Capstone Infrastructure Corporation Reports Third Quarter 2012 Results

  Capstone Infrastructure Corporation Reports Third Quarter 2012 Results

Highlights:

  *Achieved 110% increase in quarterly revenue and 84.7% increase in
    quarterly Adjusted EBITDA (excluding internalization costs) primarily due
    to Bristol Water
  *Strong overall performance from portfolio partially offset by poor
    hydrology and wind conditions
  *Variance in quarterly and year-to-date AFFO (excluding internalization
    costs) partly reflected impact of higher debt amortization and preferred
    share costs, which were lower in 2011
  *Successfully refinanced all debt maturing in 2012

Business Wire

TORONTO -- November 13, 2012

Capstone Infrastructure Corporation (TSX: CSE; CSE.DB.A; CSE.PR.A – the
“Corporation”) today reported unaudited results for the three and nine months
ended September 30, 2012. The Corporation’s Management’s Discussion and
Analysis and unaudited consolidated financial statements are available at
www.capstoneinfrastructure.com and on SEDAR at www.sedar.com. All amounts are
in Canadian dollars.

“Overall, our portfolio is operationally sound and our power and utilities
businesses are continuing to perform in line with expectations," said Michael
Bernstein, President and Chief Executive Officer. "Since the start of 2012, we
have taken a number of steps to strengthen our foundation for continuing
growth, including refinancing all debt maturing in 2012 and establishing a new
dividend policy that offers stable income for shareholders. We are also
continuing to work towards a new contract for Cardinal following the expiry of
its current power purchase agreement at the end of 2014. Overall, we have a
strong, diversified portfolio that represents a solid platform from which to
grow."

Financial Review

  In millions
  of Canadian      Quarter ended                   Nine months
 dollars or on   Sep 30              Variance  ended          Variance
  a per share                           (%)        Sep 30          (%)
  basis unless
  otherwise        2012     2011                  2012   2011
  noted
  Revenue          85.0      40.4       110.5      263.0   124.3   111.5
  Net income       11.8      (11.8)     (200.3)    27.4    (0.8)   (3,435.9)
  Adjusted         24.6      13.3       84.7       89.5    43.9    104.1
  EBITDA^1,2,3
  AFFO^1,3,4       3.4       6.0        (43.3)     22.0    24.8    (11.3)
  AFFO per         0.045     0.096      (53.1)     0.294   0.403   (27.0)
  share^1,3,4
  Dividends per    0.075     0.165      (54.5)     0.375   0.495   (24.2)
  share
  Payout           167%      171%       -          128%    123%    -
  ratio^1,3
                                                                             
  ^1"Adjusted EBITDA", “Adjusted Funds from Operations”, “Adjusted Funds
  from Operations per Share” and “Payout Ratio” are non-GAAP financial
  measures and do not have any standardized meaning prescribed by
  International Financial Reporting Standards (“IFRS”). As a result, these
  measures may not be comparable to similar measures presented by other
  issuers. Definitions of each measure are provided on pages 6 and 7 of
  Management’s Discussion and Analysis with reconciliation to IRFS measures
  provided on page 7.

  ^2While Bristol Water’s revenue and expenses are fully consolidated into
  Capstone’s financial results, its Adjusted EBITDA was adjusted to reflect
  Capstone’s 70% ownership interest between January 1, 2012 and May 9, 2012
  and subsequently reduced to 50% to reflect Capstone’s sale of a 20%
  interest to ITOCHU Corporation on May 10, 2012.

  ^3In the third quarter and first nine months of 2011, Capstone recorded
  $75.0 thousand and $19.3 million, respectively, in costs related to the
  internalization of management.

  ^4Consolidated AFFO includes dividends received from Bristol Water, which
  is more reflective of the cash flow available to Capstone from the
  operating activities of Bristol Water.

The Corporation's financial results for the third quarter and first nine
months of 2012 primarily reflected the contribution from Bristol Water, which
was partially offset by lower production at the Corporation's power facilities
due to poor hydrology in Ontario in the third quarter, scheduled outages for
maintenance work, and lower production at Erie Shores Wind Farm. In addition,
the third quarter is typically the Corporation's seasonally lowest period of
the year due to wind and water patterns, the impact of warmer weather on
Cardinal's production and the timing of dividends from Bristol Water, which
are paid in the second and fourth quarters of the year. These drivers
culminated in a 110%, or $44.6 million, increase in consolidated revenue for
the quarter, and a 112%, or $138.7 million, increase for the year-to-date
period over the comparable periods in 2011.

