SEA BREEZE POWER CORP. MANAGEMENT S DISCUSSION AND ANALYSIS FOR YEAR ENDED DECEMBER 31, 2013

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1 The following discussion of the financial results for Sea Breeze Power Corp. ( the Company ) and all its subsidiaries and partnership arrangements should be read in conjunction with the audited consolidated annual financial statements for the year ended December 31, 2013 and December 31, All sums of money presented in this Management Discussion & Analysis (MD&A) are expressed in Canadian dollars, unless otherwise indicated. This MD&A was prepared, reviewed and authorized by the Board of Directors on April 29, 2014 (the Report Date ). FORWARD LOOKING INFORMATION Certain information regarding the Company set forth in this document, including management s assessment of the Company s future plans and operations, contain forward-looking statements that involve substantial known and unknown risks and uncertainties. These forward-looking statements are subject to numerous risks and uncertainties, which are beyond the Company s control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, precision of resource estimates, environmental risks, competition from other energy companies, lack of availability of qualified personnel or management, stock market volatility and ability to access sufficient capital from both internal and external sources. The Company s actual results, performance or achievement could differ materially from those expressed, or implied by these forwardlooking statements, and accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire. The following table outlines certain significant forward-looking statements contained in this MD&A and provides the material assumption used to develop such forward-looking statements and material risk factors that could cause actual results to differ materially from the forward-looking statements. Forward-looking Information Key Assumptions Relevant Risk Factors Cash balance and funding requirements Environmental impact The Company continues to follow the corporate budget as approved by the Board Minimal impact on the local wildlife and environment based on studies conducted Unforeseen expenses may arise for the Company that may affect Company s goals and priorities Environmental Assessment certificates and other approvals may restrict or delay the project Regulatory approvals Capital cost of renewal energy Maintaining project permits and occupancy licences from government agencies The demand for renewable energy will make the projects viable Permits and licences have requirements relating to the amount of work performed, maintaining public, First Nation and government support The fluctuation of the market price of renewable energy can adversely affect the profitability of the Company 1 of 14

2 NATURE OF OPERATIONS Sea Breeze Power Corp. (the Company ) is in the business of developing utility-scale renewable energy, and through jointly owned special purpose vehicles, developing independent transmission systems. The Company is currently focused on further developing its renewable energy sites, and on obtaining longterm power purchase agreements in the British Columbia and western U.S. markets. On the transmission side, the Company is furthering development work on its transmission projects and is in the negotiation stage for commercial contracting on its first project, the Juan de Fuca Cable. Sea Breeze also provides consulting services to third parties on matters and activities relating to renewable energy technologies. The present geographic focus for the Company s wind projects is British Columbia, with its transmission activities extending from British Columbia to California. The Company was incorporated on January 18, 1979 pursuant to the British Columbia Company Act, as a British Columbia, Canada, corporation, under the name Northern Horizon Resource Corporation. Effective July 29, 2003 the Company changed its name to Sea Breeze Power Corp. The corporate offices for the Company are located at Suite Seymour Street, Vancouver, British Columbia, Canada V6B 5A6, telephone (604) The registered and records office of the Company is located at Suite West Georgia Street, Vancouver, British Columbia, Canada V6E 4N7, telephone (604) Sea Breeze has exceptional in-house capabilities in wind assessment, consultation, environmental planning, and permit management. Due to the cross-border nature of its projects, the Company s expertise now extends to both US and Canadian markets. Sea Breeze has also developed strong working relationships with experts in the fields of electrical transmission, engineering and design, and energy project permitting. The Company has assembled a knowledgeable environmental permitting team, who are leaders in wind energy, and environmental studies and assessment. Renewable Energy Sea Breeze Power Corp. s business activities in renewal energy date to 1990 when Powerhouse Developments Inc. (now a wholly owned subsidiary of the Company) was formed, with the purpose of acquiring the original hydroelectric powerhouse site of Cascade Power & Light on the Kettle River in south-central British Columbia. The historic Cascade facility had been built in 1898 and was among the first generators to produce alternating current for commercial purposes. Hydroelectric Projects The Cascade Heritage Power Project ( Cascade ) has been re-designed as a modern, low impact, 28 MW run-of-river hydroelectric facility suitable to the geography of the Cascade Falls site. Permit approval for the development was received on August 4, The Cascade project recently was granted a fiveyear extension to its Environmental Assessment Certificate by the BC Environmental Assessment Office. The Company is still optimistic that the project is viable for future development with a suitable partner. The Company continues to keep the Cascade project permits and licences in good standing. Wind Farm Projects In 2002, Sea Breeze Energy Inc. ( SBE, a wholly owned subsidiary of Sea Breeze Power Corp.) became the first private entity within British Columbia to identify and act upon wind power generation as a business opportunity. It was the first renewable energy company to apply for provincial lands for the investigation of wind potential, and the first company to be granted environmental approvals for the 2 of 14

