Algonquin Power & Utilities Corp. – Management’s Discussion & Analysis Three months ended December 31  Year ended  December 31  2012  2011  2012  2011  (millions)  (millions)  (millions)  (millions)  Net earnings/(loss) attributable to Shareholders $ 6.4 $ (8.5) $ 14.5 $ 23.4 Add (deduct): Net earnings attributable to the non-controlling interest  6.2 0.5 7.4 3.9 Loss from discontinued operations  0.1 0.9 1.2 0.8 Income tax recovery  (6.6) (6.0) (13.6) (22.5) Interest expense*  10.2 7.6 34.8 30.4 Acquisition costs  1.3 1.2 7.7 3.0 Write down of long-lived assets  - 15.2 - 15.2 Quebec water lease litigation  - - 0.5 - (Gain)/Loss on derivative financial instruments  (0.4) 1.6 (0.2) 5.8 (Gain)/Loss on foreign exchange  (1.6) 0.4 (0.6) (0.7) Depreciation and amortization 17.8 11.4 54.5 44.4 Adjusted EBITDA  $  33.4  $  24.3  $  106.2 $  103.7 Three months ended  December 30  Year ended December 30  (millions) (millions) Comparative Prior Period Adjusted EBITDA $  24.3  $  103.7  Significant Changes:  Liberty Utilities (West) - (Reduced)/Increased electricity sales due to different weather  patterns compared to prior year  1.9 (3.5) Liberty Utilities (Central) – Midwest Gas Utilities acquisition  3.7  4.4 Liberty Utilities (East) –EnergyNorth Gas Utility acquisition  4.7  6.1 Liberty Utilities (East) –Granite State Electric Utility acquisition  0.4 2.3 Renewable – Decreased hydrologic resource -  (3.8)  Renewable - Acquisition of U.S. Wind assets  1.9  2.0 Renewable – St Leon – Reduced wind resource compared to prior year  (1.4)  (0.5)  Renewable – St Leon II – Operations from facility expansion  0.7  1.1 Renewable – Tinker Hydro/AES - Increased demand for retail sales overshadowed by  higher energy costs  (1.0) (1.7) Thermal – Windsor Locks – Reduced energy sales due to market conditions  0.1  (2.9) Thermal – EFW – Lower production due to expiry of Region of Peel contract  (1.2)  (0.7)  Administrative expense (0.5) (2.1) Increased/(decreased) results from the stronger U.S. dollar  (0.7)  0.6 Other  0.5 1.2 Current Period Adjusted EBITDA  $  33.4  $   106.2  Adjusted net earnings is a non-GAAP metric used by many investors to compare net earnings from operations  without the effects of certain volatile primarily non-cash items that generally have no current economic impact or  items such as acquisition expenses or litigation expenses and are viewed as not directly related to a company’s  operating performance. Net earnings of APUC can be impacted positively or negatively by gains and losses on  derivative financial instruments, including foreign exchange forward contracts, interest rate swaps and energy  forward purchase contracts as well as to movements in foreign exchange rates on foreign currency  denominated debt and working capital balances. Adjusted weighted average shares outstanding represents  weighted average shares outstanding adjusted to remove the dilution effect related to shares issued in advance  of funding requirements. APUC uses adjusted net earnings to assess its performance without the effects of  gains or losses on foreign exchange, foreign exchange forward contracts, interest rate swaps, acquisition costs,  litigation expenses and write down of intangibles and property, plant and equipment as these are not reflective  of the performance of the underlying business of APUC. APUC believes that analysis and presentation of net  * Interest expense is net of AFUDC Allowance for equity funds. See note 1(i) of notes to the financial statements.  For the year ended December 31, 2012, Adjusted EBITDA totalled $106.2 million as compared to $103.7  million, an increase of $2.5 million or 2% as compared to the same period in 2011. For the quarter ended  December 31, 2012, Adjusted EBITDA totalled $33.4 million as compared to $24.3 million, an increase of $9.1  million or 37% as compared to the same period in 2011.  The major factors impacting Adjusted EBITDA are set out below. A more detailed analysis of these factors is  presented within the business unit analysis.  Reconciliation of adjusted net earnings to net earnings  2012 Annual Report 46