DEFM14A 1 tm216864-3_defm14a.htm DEFM14A tm216864-3_defm14a - none - 26.3596588s
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.   )
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Soliciting Material Pursuant to §240.14a-12
Atlantic Power Corporation
(Name of Registrant as Specified In Its Charter)
   
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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LETTER TO COMMON SHAREHOLDERS AND PREFERRED SHAREHOLDERS
[MISSING IMAGE: lg_atlanticpowercorp-pn.jpg]
ATLANTIC POWER CORPORATION
ATLANTIC POWER PREFERRED EQUITY LTD.
3 Allied Drive, Suite 155
Dedham, MA 02026
March 2, 2021
Dear Fellow Shareholder:
On January 14, 2021, Atlantic Power Corporation, a corporation existing under the laws of the Province of British Columbia (“Atlantic Power”, the “Company”, “we” or “us”), Atlantic Power Preferred Equity Ltd., a corporation existing under the laws of the Province of Alberta (“APPEL”) and Atlantic Power Limited Partnership, a limited partnership existing under the laws of the Province of Ontario (“APLP”) entered into an Arrangement Agreement (the “Arrangement Agreement”) with Tidal Power Holdings Limited, a private limited company existing under the laws of the United Kingdom, and Tidal Power Aggregator, L.P., a limited partnership existing under the laws of the Cayman Islands (together with Tidal Power Holdings Limited, the “Purchasers”), each of which was formed by funds managed by I Squared Capital Advisors (US) LLC (“I Squared Capital”). Under the terms of the Arrangement Agreement, Tidal Power Holdings Limited will acquire all of the outstanding common shares of Atlantic Power (the “Common Shares”) and all of the outstanding preferred shares (the “Preferred Shares”) of APPEL will be acquired by APPEL pursuant to a plan of arrangement (the “Arrangement”) to be approved by the Supreme Court of British Columbia (the “Court”) in accordance with Division 5 of Part 9 of the Business Corporations Act (British Columbia) (the “BCBCA”). If the Arrangement is completed, you will be entitled to receive US$3.03 in cash (less any applicable withholding taxes) for each Common Share and C$22.00 in cash (less any applicable withholding taxes) for each Preferred Share that you own.
A special meeting (the “Common Shareholder Meeting”) of holders of Common Shares (the “Common Shareholders”) will be held on April 7, 2021 at 10:00 a.m., Eastern Daylight Time, to vote on a resolution in favor of the Arrangement (the “Arrangement Resolution”).
A special meeting (the “Preferred Shareholder Meeting” and together with the Common Shareholder Meeting, the “Special Meetings”) of the holders of Preferred Shares (the “Preferred Shareholders”) will be held on April 7, 2021 at 11:00 a.m., Eastern Daylight Time, to vote on a resolution in favor of the Arrangement (the “Preferred Shareholder Resolution”) and a resolution in favor the continuance (the “Continuance”) of APPEL, prior to the completion of the Arrangement, from the jurisdiction of the Province of Alberta to the jurisdiction of the Province of British Columbia pursuant to Section 302 of the BCBCA and Section 189 of the Business Corporations Act (Alberta) (the “Continuance Resolution”). The Special Meetings will be held as virtual online meetings, available at https://web.lumiagm.com/422322246 (as to the Common Shareholder Meeting) and https://web.lumiagm.com/414674433 (as to the Preferred Shareholder Meeting). Notice of the Special Meetings and the related information circular and proxy statement are enclosed.
The accompanying information circular and proxy statement gives you detailed information about the Special Meetings and the Arrangement and includes the Arrangement Agreement as Annex D and the Plan of Arrangement as Annex E. The receipt of cash in exchange for Common Shares and/or Preferred Shares in the Arrangement will each constitute a taxable transaction to U.S. persons for U.S. federal income tax purposes and to Canadian persons for Canadian federal income tax purposes. We encourage you to read this information circular and proxy statement and the Arrangement Agreement carefully.
Atlantic Power’s board of directors (the “Board”), upon receipt of a unanimous recommendation of a special committee comprised of independent directors of the Board (the “Special Committee”) and after receiving advice from its legal and financial advisors, unanimously (i) determined that the transactions
 

 
contemplated by the Arrangement Agreement, including the Arrangement, are in the best interest of Atlantic Power (taking into account the interests of all affected stakeholders), (ii) determined that the US$3.03 per Common Share consideration to be received by Common Shareholders pursuant to the Arrangement is fair to the Common Shareholders, and (iii) resolved to recommend that the Common Shareholders vote in favor of the Arrangement Resolution. The board of directors of APPEL (the “APPEL Board”), upon receipt of a unanimous recommendation from the Special Committee and after receiving advice from its legal and financial advisors, unanimously (i) determined that the transactions contemplated by the Arrangement Agreement, including the Arrangement and the Continuance, are in the best interests of APPEL (taking into account the interests of all affected stakeholders), (ii) determined that the C$22.00 per Preferred Share consideration to be received by the Preferred Shareholders pursuant to the Arrangement is fair to such Preferred Shareholders, and (iii) resolved to recommend that the Preferred Shareholders vote in favor of the Preferred Shareholder Resolution and the Continuance Resolution. The Board and the APPEL Board reached their respective determinations after considering a number of factors, including, but not limited to, (i) the fact that an active and engaged Special Committee composed entirely of independent members of the Board approved the Arrangement Agreement and the transactions contemplated thereby and (ii) the belief of each of the Board and the APPEL Board, based on their knowledge of Atlantic Power’s long-term strategic goals and opportunities, that the value offered to Common Shareholders and Preferred Shareholders pursuant to the Arrangement and the Continuance is more favorable to the Common Shareholders and Preferred Shareholders than the potential value that might reasonably be expected to result from Atlantic Power remaining an independent, publicly-traded company. For further information regarding the Board’s and the APPEL Board’s recommendations and the reasons for their respective recommendations, please see the section entitled “The Arrangement — Background to the Arrangement,” beginning on page 26 of the enclosed information circular and proxy statement, “The Arrangement — Recommendation of the Special Committee to the Board of Atlantic Power and Its Reasons for the Recommendation”, beginning on page 33 of the enclosed information circular and proxy statement and “The Arrangement — Recommendation of the Board of Atlantic Power and its Reasons for the Recommendation” beginning on page 39 of the enclosed information circular and proxy statement.
Your vote is very important.   The Arrangement must be approved by no less than two-thirds of (A) the votes cast by Common Shareholders present in person or represented by proxy at the Common Shareholder Meeting and (B) the votes cast by Preferred Shareholders, voting as a single class, present or represented by proxy at the Preferred Shareholder Meeting. The Continuance must be approved by no less than two-thirds of the votes cast by Preferred Shareholders, voting together as a single class, present or represented by proxy at the Preferred Shareholder Meeting. The Board recommends that Common Shareholders vote FOR the Arrangement Resolution and the APPEL Board recommends that Preferred Shareholders vote FOR the Preferred Shareholder Resolution and the Continuance Resolution.
Common Shareholders will also be asked to vote on a proposal to approve certain compensation that will or may be paid to our named executive officers by Atlantic Power based on or otherwise relating to the Arrangement (the “NEO arrangement-related compensation proposal”), as required by the rules adopted by the U.S. Securities and Exchange Commission, and Common Shareholders will also be asked to vote on a proposal to approve the adjournment of the Common Shareholder Meeting to solicit additional proxies if there are insufficient votes at the time of the Common Shareholder Meeting to approve the Arrangement Resolution. The NEO arrangement-related compensation proposal requires the affirmative vote of a majority of the votes cast by Common Shareholders present or represented by proxy at the Common Shareholder Meeting and entitled to vote thereon. The proposal to adjourn the Common Shareholder Meeting must be approved by no less than a majority of the votes cast by Common Shareholders present in person or represented by proxy at the Common Shareholder Meeting. The Board recommends that shareholders vote FOR each of these proposals.
Whether or not you plan to attend the Special Meetings, please complete, date, sign and return, as promptly as possible, the enclosed proxy card in the accompanying reply envelope or by facsimile, or submit your proxy by telephone or the Internet. Common Shareholders who attend the Common Shareholder Meeting and Preferred Shareholders who attend the Preferred Shareholder Meeting virtually may revoke their proxies and vote in person at the virtual meetings.
The Board and APPEL Board appreciate your continuing support of Atlantic Power.
 

 
Sincerely,
/s/ “James J. Moore, Jr.”
James J. Moore, Jr.
President and Chief Executive Officer
Neither the Securities and Exchange Commission nor any state, provincial or territorial securities regulatory agency has approved or disapproved the Arrangement, passed upon the merits or fairness of the Arrangement or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.
The information circular and proxy statement is dated March 2, 2021, and is first being mailed to Common Shareholders and Preferred Shareholders on or about March 2, 2021.
 

 
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ATLANTIC POWER CORPORATION
3 Allied Drive, Suite 155
Dedham, MA 02026
NOTICE OF SPECIAL MEETING OF COMMON SHAREHOLDERS
To Be Held on April 7, 2021
Dear Shareholder:
PLEASE TAKE NOTICE that a special meeting of holders (the “Common Shareholders”) of common shares (the “Common Shares”) of Atlantic Power Corporation, a corporation existing under the laws of the Province of British Columbia (“Atlantic Power”, the “Company”, “we” or “us”), will be held on April 7, 2021, at 10:00 a.m., Eastern Daylight Time, virtually via the Internet at https://web.lumiagm.com/422322246 (the “Common Shareholder Meeting”), for the following purposes:
(1)
To consider, pursuant to an interim order of the Supreme Court of British Columbia, dated as of February 23, 2021 (the “Interim Order”) and, if deemed advisable, to pass, with or without variation, a special resolution (the “Arrangement Resolution”) to approve an arrangement (the “Arrangement”) in accordance with Division 5 of Part 9 of the Business Corporations Act (British Columbia) (the “BCBCA”) pursuant to the Arrangement Agreement (the “Arrangement Agreement”), dated as of January 14, 2021, by and among the Company, Atlantic Power Preferred Equity Ltd., a corporation existing under the laws of the Province of Alberta, Atlantic Power Limited Partnership, a limited partnership existing under the laws of the Province of Ontario, Tidal Power Holdings Limited, a private limited company existing under the laws of the United Kingdom, and Tidal Power Aggregator, L.P., a limited partnership existing under the laws of the Cayman Islands (together with Tidal Power Holdings Limited, the “Purchasers”), to effect among other things, the acquisition by the Purchasers of all of the outstanding Common Shares in exchange for US$3.03 in cash (less any applicable withholding taxes) per Common Share.
(2)
To consider and vote on a proposal to approve, by non-binding, advisory vote, certain compensation arrangements for the Company’s named executive officers in connection with the Arrangement (the “NEO arrangement-related compensation proposal”).
(3)
Subject to the provisions of the Arrangement Agreement, to consider and vote on the proposal to approve the adjournment or postponement of the Common Shareholder Meeting, if necessary, to solicit additional proxies if there are insufficient votes at the time of the meeting to approve the Arrangement Resolution.
(4)
To act upon other business as may properly come before the Common Shareholder Meeting and any and all adjourned or postponed sessions thereof.
The record date for the determination of Common Shareholders entitled to notice of and to vote at the Common Shareholder Meeting is February 16, 2021. Accordingly, only Common Shareholders of record as of that date will be entitled to notice of and to vote at the Common Shareholder Meeting or any adjournment or postponement thereof. A list of our Common Shareholders entitled to vote at the Common Shareholder Meeting will be available at our principal executive offices at 3 Allied Drive, Suite 155, Dedham, MA 02026 during ordinary business hours for ten days prior to the Common Shareholder Meeting. Requests to inspect the list prior to the Common Shareholder Meeting should be addressed to our Investor Relations department at our principal executive offices.
Please read the accompanying information circular and proxy statement carefully as it sets forth details of the proposed Arrangement and other important information related to the Arrangement.
 