Total expenses in the third quarter increased by 73.5%, or $21.3 million, over
the same period last year, excluding the costs related to the management
internalization that occurred in April 2011. For the first nine months of the
year, total expenses increased by 79.1%, or $67.0 million, over the same
period last year (excluding internalization costs). Higher costs were
primarily attributable to Bristol Water, which incurred $23.5 million and
$68.5 million in costs in the quarter and year-to-date period, respectively.

Adjusted EBITDA in the third quarter and first nine months of 2012 increased
by 84.7%, or $11.3 million, and 104%, or $45.7 million, respectively, over the
same periods in 2011 (excluding internalization costs), primarily reflecting
the contribution from Bristol Water and lower corporate administrative
expenses. During the quarter, these drivers were partially offset by lower
interest income from Värmevärden and lower revenue from the power segment
attributable to poor hydrology at the Wawatay and Dryden hydro power
facilities in Ontario and lower gas sales at Cardinal. For the year-to-date
period, the increase in Adjusted EBITDA also reflected the contribution from
the Amherstburg Solar Park, which commenced operations on June 30, 2011, and
interest income and dividends received from Värmevärden in the first six
months of the year.

Adjusted Funds from Operations (“AFFO”) in the third quarter decreased by
43.3%, or $2.6 million, and by 11.3%, or $2.8 million, in the year-to-date
period. The variance partly reflected the impact of amortizing debt, which was
lower in 2011, and the payment of dividends, including applicable taxes, on
the Corporation’s preferred shares, which were issued on June 30, 2011. These
factors alone had a $1.7 million impact on AFFO in the third quarter and a
$9.1 million impact on AFFO in the first nine months of the year.

Financial Performance Highlights by Segment

Power Infrastructure:

  In millions of      Quarter ended              Nine months ended
 Canadian dollars   Sep 30         Variance  Sep 30             Variance
  unless otherwise                    (%)                            (%)
  noted               2012   2011               2012     2011
  Power generated     418.2   435.7   (4.0)      1,358.9   1,374.8   (1.2)
  (GWh)
  Revenue             39.4    40.4    (2.4)      130.2     124.3     4.7
  Adjusted EBITDA     15.1    16.3    (7.1)      55.6      51.4      8.1
  AFFO                6.4     9.0     (29.7)     29.3      34.9      (16.0)

Revenue in the third quarter was 2.4%, or $1.0 million, lower than in 2011 and
4.7%, or $5.9 million, higher in the first nine months of the year compared to
the same period last year. Third quarter revenue reflected lower production
and revenue at the Wawatay and Dryden hydro power facilities due to poor
hydrology, lower gas sales at Cardinal following the expiry of the gas hedge
in 2011 and outages for scheduled maintenance compared with the same period
last year. These drivers were partially offset by higher revenue at
Amherstburg due to increased availability and sunnier conditions. Revenue in
the nine-month period primarily reflected the contribution from Amherstburg
and higher production at Erie Shores in the first quarter of 2012. In
addition, the Whitecourt biomass facility sold approximately $0.2 million and
$0.8 million in renewable energy credits (“RECs”) in the quarter and
year-to-date periods, respectively, some of which were related to historical
production.

Adjusted EBITDA for the quarter decreased by 7.1%, or $1.2 million, over the
same quarter last year and increased by 8.1%, or $4.2 million, in the first
nine months of the year over 2011. The quarterly variance primarily reflected
the lower revenue from the hydro power facilities and Cardinal while the
year-to-date variance primarily reflected the contribution of Amherstburg,
which commenced operations on June 30, 2011, in the first six months of 2012.
AFFO declined by 29.7%, or $2.6 million, and by 16.0%, or $5.6 million, in the
quarter and year-to-date periods, respectively, from 2011, reflecting lower
revenue, higher maintenance capital expenditures and higher debt service
expenses.

