MANAGEMENT’S DISCUSSION AND ANALYSIS Project development Seasonality With the acquisition of ReD on October 1, 2013, Capstone gained the rights to net 79 MW from nine wind development projects. Seven of these projects are being developed in Ontario under power purchase agreements ("PPAs") awarded by the Ontario Power Authority ("OPA"), one project in Quebec with a PPA awarded by Hydro-Québec and one project in Saskatchewan with a PPA awarded by SaskPower. Three of the projects are  characterized as near-term, with construction commencing on two of these projects in the fourth quarter of 2013. Capstone currently expects all of  the near-term projects to be completed on time and without material cost over-runs. The remaining six development-stage projects are expected  to be completed over the mid-term. All projects not yet under construction are at various stages and require certain regulatory approvals and permits to proceed with construction and meet the expected commercial operations dates ("COD"). A summary of Capstone's near-term projects is as follows: Capstone expects to fund these development projects with a combination of equity and project-level debt financing. Capstone's equity contributions will be funded from existing cash and available credit in combination with equity partners, including First Nations and municipalities. The project debt financing for the near-term projects, which is expected to be established between the first and fourth quarters of 2014, is expected to be specific to each project, non-recourse to Capstone and on comparable terms to typical wind power projects. The mid-term projects have expected CODs from 2015 to 2016. Results for Capstone’s power segment fluctuate during the year due to seasonal factors that affect quarterly production of each facility. These  factors include scheduled maintenance and environmental factors such as water flows, sunlight, wind speeds and density, ambient temperature and humidity, which affect the amount of electricity generated. In aggregate, these factors have historically resulted in higher electricity production during the first and fourth quarters as shown in the following table: (1) Average long-term production is from March 2005 toDecember 31, 2013, except for Erie Shores, which is from June 2006, and Amherstburg,  which is from July 2011 and the ReD wind facilities, which are from January 2013. (2) The average long-term production excludes the production of Capstone's equity investments (the Chapais biomass facility and the Glen Dhu  and Fitzpatrick wind facilities). In addition, the PPAs for Cardinal, and the Wawatay and Dryden hydro facilities provide for higher prices to be paid for electricity delivered during winter months than electricity delivered during summer months. In 2014, production and revenue are expected to increase based on a full year of ownership of the ReD facilities. This will be offset by higher  project development costs as construction of the wind power projects progresses. All power facilities are expected to perform consistently with their long-term average production, subject to variations in wind, water flows, ambient temperatures and sunlight. In addition, we expect two of Capstone's development projects to contribute after COD. Overall, Capstone expects the net impact of these factors to result in higher Adjusted EBITDA for the power segment in 2014 compared with 2013. (1) See page 20 for a description of various other material factors or assumptions underlying our outlook. Outlook (1) Project Expected COD Ownership Interest Net Capacity Counterparty PPA Expiry Status Goulais 2015 51% 12.75 MW OPA 20 years from COD Pre-construction Saint-Philémon Q4 2014 51% 12.24 MW Hydro-Québec 20 years from COD Under construction Skyway 8 Q3 2014 100% 9.48 MW OPA 20 years from COD Under construction Type PPA Expiry Actual Average long-term production (GWh) (1) 2013 Q1 Q2 Q3 Q4 Annual Gas 2014 1,287.5 343.4 281.4 302.3 334.1 1,261.2 Wind  (2) 2020 - 2037 469.3 140.6 105.6 75.4 135.9 457.5 Biomass  (2) 2014 198.4 50.2 45.5 50.3 49.3 195.3 Hydro 2017 - 2042 168.7 31.5 57.2 30.4 41.0 160.1 Solar 2031 36.6 6.4 13.1 12.4 5.9 37.8 Total 2,160.5 572.1 502.8 470.8 566.2 2,111.9 30 CAPSTONE INFRASTRUCTURE CORPORATION For Cardinal, transportation costs will be lower, reflecting a full year of the reduced TCPL rate. Finally, we expect lower maintenance capital expenditures than in 2013.