 
Your vote is important, regardless of the number of Common Shares you own. The Arrangement Resolution must be approved by no less than two-thirds of the votes cast by Common Shareholders present virtually or represented by proxy at the Common Shareholder Meeting. In addition, the Arrangement Resolution must be approved by a majority of the votes cast at the Common Shareholder Meeting by Common Shareholders, excluding votes attached to Common Shares held by persons described in items (a) through (d) of Section 8.1(2) of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions. The number of Common Shares to be excluded from this “majority of the minority” vote is immaterial. The NEO arrangement-related compensation proposal requires the affirmative vote of a majority of the votes cast by Common Shareholders present or represented by proxy at the Common Shareholder Meeting and entitled to vote thereon. The adjournment proposal requires the affirmative vote of a majority of the votes cast by Common Shareholders present or represented by proxy at the Common Shareholder Meeting and entitled to vote thereon. Even if you plan to attend the Common Shareholder Meeting virtually, we request that you complete, sign, date and return the enclosed proxy card by mail or facsimile or submit your proxy by telephone or the Internet prior to the Common Shareholder Meeting and thus ensure that your Common Shares will be represented at the Common Shareholder Meeting. If you fail to return your proxy card or fail to submit your proxy by telephone or the Internet, your Common Shares will not be counted for any purpose. Atlantic Power’s board of directors recommends that Common Shareholders vote FOR the approval of the Arrangement Resolution, FOR the NEO arrangement-related compensation proposal and FOR the adjournment of the Common Shareholder Meeting, if necessary, to solicit additional proxies.
Pursuant to the Interim Order, registered holders of Common Shares will have a right to dissent in respect of the Arrangement Resolution and to be paid an amount equal to the fair value of their Common Shares. See the section entitled “Dissent Rights of Common Shareholders and Preferred Shareholders in Respect of the Arrangement,” beginning on page 113 in the accompanying information circular and proxy statement.
Whether or not you plan to attend the Common Shareholder Meeting virtually, please complete, sign and return, as promptly as possible, the enclosed proxy card in the accompanying reply envelope or by facsimile, or submit your proxy by telephone or the internet. Common Shareholders who attend the Common Shareholder Meeting virtually may revoke their proxies and vote in person.
By Order of the Board,
/s/ “James J. Moore, Jr.”
James J. Moore, Jr.
President and Chief Executive Officer
Dedham, MA
March 2, 2021
 

 
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ATLANTIC POWER PREFERRED EQUITY LTD.
3 Allied Drive, Suite 155
Dedham, MA 02026
NOTICE OF SPECIAL MEETING OF PREFERRED SHAREHOLDERS
To Be Held on April 7, 2021
Dear Preferred Shareholder:
PLEASE TAKE NOTICE that a special meeting of holders (the “Preferred Shareholders”) of preferred shares in the capital of Atlantic Power Preferred Equity Ltd. (“APPEL”), being (i) the 4.85% cumulative redeemable preferred shares, Series 1 in the capital of APPEL, (ii) the 7.00% cumulative rate reset preferred shares, Series 2 in the capital of APPEL and (iii) the cumulative floating rate preferred shares, Series 3 in the capital of APPEL (collectively, the “Preferred Shares”) of APPEL, will be held on April 7, 2021, at 11:00 a.m., Eastern Daylight Time, virtually via the Internet at https://web.lumiagm.com/414674433 (the “Preferred Shareholder Meeting”), for the following purposes:
(1)
For the holders of Preferred Shares, voting together as a single class, to:
1.
consider and, if deemed advisable, to pass, with or without variation, a special resolutions to approve the continuance (the “Continuance”) of APPEL from the jurisdiction of the Province of Alberta to the jurisdiction of the Province of British Columbia pursuant to Section 302 of the Business Corporations Act (British Columbia) (the “BCBCA”) and Section 189 of the Business Corporations Act (Alberta) (the “ABCA”) (the “Continuance Resolution”); and
2.
consider, pursuant to an interim order of the Supreme Court of British Columbia, dated as of February 23, 2021 (the “Interim Order”) and, if deemed advisable, to pass, with or without variation, a special resolution to approve arrangement (the “Arrangement”) in accordance with Division 5 of Part 9 of the BCBCA pursuant to the Arrangement Agreement (the “Arrangement Agreement”), dated as of January 14, 2021, by and among the Atlantic Power Corporation, a corporation existing under the laws of the Province of British Columbia, APPEL, Atlantic Power Limited Partnership, a limited partnership existing under the laws of the Province of Ontario, Tidal Power Holdings Limited, a private limited company existing under the laws of the United Kingdom, and Tidal Power Aggregator, L.P., a limited partnership existing under the laws of the Cayman Islands to effect among other things, the transfer to APPEL of all of the outstanding Preferred Shares in exchange for C$22.00 in cash (less any applicable withholding taxes) per Preferred Share (the “Preferred Shareholder Resolution”).
(2)
To act upon other business as may properly come before the Preferred Shareholder Meeting and any and all adjourned or postponed sessions thereof.
The record date for the determination of Preferred Shareholders entitled to notice of and to vote at the Preferred Shareholder Meeting is February 16, 2021. Accordingly, only Preferred Shareholders of record as of that date will be entitled to notice of and to vote at the Preferred Shareholder Meeting or any adjournment or postponement thereof. A list of our Preferred Shareholders entitled to vote at the Preferred Shareholder Meeting will be available at our principal executive and registered offices at 3 Allied Drive, Suite 155, Dedham MA 02026 during ordinary business hours for ten days prior to the Preferred Shareholder Meeting.
Please read the accompanying information circular and proxy statement carefully as it sets forth details of the proposed Continuance and Arrangement and other important information related to the Continuance and the Arrangement.
 

 
Your vote is important, regardless of the number of Preferred Shares you own. The Preferred Shareholder Resolution and Continuance Resolution must each be approved by no less than two-thirds of the votes cast by Preferred Shareholders present virtually or represented by proxy at the Preferred Shareholder Meeting. Even if you plan to attend the Preferred Shareholder Meeting virtually, we request that you complete, sign, date and return the enclosed proxy card by mail or facsimile or submit your proxy by telephone or the Internet prior to the Preferred Shareholder Meeting and thus ensure that your Preferred Shares will be represented at the Preferred Shareholder Meeting. If you fail to return your proxy card or fail to submit your proxy by telephone or the Internet, your Preferred Shares will not be counted for any purpose. APPEL’s board of directors recommends that Preferred Shareholders vote FOR the approval of the Preferred Shareholder Resolution and FOR the approval of the Continuance Resolution.
Pursuant to the Interim Order, registered holders of Preferred Shares will have a right to dissent in respect of the Preferred Shareholder Resolution and to be paid an amount equal to the fair value of their Preferred Shares. See the section entitled “Dissent Rights of Common Shareholders and Preferred Shareholders in Respect of the Arrangement” beginning on page 113 in the accompanying information circular and proxy statement. Registered holders of Preferred Shares will also have a right to dissent pursuant to and in the manner set forth in Section 191 of the ABCA in respect of the Continuance Resolution and to be paid an amount equal to the fair value of their Preferred Shares. See the section entitled “Dissent Rights of Preferred Shareholders in Respect of the Continuance” beginning on page 118 in the accompanying information circular and proxy statement.
Whether or not you plan to attend the Preferred Shareholder Meeting virtually, please complete, sign and return, as promptly as possible, the enclosed proxy card in the accompanying reply envelope or by facsimile, or submit your proxy by telephone or the internet. Preferred Shareholders who attend the Preferred Shareholder Meeting virtually may revoke their proxies and vote in person.
By Order of the Board,
/s/ “James J. Moore, Jr.”
James J. Moore, Jr.
President and Chief Executive Officer
Dedham, MA
March 2, 2021
 

 
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ANNEXES
ANNEX A — ARRANGEMENT RESOLUTION
ANNEX B — PREFERRED SHAREHOLDER RESOLUTION
ANNEX C — CONTINUANCE RESOLUTION
ANNEX D — ARRANGEMENT AGREEMENT
ANNEX E — PLAN OF ARRANGEMENT
ANNEX F — GOLDMAN SACHS FAIRNESS OPINION
ANNEX G — BLAIR FRANKLIN FAIRNESS OPINION
ANNEX H — INTERIM ORDER
ANNEX I — PETITION TO THE COURT AND NOTICE OF HEARING OF PETITION
ANNEX J — DIVISION 2 OF PART 8 OF THE BCBCA
ANNEX K — SECTION 191 OF THE ABCA
ANNEX M — DEFINED TERMS
 
iii

 
Except as otherwise provided herein or unless the context requires otherwise, capitalized terms used but not otherwise defined herein have the meaning set forth in Annex M to this information circular and proxy statement.
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETINGS AND THE ARRANGEMENT
The following questions and answers are intended to address briefly some commonly asked questions regarding the Arrangement Agreement, the Arrangement and the Special Meetings. These questions and answers do not address all questions that may be important to you as a Common Shareholder or Preferred Shareholder. Please refer to the “Summary Term Sheet” and the more detailed information contained elsewhere in this information circular and proxy statement, the annexes to this information circular and proxy statement and the documents referred to or incorporated by reference in this information circular and proxy statement, which you should read carefully.
About the Arrangement
Q.
Why am I receiving these materials?
A.
Atlantic Power, APPEL and APLP entered into an arrangement agreement under which they will be acquired by a fund managed by I Squared Capital, an independent global infrastructure investment manager focusing on energy, utilities, digital infrastructure, transport, and social infrastructure in the Americas, Europe and Asia. The Arrangement is subject to, among other things, obtaining the Required Approvals. If you are a Common Shareholder as of the close of business on February 16, 2021, you are entitled to receive notice of and vote at the Common Shareholder Meeting. If you are a Preferred Shareholder as of the close of business on February 16, 2021, you are entitled to receive notice of and vote at the Preferred Shareholder Meeting. We are soliciting your proxy, or vote, and providing this information circular and proxy statement in connection with that solicitation.
Q.
What is a plan of arrangement?
A.
A plan of arrangement is a statutory procedure under British Columbia corporate law that allows a company to carry out transactions with the approval of its securityholders and the Court. The Plan of Arrangement that you are being asked to consider will provide for, among other things, the acquisition by the Purchasers (each of which was formed by funds managed by I Squared Capital) of all of the issued and outstanding Common Shares for US$3.03 in cash, without interest and less any applicable withholding taxes, for each Common Share and the transfer of all of the issued and outstanding Preferred Shares to APPEL for C$22.00 in cash, without interest and less any applicable withholding taxes.
Q.
Why are you selling now? Why to I Squared Capital?
A.
The Board and management of the Company regularly reviews and evaluates, with the assistance of financial and legal advisors, the Company’s operations, financial performance and potential strategic options, with the goal of enhancing value for all securityholders of the Company and its subsidiaries. As part of this process, the Company and the Board regularly reviews a broad range of opportunities, including strategic external investments, internal investments, such as share repurchases and investments to optimize the Company’s existing fleet, and aggressively reducing debt. Through their evaluation of these various opportunities, the Company’s senior management and the Board have developed a well-informed knowledge of the market in which it operates, including with respect to commercial power operations and maintenance, project development, asset management, mergers and acquisitions, capital raising and management and financial controls.
While actively pursuing opportunities to enhance securityholder value, Atlantic Power has explored on a number of occasions the possibility of a sale of the Company to a third party. In 2014, the Company engaged a financial advisor and ran a sale process involving multiple parties. That process, however, ultimately did not result in an acceptable offer from a potential acquirer. Since then, the Company has been approached by multiple parties that have expressed an interest in exploring an acquisition of the Company. Some of these discussions extended beyond a preliminary stage, with some potential bidders signing confidentiality agreements and conducting preliminary due diligence on the Company.
 
