CONSOLIDATED FINANCIAL STATEMENTS See accompanying notes to these consolidated financial statements 56 CAPSTONE INFRASTRUCTURE CORPORATION For the year ended Notes Dec 31, 2013 Dec 31, 2012 Operating activities: Net income 67,210 45,971 Deferred income tax expense (recovery) 6,206 11,019 Depreciation and amortization 62,167 57,552 Other gains and losses (net) 26 (9,789) (1,294) Amortization of deferred financing costs and non-cash financing costs 9,020 9,893 Equity accounted (income) loss 11a 2,638 (2,294) Unrealized foreign exchange (gain) loss (2,890) (1,206) Change in non-cash working capital 30 1,114 (4,963) Total cash flows from operating activities 135,676 114,678 Investing activities: Cash acquired on business acquisition 3 10,464 — Change in restricted cash and short-term deposits 5,583 72,010 Return of capital from equity accounted investments 11a 4,005 2,001 Receipt of loans receivable 2,514 48,943 Investment in capital assets and computer software 12b (146,279) (127,941) Investment in projects under development 13b (4,648) — Proceeds from sale (purchase) of foreign currency contracts (896) 38 Total cash flows used in investing activities (129,257) (4,949) Financing activities: Proceeds from issuance of long-term debt 82,196 100,621 Contributions from non controlling interest 22 3,405 — Proceeds from partial sale of Bristol Water 3 — 68,952 Repayment of long-term debt and finance lease obligations (58,681) (253,311) Dividends paid to common and preferred shareholders (25,446) (26,131) Dividends paid to non-controlling interests 22 (7,773) (5,312) Settlement of interest rate swaps (2,407) — Transaction costs on debt issuance (1,811) (3,364) Transactions costs on issuance of common shares (224) (89) Total cash flows used in financing activities (10,741) (118,634) Effect of exchange rate changes on cash and cash equivalents 491 917 Decrease in cash and cash equivalents (3,831) (7,988) Cash and cash equivalents, beginning of year 49,599 57,587 Cash and cash equivalents, end of year 45,768 49,599 Supplemental information: Interest paid 35,177 40,670 Taxes paid (recovery) 3,195 929 CONSOLIDATED STATEMENTS OF CASH FLOWS