3 construction of a wind farm facility in British Columbia. Sea Breeze Energy and its affiliate companies currently hold 44 investigative use permits for wind farms on approximately 173,000 hectares of land in British Columbia. Another 3 permits covering 15,000 hectares of land are currently under application. These properties are in various stages of development and are in the following areas: Twelve properties on northern Vancouver Island. Fourteen properties on the Central Coast. Four properties in the Peace region. Twelve properties in the Okanagan region. Five properties in the Central Interior region. a) Cape Scott Wind Farm (formerly Knob Hill Phase 1) The Cape Scott Wind Farm is a wind energy project on northern Vancouver Island with a permitted area of over 4,400 hectares (approximately 10,900 acres). In 2011, SBE closed an Asset Purchase transaction with GDF Suez North America for the 99 MW Phase 1 of the Cape Scott Wind farm. SBE will receive an ongoing royalty based on a percentage of gross revenue generated by the project through the 20 year BC Hydro EPA. The first commercial energy royalty payment was received on April 10, 2014 in the amount of $107, b) Knob Hill Phase 2 Sea Breeze Energy continues to develop its Knob Hill Phase 2 project. The Company is currently investigating whether a portion of the project area available could be viable under BC Hydro s Standing Offer Program. c) Okanagan Region Sea Breeze Energy and its affiliates are in active discussions with local First Nations to develop the Bouleau Mountain Wind Farm project, including work on the ground during the upcoming 2014 field season to install up to four meteorological towers. In 2013, SBE installed four meteorological towers in the Okanagan region (1-Pothole. 1-Wart and 2-Bouleau Mountain). d) Strategic Planning The Company, through its wholly owned subsidiary SB Central Coast Holdings (01) Corp., intends to further develop its project on Aristizabal Island in A meteorological tower was installed in 2012 and bird/bat studies are planned for the future. The Company will continue to look for suitable partners to further advance Aristizabal and other wind sites. Transmission Systems In 2003, the Company undertook a comprehensive investigation of independent transmission options for the large-scale sale of power from British Columbia to potential customers in the United States. The review of transmission options culminated in a Joint Venture Agreement being executed with Boundless Energy LLC, of York Harbor, Maine, for development of several independent transmission projects. Thus far Sea Breeze s association with Boundless Energy LLC has resulted in three major transmission project 3 of 14

4 initiatives that have been the subject of public disclosure, along with several other potential major projects either in the conceptual or negotiation stages. Through an indirect interest in Sea Breeze Pacific Juan de Fuca Cable, LP ( SBPRJF ), the Company is actively developing the Juan de Fuca Transmission Corridor ( JDF Cable Project 1 estimated to cost US$ 665 million). Through its 50% owned subsidiary, Sea Breeze Pacific Regional Transmission System, Inc., ( SBP-RTS ) is proposing the development of the West Coast Cable, a 650-mile 1600 MW cable to be routed offshore between San Francisco Bay and the Columbia River. Such a cable would enable US utilities to access inexpensive hydroelectric energy from the Pacific Northwest, and, through the new Juan de Fuca corridor, also provide access to the vast renewable energy resources of western Canada. On October 28, 2013, the Company, through its wholly-owned subsidiary Sea Breeze Power Projects Inc., submitted an unsolicited Term Sheet to the British Columbia Ministry of Energy and Mines for their consideration, proposing a transaction whereby the Province of British Columbia would purchase 550 MW of firm power (24/7) for a 10-year period, at a price of $69 per megawatt hour. Other Renewable Projects The Company through its wholly owned subsidiary, Sea Breeze MicroGrid Systems Inc. ("SBMS"), aims to develop a high-penetration drop-in renewable-diesel-storage hybrid energy system as a means to address and resolve a multitude of energy concerns facing isolated northern communities. SBMS initiated discussions with the Vuntut Gwitchin First Nation to see how they could assist the community in achieving their expressed energy objectives. The prefeasibility study for this project has been completed. Wind and solar resources were reviewed to determine if either is strong enough to provide a sufficient amount of energy to meet the community's power needs. In early 2014, the Company was engaged to do to meteorology tower install and removal work in Northwest Territories. Also in early 2014, the Company s wholly-owned subsidiary, Sea Breeze Power Projects, entered into a non-binding Letter of Intent with another renewal energy company to help develop a plan for integrating renewal energy into a mining site. RESULTS FROM OPERATIONS This Management Discussion and Analysis (MD&A) is to be read in conjunction with the audited consolidated annual Financial Statements for the year ended December 31, These financial statements were prepared on a going-concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. As at December 31, 2013, the Company s assets were in Canada. Monetary items denominated in a foreign currency are translated to Canadian dollars at exchange rates in effect at the period end date. The resulting foreign exchange gains and losses are included in the Statement of Comprehensive Loss. The audited consolidated annual financial statements and comparative information have been prepared in accordance with International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board ( IASB ), effective December 31, The Company reported net loss of $2,082,497 (2012 gain $3,227,423) for the period ended December 31, 2013, and has an accumulated deficit of $44,262,166 at December 31, The Company has cash 4 of 14