1

 
However, through the second quarter of 2020, none of these discussions resulted in an offer that the Company’s senior management and the Board believed represented fair value to the Company’s and its subsidiary’s securityholders.
In March 2020, the Company’s senior management received an unsolicited expression of interest from representatives of I Squared Capital regarding a possible acquisition of the Company. A detailed description of the background to the Arrangement Agreement is described in this information circular and proxy statement under “The Arrangement — Background to the Arrangement,” beginning on page 26. The reasons why the Special Committee, the Board and the APPEL Board support the Arrangement are described in this information circular and proxy statement under “The Arrangement — Recommendation of the Special Committee to the Board of Atlantic Power and Its Reasons for the Recommendation,” beginning on page 33, “The Arrangement — Recommendation of the Board of Atlantic Power and its Reasons for the Recommendation,” beginning on page 39, and “The Arrangement — Recommendation of the Board of APPEL and its Reasons for the Recommendation,” beginning on page 40, respectively.
Q.
What consideration will I receive?
A.
Common Shareholders:   The Plan of Arrangement that you are being asked to consider will provide for, among other things, the acquisition by the Purchasers (each of which was formed by funds managed by I Squared Capital) of all of the issued and outstanding Common Shares for US$3.03 in cash per Common Share, without interest and less any applicable withholding taxes. The US$3.03 per Common Share consideration exceeded the price that the Common Shares have traded in the 52-week and five-year periods preceding the announcement of the Arrangement on January 14, 2021 and represented a 19% premium to the 52-week high and a 48% premium to the 30-day volume weighted average price immediately preceding such date.
Preferred Shareholders:   The Plan of Arrangement that you are being asked to consider will provide for, among other things, the transfer to APPEL of all of the issued and outstanding Preferred Shares for C$22.00 in cash per Preferred Share, without interest and less any applicable withholding taxes. The C$22.00 per Preferred Share consideration (i) exceeded the price that each series of Preferred Shares had traded in the 52-week and eight-year periods preceding the announcement of the Arrangement on January 14, 2021, (ii) represented a 40% premium to the average repurchase price of the Preferred Shares repurchased by APPEL between 2017 and 2020 under APPEL’s normal course issuer bids and (iii) represented a premium of 19.5% to the average 52-week high for each series of Preferred Shares immediately prior to announcement of the Arrangement on January 14, 2021.
Q.
How can I be sure that the consideration is fair?
A.
In response to the unsolicited offer from I Squared Capital, the Board formed the Special Committee, comprised of entirely independent directors. The Special Committee was provided with a robust mandate to review, supervise and negotiate the proposed transaction with I Squared Capital and to review any other strategic alternatives that may be available to the Company (including remaining as an independent, publicly-traded company).
As part of the Special Committee’s process, it engaged two financial advisors and obtained fairness opinions with respect to the consideration to be received by Common Shareholders and Preferred Shareholders in connection with the Arrangement. For more information on the fairness opinions, see the section entitled “The Arrangement — Opinions of Financial Advisors,” beginning on page 42.
Following extensive negotiations with representatives from I Squared Capital, the Special Committee, after consultation with its outside legal and financial advisors and on the basis of the fairness opinions unanimously determined to unanimously recommend (i) to the Board, the APPEL Board and the board of directors of the general partnership of APLP that they approve the Arrangement Agreement, (ii) that the Board recommend to the Common Shareholders that they vote in favor of the Arrangement Resolution approving the Arrangement at the Common Shareholder Meeting, and (iii) that the APPEL Board recommend to the Preferred Shareholders that they vote in favor of the Preferred Shareholder Resolution and the Continuance Resolution at the Preferred Shareholder Meeting.
 
2

 
A detailed description of the background to the Arrangement Agreement is described in this information circular and proxy statement under “The Arrangement — Background to the Arrangement,” beginning on page 26. The reasons why the Special Committee, the Board and the APPEL Board support the Arrangement are described in this information circular and proxy statement under “The Arrangement — Recommendation of the Special Committee to the Board of Atlantic Power and Its Reasons for the Recommendation,” beginning on page 33, “The Arrangement — Recommendation of the Board of Atlantic Power and its Reasons for the Recommendation,” beginning on page 39, and “The Arrangement — Recommendation of the Board of APPEL and its Reasons for the Recommendation,” beginning on page 40, respectively.
Common Shareholders and Preferred Shareholders are encouraged to consult their own advisors to determine if it is in their best interests to vote in favor of the Arrangement Resolution, the Preferred Shareholder Resolution and the Continuance Resolution (as applicable).
Q.
Is the Special Committee “independent”?
Yes, each member of the Special Committee is considered independent for the purposes of all applicable securities laws. In addition, each member of the Special Committee owns some combination of Common Shares, DSUs and Preferred Shares, which align their interests with those of Common Shareholders and Preferred Shareholders (as applicable). One of the main purposes of equity-based compensation awards (such as DSUs) is to ensure that the incentives of the directors of a company are aligned with those of common shareholders. In fact, governance advisory coalitions recommend that directors acquire shares of the companies on which they serve as board members.
Q.
Aren’t the Preferred Shares only redeemable at par?
A.
The Arrangement is not a redemption of the Preferred Shares pursuant to their existing terms; rather, the Preferred Shares are included as part of the Arrangement. A plan of arrangement is a flexible statutory procedure that is approved by a court and allows for the acquisition of 100% of a company’s securities in a single step (notwithstanding the terms of a company’s governing documents). As a result, the redemption and liquidation features in the Preferred Share terms are not applicable to the Arrangement.
Q.
As a Preferred Shareholder, I find the quarterly dividends attractive. Why should I vote to have the shares transferred to APPEL for C$22.00?
A.
The Special Committee and the APPEL Board took the interest of Preferred Shareholders (including the quarterly dividends) into account during the negotiation of the proposed transaction with I Squared Capital. Some of the key reasons why the Special Committee and the APPEL Board recommend you vote in favor of the Preferred Shareholder Resolution and the Continuance are as follows:

the Special Committee obtained a fairness opinion with respect to the consideration to be received by the Preferred Shareholders under the Arrangement;

the APPEL Board believes that the yields implied by the Preferred Share Consideration of C$22.00 for each Preferred Share compared favorably to the current yields of other publicly traded preferred shares with similar or better credit ratings;

the belief of the Special Committee and the APPEL Board that it is unlikely that the trading price of the Preferred Shares would, in the near to medium term, yield greater value to Preferred Shareholders compared to the immediate and certain consideration to be received by Preferred Shareholders if the Arrangement is completed;

the consideration of C$22.00 for each Preferred Share provides Preferred Shareholders with immediate liquidity at an attractive premium to historical trading prices and certainty of value for their investment, and removes the risks and volatility associated with owning securities of APPEL while the Company remains an independent, publicly-traded company. Some of the near-term, medium-term and long-term risks associated with execution of the Company’s strategic plan as an independent, publicly-traded company, include:
 
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significantly depressed power prices, both with respect to capacity and energy, due to decreased rates of demand growth and continuing growth of supply, particularly from renewable energy sources, which have resulted in a highly challenging environment with respect to re-contracting power purchase agreements with respect to all of the Company’s power generating projects, including its hydro projects, which the Board believes is unlikely to improve in the near term;

the Company’s status as a micro-cap power generating company and the Company’s declining EBITDA profile, with power purchase agreements for nine of the Company’s power generating projects representing 57% of the Company’s net megawatts of generating capacity and 59% of the Company’s 2020 Project Adjusted EBITDA expiring within the next five years;

industry conditions and competition increasing the likelihood that the Company will not be able to secure new power purchase agreements on acceptable terms or timing, if at all, or only on terms with significantly reduced pricing;

that if the Company fails to negotiate a new power purchase agreement for a project, the relevant project may be required sell into the electricity wholesale market, in which case the prices for electricity will depend on market conditions at the time, which may not be favorable;

that the Company may not have sufficient cash to finance acquisitions or other growth opportunities given increased competition in the North American power generating industry for external investment opportunities and that a significant portion of the Company’s cash flow is used to service its debt obligations;

increased competition and consolidation in the power generating industry and the fact that the Company faces significant competition from companies with greater size and resources; and

despite improvements in business fundamentals at the Company since 2014, including the reduction of its debt obligations by nearly $1.2 billion, restructuring of its debt maturities resulting in a reduction of cash interest payments of more than 70%, the sales and acquisitions of power generating assets at attractive process and the reduction of corporate overhead expenses by nearly 50%, the market prices of the Company’s publicly-traded securities have remained depressed since 2014; and

the Arrangement results in a better outcome for the Preferred Shareholders, as compared to a transaction in which only Common Shares were to be acquired by a third party, which would result in the Preferred Shares remaining outstanding and being subject to risks currently faced by the Company and those associated with how the acquirer of the Common Shares may operate the business post-acquisition, including the potential for the acquirer to take a more aggressive approach to liability management than the Company’s approach since 2014.
A full description of the reasons why the Special Committee, the Board and the APPEL Board support the Arrangement are described in this information circular and proxy statement under “The Arrangement — Recommendation of the Special Committee to the Board of Atlantic Power and Its Reasons for the Recommendation,” beginning on page 33, “The Arrangement — Recommendation of the Board of Atlantic Power and its Reasons for the Recommendation,” beginning on page 39, and “The Arrangement — Recommendation of the Board of APPEL and its Reasons for the Recommendation,” beginning on page 40, respectively.
Q.
Will Preferred Shareholders continue to be paid dividends until closing?
A.
It is currently expected that Preferred Shareholders will continue to be paid regularly scheduled quarterly dividends until the closing of the Arrangement. Preferred Shareholders will not be entitled to a pro rata dividend in the event that the closing of the Arrangement occurs mid-quarter.
Q.
What are the conditions to closing?
A.
The consummation of the Arrangement is conditioned on the satisfaction or waiver by the applicable party to the Arrangement Agreement (to the extent permitted by law) of a number of conditions, including the following:
 
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the Arrangement Resolution must have been approved by at least two-thirds of the votes cast by Common Shareholders present or represented by proxy at the Common Shareholder Meeting and by a majority of the votes cast at the Common Shareholder Meeting by Common Shareholders, excluding votes attached to Common Shares held by persons described in items (a) through (d) of Section 8.1(2) of Multilateral Instrument 61-10 Protection of Minority Security Holders in Special Transactions;

the Continuance Resolution and the Preferred Shareholder Resolution must have been approved by at least two-thirds of the votes cast by Preferred Shareholders present or represented by proxy at the Preferred Shareholder Meeting;

the MTN Noteholder Consent shall have been obtained by the Company and APLP and shall not have been withdrawn or revoked;

either (i) the Debentureholder Consent shall have been obtained by the Company and shall not have been withdrawn or revoked or (ii) the Debentureholder Resolution shall have been approved by the Company Debentureholders at the Debentureholder Meeting, as applicable;

the Arrangement must have received interim and final approval from the Court;

no law shall be in effect that makes illegal or otherwise prohibits or enjoins the consummation of the Arrangement;

certain regulatory approvals must have been obtained and not rescinded or modified, as described under “The Arrangement Agreement — Conditions to the Arrangement,” beginning on page 103;