Utilities:

Water

 In millions of Canadian dollars unless   Quarter ended  Nine months ended
  otherwise noted                           Sep 30          Sep 30
                                            2012    2011   2012       2011
  Water supplied (megalitres)               20,248   —      61,370      —
  Revenue                                   45.6     —      132.8       —
  Adjusted EBITDA                           11.1     —      38.4        —
  AFFO                                      —        —      4.9         —

The Corporation’s interest in Bristol Water was acquired on October 5, 2011
and so there are no comparative results available for the third quarter and
first nine months of 2011. On May 10, 2012, the Corporation sold an interest
representing 20% of Bristol Water to a subsidiary of ITOCHU Corporation.

In the third quarter and year-to-date period for 2012, Bristol Water
represented approximately 53.6%, or $45.6 million, and approximately 50.5%, or
$132.8 million, respectively, of the Corporation’s revenue. Revenue at Bristol
Water in the quarter and year-to-date periods reflected higher rainfall and
cooler temperatures than usual in the Bristol region, which reduced metered
consumption of water.

In the quarter and year-to-date periods, Bristol Water represented
approximately 45.1%, or $11.1 million, and approximately 42.9%, or $38.4
million, respectively, of the Corporation’s Adjusted EBITDA.

District Heating

  In millions of      Quarter ended              Nine months ended
 Canadian dollars   Sep 30         Variance  Sep 30             Variance
  unless otherwise                    (%)                            (%)
  noted               2012    2011              2012      2011
  Heat production     125      149    (16.1)     726        416      74.5
  (GWh)
  Interest income     0.7      1.7    (60.0)     2.7        3.4      (20.6)
  Adjusted EBITDA     0.7      1.7    (60.0)     3.7        3.4      8.6
  and AFFO
  ^1 Only six months of activity from the date of acquisition are included in
  the nine months ended June 30, 2011.

During the third quarter of 2012, Värmevärden paid $0.7 million of interest
income to the Corporation compared with $1.7 million of interest income in the
third quarter last year. Interest income in the quarter declined from the
prior year period because the Corporation repatriated approximately $50
million of capital in March 2012, thereby reducing the balance outstanding on
the shareholder loan receivable.

Financial Position

As at September 30, 2012, the Corporation had cash and cash equivalents of
$56.9 million, including $14.4 million from the power segment and $40.7
million from Bristol Water, which, along with $111.1 million added in credit
capacity during the quarter, will be used to support Bristol Water's capital
investment program. Approximately $10.3 million of the Corporation’s total
cash and cash equivalents, including $8.5 million from the power segment and
$1.8 million at the corporate level, is available for general corporate
purposes. As at September 30, 2012, the Corporation’s debt to capitalization
ratio was 60.3%, reflecting a 16.3% increase in the common share price since
December 31, 2011 and a $220.8 million decrease in the fair value of debt due
to the repayment of $112.4 million in debt related to the acquisition of
Bristol Water and a $105.6 million adjustment to reflect Capstone's 50%
proportionate share of Bristol Water's debt.

Outlook^1

The Corporation continues to expect stable operational performance from its
portfolio in 2012. The Corporation’s outlook for each of its business segments
is provided in its interim financial report on pages 15 to 18. Adjusted EBITDA
in 2012 is currently expected to be approximately $110 to $120 million  based
on the Corporation’s current portfolio and assumptions.

The Corporation’s remaining strategic priorities for 2012 include:

Securing a new PPA for Cardinal.

The Corporation continues to negotiate with the Ontario Power Authority
(“OPA”) to achieve a fair outcome on Cardinal that balances value for Ontario
ratepayers, value for Cardinal’s industrial partner and value for the
Corporation’s shareholders. While the Corporation is striving to complete a
new contract in 2012 and remains in negotiations with the OPA, the current
political situation in Ontario could affect the timing and terms of a new
contract.

Maximizing the performance of its existing businesses.

The Corporation continues to identify and pursue opportunities to improve the
operational performance, availability and cash flow of the power
infrastructure businesses, including the sale of RECs by Whitecourt.

Continuing to evaluate new investment opportunities.

With a stronger balance sheet, the Corporation has resumed the evaluation and
pursuit of new growth opportunities in order to continue to build value for
shareholders.

