Liquidity and Capital Resources Operating activities Investing activities Cash flows from operating activities for 2012 decreased compared with 2011 primarily due to the disposal of CPILP which reduced cash inflows and increases in trade and other receivables and trade and other payables due to the timing of settlement of certain accounts. The cash flows used in investing activities for 2012 included $598 million for capital expenditures (most significantly, the Quality Wind and Halkirk projects) partly offset by $116 million of proceeds received on the sale of shares in Atlantic Power and the divestiture of the British Columbia hydro assets. Business acquisitions in 2011, including the New England facilities, significantly contributed to the year-over-year decrease in cash flows used in investing activities. (unaudited, $ millions) Year ended December 31 Increase (decrease) Cash inflows (outflows) 2012 2011 Operating activities 242 461 (219) Investing activities (466) (985) 519 Financing activities 205 541 (336) (unaudited, $ millions) Pre- 2011 Year ended December 31 Total project Timing 2011 2012 Actual or Projected (1) (3) Budget Keephills 3 892 57 - 949 949 Completed 3 rd quarter 2011 Quality Wind 24 131 264 405 to 415 455 Completed 4 th quarter 2012 Halkirk - 183 131 325 to 335 357 Completed 4 th quarter 2012 Port Dover & Nanticoke 25 24 19 340 340 Projected completion 4 th quarter 2013 K2 - - 3 291 291 Projected completion 2015 Shepard Energy Centre - - 50 860 860 Projected completion 2015 Subtotal growth projects 395 467 CPILP 21 - Sustaining – plant maintenance and other 77 102 Sustaining – Genesee mine lands 15 17 Total capital expenditures (2 ) 508 586 Emission credits 21 35 Capitalized interest (36) (23) Net payments to acquire property, plant and equipment and other assets 493 598 (1) Capital expenditures to be incurred over the life of the project are based on management’s estimates. (2) Capital expenditures include capitalized interest. Capital expenditures excluding capitalized interest are presented on the Statement of Cash Flows as payments to acquire property, plant and equipment and other assets. (3) Projected costs for projects completed in 2012 consist of certain costs that are expected to be incurred subsequent to the date of commercial operations such as site remediation, vendor optimization, project clean-up and project close-out costs. Capital Power Corporation Management’s Discussion and Analysis 2012 39 Capital expenditures