Atlantic Power’s representations and warranties in the Arrangement Agreement, and the Purchasers’ respective representations and warranties in the Arrangement Agreement must be true and correct, subject to applicable materiality qualifiers, as of the date of the agreement and as of the closing date as described under “The Arrangement Agreement — Conditions to the Arrangement,” beginning on page 103;

Atlantic Power and the Purchasers must have performed in all material respects all covenants that each is required to perform under the Arrangement Agreement;

since the date of the Arrangement Agreement, no “Material Adverse Effect” ​(as such term is defined in the section of this information circular and proxy statement captioned “The Arrangement Agreement — Representation and Warranties” beginning on page 97) shall have occurred and be continuing;

certain pre-arrangement steps set forth in the disclosure letter to the Arrangement Agreement shall have been consummated;

Dissent Rights shall not have been exercised in respect of more than 10% of the outstanding Common Shares;

no proceeding by any governmental entity being pending that is reasonably likely to:

cease trade, enjoin, prohibit, or impose any material limitations or conditions on, the Purchasers’ ability to acquire, hold, or exercise full rights of ownership over, any Common Shares;

impose material terms or conditions on completion of the Arrangement or on the ownership or operation by the Purchasers of the business or assets of Atlantic Power, or compel the Purchasers to dispose of or hold separate any material portion of the business or assets of the Purchasers, any of its affiliates, or Atlantic Power; or

prevent the consummation of the Arrangement, or if the Arrangement is consummated, have a Material Adverse Effect; and

consents from third-party contractual counterparties to certain agreements of Atlantic Power and its subsidiaries (collectively, the “Required Consents”) shall have been obtained on terms acceptable to the Purchasers, and not rescinded or modified.
 
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See the section entitled “The Arrangement Agreement — Conditions to the Arrangement,” beginning on page 103 and “The Arrangement Agreement — Representations and Warranties,” beginning on page 97.
Q.
When is the Arrangement expected to be completed?
A.
We are working toward completing the Arrangement as quickly as possible, and we anticipate that it will be completed in the second quarter of 2021. In order to complete the Arrangement, we must obtain the requisite securityholder approvals and the other closing conditions under the Arrangement Agreement must be satisfied or waived (as permitted by law).
Q.
When will I receive the consideration for my Common Shares or Preferred Shares?
A.
You will receive the consideration for your Common Shares and/or Preferred Shares as soon as practicable after the Effective Time, provided you have sent all of the necessary documentation to the depositary.
Q.
What happens if the Common Shareholders do not approve the Arrangement or if the Preferred Shareholders do not approve the Arrangement and the Continuance?
A.
If the Arrangement Resolution is not approved by the Common Shareholders, if the Preferred Shareholder Resolution and Continuance Resolution are not approved by the Preferred Shareholders or if the Arrangement is not completed for any other reason, Common Shareholders will not receive the Common Share Consideration for their Common Shares and Preferred Shareholders will not receive the Preferred Share Consideration for their Preferred Shares in connection with the Arrangement. Instead, Atlantic Power will remain an independent public company. In addition, if the Arrangement is not completed, we expect that management will operate the business in a manner similar to that in which it is being operated today and that Common Shareholders and Preferred Shareholders will continue to be subject to the same risks and opportunities as they currently are, including, among other things, general industry, economic, regulatory and market conditions. Accordingly, if the Arrangement is not consummated, there can be no assurance as to the effect of these risks and opportunities on the future value of your Common Shares and/or Preferred Shares. Furthermore, if the Arrangement is not completed, and depending on the circumstances that caused the Arrangement not to be completed, the price of our Common Shares and Preferred Shares may decline significantly. If that were to occur, it is uncertain when, if ever, the prices of our Common Shares and Preferred Shares would return to the prices at which our Common Shares and Preferred Shares trade as of the date of this information circular and proxy statement. From time to time, the Board will evaluate, among other things, the business operations, properties, dividend policy and capitalization of Atlantic Power and make such changes as are deemed appropriate and continue to seek to identify strategic alternatives to enhance shareholder value. If the Arrangement Resolution is not approved by the Common Shareholders, if the Preferred Shareholder Resolution and Continuance Resolution are not approved by the Preferred Shareholders or if the Arrangement is not completed for any other reason, there can be no assurance that any other transaction acceptable to Atlantic Power will be offered, or that the business, prospects or results of operations of Atlantic Power will not be adversely impacted.
See the section entitled “Risk Factors Relating to the Arrangement,” beginning on page 12 “The Arrangement — Effects on the Company if the Arrangement is Not Completed” beginning on page 60 and “The Arrangement Agreement — Termination of the Arrangement Agreement” beginning on page 108.
Q.
How can I obtain additional information about Atlantic Power and APPEL?
A.
We will provide a copy of our annual report on Form 10-K for the year ended December 31, 2019 (excluding certain of its exhibits), and other filings with the SEC and the Canadian securities commissions, without charge, to any shareholder who makes a written request to Atlantic Power Corporation, 3 Allied Drive, Suite 155 Dedham, Massachusetts, United States 02026, Attention: Investor Relations, by phone at 1-617-977-2700 or by e-mail at info@atlanticpower.com. Our annual report on Form 10-K and other filings also may be accessed by internet on the SEC’s website at http://www.sec.gov or on the Canadian Securities Administrators’ website at http://www.sedar.com or
 
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on the Company’s website at http://www.atlanticpower.com. The information provided on our website is not, and shall not be deemed to be, incorporated by reference in, or made part of, this information circular and proxy statement.
For a more detailed description of the information available, please refer to “Where You Can Find More Information.”
Q.
Am I entitled to exercise Dissent Rights?
A.
Common Shareholders. Pursuant to the Interim Order, Registered Common Shareholders as of the record date for the Common Shareholder Meeting will have a right to dissent under Division 2 of Part 8 of the BCBCA in respect of the Arrangement Resolution and to be paid an amount equal to the fair value of their Common Shares. See the section entitled “Dissent Rights of Common Shareholders and Preferred Shareholders in Respect of the Arrangement” as well as Annex J to this information circular and proxy statement.
Preferred Shareholders.   Pursuant to the Interim Order, Registered Preferred Shareholders as of the record date for the Preferred Shareholder Meeting will have a right to dissent under Division 2 of Part 8 of the BCBCA in respect of the Preferred Shareholder Resolution and to be paid an amount equal to the fair value of their Preferred Shares. See the section entitled “Dissent Rights of Common Shareholders and Preferred Shareholders in Respect of the Arrangement” as well as Annex J to this information circular and proxy statement. Registered Preferred Shareholders will also have a right to dissent under Section 191 of the ABCA in respect of the Continuance Resolution and to be paid an amount equal to the fair value of their Preferred Shares. See the section entitled “Dissent Rights of Preferred Shareholders in Respect of the Continuance” as well as Annex K to this information circular and proxy statement.
Failure to comply strictly with the dissent procedures described in this information circular and proxy statement will result in the loss of any right of dissent.
Q.
Who can help answer my questions?
A.
If you have any questions or need assistance in your consideration of the Arrangement, in voting your Common Shares or Preferred Shares, or if you have any questions or need assistance with the completion and delivery of your proxy, please contact your financial, legal or other professional advisors or the Company’s proxy solicitation agent, Kingsdale Advisors, by telephone at 1-866-229-8263 (toll free in North America) or 416-867-2272 (collect outside North America), by facsimile at 1-866-545-5580 or by e-mail at contactus@kingsdaleadvisors.com.
About the Special Meetings
Q.
When and where is the Common Shareholder Meeting?
A.
The Common Shareholder Meeting will be held on April 7, 2021, at 10:00 a.m. (Eastern Daylight Time), virtually via live audio webcast over the internet at https://web.lumiagm.com/422322246.
Q.
When and where is the Preferred Shareholder Meeting?
A.
The Preferred Shareholder Meeting will be held on April 7, 2021, at 11:00 a.m. (Eastern Daylight Time), virtually via live audio webcast over the internet at https://web.lumiagm.com/414674433.
Q.
What matters will be voted on at the Common Shareholder Meeting?
A.
Common Shareholders will be asked to consider and vote on the following proposals:

to approve the Arrangement Resolution;

to approve the non-binding, advisory NEO arrangement-related compensation resolution;

to approve the adjournment of the Common Shareholder Meeting, if necessary, to solicit additional proxies if there are insufficient votes at the time of the meeting to approve the Arrangement Resolution; and
 
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to act upon other business that may properly come before the Common Shareholder Meeting or any adjournment or postponement thereof.
Q.
What matters will be voted on at the Preferred Shareholder Meeting?
A.
Preferred Shareholders will be asked to consider and vote on the following proposals:

to approve the Preferred Shareholder Resolution;

to approve the Continuance Resolution; and

to act upon other business that may properly come before the Preferred Shareholder Meeting or any adjournment or postponement thereof.
Q.
How does the Board recommend that Common Shareholders vote on the proposals?
A.
The Board recommends that you vote:

FOR” the approval of the Arrangement Resolution;

FOR” the approval of the NEO arrangement-related compensation proposal; and

FOR” the adjournment proposal.
Q.
How does the APPEL Board recommend that Preferred Shareholders vote on the proposals?
A.
The APPEL Board recommends that you vote:

FOR” the approval of the Preferred Shareholder Resolution; and

FOR” the approval of the Continuance Resolution.
Q.
Who is entitled to vote at the Common Shareholder Meeting?
A.
Only Common Shareholders of record holding Common Shares as of the close of business on February 16, 2021, the record date for the Common Shareholder Meeting, are entitled to vote at the Common Shareholder Meeting. As of the record date, there were approximately 89,222,568 Common Shares outstanding. Every Common Shareholder is entitled to one vote for each Common Share held as of the record date.
Q.
Who is entitled to vote at the Preferred Shareholder Meeting?
A.
Only Preferred Shareholders of record holding Preferred Shares as of the close of business on February 16, 2021, the record date for the Preferred Shareholder Meeting, are entitled to vote at the Preferred Shareholder Meeting. As of the record date, there were approximately 6,864,863 Preferred Shares outstanding, comprised of 3,465,706 Series 1 Preferred Shares, 2,441,766 Series 2 Preferred Shares and 957,391 Series 3 Preferred Shares. Every Preferred Shareholder is entitled to one vote for each Preferred Share held as of the record date.
Q.
What if I acquire ownership of Common Shares or Preferred Shares after the record date of February 16, 2021?
Only Common Shareholders and Preferred Shareholders of record as of the close of business on February 16, 2021 are entitled to receive notice of, attend, be heard and vote at the Common Shareholder Meeting and Preferred Shareholder Meeting, as applicable. All Common Shareholders and Preferred Shareholders as of the closing of the Arrangement would be entitled to receive the consideration paid under the Arrangement, whether or not they held Common Shares and Preferred Shares on the record date.
Q.
What vote is required for approval of the Arrangement and the Continuance? How do Atlantic Power’s directors and officers intend to vote?
A.
The Arrangement Resolution must be approved by the affirmative vote of not less than two-thirds of the votes cast by Common Shareholders present or represented by proxy at the Common Shareholder
 