Dividend Declarations

The Board of Directors today declared a quarterly dividend of $0.075 per
common share for the quarter ending December 31, 2012 on the Corporation’s
outstanding common shares. The dividend will be payable on January 31, 2013 to
shareholders of record at the close of business on December 31, 2012.

The Board of Directors also declared a dividend on its Cumulative 5-Year Rate
Reset Preferred Shares, Series A (the “Preferred Shares”) of $0.3125 per
Preferred Share to be paid on or about January 31, 2013 to shareholders of
record at the close of business on January 15, 2013. The dividend on the
Preferred Shares covers the period from November 1, 2012 to January 31, 2013.

In respect of the Corporation’s January 31, 2013 common share dividend
payment, the Corporation will issue common shares in connection with the
reinvestment of dividends to shareholders enrolled in the Corporation’s
Dividend Reinvestment Plan. The price of common shares purchased with
reinvested dividends will be the previous five-day volume weighted average
trading share price on the Toronto Stock Exchange, less a 5% discount.

The dividends paid by the Corporation on its common shares and the Preferred
Shares are designated “eligible” dividends for purposes of the Income Tax Act
(Canada). An enhanced dividend tax credit applies to eligible dividends paid
to Canadian residents.

A distribution of $0.075 per unit will also be paid on January 31, 2013 to
holders of record on December 31, 2012 of Class B Exchangeable Units of MPT
LTC Holding LP, which is a subsidiary entity of the Corporation.

Dividend Reinvestment Plan

Learn more about the Corporation’s Dividend Reinvestment Plan (“DRIP”) at
http://www.capstoneinfrastructure.com/InvestorCentre/StockInformation/DRIP.aspx.

Q3 Conference Call and Webcast

The Corporation will hold a conference call and webcast (with accompanying
slides) on Wednesday, November 14, 2012 at 8:30 a.m. ET to discuss third
quarter results. To listen to the call from Canada or the United States, dial
1-800-319-4610. If calling from elsewhere, dial +1-604-638-5340. A replay of
the call will be available until November 28, 2012. For the replay, from
Canada or the United States, dial 1-800-319-6413 and enter the code 1385#.
From elsewhere, dial +1-604-638-9010 and enter the code 1385#. The event will
be webcast live with an accompanying slide presentation on the Corporation’s
website at www.capstoneinfrastructure.com.

About Capstone Infrastructure Corporation

Capstone Infrastructure Corporation’s mission is to build and responsibly
manage a high quality portfolio of infrastructure businesses in Canada and
internationally in order to deliver a superior total return to shareholders by
providing reliable income and capital appreciation. The Corporation’s
portfolio currently includes investments in gas cogeneration, wind, hydro,
biomass and solar power generating facilities, representing approximately 370
MW of installed capacity, a 33.3% interest in a district heating business in
Sweden, and a 50% interest in a regulated water utility in the United Kingdom.
Please visit www.capstoneinfrastructure.com for more information.

Notice to Readers

Certain of the statements contained within this document are forward-looking
and reflect management’s expectations regarding the future growth, results of
operations, performance and business of the Corporation based on information
currently available to the Corporation. Forward-looking statements and
financial outlook are provided for the purpose of presenting information about
management’s current expectations and plans relating to the future and readers
are cautioned that such statements and financial outlook may not be
appropriate for other purposes. These statements and financial outlook use
forward-looking words, such as “anticipate”, “continue”, “could”, “expect”,
“may”, “will”, “estimate”, “plan”, “believe” or other similar words, and
include, among other things, forward-looking statements concerning the
Corporations new dividend policy, the outlook for the Corporation's power
infrastructure facilities; Swedish district heating business ("Värmevärden")
and the UK water utility ("Bristol Water"). These statements and financial
outlook are subject to known and unknown risks and uncertainties that may
cause actual results or events to differ materially from those expressed or
implied by such statements and financial outlook and, accordingly, should not
be read as guarantees of future performance or results. The forward-looking
statements and financial outlook within this document are based on information
currently available and what the Corporation currently believes are reasonable
assumptions, including the material assumptions set out in the management’s
discussion and analysis of the results of operations and the financial
condition of the Corporation (“MD&A”) for the year ended December 31, 2011
under the heading “Results of Operations”, as updated in subsequently filed
interim MD&A of the Corporation (such documents are available under the
Corporation’s profile on www.sedar.com).

