Capital Power uses derivative instruments, including futures, forwards, options and swaps, to manage its commodity and financial market risks inherent in its electricity generation operations. These activities, although intended to mitigate price volatility, expose Capital Power to other risks. When Capital Power sells power forward, it gives up the opportunity to sell power at potential higher prices in the future which may result in lost opportunity costs. In addition, Capital Power purchases and sells commodity-based contracts in the natural gas and electricity markets for trading purposes. In the future, Capital Power could recognize financial losses on these contracts as a result of volatility in the market values of the underlying commodities. Capital Power is exposed to market risks through its power marketing business, which involves the sale of energy, capacity and related products, and the purchase and sale of fuel, transmission services and emission allowances. These market risks include, among other risks, volatility arising from location and from timing differences that may be associated with buying and transporting fuel, converting fuel into energy and delivering the energy to a buyer. When aggregate customer electricity consumption (load shape) changes unexpectedly, Capital Power is exposed to price risk. Load shape refers to the different pattern of consumption between peak hours and off-peak hours. Consumption is higher during peak hours when people and organizations are most active; conversely, consumption is lower during off-peak hours. The sensitivity of changes in Alberta power prices (based on the expected portfolio position) on the Company’s adjusted EBITDA (assuming all other potential variables are held constant) is estimated as follows: The sensitivity of changes in North East U.S. spark spreads on the Company’s adjusted EBITDA (assuming all other potential variables are held constant) is estimated as follows: Strategies for managing commodity price volatility risk  Execute Company’s growth strategy and re-contract generation plants under new or extended contracts to maintain a balance of contracted and non-contracted plants.  Limit exposure to market price volatility by entering into long-term commercial contracts such as those contracts for the Company’s Genesee 1 and 2, Halkirk, Kingsbridge 1, Quality Wind, Island Generation, Roxboro and Southport plants.  Establish and maintain a commodity risk management program which provides the infrastructure to manage commodity and trading risks associated with the commodity business.  Take market risk positions within authorized limits approved by Capital Power’s executive team and Board of Directors.  Report daily key risk measures in relation to applicable limits to the executive team with quarterly review by the Board of Directors.  Perform regular commodity portfolio stress testing to observe the effects of plausible scenarios taking into account historical maximum volatilities and observed price movements. Capital Power Corporation Management’s Discussion and Analysis 2012 46 ($ millions) Alberta power price Estimated increase (decrease) in adjusted EBITDA Increase of $1.00 per MWh Decrease of $1.00 per MWh 2013 4 (4) 2014 4 (4) 2015 6 (6) ($ millions) North East U.S. spark spread Estimated increase (decrease) in adjusted EBITDA Increase of $1.00 per MWh Decrease of $1.00 per MWh 2013 6 (6) 2014 6 (7) 2015 7 (7)