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Meeting. In addition, the Arrangement Resolution must be approved by a majority of the votes cast at the Common Shareholder Meeting by Common Shareholders, excluding votes attached to Common Shares held by persons described in items (a) through (d) of Section 8.1(2) of Multilateral Instrument 61-10 Protection of Minority Security Holders in Special Transactions. The number of Common Shares to be excluded from this “majority of the minority” vote is immaterial.
The Preferred Shareholder Resolution and the Continuance Resolution must each be approved by the affirmative vote of not less than two-thirds of the votes cast by Preferred Shareholders (voting as a single class) present or represented by proxy at the Preferred Shareholder Meeting.
Our directors and executive officers who collectively own approximately 3.78% of the outstanding Common Shares and 0.30% of the outstanding Preferred Shares have informed us that they intend to vote all such Common Shares FOR the approval of the Arrangement Resolution and all such Preferred Shares FOR the approval of the Preferred Shareholder Resolution and the Continuance Resolution. Further, as of January 14, 2021, each of our directors and executive officers has entered into a support agreement to vote their Common Shares and Preferred Shares, if any, in support of the Arrangement, and to vote their Company Debentures and MTNs, if any, in support of the amendments to the respective trust indentures. See the section entitled “The Arrangement — Voting Agreements and Support Agreement,” beginning on page 41.
Q.
What vote is required for Common Shareholder to approve the NEO arrangement-related compensation proposal?
A.
The NEO arrangement-related compensation proposal requires the affirmative vote of the holders of a majority of the votes cast by Common Shareholders present or represented by proxy at the Common Shareholder Meeting and entitled to vote on the matter.
Q.
What vote is required for Common Shareholders to approve the proposal to adjourn the Common Shareholder Meeting, if necessary, to solicit additional proxies?
A.
The proposal to adjourn the Common Shareholder Meeting, if necessary, to solicit additional proxies requires the affirmative vote of the holders of a majority of the votes cast by Common Shareholders present or represented by proxy at the Common Shareholder Meeting and entitled to vote on the matter.
Q.
Why am I being asked to consider and vote on the NEO arrangement-related compensation proposal?
A.
The rules of the U.S. Securities and Exchange Commission require the Company to seek approval on a non-binding, advisory basis with respect to certain payments that will or may be made to the Company’s NEOs in connection with the Arrangement. Approval of the NEO arrangement-related compensation proposal is not required to complete the Arrangement.
About Voting
Q.
Who is soliciting my vote?
A.
This proxy solicitation is being made by and on behalf of the Board and the APPEL Board. In addition, we have retained Kingsdale Advisors to assist in the solicitation. Assuming the Arrangement is approved by Common Shareholders, Preferred Shareholders and holders of Company Debentures, we expect to pay Kingsdale Advisors reasonable and customary fees for their services. We may request additional services from Kingsdale Advisors on an as needed basis. Our directors, officers and employees may also solicit proxies by personal interview, mail, e-mail, telephone, facsimile or by other means of communication. These persons will not be paid additional remuneration for their efforts. We will also request brokers and other fiduciaries to forward proxy solicitation material to the Beneficial Shareholders that the brokers and fiduciaries hold of record. We will reimburse them for their reasonable out-of-pocket expenses.
Q.
How do I vote?
A.
Even if you plan to attend the Common Shareholder Meeting and/or the Preferred Shareholder
 
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Meeting, if you hold your Common Shares or Preferred Shares in your own name as the shareholder of record, please vote your shares: (1) by completing, signing, dating and returning the enclosed proxy card(s) for Common Shareholders and/or Preferred Shareholders, as applicable, by mail; (2) by going to www.investorvote.com and entering the 15-digit control number on the form of proxy for Common Shareholders and/or Preferred Shareholders, as applicable; or (3) by calling the telephone number printed on your proxy card.
Your telephone, Internet, or mail vote must be received by 10:00 a.m. (Eastern Daylight Time) on April 5, 2021 for Common Shares and 11:00 a.m. (Eastern Daylight Time) on April 5, 2021 for Preferred Shares. As a Common Shareholder or Preferred Shareholder, you can also attend the Common Shareholder Meeting and/or Preferred Shareholder Meeting, as applicable, each of which are to be held online, and vote, or change your prior vote. Do NOT enclose or return your share certificate(s) with your proxy card. If you hold your Common Shares or Preferred Shares through a broker, bank or other nominee, then you received this information circular and proxy statement from the nominee, along with the nominee’s proxy card which includes voting instructions and instructions on how to change your vote.
Each person named in the proxy card to represent you at the Common Shareholder Meeting and/or Preferred Shareholder Meeting, as applicable, is a director or officer of the Company. You can appoint someone else to represent you at the Common Shareholder Meeting and/or Preferred Shareholder Meeting, as applicable. Please follow the instructions contained in the appropriate proxy card.
Q:
How can I revoke my vote?
A:
You have the right to revoke your proxy at any time before the vote is taken at the Common Shareholder Meeting or Preferred Shareholder Meeting, as applicable. Please see the sections “The Common Shareholder Meeting — Appointment and Revocation of Proxies” beginning on page 82 and “The Preferred Shareholder Meeting — Appointment and Revocation of Proxies” beginning on page 88 of this information circular and proxy statement.
Q.
If my shares are held by my broker, bank or other nominee, will my broker, bank or other nominee vote my shares for me?
A.
Your broker, bank or other nominee will be permitted to vote your Common Shares or Preferred Shares, as applicable, only if you instruct your broker, bank or other nominee how to vote. You should follow the procedures provided by your broker, bank or other nominee regarding the voting of your shares. Absent specific instructions from the beneficial owner of such shares, banks, brokerage firms or other nominees are not empowered to vote those shares, which we refer to as “broker non-votes.” If you do not instruct your broker, bank or other nominee to vote your shares, your shares will not be voted and will not have an effect on the approval of the Arrangement Resolution, the NEO arrangement-related compensation proposal, the Preferred Shareholder Resolution, the Continuance Resolution, or on the proposal to adjourn the Common Shareholder Meeting. Please see the section “Information for Beneficial Shareholders” beginning on page 93 of this information circular and proxy statement.
Q.
What do I do if I receive more than one proxy or set of voting instructions?
A.
If you hold Common Shares or Preferred Shares through a broker, bank or other nominee and directly as a record holder or otherwise you may receive more than one proxy and/or set of voting instructions relating to the Common Shareholder Meeting and/or Preferred Shareholder Meeting, as applicable. These should each be voted and/or returned separately as described elsewhere in this information circular and proxy statement in order to ensure that all of your shares are voted.
In addition, if you hold both Common Shares and Preferred Shares, you may receive more than one proxy and/or set of voting instructions relating to the Common Shareholder Meeting and Preferred Shareholder Meeting. These should each be voted and/or returned separately as described elsewhere in this information circular and proxy statement in order to ensure that all of your shares are voted.
Q.
How are votes counted?
A.
Common Shareholders may vote “FOR” or “AGAINST” the proposals to approve the Arrangement
 
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Resolution, to approve the NEO arrangement-related compensation and to adjourn the Common Shareholder Meeting, if necessary, to solicit additional proxies. Preferred Shareholders may vote “FOR” or “AGAINST” the proposals to approve the Preferred Shareholder Resolution and the Continuance Resolution. Common Shares and Preferred Shares that are not voted will have no effect on the vote to approve the Arrangement Resolution, the Preferred Shareholder Resolution, the Continuance Resolution, the NEO arrangement-related compensation or the proposal to adjourn the Common Shareholder Meeting, as applicable.
If you are a Common Shareholder and sign your proxy card without indicating your vote, your Common Shares will be voted “FOR” the approval of the Arrangement Resolution, “FOR” the approval of the NEO arrangement-related compensation, “FOR” the proposal to adjourn the Common Shareholder Meeting, if necessary, to solicit additional proxies, and in accordance with the recommendations of the Board on any other matters properly brought before the Common Shareholder Meeting for a vote. If you are a Preferred Shareholder and sign your proxy card without indicating your vote, your Preferred Shares will be voted “FOR” the approval of the Preferred Shareholder Resolution, “FOR” the Continuance Resolution and in accordance with the recommendations of the APPEL Board on any other matters properly brought before the Preferred Shareholder Meeting for a vote.
Q.
Where should I send in my share certificates?
A.
If you are a Common Shareholder or Preferred Shareholder of record, you will have received a letter of transmittal with detailed instructions for exchanging your share certificates for the applicable consideration. If your Common Shares or Preferred Shares are held by your broker, bank or other nominee you will receive instructions from your broker, bank or other nominee as to how to effect the surrender of your Common Shares and/or Preferred Shares in exchange for the applicable consideration. Please do not send your share certificates with your form of proxy.
 
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RISK FACTORS RELATING TO THE ARRANGEMENT
There can be no certainty that all conditions to the Arrangement will be satisfied. Failure to complete the Arrangement could negatively impact the share price of the Common Shares or Preferred Shares or otherwise adversely affect the business of the Company.
The completion of the Arrangement is subject to a number of conditions, certain of which are outside the control of the Company, including Common Shareholder approval, Preferred Shareholder approval, the obtaining of the MTN Noteholder Consent, the obtaining of Debentureholder Consent or Company Debentureholder approval, the obtaining of the Required Regulatory Approvals, the obtaining of the Required Consents and receipt of the Final Order. There can be no certainty, nor can the Company provide any assurance, that these conditions will be satisfied or, if satisfied, when they will be satisfied by. A substantial delay in obtaining satisfactory approvals or third party consents and/or the imposition of unfavorable terms or conditions in the approvals or third party consents to be obtained could have an adverse effect on the business, financial condition or results of operations of the Company or could result in the termination of the Arrangement Agreement. If: (i) Common Shareholders choose not to approve the Arrangement, (ii) Preferred Shareholder choose not to approve the Continuance and the Arrangement, (iii) MTN Noteholders choose not to amend the MTN Indenture, (iv) Company Debentureholders choose not to amend the Company Debentures Indenture, (v) the Company otherwise fails to satisfy, or fails to obtain a waiver of the satisfaction of, the closing conditions to the Arrangement and the Arrangement is not completed, (vi) a Material Adverse Effect has occurred that results in the termination of the Arrangement Agreement, or (vii) any legal proceeding results in enjoining the transactions contemplated by the Arrangement, the Company could be subject to various adverse consequences, including that the Company would remain liable for significant costs relating to the Arrangement, including, among others, legal, accounting, financial advisory, proxy solicitation and financial printing expenses.
If the Arrangement is not completed, the market price of the Common Shares and Preferred Shares may decline to the extent that the market price reflects a market assumption that the Arrangement will be completed. If the Arrangement is not completed and the Board decides to seek another merger or business combination, there can be no assurance that it will be able to find a party willing to pay an equivalent or more attractive price than the Common Share Consideration and Preferred Share Consideration to be paid pursuant to the Arrangement.
In addition, since the completion of the Arrangement is subject to uncertainty, officers and employees of the Company may experience uncertainty about their future roles with the Company. This may adversely affect the Company’s ability to attract or to retain key management and personnel in the period until the Arrangement is completed or terminated.
The Arrangement Agreement may be terminated in certain circumstances.
Each of the parties to the Arrangement Agreement has the right to terminate the Arrangement Agreement in certain circumstances. Accordingly, there is no certainty, nor can the Company provide any assurance, that the Arrangement will not be terminated by any of the parties to the Arrangement Agreement before the completion of the Arrangement. Failure to complete the Arrangement could negatively impact the trading price of the Common Shares or Preferred Shares or otherwise adversely affect the business of the Company.
The Termination Fee provided under the Arrangement Agreement if the Arrangement Agreement is terminated in certain circumstances may discourage other parties from attempting to acquire the Company.
Under the Arrangement Agreement, the Company is required to pay a Termination Fee (as defined below) of $12,500,000 in the event the Arrangement Agreement is terminated following the occurrence of a Termination Fee Event (as defined below). The Termination Fee may discourage other parties from attempting to acquire the Common Shares and Preferred Shares, even if those parties would otherwise be willing to offer greater value than that offered under the Arrangement. See the section entitled “The Arrangement Agreement — Termination Fee” beginning on page 109.
 