Other material factors or assumptions that were applied in formulating the
forward-looking statements and financial outlook contained herein include or
relate to the following: that the business and economic conditions affecting
the Corporation’s operations will continue substantially in their current
state, including, with respect to industry conditions, general levels of
economic activity, regulations, weather, taxes and interest rates; the
contribution from Bristol Water reflecting the Corporation’s reduced ownership
interest as at May 10, 2012; a TransCanada Pipelines (“TCPL”) gas
transportation toll of approximately $2.24 per gigajoule in 2012; no material
change in the level of gas mitigation revenue earned by the Cardinal facility;
that there will be no unplanned material changes to the Corporation’s
facilities, equipment or contractual arrangements, no unforeseen changes in
the legislative, regulatory and operating framework for the Corporation’s
businesses, no delays in obtaining required approvals, no unforeseen changes
in rate orders or rate structures for the Corporation’s power infrastructure
facilities, Värmevärden or Bristol Water, no unfavourable changes in
environmental regulation and no significant event occurring outside the
ordinary course of business; that there will be no further amendments by the
Ontario government to the regulations governing the mechanism for calculating
the Global Adjustment (which affects the calculation of the price escalators
under each power purchase agreement (a “PPA”) for the Cardinal facility and
the hydro power facilities located in Ontario); the accounting treatment for
Bristol Water’s business under International Financial Reporting Standards,
particularly with respect to accounting for maintenance capital expenditures;
no material change to the amount and timing of capital expenditures by Bristol
Water; no material change to the Swedish Krona to Canadian dollar exchange
rate; no material change to the UK pound sterling to Canadian dollar exchange
rate; and that Bristol Water will operate and perform in a manner consistent
with the regulatory assumptions underlying its current asset management plan,
including, among others: real and inflationary increases in Bristol Water’s
revenue, Bristol Water’s expenses increasing in line with inflation, and
capital investment, leakage, customer service standards and asset
serviceability targets being achieved.

Although the Corporation believes that it has a reasonable basis for the
expectations reflected in these forward-looking statements and financial
outlook, actual results may differ from those suggested by the forward-looking
statements and financial outlook for various reasons, including risks related
to: variability and payments of dividends on the Corporation’s common shares,
which are not guaranteed; volatile market price for the Corporation’s
securities; availability of debt and equity financing; default under credit
agreements; credit risk, prior ranking indebtedness and absence of covenant
protection for holders of the Corporation’s convertible debentures; dependence
on subsidiaries and investees; acquisitions; geographic concentration and
non-diversification; foreign exchange risk; reliance on key personnel;
insurance; shareholder dilution; derivatives risks; changes in legislation and
administrative policy; competition; private companies and illiquid securities;
operational performance; PPAs; fuel costs and supply; contract performance;
Amherstburg Solar Park technology risk; land tenure and related rights;
environmental, health and safety regime; regulatory regime and permits; force
majeure; influence of the UK water regulator (“Ofwat”) price determinations;
failure of Bristol Water to deliver capital investment programs; failure of
Bristol Water to deliver water leakage target; Ofwat’s introduction of the
Service Incentive Mechanism and the serviceability assessment; economic
environment, inflation and capital market conditions; pension plan
obligations; operational risks; competition; default under Bristol Water’s
artesian loans, bonds, debentures and credit facility; seasonality and climate
change; labour relations; special administration; general risks inherent in
the district heating sector; industrial and residential contracts; default
under Värmevärden’s bonds; and minority interest. Further information
regarding these risk factors is contained in the Corporation’s Annual
Information Form (which is available under the Corporation’s profile on
www.sedar.com).

The assumptions, risks and uncertainties described above are not exhaustive
and other events and risk factors could cause actual results to differ
materially from the results and events discussed in the forward-looking
statements and financial outlook. The forward-looking statements and financial
outlook within this document reflect current expectations of the Corporation
as at the date of this document and speak only as at the date of this
document. Except as may be required by applicable law, the Corporation does
not undertake any obligation to publicly update or revise any forward-looking
statements or financial outlook.

^1See Notice to Readers

Contact:

Capstone Infrastructure Corporation
Sarah Borg-Olivier,(416) 649-1325
Senior Vice President, Communications
sborg-olivier@capstoneinfrastructure.com