DEAR SHAREHOLDERS MESSAGE FROM THE CHAIRMAN Since Capital Power’s initial public offering in July 2009, the Board has provided  independent leadership and oversight in guiding the company’s growth through  acquisitions, divestitures and developments. This past year’s results were mixed  with the company facing a number of challenging headwinds but overall, progress  was made towards the goal of establishing Capital Power as one of North  America’s most respected, reliable, and competitive power generators.  Each year, Capital Power’s strategy is  tested by the Board to ensure the company  continues to be well positioned to deliver  a stable long-term competitive shareholder  return. This year’s review confi rmed the  current strategy continues to be the right  strategy for the company. Successful  execution of this strategy was evident  in 2012 as the company continued to  provide safe reliable operations, completed  successful offerings of debt and equity  to fund growth, and developed the  Quality Wind and Halkirk Wind projects  on time and under budget.  A critical area of Board oversight is  enterprise risk management. The Board  is actively engaged with management in  identifying, understanding and mitigating  risks, particularly during uncertain economic  conditions. Given the outlook for softer  Alberta power prices in the medium  term, a joint venture agreement for the  development and ownership of ENMAX’s  Shepard Energy Centre was entered  into last December. The transaction also  included various commercial agreements  that increased Capital Power’s overall  contracted position that signifi cantly  reduced its electricity price and  volume risk.  The Board recognizes the climate of rising  shareholder and stakeholder activism that  exists today and continually looks at ways  to improve dialogue with its shareholders.  We appreciate that shareholders have  a very legitimate interest in how the  company is operating and governed.  On behalf of the Board, I would like to  thank all of the people of Capital Power  for their work and achievements in 2012,  and welcome our shareholders to the  upcoming annual meeting. As part of our commitment to shareholder  engagement, shareholders have the  opportunity to vote on our second ‘say  on pay’ advisory vote on executive  compensation at the 2013 annual meeting.  Despite receiving 99% approval from  shareholders on ‘say on pay’ last year that  strongly supported our approach to executive  compensation, we believe it’s important to  continue receiving direct feedback from  our shareholders on this important matter.  Shareholders will also be voting on  a Shareholder Rights Plan and the  Advance Notice By-law. The primary  objective of the Rights Plan is to ensure  the fair treatment of all shareholders in  the event that an unsolicited take-over  bid for Capital Power is ever made and to  provide the Board with sufficient time to  evaluate the unsolicited bid and explore  other options to maximize shareholder  value. The Rights Plan was adopted by  the Board last November; however, it must  be ratified by our shareholders and fi led  with the Toronto Stock Exchange. If the  Rights Plan is approved, it will remain in  effect until the end of our 2016 annual  meeting. The purpose of the Advance  Notice By-law is to ensure all shareholders  receive adequate notice and information  about nominated directors, so that they  can make informed voting decisions. DONALD LOWRY  CHAIRMAN We look forward to meeting you, hearing  your thoughts and speaking with you. CAPITAL POWER  2012 ANNUAL REPORT 4