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Even if the Arrangement Agreement is terminated without payment of the Termination Fee, the Company may, in the future, be required to pay the Termination Fee in certain circumstances.
Under the Arrangement Agreement, the Company may be required to pay the Termination Fee to the Purchasers at a date subsequent to the termination of the Arrangement Agreement if the Arrangement Agreement is terminated due to the Required Approvals not being obtained, the Effective Time having not occurred prior to the Outside Date, or Atlantic Power breaching certain of its representations and warranties if (A) prior to such termination an Acquisition Proposal (as defined below) is publicly announced after the date of the Arrangement Agreement and not withdrawn prior to the Special Meetings and (B) within twelve months of such termination, (x) an Acquisition Proposal (whether or not the same Acquisition Proposal described in clause (A) above) is consummated or (y) Atlantic Power or one or more of its subsidiaries enters into an agreement with respect to an Acquisition Proposal and such Acquisition Proposal is later consummated (whether or not within the twelve month period following such termination). See the section entitled “The Arrangement Agreement — Termination Fee” beginning on page 109.
While the Arrangement is pending, the Company is restricted from taking certain actions.
The Arrangement Agreement restricts the Company from taking certain specified actions until the Arrangement is completed without the consent of the Purchasers. These restrictions may prevent the Company from pursuing attractive business opportunities that may arise prior to the completion of the Arrangement. See the section entitled “The Arrangement Agreement — Conduct of Business Pending the Arrangement” beginning on page 99.
The right to match may discourage other parties from attempting to acquire the Company.
Under the Arrangement Agreement, as a condition to entering into a definitive agreement in respect of a Superior Proposal, the Company and APPEL are required to offer the Purchasers the right to match such Superior Proposal. This right may discourage other parties from making a Superior Proposal, even if they would otherwise have been willing to acquire the Company on more favorable terms than the Arrangement.
No solicitation of other potential purchasers of the Company may reduce the likelihood of other parties attempting to acquire the Company.
Prior to entering into the Arrangement Agreement, the Company engaged in exclusive negotiations with I Squared Capital and did not solicit expressions of interest from other potential buyers of the Company. The Special Committee and the Board concluded, after receiving advice from their financial and legal advisors, that the risks of soliciting expressions of interest from other potential buyers outweighed the benefits of doing so, particularly having regard to the financial and other terms of the Arrangement Agreement. However, there can be no assurance that, if the Company had solicited expressions of interest from other potential buyers, that one or more of such potential buyers would not have been willing to acquire the Company on more favorable terms than I Squared Capital and the Purchasers.
The pending Arrangement may divert the attention of the Company’s management.
The pendency of the Arrangement could cause the attention of the Company’s management to be diverted from the day-to-day operations and customers or suppliers may seek to modify or terminate their business relationships with the Company. These disruptions could be exacerbated by a delay in the completion of the Arrangement and could have an adverse effect on the business, operating results or prospects of the Company.
The Company’s directors and officers may have interests in the Arrangement that are different from those of Common Shareholders.
In considering the recommendation of the Special Committee and the Board to vote in favor of the Arrangement Resolution, Common Shareholders should be aware that certain members of the Board and officers of the Company may have agreements or arrangements that provide them with interests in the Arrangement that differ from, or are in addition to, those of Common Shareholders, generally. See the section
 
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entitled “The Arrangement — Interests of the Company’s Directors and Executive Officers in the Arrangement” beginning on page 67.
The consideration to be received by Common Shareholders and Preferred Shareholders may be affected by foreign currency exchange rates.
If you are a Common Shareholder, you will receive the consideration for your Common Shares in U.S. dollars unless you elect in your letter of transmittal to receive the consideration for your Common Shares in Canadian dollars. If you are a Preferred Shareholder, you will receive the consideration for your Preferred Shares in Canadian dollars unless you elect in your letter of transmittal to receive the respective consideration for your Preferred Shares in U.S. dollars.
The exchange rate that will be used to convert payments from U.S. dollars into Canadian dollars or Canadian dollars into U.S. dollars will be the rate established by the depositary, in its capacity as foreign exchange service provider to the Purchasers and Company, on behalf of those Common Shareholders and Preferred Shareholders, respectively, who elect to receive Canadian dollars and U.S. dollars, respectively, on the date the funds are converted, which rate will be based on the prevailing market rate on the date the funds are converted. The risk of any fluctuations in such rates, including risks relating to the particular date and time at which funds are converted, will be solely borne by the Common Shareholder or Preferred Shareholder. The depositary will act as principal in such currency conversion transactions.
Common Shareholders and Preferred Shareholders will no longer hold an interest in the Company following the Arrangement.
Following the Arrangement, Common Shareholders and Preferred Shareholders will no longer hold any of the Common Shares or Preferred Shares, respectively, and will forego any future increase in value that might result from future growth and the potential achievement of the Company’s long-term plans.
 
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SUMMARY TERM SHEET
This Summary Term Sheet, together with the “Questions and Answers About the Special Meetings and the Arrangement,” summarizes the material information in this information circular and proxy statement. You should carefully read this entire information circular and proxy statement and the other documents to which this information circular and proxy statement refers you for a more complete understanding of the matters being considered at the Special Meetings (as defined below). In addition, this information circular and proxy statement incorporates by reference important business and financial information about Atlantic Power. You may obtain the information incorporated by reference into this information circular and proxy statement without charge by following the instructions in “Where You Can Find More Information.”
Defined terms referred to in this information circular and proxy statement are defined in Annex M.
We publish our consolidated financial statements in U.S. dollars. All references in this information circular and proxy statement to “dollars” or “$” are to U.S. dollars and all references to “C$” are to Canadian dollars, unless otherwise noted. Except as otherwise indicated, all financial statements and financial data contained in this information circular and proxy statement and in the documents incorporated by reference in this information circular and proxy statement have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, which differs in certain material respects from financial statements prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. These differences are not described in this information circular and proxy statement or the documents incorporated by reference in this information circular and proxy statement.
The Arrangement and the Arrangement Agreement

The Parties to the Arrangement.   Atlantic Power, a British Columbia corporation, is an independent power producer. APPEL, a corporation existing under the laws of the Province of Alberta, and APLP, a limited partnership existing under the laws of the Province of Ontario, are subsidiaries of Atlantic Power. Tidal Power Holdings Limited, a private limited company existing under the laws of the United Kingdom, and Tidal Power Aggregator, L.P., a limited partnership existing under the laws of the Cayman Islands, were formed solely for the purpose of effecting the Arrangement and the transactions related to the Arrangement. The Purchasers are currently owned and controlled by funds affiliated with I Squared Capital, a private equity investment group. See the section entitled “The Parties to the Arrangement,” beginning on page 80.

The Arrangement.   Common Shareholders are being asked to vote FOR the approval of the Arrangement Resolution and Preferred Shareholders are being asked to vote FOR the Preferred Shareholder Resolution, each of which approves the Plan of Arrangement providing for (i) the acquisition by the Purchasers of all of the outstanding Common Shares (including those resulting from conversion of the Company Debentures in accordance with the Company Debenture Transaction), and (ii) the transfer to APPEL of the Preferred Shares. Preferred Shareholders are also being asked to vote FOR the Continuance Resolution approving the Continuance. As a result of the Arrangement, Atlantic Power and APPEL will cease to be publicly traded companies. See the section entitled “The Arrangement Agreement,” beginning on page 95.

Arrangement Consideration.   If the Arrangement is completed, you will be entitled to receive US$3.03 in cash, without interest and less any applicable withholding taxes, for each Common Share that you own (the “Common Share Consideration”), and C$22.00 in cash, without interest and less any applicable withholding taxes, for each Preferred Share that you own (the “Preferred Share Consideration”). See the section entitled “The Arrangement Agreement — Arrangement Consideration,” beginning on page 95.

Treatment of Outstanding Incentive Securities.   If the Arrangement is completed, all outstanding Incentive Securities will vest (to the extent not already vested) and be cancelled, and the holders of such vested Incentive Securities will be entitled to receive US$3.03 in cash, without interest and less any applicable withholding taxes, for each Common Share underlying such Incentive Securities. See the sections entitled “The Arrangement — Interests of the Company’s Directors and Executive Officers in
 
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the Arrangement,” beginning on page 67 and “The Arrangement Agreement — Treatment of Incentive Securities,” beginning on page 96.

Conditions to the Arrangement.   The consummation of the Arrangement is conditioned on the satisfaction or waiver by the applicable party to the Arrangement Agreement (to the extent permitted by law) of a number of conditions, including the following:

the Arrangement Resolution must have been approved by at least two-thirds of the votes cast by Common Shareholders present or represented by proxy at the Common Shareholder Meeting, and the Arrangement Resolution must also have been approved by a majority of the votes cast at the Common Shareholder Meeting by Common Shareholders, excluding votes attached to Common Shares held by persons described in items (a) through (d) of Section 8.1(2) of MI 61-101. The number of Common Shares to be excluded from this “majority of the minority” vote is immaterial;

the Continuance Resolution and the Preferred Shareholder Resolution must have been approved by at least two-thirds of the votes cast by Preferred Shareholders present or represented by proxy at the Preferred Shareholder Meeting (together with the approval of the Arrangement Resolution described in the preceding bullet, the “Required Approvals”);

the MTN Noteholder Consent shall have been obtained by the Company and APLP and shall not have been withdrawn or revoked;

either (i) the Debentureholder Consent shall have been obtained by the Company and shall not have been withdrawn or revoked or (ii) the Debentureholder Resolution shall have been approved by the Company Debentureholders at the Debentureholder Meeting, as applicable

the Arrangement must have received interim and final approval from the Court;

no law shall be in effect that makes illegal or otherwise prohibits or enjoins the consummation of the Arrangement;

the Required Regulatory Approvals (as defined below) must have been obtained and not rescinded or modified, as described under “The Arrangement Agreement — Conditions to the Arrangement,” beginning on page 103;

Atlantic Power’s representations and warranties in the Arrangement Agreement, and the Purchasers’ respective representations and warranties in the Arrangement Agreement must be true and correct, subject to applicable materiality qualifiers, as of the date of the agreement and as of the closing date as described under “The Arrangement Agreement — Conditions to the Arrangement,” beginning on page 103;

Atlantic Power and the Purchasers must have performed in all material respects all covenants that each is required to perform under the Arrangement Agreement;

since the date of the Arrangement Agreement, no “Material Adverse Effect” ​(as such term is defined in the section of this information circular and proxy statement captioned “The Arrangement Agreement — Representation and Warranties” beginning on page 97) shall have occurred and be continuing;

certain pre-arrangement steps set forth in the disclosure letter to the Arrangement Agreement shall have been consummated;

Dissent Rights shall not have been exercised in respect of more than 10% of the outstanding Common Shares;

no proceeding by any governmental entity being pending that is reasonably likely to:

cease trade, enjoin, prohibit, or impose any material limitations or conditions on, the Purchasers’ ability to acquire, hold, or exercise full rights of ownership over, any Common Shares;

impose material terms or conditions on completion of the Arrangement or on the ownership or operation by the Purchasers of the business or assets of Atlantic Power, or compel the
 
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Purchasers to dispose of or hold separate any material portion of the business or assets of the Purchasers, any of its affiliates, or Atlantic Power; or

prevent the consummation of the Arrangement, or if the Arrangement is consummated, have a Material Adverse Effect; and

consents from third-party contractual counterparties to certain agreements of Atlantic Power and its subsidiaries (collectively, the “Required Consents”) shall have been obtained on terms acceptable to the Purchasers, and not rescinded or modified.
See the section entitled “The Arrangement Agreement — Conditions to the Arrangement,” beginning on page 103 and “The Arrangement Agreement — Representations and Warranties,” beginning on page 97.

