Financial Report - Veresen Inc.

Operational performance from our gas-fired and district energy systems during 2012 generally met our expectations. Our Ontario
gas-fired facilities performed well in response to robust energy demand, particularly during the third quarter. Our San Gabriel gas-fired
facility experienced a brief unplanned outage in late May, which resulted in increased maintenance expenditures.
With respect to our renewable power facilities, no significant operational issues were experienced during 2012. The first two phases of
our Grand Valley wind farm successfully commenced operations on March 24, 2012. Power production from Glen Park and our waste
heat facilities were negatively impacted by reduced water flows and host compressor unit maintenance, respectively.
Financial Highlights
For the three and 12 months ended December 31, 2012, EBITDA from our Power business, as determined on a proportionately
consolidated basis, was $17.6 million and $65.5 million, respectively, a $9.5 million and $17.2 million increase compared to the same
periods last year. Our gas-fired and district energy systems generated $8.7 million and $17.5 million of the increase, respectively, due
to a $6.0 million and $14.8 million contribution from York Energy Centre, higher energy margins earned by East Windsor due to strong
market demand, particularly in the third quarter, and $2.0 million of insurance proceeds at San Gabriel recorded in the fourth quarter.
EBITDA from our renewable power facilities increased by $1.5 million and $0.3 million for the three and 12-month periods, respectively,
due to a $1.3 million and $3.1 million contribution from Grand Valley and higher water flows at our B.C. run-of-river facilities, partially
offset by lower water flows and continued weak energy prices at Glen Park and maintenance at the host compressor units of our waste
heat facilities. Power-Corporate costs for 2012 were partially offset by a $3.0 million completion bonus, which we received in the
second quarter of 2012 due to the successful commissioning of York Energy Centre within schedule and under budget.
Net income (loss) before taxes and non-controlling interest was $0.7 million and ($1.0) million for the three and 12 months ended
December 31, 2012, respectively, compared to a net loss of $9.2 million and $24.0 million for the same periods last year. Excluding the
effect of fair value gains and losses related to York Energy Centre’s interest rate hedges, net loss before tax and non-controlling interest
was $1.2 million for each of the three and 12 months ended December 31, 2012, respectively, a $3.3 million and $1.1 million decrease
compared to the same periods last year. The increases in EBITDA, discussed above, were offset by higher depreciation and interest
associated with York Energy Centre and Grand Valley.
Veresen – Corporate
Three months ended December 31, Year ended December 31,
($ Millions) 2012 2011 2012 2011
Equity loss 0.9 0.5 1.9 1.3
General & administrative
Recurring 5.5 6.4 22.8 21.9
Non-recurring 0.5 0.2 4.8 1.7
Project development 5.0 2.9 17.0 8.3
Depreciation & amortization 0.5 0.5 2.2 2.1
Interest 10.2 5.7 39.3 25.6
Foreign exchange & other (0.2) 0.1 0.9 1.5
Net expenses before taxes 22.4 16.3 88.9 62.4
Current tax expense 6.0 8.3 18.2 28.1
Future tax expense 0.9 7.5 10.6 15.1
Net expenses 29.3 32.1 117.7 105.6
For the three and 12 months ended December 31, 2012, we incurred $22.4 million and $88.9 million, respectively, of corporate net
expenses before taxes, a $6.1 million and $26.5 million increase compared to the same periods last year. The increase reflects higher
interest costs, primarily related to financing the Hythe/Steeprock acquisition; higher project development spending related to our
Jordan Cove LNG project; and higher non-recurring general and administrative costs, primarily comprised of integration costs which,
in 2012, relate to the Hythe/Steeprock acquisition, and, in 2011, relate to the Pristine acquisition. Fourth quarter recurring G&A costs
decreased by $0.9 million primarily due to the downward revaluation of our long-term incentive plan, which is valued relative to our
share price. For the 12-month period, this dynamic was partially offset by costs incurred to support our growing business, resulting in
an overall $0.9 million increase in recurring G&A. Taxes have decreased for the three and 12 month periods relative to the same periods
last year due to the decrease in earnings.
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