CAPITAL POWER CORPORATION Notes to the Consolidated Financial Statements (Tabular amounts in millions of Canadian dollars, except share and per share amounts) The Company has recorded decommissioning provisions for its power generation plants and the Genesee coal mine as it is obliged to remove the facilities at the end of their useful lives and restore the plant and mine sites to their original condition. Decommissioning provisions for the coal mine are incurred over time as new areas are mined, and a portion of the liability is settled over time as areas are reclaimed prior to final pit reclamation. The Company estimates the undiscounted amount of cash flow required to settle its decommissioning obligations is approximately $331 million, calculated using inflation rates ranging from 2% to 3%. The expected timing for settlement of the obligations is between 2013 and 2066, which reflects the anticipated useful lives of the different power plants. The majority of the payments to settle the obligations are expected to occur between 2032 and 2066 for the power generation plants and between 2013 and 2019 for sections of the Genesee coal mine. Discount rates used to calculate the carrying amount of the obligation ranged from 1.14% to 2.95%. The actual costs to settle decommissioning obligations may vary from estimates as a result of changes to contractor rates required to perform the decommissioning. No assets have been legally restricted for settlement of these liabilities. The Company holds retail and commercial natural gas customer contracts in Alberta, acquired as part of the July 1, 2009 acquisition of assets from EPCOR Utilities Inc. The future unavoidable costs of meeting the terms of these contracts are expected to exceed the economic benefits to be received under these contracts. As a result, a provision has been recorded on the consolidated statement of financial position to reflect the estimated present value of the loss on these contracts. The expected timing of settlement of these contracts range from 2013 to 2046 and the costs were discounted using risk free rates between 1.10% and 2.46%. The timing and amount of settlement of the obligation is dependent on expectations of renewal of the contracts and expectations over the forward price of gas. 110 Other provisions Decommissioning provisions 23. Provisions, continued: Decommissioning Employee benefits Other Total As at January 1, 2011 $ 124 $ 30 $ 21 $ 175 Additional liabilities incurred 38 31 9 78 Liabilities settled (1) (16) - (17) Amounts reversed unused (3) (2) (2) (7) Foreign currency translation adjustments 3 - - 3 Revisions to decommissioning costs 45 - - 45 Unwinding of the discount 5 - - 5 Settlement on CPILP disposal (54) - - (54) Additional liabilities incurred on CPILP disposal - - 2 2 As at December 31, 2011 $ 157 $ 43 $ 30 $ 230 Additional liabilities incurred 9 32 1 42 Liabilities settled (1) (21) (9) (31) Amounts reversed unused - (2) (9) (11) Foreign currency translation adjustments (1) - - (1) Revisions to decommissioning costs 9 - - 9 Unwinding of the discount 4 - - 4 Settlement on disposal of hydro assets (note 8) (4) - - (4) As at December 31, 2012 $ 173 $ 52 $ 13 $ 238