Restrictions on Solicitations of Other Offers.

The Arrangement Agreement contains a “non-solicitation” provision that restricts our ability to solicit, encourage or otherwise facilitate any competing Acquisition Proposal. The “non-solicitation” provision is subject to a “fiduciary out” provision that allows us to provide information and participate in discussions with respect to bona fide written Acquisition Proposals if, among other requirements, the Board determines in good faith that such Acquisition Proposal constitutes or would reasonably be expected to constitute or lead to a Superior Proposal.
See the section entitled “The Arrangement Agreement — Restrictions on Solicitations of Other Offers,” beginning on page 105.

Termination of the Arrangement Agreement.   The Arrangement Agreement may be terminated:

by mutual written consent of the Company, on the one hand, and the Purchasers, on the other hand;

by either the Company, on the one hand, or the Purchasers, on the other hand, if:

the Arrangement is not consummated on or before July 14, 2021 (the “Outside Date”), so long as the failure to complete the Arrangement is not the result of, or caused by, a breach by the party seeking to exercise such termination rights of its representations or warranties or the failure of such party to perform any of its covenants or agreements, and if all conditions to closing have been satisfied or are capable of being satisfied other than receipt of the Final Order, receipt of regulatory approvals under the Competition Act and the HSR Act, and from FERC and the FCC (each as defined below) (collectively, the “Required Regulatory Approvals”), or receipt of the Required Consents, then either the Company or the Purchasers may, by written notice to the other party, extend the Outside Date from time to time by a specified period of not less than ten business days, provided that in aggregate such extensions shall not exceed 90 days from July 14, 2021;

any law is enacted that makes illegal or otherwise prohibits or enjoins the consummation of the Arrangement and such law has become final and non-appealable, provided that the party seeking to terminate the Arrangement Agreement has used its commercially reasonable efforts to prevent such result; or

(1) the Required Approvals are not obtained, (2) the MTN Noteholder Consent is not obtained, and/or (3) neither the Debentureholder Consent nor the approval of the Debentureholder Resolution, as applicable, is obtained;

by the Purchasers if:

the Company has breached any of its representations, warranties, covenants or agreements under the Arrangement Agreement which would give rise to the failure of certain conditions to closing and where that breach is incapable of being cured by the Outside Date; provided that the Purchasers are not then in breach of the Arrangement Agreement so as to cause certain conditions to closing to not be satisfied;

(A) any of the Board, the APPEL Board or APLP GP Board (as applicable) changes or publicly proposes to change the Board Recommendation in a manner adverse to the
 
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Purchasers; (B) any of the Board, the APPEL Board or the APLP GP Board accepts or recommends a competing Acquisition Proposal or publicly proposes to do so; (C) any of the Board, the APPEL Board or the APLP GP Board accepts or enters into any written agreement, understanding or arrangement in respect of an Acquisition Proposal (other than a confidentiality and standstill agreement) or publicly proposes to do so; (D) any of the Board, the APPEL Board or the APLP GP Board fails to publicly reaffirm the Board Recommendation within a specified period following the Purchasers’ request for such reaffirmation or (E) the Company breaches its non-solicitation obligations in a material respect;

any event occurs as a result of which the conditions related to dissent rights, no Material Adverse Effect, or Required Consents are not capable of being satisfied by the Outside Date.

by the Company if:

the Purchasers have breached any of their representations, warranties, covenants or agreements under the Arrangement Agreement which would give rise to the failure of certain conditions to closing and where that breach is incapable of being cured by the Outside Date; provided that the Company is not then in breach of the Arrangement Agreement so as to cause certain conditions to closing to not be satisfied; or

prior to obtaining approval of the Common Shareholders, the Board authorizes the Company to enter into an agreement with respect to a Superior Proposal in accordance with and subject to the terms and conditions described in “The Arrangement Agreement — Termination of the Arrangement Agreement,” beginning on page 108, provided that we, concurrently with doing so, pay the Termination Fee described below (the “Superior Proposal Termination Right”).

Termination Fees.   In connection with a termination pursuant to the Superior Proposal Termination Right and certain other circumstances specified in the Arrangement Agreement, the Company must pay the Purchasers a fee of $12,500,000. See the section entitled “The Arrangement Agreement — Termination Fee,” beginning on page 109.

Reverse Termination Fees.   In connection with a termination pursuant to a Reverse Termination Fee Event, the Purchasers must pay the Company a fee of $15,000,000. See the section entitled “The Arrangement Agreement — Reverse Termination Fee,” beginning on page 109.
The Continuance
Pursuant to the terms of the Arrangement Agreement, the continuance of APPEL from the jurisdiction of the Province of Alberta to the jurisdiction of the Province of British Columbia pursuant to Section 302 of the BCBCA and Section 189 of the ABCA must occur in order for the Final Order to be obtained and the Arrangement to become effective. Accordingly, Preferred Shareholders will be asked at the Preferred Shareholder Meeting to consider and, if deemed advisable, pass the Continuance Resolution, authorizing the Continuance. The full text of the Continuance Resolution is set forth in Annex C. See the section entitled “The Continuance” beginning on page 105.
The Special Meetings
See the section entitled “Questions and Answers About the Special Meetings and the Arrangement”, beginning on page 1; “The Common Shareholder Meeting”, beginning on page 81; and “The Preferred Shareholder Meeting”, beginning on page 87.
Other Important Considerations

Special Committee Recommendation.   The Board formed the Special Committee comprised of independent directors to assist the Board in connection with its evaluation of the Arrangement. The Special Committee unanimously determined to recommend to the Board and the APPEL Board that they approve the Arrangement Agreement, that the Board recommend that Common Shareholders vote in favor of the Arrangement Agreement and that the APPEL Board recommend that Preferred
 
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Shareholders vote favor of the Continuance Resolution and the Preferred Shareholder Resolution. See the section entitled “The Arrangement — Recommendation of the Special Committee to the Board of Atlantic Power and Its Reasons for the Recommendation,” beginning on page 33.

Board and APPEL Board Recommendations.   The Board has unanimously determined that the Arrangement Agreement is fair to the Common Shareholders and recommends that Common Shareholders vote “FOR” the approval of the Arrangement Agreement. The Board also recommends that Common Shareholders vote “FOR” the NEO arrangement-related compensation proposal and “FOR” the adjournment of the Common Shareholder Meeting, if necessary, to solicit additional proxies. The APPEL Board has determined that the Arrangement and the Continuance are in the best interests of APPEL and recommends that the Preferred Shareholders vote “FOR” the Continuance Resolution and the Preferred Shareholder Resolution. See the section entitled “The Arrangement — Recommendation of the Board of Atlantic Power and its Reasons for the Recommendation,” beginning on page 39; and “The Arrangement — Recommendation of the Board of APPEL and its Reasons for the Recommendation,” beginning on page 40.

Share Ownership of Directors and Executive Officers.   As of January 14, 2021, each of the directors and executive officers of Atlantic Power has entered into a support agreement to vote their Common Shares and Preferred Shares, if any, in support of the Arrangement, and to vote their Company Debentures and MTNs, if any, in support of the amendments to the respective trust indentures. See the section entitled “The Arrangement — Voting Agreements and Support Agreement,” beginning on page 41.

Interests of the Company’s Directors and Executive Officers in the Arrangement.   In considering the proposal to approve the Arrangement Resolution, Common Shareholders and Preferred Shareholders should be aware that certain of Atlantic Power’s directors and executive officers have interests in the Arrangement that are different from, and/or in addition to, the interests of Common Shareholders and Preferred Shareholders generally, including accelerated vesting of equity awards, potential cash severance and other termination benefits, and provision of indemnification and insurance arrangements. The Board and the APPEL Board were each aware of these potential conflicts of interest and considered them, among other matters, in reaching its decision to approve the Arrangement Agreement and to recommend that Common Shareholders and Preferred Shareholders vote in favor of approving the Arrangement Resolution. These interests are described under “The Arrangement — Interests of the Company’s Directors and Executive Officers in the Arrangement,” beginning on page 67.

Opinion of Goldman Sachs & Co. LLC
On October 2, 2020, the Special Committee engaged Goldman Sachs & Co. LLC (“Goldman Sachs”), pursuant to an engagement letter dated as of October 2, 2020, to act as the Company’s financial advisor to provide the Special Committee with financial advice and assistance in connection with the possible sale of all or a significant portion of the Company.
At the meeting of the Special Committee held on January 14, 2021, Goldman Sachs rendered its oral opinion to the Special Committee, which was subsequently confirmed by delivery of a written opinion dated January 14, 2021, that, as of such date, and based upon and subject to the factors and assumptions set forth therein, the US$3.03 in cash per Common Share to be paid to the Common Shareholders (other than I Squared Capital and its affiliates) pursuant to the Arrangement Agreement was fair, from a financial point of view, to such Common Shareholders. The full text of the written opinion of Goldman Sachs, dated January 14, 2021, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex F to this information circular and proxy statement. The Goldman Sachs opinion is not a recommendation as to how any Common Shareholder should vote with respect to the transactions contemplated by the Arrangement Agreement or any other matter. Pursuant to an engagement letter between Atlantic Power, the Special Committee and Goldman Sachs, the Company has agreed to pay Goldman Sachs a transaction fee of approximately US$3.0 million, US$200,000 of which was payable upon execution of the engagement letter, US$450,000 of which
 
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was payable upon announcement of the transactions contemplated by the Arrangement Agreement and the remainder of which is contingent upon consummation of the transactions contemplated by the Arrangement Agreement.
Atlantic Power encourages you to read carefully and in its entirety the full text of Goldman Sachs’ written opinion attached as Annex F to this information circular and proxy statement. For a description of the opinion that the Special Committee received from Goldman Sachs, see “The Arrangement — Opinions of Financial Advisors — Opinion of Goldman Sachs,” beginning on page 42.