5 and cash equivalent on hand of $777,693 as of December 31, The Company has sufficient working capital for its operations but will continue to explore opportunities to raise additional working capital. Financing During the year ended December 31, 2013, the Company received $68,078 from consulting services and 22,441 from interest income. SUMMARY OF QUARTERLY RESULTS The following table summarizes the quarterly results from Sea Breeze Power Corp s financial statements, prepared in accordance with IFRS: Table1. Summary of Quarterly Results Project Development Costs G&A Proceeds on Sale of project Net Income/(Loss) EPS 2013 Fourth Quarter $ 21,053 $ 700,866 $1,750,000 $ 751,056 $ 0.01 Third Quarter 469, ,413 - ($896,026) (0.01) Second Quarter 352, ,603 - ($1,004,720) (0.01) First Quarter 288, ,650 - $(932,807) (0.01) 2012 Fourth Quarter $ 1,274,940 $ 731,637 $ 1,500,000 $ (1,070,451) $ (0.01) Third Quarter 589, , ,000 (292,251) 0.00 Second Quarter 736, ,228 7,000,000 5,519, First Quarter 294, ,087 - (929,721) (0.01) 5 of 14

6 Current Quarter The Company s cash and cash equivalent position decreased from $1,374,481 to $777,693. The decrease in funds was mostly used to fund project expenditures and normal operating expenditures. Accounts receivable increased from $44,813 to $1,825,962 mainly due accrual of the sixth and final milestone ($1,750,000). The milestone was deemed to be payable by GDF Suez when the Cape Scott Wind Farm started commercial operations on November 26, Prepaid expenses and deposits increased by $5,840 due to prepayment of business insurance for the period January 2014 September Accounts payable and accrued liabilities decreased by $397,267 in the quarter due to the reversal of old outstanding trade invoices being written off and an adjustment of the royalty fee accrual. Loans payable increased in the quarter by $271,457 based mainly on interest and foreign exchange accrued of $165,977 and the reallocation of a matured convertible debenture (US$100,000) to loans payable. Year Ended December 31, 2013 Results of operations for the year ended December 31, 2013 are discussed in comparison with the year ended December 31, Administration expense in 2013 was $2,496,532 (2012 $2,599,313), a decrease of $102,781 compared to the comparative fiscal year. The following highlights the notable changes: Foreign exchange was a loss in 2013 compared to a gain in The net effect is $109,948. The USD dollar had strengthen to CAD on December 31, 2013 versus CAD at December 31, 2012; Bank and Interest expense was lower in 2013 due to reallocation of prior year interest expense to interest on convertible debentures; The adjustment amount was $61,110 Interest on convertible debentures was a decrease of $150,516 due to maturity of two convertible debentures during the year. The two debentures totaling 2,606,360 were reallocated to loans payable; Professional fees decreased in 2013 by $55,321 mainly due to the fact that no audit accrual was made for the 2011 audit fee, hence the amount of $60,000 was recorded in This has no impact to 2013; Consulting decrease by $36,459 due to the one of the officers of the company switching from consultant to employee in July Salaries and benefits had increased in 2013 by $66,310 as several staff members switch from consultants to employees; The decrease in project related expenditures of $1,764,158 in 2013 were mainly attributable to an adjustment in royalty fee accrual and decrease work in the wind division. Also there were less resources working on the transmission projects, which contributed to decrease of $486,313. The Company s resources were shifted from wind projects to the other renewable projects, hence other renewal projects expenditures increased by $267,625 in of 14

