Algonquin Power & Utilities Corp. – Consolidated Financial Statements ALGONQUIN POWER & UTILITIES CORP.  Notes to the Consolidated Financial Statements  December 31, 2012 and 2011   (in thousands of Canadian dollars except as noted and amounts per share)  24. Financial instruments (continued) For derivatives that are not designated as cash flow hedges and for the ineffective portion of  gains and losses on derivatives that are accounted for a hedges, the changes in the fair value  are immediately recognized in earnings. The effects on the statement of operations of  derivative financial instruments not designated as hedges consist of the following:  In the normal course of business, the Company is exposed to financial risks that potentially  impact its operating results. The Company employs risk management strategies with a view  to mitigating these risks to the extent possible on a cost effective basis. Derivative financial  instruments are used to manage certain exposures to fluctuations in exchange rates, interest  rates and commodity prices. The Company does not enter into derivative financial  agreements for speculative purposes.  This note provides disclosures relating to the nature and extent of the Company's exposure  to risks arising from financial instruments, including credit risk, liquidity risk, foreign currency  risk and interest rate risk, and how the Company manages those risks.  (b) Derivative instruments (continued)  (iv) Other derivatives (continued) (c) Risk management  2012 2011 Change in unrealized loss/(gain) on derivative  financial instruments:  Foreign exchange contracts  $ - $ (45)  Interest rate swaps  (2,197) 1,536  Energy derivative contracts  (825) 833  Total change in unrealized loss/(gain) on derivative financial instruments  $ (3,022) $ 2,324  Realized loss/(gain) on derivative financial  instruments: Foreign exchange contracts  $ (187) $ 691  Interest rate swaps  2,094 2,138  Energy derivative contracts  987 691  Total realized loss on derivative financial instruments  $ 2,894 $ 3,520  Loss/(gain) on derivative financial instruments  accounted for as hedges  $ (128) $ 5,844  Ineffective portion of derivatives financial  instruments accounted for as hedges  $ (105) $ -  Loss/(gain) on derivative financial instruments  $ (233)  $ 5,844  2012 Annual Report 136