Algonquin Power & Utilities Corp. – Consolidated Financial Statements Notes to the Consolidated Financial Statements  December 31, 2012 and 2011   (in thousands of Canadian dollars except as noted and amounts per share)  ALGONQUIN POWER & UTILITIES CORP.  8.  Long-term investments and notes receivable  2012 Annual Report 103 In connection with the subordinated debt facility, the Company has been granted an option to  subscribe for a 75% equity interest in the Partnership in exchange for the outstanding amount  on its subordinated loan of up to $19,500, exercisable for a period of 90 days commencing in  2016. The fair value of the conversion option as at December 31, 2012 and 2011 was  determined to be negligible.  A second tranche of subordinated loan for an amount equal to the amounts outstanding on  Tranche 2 of the senior debt but no greater than $17,000 will be advanced in 2016 by the  Company. The proceeds from this additional subordinated debt are required to be used to repay  Tranche 2 of the Partnership’s senior debt, including APUC’s portion. The subordinated loan earns an interest rate of 12.5%, the principal matures in 2036 but is  repayable by the Partnership in whole or in part at any time after 2016, without a pre-payment  premium. The subordinated loan is secured by substantially all the assets of the Partnership  but is subordinated to the senior debt. The Company’s investment in Red Lily I is in the form of participation in a portion of the  senior debt facility, and a subordinated debt facility from the Partnership. In 2011, APUC  advanced $13,000 under a senior debt facility to the Partnership and received a pre-payment  of $1,412 in 2012. Another third party lender has also advanced $31,000 of senior debt to  the Partnership. The Company’s senior loan to the Partnership earns interest at the rate of  6.31% and will mature in 2016. Both tranches of senior debt are secured by substantially all  the assets of the Partnership on a pari passu basis.  The Red Lily I Partnership (“Partnership”) is owned by an independent investor. The  Company provides operation and supervision services to the Red Lily I project, a 26.4  megawatt wind energy facility located in south-eastern Saskatchewan. (a) Red Lily I  The above notes are secured by the underlying assets of the respective facilities. There is no  impairment provision in regards to the notes receivable as at December 31, 2012 and 2011.  Long-term investments and notes receivable consist of the following:  2012 2011 Red Lily Senior loan, interest at 6.31% (a)  $ 11,588  $ 13,000  Red Lily Subordinated loan, interest at 12.5% (a)  6,565  6,565  32.4% of Class B non-voting shares of Kirkland Lake Power  Corp. 4,926  4,926  25% of Class B non-voting shares of Cochrane Power  Corporation 4,669  5,382  45% interest in the Algonquin Power (Rattle Brook)  Partnership 3,884 3,784 Chapais Énergie, Société en Commandite interest at 10.789%  and 4.91%, respectively  2,448  2,913  Silverleaf resorts loan, interest at 15.48% maturing July 2020  2,010  2,056  50% interest in the Valley Power Partnership 1,767  1,676  Other 326 - 38,183 40,302 Less: current portion  (537)  (482)  Total long term investments and notes receivable  $ 37,646  $ 39,820 