7 Year Ended, 2013 (IFRS) 2012 (IFRS) 2011 (IFRS) Total Administration Expenses $ 2,496,532 $ 2,599,313 $ 3,095,424 Net Income/(Loss) $ (2,082,497) $ 3,227,423 $ (1,541,091) Basic loss per share (0.02) 0.04 (0.02) Assets $ 2,951,491 $ 4,016,829 $ 384,473 Long-term liabilities $ 5,439,020 $ 3,763,589 $ 5,642,763 A detail breakdown of the Administration expenses can be found in the consolidated financial statements for the year ended December 31, Projects under development relate to the costs of land and associated holdings, development, approval and proposals on projects held for future development as electricity generation sites. Directly related management fees, overhead costs, and interest costs are allocated to the projects under development based on the level of expenditures incurred. Wind Farm Projects During the year ended December 31, 2013, the Company incurred $435,764 ( $1,972,274) in wind farm related expenditures. Corresponding costs were project consulting, professional fees and project administration costs, necessary to design and install improved meteorological towers (i.e. more resilient to wind inflicted stress, improved instruments for automated data transmission, advanced software for analysis of wind data, etc). Table 2: Projects Percent of Total Vancouver Island 19.1% $83,187 $1,315,305 Central Coast Region 18.6% 81, ,429 Peace Region 4.4% 19,130 28,221 Okanagan 51.1% 222, ,668 North Coast 0.7% 3,145 43,335 Other 6.1% 26,677 53,316 Total Expenses % $435,764 $1,972,274 7 of 14

8 Table 2.1: Breakout by Account Data analysis and modeling 90, ,048 Overhead (356,974) 805,692 Permitting 53, ,674 Professional fees 160, ,524 Research and report writing 53,494 66,325 Travel and public relations 202, ,950 Met Tower installations 233, ,062 Total Expenses $435,764 $1,972,274 Hydroelectric Projects During the year ended December 31, 2013, the Company incurred $24,440 in project expenditures ( $33,400) towards its Cascade project. The expenditures were related to property taxes on the parcel of land the Cascade project owns. Transmission Projects During the year ended December 31, 2013, the Company spent $233,084 ( $719,397) on the development of transmission projects. The majority of the expenditure relates to internal labour supporting the Juan de Fuca Project. The Juan de Fuca Project has been granted major permits including a Presidential Permit issued by the US Department of Energy. The Juan de Fuca Project is the integral piece of the unsolicited Term Sheet that was submitted to the BC Ministry of Energy and Mines on October 28, Other Renewable Projects During the year ended December 31, 2013, the Company spent $438,738 ( $171,113) on the development of other projects. These other projects involve preparing prefeasibility studies for wind projects in the Yukon, Northwest Territories and reviewing potential synergies with deployable grid-scale energy storage. The expenditures for these projects mainly consist of labour and travel expenditures. Through the Company s subsidiary, Sea Breeze Yukon Project Inc., the Company applied and was successful in obtaining approximately $18,000 in funding to be used in potential renewable studies in the Yukon. LIQUIDITY The Company, through its subsidiary Sea Breeze Energy Inc., has entered into Phase 1 agreement with International Power Canada (IPC) on future development on the Cape Scott Wind Farm. The Company has since received all six milestone payments totalling $11,635,000 ($365,000 was netted in the Impacts Benefit Agreement from the total $12 million). 8 of 14

9 Other wind farm projects and the hydroelectric projects are not expected to generate any revenue until 2015 at the earliest. The Company s transmission projects are not expected to generate any revenue until 2015 at the earliest. Present and emerging trends in the industry indicate strong future demand for the Company s anticipated production of renewable energy. Notwithstanding those trends, there can be no assurance that further financing, either equity or debt, will always be available to the Company. To date, the Company has financed its operations principally through equity financing and loans. The application of the going concern concept is dependent upon continuing rights to the areas, obtaining necessary regulatory approvals, obtaining the necessary financing to complete development, and securing a power purchase agreement. The Company s ability to meet its obligations in the ordinary course of business is dependent upon the milestone events being met in the development of the Cape Scott Wind Farm and to obtain additional funding through public and private equity financing, or other arrangements with corporate or other sources. Management plans to continue raising capital through private placement equity financing. COMMITMENT AND OBLIGATIONS The Company s contractual obligations are shown in the table below: Table 3. Contractual Obligations as of December 31, 2013: Copier Office lease Total Total $12,935 Less than 1 year $3, years $7, Years $995 $106,356 $40,906 $65,450 $Nil $119,291 $44,886 $73,410 $995 The Company is currently on a month to month sublease after the 5 year sublease ended September The Company signed a 26 month sublease to remain at its current premise starting from March 1, 2014 April 29, SUBSEQUENT EVENTS Subsequent to December 31, 2013, the Company: Received final milestone payment of $1,750,000 from the Cape Scott Wind Farm project. Issued 15,293,391 common shares to settle outstanding debt of $1,501,644 relating to interest accrued on a convertible debenture which matured during the year ended December 31, A total of 6,375,983 stock options expired unexercised. 9 of 14

