Algonquin Power & Utilities Corp. – Management’s Discussion & Analysis During the year ended December 31, 2012, the Renewable Energy Division generated electricity equal to 91%  of long-term projected average resources (wind and hydrology) as compared to 107% during the same period in  2011. For the year ended December 31, 2012, the new Texas region experienced resources higher than long- term averages resources, whereas the Quebec, Western, Maritimes, Manitoba, Saskatchewan regions and the  new Illinois region experienced below long-term averages resources, with energy production consistent with  resources between 1%-10% below long-term average resources. The Ontario and Pennsylvania regions  experienced results between 23%-29% below long-term average resources. The Ontario region’s lower  production was primarily due to an unplanned shutdown at the Long Sault facility.  For the year ended December 31, 2012, revenue from energy sales in the Renewable Energy Division totalled  $84.2 million, as compared to $81.6 million during the same period in 2011. As the purchase of energy by the  Energy Services Business is a significant revenue driver and component of variable operating expenses, the  division compares ‘net energy sales’ (energy sales revenue less energy purchases) as a more appropriate  measure of the division’s sales results. For the year ended December 31, 2012, net revenue from energy sales  in the Renewable Energy Division totalled $75.3 million, as compared $77.8 million during the same period in  2011.  Revenue generated from APCo’s hydro facilities located in the Quebec and Western regions decreased by $3.6  million primarily due to $5.1 million in lower hydrology and partially offset by $1.5 million due to an increase in  weighted average energy rates, as compared to the same period in 2011. Revenue from lost production due to  the unplanned shutdown in Ontario was covered by business interruption insurance claim proceeds in the  amount of $1.8 million. Revenue from APCo’s hydro facility located in the Maritime region decreased by 10%  primarily driven by a $1.8 million in decreased customer demand offset by a $1.5 million increase in weighted  average energy rates as compared to the same period in 2011. Revenue from APCo’s wind facilities located in the Manitoba region increased $0.7 million primarily due to the  expansion of the St. Leon facility offset by a lower than average wind resource. APCo’s wind facilities located in  the new Pennsylvania, Texas, and Illinois regions, which were acquired in late 2012, produced revenue of $3.9  million. Revenue at the Energy Services Business increased 24% due to $6.4 million of increased customer demand,  partially offset by a $3.2 million decrease in weighted average energy rates. Revenue at the Energy Services  Business primarily consists of wholesale deliveries to local electric utilities, retail sales to commercial and  industrial customers in Northern Maine, and merchant sales of production in excess of customer demand at the  Tinker hydroelectric generating facility.  For the year ended December 31, 2012, energy purchase costs by the Energy Services Business totalled $8.9  million as compared to $3.8 million during the same period in 2011, an increase of $5.1 million. During this  period, the Energy Services Business purchased approximately 140.7 GW-hrs of energy at market and fixed  rates averaging U.S. $63 per MW-hr. The Maritime region generated approximately 43% of the load required to  service its customers as well as the customers of the Energy Services Business in the year ended December  31, 2012, as compared to 80% in the same period in 2011. The lower production from the Maritime region was  the primary driver for the increased energy purchase costs for the year ended December 31, 2012. The division  reported increased energy purchase costs of $0.1 million as a result of the stronger U.S. dollar as compared to  the same period in 2011.  The Red Lily I wind farm located in Saskatchewan produced 82.8 GW-hrs of electricity for the year ended  December 31, 2012. APCo’s economic return from its investment in Red Lily currently comes in the form of  interest payments, fees and other charges and is not reflected in revenues from energy sales. Under the terms  of the agreements, APCo has the right to exchange these contractual and debt interests in Red Lily I for a direct  75% equity interest in 2016. For the year ended December 31, 2012, APCo earned fees and interest payments  from Red Lily I in the total amount of $3.2 million.  The Renewable Energy Division reported increased revenue of $0.2 million from U.S. operations as a result of  the stronger U.S. dollar as compared to the same period in 2011.  For the year ended December 31, 2012, operating expenses excluding energy purchases totalled $21.4 million,  as compared to $21.6 million during the same period in 2011, a decrease of $0.2 million or 1%. The decrease  was primarily impacted by $1.8 million in lower operating costs at the hydro facilities due to lower flows and  related direct production costs, and $0.3M in lower personnel costs at the Energy Services Business. These  items were partially offset by a $0.5 million accrual for costs related to the Quebec water lease proceedings and  by $1.4 million in operating costs related to the U.S. Wind Project acquisitions and other business development  initiatives such as the Cornwall Solar development.  2012 Annual Report 25