Strategies for managing political, legislative and regulatory risk  Identify existing, new or changed laws or regulations and prepare appropriate responses or plans.  Comply with all applicable laws, regulations and guidelines and monitor compliance by performing environmental compliance audits with corrective actions as necessary.  Establish positive relationships with all levels of government and stakeholders.  Consult with all levels of government with respect to policy development and current and potential legislation.  Execute on-time permitting, license renewals and other activities associated with laws and regulations.  Proactive identification of environmental risks within operations, maintenance and construction activities and promote awareness throughout and at all levels of the Company.  Ensure that contractors align with Capital Power’s environmental policies and procedures.  Support the timely development of appropriate transmission capability through active relationships with regulators and government. Operations, process and infrastructure risk Power plant operations are susceptible to outages due to failure of generation equipment, transmission lines, pipelines or other equipment, which could make the impacted plant unavailable to provide service. The inability of Capital Power's power plants to generate the expected amount of electricity to be sold under contract or to the applicable market could have a significant adverse impact on the Company’s revenues. In addition, counterparties to PPAs have remedies available to them if Capital Power fails to operate facilities in accordance with contract requirements, including the recovery of damages and termination of contractual arrangements. To the extent that plant equipment requires significant capital and other operation and maintenance expenditures to maintain efficiency, requires longer than forecast down-times for maintenance and repair, experiences outages due to equipment failure or suffers disruptions of power generation for other reasons, Capital Power's cost of generating electricity will increase and its revenues may be negatively affected. As an adopter of new technology, Capital Power can be exposed to design flaws or other issues, the impacts of which may not be covered by warranties or insurance. The failure of Capital Power’s facilities to operate at required capacity levels may result in the facilities having their contracted capacity reduced and, in certain cases, Capital Power having to make payments on account of reduced capacity to power purchasers. The terms of the PPAs for owned plants and the acquired Sundance PPA provide appropriate incentives to plant owners to keep the plants well maintained and operational. They also provide force majeure protection for high- impact, low-probability events including major equipment failure. Strategies for managing operations risk  Execute appropriate operating and maintenance practices to minimize the likelihood of prolonged unplanned down time for the Company’s plants.  Maintain an inventory of strategic spare parts which can reduce down time in the event of failure.  Participate in a leased engine program for the LMS 100 units at CBEC to reduce down time by replacing a failed unit with a leased unit provided by the manufacturer.  Establish appropriate business interruption and property and boiler insurance to reduce the impact of prolonged outages caused by insured events. Many of Capital Power's generation plants operate under PPAs, which are subject to a number of risks. PPA contracts contain performance benchmarks that must be achieved and other obligations that must be complied with by Capital Power. Capital Power may incur charges in the event of unplanned outages or variations from the contract performance benchmarks. Electricity sales are accounted for as long-term fixed margin contracts, which limit the impact of swings in wholesale spot electricity prices, unless plant availability drops significantly below the PPA target availability for an extended period. PPAs expire at various times and there can be no assurance that a subsequent PPA will be available or, if available, that it will be on terms, or at prices that permit the operation of the facility on a profitable basis. Capital Power Corporation Management’s Discussion and Analysis 2012 48