10 CAPITAL MANAGEMENT New installations of renewable generation equipment (wind or hydroelectric) typically cost in the range of US$ 3,000,000 per megawatt installed. By extension, a 100 MW farm would cost approximately US$300,000,000. Typically, the majority of the funding required for project construction (50% - 80%) comes in the form of senior debt. Sources of senior debt generally require environmental assessment approval and a power purchase agreement in place prior to advancing funds. The amount of project financing not covered by senior debt usually requires an investment of equity, provided by the developer, partners, or a purchaser of the project. Funding for renewable energy projects has been growing in availability in British Columbia over the past few years due to favourable changes in government policy, demand for this type of investment from the financial community, and growing recognition of the positive contribution that renewable energy will bring to the issue of global climate change both socially and economically. LOANS PAYABLE Loan payable to directors and companies controlled by directors with interest at 10% per annum, unsecured, due on demand Interest on loans payable to directors and companies controlled by directors, unsecured, non-interest bearing, due on demand (US$561,659) $ 2,600,489 $ 1,761, , ,972 Loan payable to a third party with interest at 12% per annum, unsecured, due on demand (US$100,000) 106,360 - Interest on loan payable to a third party, unsecured, due on demand, (US$6,855) 7,291 5,609 Loan payable to a third party, no interest, unsecured, due on demand 41,280 41,280 $ 3,352,801 $ 2,295,089 RELATED PARTY TRANSACTIONS All related party transactions and amounts owing are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. 10 of 14

11 a) Compensation and Benefits During the year ended December 31, 2013, the Company incurred $120,000 ( $120,000) in consulting fees to Banks Island Management Inc, a company controlled by a director and officer of the Company. An amount owing to this director at December 31, 2013 is $nil (2012- $nil). Further, the Company incurred $240,000 ( $240,000) for salaries for two officers of the Company. Included in accounts payable and accrued liabilities is $147,874 (2012- $10,874) owing to this officer. b) Interest Expenses i) Convertible debentures During the year ended December 31, 2013, the Company incurred $817,231 in interest (2012- $976,685) to directors or companies controlled by a director. As at December 31, 2013, accrued convertible debenture interest payable in shares included $3,169,959 ( $3,631,773) owing to directors or companies controlled by directors. ii) Loans During the year ended December 31, 2013, the Company incurred $74,555 in interest (2012- $97,713) to directors or companies controlled by a director. As at December 31, 2013, the loans payable balance was $3,195,454 (2012-$2,245,940) owing to directors or companies controlled by directors. c) Fees Charged to Partnership During the year ended December 31, 2013, the Company charged the JDFC partnership $261,982 ( $476,226) for travel, wages and consulting fees related to the JDF transmission project. d) Success Fees During the year ended December 31, 2013, the Company paid $24,000 (2012-$nil) in success fee to the Executive Vice President of the Company for the completion of milestones related to the sale of the Cape Scott Wind Farm. Included in the accounts payable and accrued liabilities is $137,000 (2012-$161,000) owing to the Chief Financial Officer and the Executive Vice President of the Company. e) Key Management Compensation Salaries, fees and other short term benefits $ 440,000 $ 440,000 Share based compensation - - Total $ 440,000 $ 440, of 14

