The Business and Corporate Structure Corporate Strategy Financial discipline Continued focus on operational excellence and environmental and safety leadership Sustainable growth Capital Power Corporation Management’s Discussion and Analysis 2012 12 The Company also plans to develop the new Capital Power Energy Centre (CPEC), a natural gas combined cycle power generation facility in Alberta. CPEC’s capacity is expected to be up to 900 MW with targeted commercial operations in the 2017 to 2020 timeframe. On December 6, 2012, Capital Power announced the signing of a joint venture agreement for the construction, ownership and operations of the 800 MW Shepard natural gas-fired combined cycle power generation facility located in Alberta. Capital Power has a 50% ownership position of 400 MW. The facility is currently under construction and is approximately half complete with an expected commercial operation date in the first quarter of 2015. In 2012, the Company completed construction of its Quality Wind project in British Columbia and its Halkirk wind project in Alberta which commenced commercial operations on November 6, 2012 and December 1, 2012, respectively. These wind projects provide incremental combined capacity of 292 MW. See Significant Events. In 2011, the Company acquired three natural gas-fired combined cycle power generating facilities in the New England states with a combined capacity of 1,089 MW. It also acquired two mixed fuel generating plants in North Carolina with a combined capacity of 134 MW that were previously owned by its former subsidiary, Capital Power Income L.P. (CPILP).The Company’s wind power projects under development are Port Dover & Nanticoke Wind (Port Dover & Nanticoke) in Ontario (105 MW) and K2 Wind Power Project (K2) in Ontario (270 MW with Capital Power’s ownership interest being 90 MW). Capital Power is committed to a policy of financial discipline founded upon operational success, contracted generation assets and targeted growth while maintaining an investment-grade credit rating. Capital Power strives to maintain a strong financial position with an appropriate dividend yield on its common shares so that it will remain well positioned to access the capital markets to finance acquisitions or strategic development opportunities. To help achieve these objectives, Capital Power expects to continue to sell forward a significant portion of its generation output and capacity under long-term contracts. Capital Power’s operational strategy is to safely manage, operate and maintain its power generation facilities in a manner that maximizes efficiency, productivity and reliability, and minimizes costs while reducing environmental impact. Capital Power is committed to maintaining its facilities’ record of strong operational performance by continuing to plan and monitor maintenance requirements in order to ensure high levels of fleet availability. The Company also remains committed to a safety culture of zero injury and occupational illness incidents. The key components of Capital Power’s corporate strategy are as follows: Capital Power’s corporate strategy seeks to balance a strong financial position with targeted growth. The Company is committed to maintaining a stable dividend, an investment-grade credit rating supported by contracted cash flows, and a prudent expansion strategy. The Company’s power generation operations and assets are owned by Capital Power L.P. (CPLP), a subsidiary of the Company. As at December 31, 2012, the Company directly and indirectly held approximately 21.750 million general partnership units and 46.699 million common limited partnership units of CPLP which represented approximately 71% of CPLP’s total partnership units. EPCOR (in this MD&A, EPCOR refers to EPCOR Utilities Inc. collectively with its subsidiaries) held 28.441 million exchangeable common limited partnership units of CPLP representing approximately 29% of CPLP. CPLP’s exchangeable common limited partnership units are exchangeable for common shares of Capital Power Corporation on a one-for-one basis. The general partner of CPLP is wholly- owned by Capital Power Corporation and EPCOR’s representation on the Board of Directors does not represent a controlling vote. Accordingly, Capital Power Corporation controls CPLP and the operations of CPLP have been consolidated for financial statement purposes. Capital Power is a growth-oriented North American independent power producer headquartered in Edmonton, Alberta. The Company develops, acquires, operates and optimizes power generation from a variety of energy sources. Capital Power owns more than 3,600 megawatts (MW) of power generation capacity at 16 facilities across North America and has rights to 371 MW through its interest in the acquired Sundance power purchase arrangement (acquired Sundance PPA). An additional 595 MW of owned generation capacity is under construction or in advanced development in Alberta and Ontario.