12 Payments to key management personnel including the Chief Executive Officer and President, Chief Financial Officer, Executive Vice President, Corporate Secretary, and companies directly controlled by key management personnel are for consulting fees or management fees and are directly related to their position in the organization. Fees incurred charged by related parties have been allocated, based on time spent on projects, to project development costs, consulting, and salaries and benefits. The success fee paid was related to the completion of the transaction agreement between Sea Breeze Energy and GDF Suez on the Cape Scott Wind Farm project. SHARE CAPITAL Total issued and outstanding common shares as at April 29, 2014 were 115,336,934 (Dec.31, ,302,542). As of April 29, 2014, the Company has 2,680,000 stock options outstanding and exercisable with an average exercise price of $0.20. PROPOSED TRANSACTIONS None. CRITICAL ACCOUNTING ESTIMATES The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual outcomes could differ from these estimates. The consolidated financial statements include estimates which, by their nature, are uncertain. Significant assumptions about the future and other sources of estimation uncertainty that management has made at the statement of financial position date, that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate to, but are not limited to, the following: the estimated useful lives of property, plant and equipment which are included in the consolidated statement of financial position and the related depreciation included in the statements of profit and comprehensive income for the period; the inputs used in assessing the recoverability of deferred income tax assets to the extent that the deductible temporary differences will reverse in the foreseeable future and that the company will have future taxable income; the inputs in accounting for shares issued/issuable as interest payments on the convertible debentures. 12 of 14

13 CHANGES IN ACCOUNTING POLICIES The Company has adopted the new and revised standards, amendments and interpretations that were effective on or after January 1, 2013 but has not early adopted the new and revised standards, amendments and interpretations that have been issued but are not yet effective: IFRS 7 Financial Instruments - Requires disclosure of information about the significance of financial instruments to an entity, and the nature and extent of risks arising from those financial instruments, both in qualitative and quantitative terms IFRS 10 Consolidated Financial Statements- Establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one of more other entities IFRS 11 Joint Arrangements- Provides for a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangements, rather than its legal form IFRS 12 Disclosure of Interests in Other Entities- New Standard on disclosure requirements for all forms of interests in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities. IFRS 13 Fair Value Measurement New Standard to provide consistency among the IFRS that deal with fair value measurements. IAS 28 Investments in Associates and Joint Ventures - Outlines how to apply, with certain limited exceptions, the equity method to investments in associates and joint ventures. New Standards Yet Adopted IAS 32 Offsetting Financial Assets and Financial Liabilities (Amended) clarifies the offsetting criteria in IAS 32 by explaining when an entity currently has a legally enforceable right to set-off and when gross settlement is equivalent to net settlement. The amendments are effective for annual periods beginning on or after January 1, The Company does not expect the amendments to IAS 32 to have a material impact on the consolidated financial statements. IFRS 9 Financial Instruments was issued in November 2009 and covers the classification and measurement of financial assets as part of its project to replace IAS 39 Financial Instruments: Recognition and Measurement. In October 2010, the requirements for classifying and measuring financial liabilities were added to IFRS 9. Under this guidance, entities have the option to recognize financial liabilities at fair value through earnings. If this option is elected, entitles would be required to reverse the portion of the fair value change due to own credit risk out of earnings and recognize the change in other comprehensive income. IFRS 9 is applicable for periods beginning on or after January 1, The Company has not yet assessed the impact of the standard or determined whether it will adopt the standard early. 13 of 14

14 CONVERTIBLE DEBENTURES Convertible debentures $ 6,926,558 $ 7,775,443 Equity portion of convertible debenture (2,699,448) (2,986,636) 4,227,110 4,788,797 Interest accretion 1,211,910 1,469,957 Debt portion of convertible debenture 5,439,020 6,258,754 Less: current portion - (2,495,165) $ 5,439,020 $ 3,763,589 On June 16, 2013 three convertible debentures totaling $2,500,000 matured. The principal amounts owing were reallocated as loans payable pending instructions from the debenture holders. On November 26, 2013, one convertible debenture totaling US$100,000 matured and the principal amount was reallocated to loans payable. MARKET CONDITIONS With the recent events related to the credit crisis and slowdown in many of the world s economies, the Company has taken steps to review the impact from these events on its operations. Although the area of venture capital funding has been affected by the crisis, the Company still believes there is strong support from both government and public sectors in the clean power sector. Management is working to obtain sufficient working capital from external sources in order to continue operations, as well as further developing the Company s business model to obtain revenues from its wind, hydro-electric power generation, and transmission projects. The Company is continuing its best efforts to raise capital through private placement equity financing, issuance of convertible debentures and project partnership arrangements. As the demand for renewable energy increases, the Company believes that strategic partnerships and investments will be available in the near future. OTHER MD&A REQUIREMENTS Additional information relating to the Company is to be found on SEDAR at and on the Company s website: ADDITIONAL INFORMATION During year ended December 31, 2013, the Company has not been party to any legal proceedings. Achievement of the Company s future business objectives is reliant upon receipt of regulatory approval from a number of government agencies, both provincial and federal. There is no guarantee as to the eventual receipt of such approvals. 14 of 14