Opinion of Blair Franklin Capital Partners Inc.
The Special Committee of Atlantic Power has retained Blair Franklin Capital Partners Inc. (“Blair Franklin”) to act as its non-exclusive financial adviser, to provide opinions to the Special Committee and the Board as to the fairness, from a financial point of view, of the Common Share Consideration to be paid to the Common Shareholders and the Company Debenture Consideration to be paid to the Company Debentureholders. Blair Franklin has also been retained to provide an opinion to the Board, the Special Committee and the APPEL Board as to the fairness, from a financial point of view, of the Preferred Share Consideration to be paid to Preferred Shareholders as a class pursuant to the Arrangement. The opinions being provided by Blair Franklin as to the fairness, from a financial point of view, of the Common Share Consideration, the Company Debenture Consideration and the Preferred Share Consideration are referred to collectively as the “Opinions”.
On January 14, 2021, Blair Franklin delivered certain of its written analyses and its oral opinions to the Special Committee, the Board and the APPEL Board, subsequently confirmed in writing as of the same date, and subject to the various assumptions, qualifications and limitations set forth therein, that as of January 14, 2021, with respect to the consideration to be paid pursuant to the Arrangement and the Company Debenture Transaction (as applicable): (i) the Common Share Consideration is fair, from a financial point of view, to the Common Shareholders; (ii) the Preferred Share Consideration is fair, from a financial point of view, to the Preferred Shareholders; and (iii) the Company Debenture Consideration is fair, from a financial point of view, to the Company Debentureholders.
The full text of the opinion letter of Blair Franklin dated as of January 14, 2021 (the “Blair Franklin Letter”) containing the Opinions, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Blair Franklin in rendering the Opinions, is attached to this information circular and proxy statement as Annex G and is incorporated by reference herein in its entirety. The summary of the Opinions contained in this information circular and proxy statement are qualified in their entirety by reference to the full text of the Blair Franklin Letter. You are encouraged to read the Blair Franklin Letter carefully and in its entirety. The Opinions were delivered to the Special Committee, the Board and the APPEL Board and address only the fairness, from a financial point of view, of the Common Shares Consideration to be paid to Common Shareholders, the Company Debenture Consideration to be paid to the Company Debentureholders and the Preferred Share Consideration to be paid to the Preferred Shareholders as a class pursuant to the Arrangement and the Company Debenture Transaction, as applicable, as of the date of the Blair Franklin Letter. The Opinions do not address the relative merits of the Arrangement as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or are available. The Opinions are not intended to, and do not, constitute advice or a recommendation as to how the Common Shareholders, the Company Debentureholders or the Preferred Shareholders should vote at any meeting of securityholders that may be held in connection with the Arrangement or the Company Debenture Transaction, or whether the securityholders should take any other action in connection with the Arrangement. The Common Share Consideration, the Preferred Shares Consideration and the Company Debenture Consideration were determined through negotiations between I Squared Capital and Atlantic Power, and not pursuant to recommendations of Blair Franklin. For a description of the Opinions that the Board, the Special Committee and the APPEL Board received from Blair Franklin, see the section entitled “The Arrangement — Opinions of Financial Advisors — Opinions of Blair Franklin,” beginning on page 46.
 
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Sources of Financing.

Atlantic Power anticipates that the total funds needed to complete the Arrangement, which are expected to be approximately US$961 million, will be funded with equity provided by funds affiliated with I Squared Capital or Debt Financing obtained by funds affiliated with I Squared Capital or their subsidiaries.
The completion of the Arrangement is not conditioned upon the Purchasers’ receipt of financing. See the section entitled “The Arrangement — Financing of the Arrangement,” beginning on page 65 and “The Arrangement Agreement — Specific Performance,” beginning on page 112.

Regulatory Approvals.

Under the HSR Act, and the rules and regulations promulgated thereunder by the Federal Trade Commission (“FTC”), the Arrangement may not be completed until notification and report forms have been filed with the FTC and the Antitrust Division of the Department of Justice (the “Antitrust Division”) and the applicable waiting period has expired or been terminated. On February 5, 2021, the parties to the Arrangement Agreement each filed their notification and report forms with the FTC and Antitrust Division.

Under the Competition Act the parties cannot complete the Arrangement until: (a) the parties have filed a Part IX notification with the Commissioner of Competition and the applicable waiting period under Section 123 of the Competition Act has expired or been terminated; (b) an advance ruling certificate has been issued by the Commissioner of Competition pursuant to Section 102(1) of the Competition Act; or (c) a waiver has been provided by the Commissioner of Competition pursuant to paragraph 113(c) of the Competition Act. On January 26, 2021, the parties to the Arrangement Agreement each filed their Part IX notification with the Commissioner of Competition. On February 5, 2021, the parties received an advance ruling certificate from the Commissioner of Competition.

As a condition to the consummation of the Arrangement, the FCC must approve the transfer of control of certain FCC licenses held by Atlantic Power or its subsidiaries. In connection with such approval, the FCC must determine whether the transfer will serve the public interest, convenience and necessity. Specifically, the FCC considers if, following the Arrangement, Atlantic Power will continue to be qualified to control such licenses and whether such transfer of control is consistent with applicable law and FCC rules. Atlantic Power and the Purchasers plan to file applications with the FCC to obtain approval of the transfer of control of the FCC authorizations held by Atlantic Power by March 19, 2021. The Purchasers must also, and intend to, notify the FCC once the Arrangement has been consummated.

Section 203 of the Federal Power Act requires prior approval by FERC for changes in control of public utilities. FERC must approve a proposed transaction if it finds that the transaction will be “consistent with the public interest, and will not result in cross-subsidization of a non-utility associate company or the pledge or encumbrance of utility assets for the benefit of an associate company . . . .” FERC examines three factors in analyzing whether a proposed transaction is consistent with the public interest: (1) the effect on competition, (2) the effect on rates, and (3) the effect on regulation. The Arrangement should be approved because it is consistent with the public interest and will not result in cross-subsidization of a non-utility associate company or the pledge or encumbrance of utility assets for the benefit of an associate company. On February 5, 2021, Atlantic Power and the Purchasers filed an application with FERC to obtain approval of the transfer of control of the Atlantic owned public utilities. The parties must also, and intend to, notify the FERC within 10 days of the Arrangement being consummated and make other required post-closing notice filings.

At least 90 days before transferring control of a generating facility receiving compensation for reactive supply and voltage support, Schedule 2 of the PJM Tariff requires the resource owner to submit an informational filing explaining the basis for the decision by the reactive power supplier not to terminate or revise its cost-based rate schedule. Schedule 2 does not expressly
 
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address indirect upstream ownership transfers in reactive supply resources. However, FERC has stated that “. . . the Schedule 2 filing requirement does in fact apply to transfers of interests in a company where, as a result, a facility is transferred from the downstream ownership of one company to another.” While each of Chambers and Morris will continue to directly own its respective facility following the Arrangement being consummated, on February 5, 2021 and February 8, 2021, Atlantic Power submitted the informational filing for Chambers and Morris, respectively, to ensure compliance with the requirements of Schedule 2 of the PJM Tariff.

Material U.S. Federal Income Tax Consequences.   Holders of Common Shares or Preferred Shares should read carefully the information under “The Arrangement — Material U.S. Federal Income Tax Consequences” beginning on page 73 of this information circular and proxy statement, which sets out a general summary of material U.S. federal income tax consequences that may be relevant to beneficial owners of Common Shares and Preferred Shares that are U.S. Holders (as defined therein). The summary is not a comprehensive discussion of all of the U.S. federal income tax consequences of the Arrangement that may be relevant to any particular holder of Common Shares or Preferred Shares in light of such holder’s particular facts and circumstances and is not intended to be legal or tax advice. Holders of Common Shares or Preferred Shares should consult their own tax advisors with respect to their particular circumstances. In addition, holders of Incentive Securities should consult their own tax advisors concerning the tax consequences of the Arrangement having regard to their own particular circumstances.

Material Canadian Federal Income Tax Consequences.   Holders of Common Shares or Preferred Shares should read carefully the information under “The Arrangement — Material Canadian Federal Income Tax Consequences” beginning on page 74 of this information circular and proxy statement, which sets out a general summary of certain Canadian federal income tax considerations that may be applicable to holders of Common Shares and Preferred Shares. Such disclosure is not intended to be legal or tax advice to any particular holder of Common Shares or Preferred Shares. Holders of Common Shares or Preferred Shares should consult their own tax advisors with respect to their particular circumstances. In addition, holders of Incentive Securities should consult their own tax advisors concerning the tax consequences of the Arrangement having regard to their own particular circumstances.

Dissenting Shareholders’ Rights.   Pursuant to the Interim Order, Registered Common Shareholders and Preferred Shareholders as of the respective record date for the Common Shareholder Meeting and the Preferred Shareholder Meeting will have a right to dissent (“Dissent Rights”) under Division 2 of Part 8 of the BCBCA in respect of the Arrangement Resolution and Preferred Shareholder Resolution, as applicable, and under Section 191 of the ABCA in respect of the Continuance Resolution, and to be paid an amount equal to the fair value of their Common Shares or Preferred Shares, respectively. The dissent procedures require that a Registered Common Shareholder or Preferred Shareholder who wishes to dissent in respect of the Arrangement Resolution and the Preferred Shareholder Resolution, as applicable, must send to Atlantic Power a written objection in the manner set forth in Division 2 of Part 8 of the BCBCA, and Preferred Shareholders who wish to dissent in respect of the Continuance Resolution must send to Atlantic Power a written objection in the manner set forth under Section 191 of the ABCA, in each case as modified by the Interim Order, in each case to be received not later than 5:00 p.m. (Eastern Daylight Time) two business days immediately preceding the date of the Common Shareholder Meeting or the Preferred Shareholder Meeting, respectively, in each case as may be adjourned or postponed from time to time. See the sections entitled “Dissent Rights of Common Shareholders and Preferred Shareholders in Respect of the Arrangement,” beginning on page 113 and “Dissent Rights of Preferred Shareholders in respect of the Continuance,” beginning on page 118.

Market Price of Common Shares.   The closing sale price of Common Shares on the New York Stock Exchange (the “NYSE”) on January 14, 2021, the last trading day prior to the announcement of the Arrangement, was US$2.10 per share. The closing price of Common Shares on the TSX on January 14, 2021, the last trading day prior to the announcement of the Arrangement, was C$2.67 per share. The US$3.03 per share to be paid for each Common Share
 
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in the Arrangement represents a premium of approximately 48% to the 30-day volume weighted average price per Common Share on the NYSE. You are encouraged to obtain current market quotations for the Common Shares in connection with voting your shares. See the section entitled “Market Price of Common Shares,” beginning on page 122.

Market Price of Preferred Shares.   The closing sale price of Series 1 Preferred Shares on the Toronto Stock Exchange (the “TSX”) on January 14, 2021, the last trading day prior to the announcement of the Arrangement, was C$17.27 per share. The closing sale price of Series 2 Preferred Shares on the TSX on January 14, 2021, the last trading day prior to the announcement of the Arrangement, was C$19.01 per share. The closing sale price of Series 3 Preferred Shares on the TSX on January 14, 2021, the last trading day prior to the announcement of the Arrangement, was C$17.00 per share. You are encouraged to obtain current market quotations for the Preferred Shares in connection with voting your shares.
 
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
To the extent any statements made in this information circular and proxy statement, and the documents to which we refer you in this information circular and proxy statement, may contain information that is not historical, these statements are forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, and forward-looking information under Canadian securities law (collectively, “forward-looking statements”).
Certain statements in this information circular and proxy statement may constitute forward-looking statements, which reflect the expectations of Atlantic Power’s management regarding the business prospects and opportunities of Atlantic Power and its projects and the Arrangement. These statements, which are based on certain assumptions and describe Atlantic Power’s future plans, strategies and expectations, can generally be identified by the use of the words “plans”, “expects”, “does not expect”, “is expected”, “intends”, “anticipates” or “does not anticipate”, “believes”, “outlook”, “objective”, or “continue”, or equivalents or variations, including negative variations, of such words and phrases, or state that certain actions, events or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved. In addition, any statements that refer to forecasts or projections of our future financial performance, our anticipated growth and trends in our business, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified under “Risk Factors” and “Forward-Looking Information” in Atlantic Power’s periodic reports as filed with the U.S. Securities and Exchange Commission (the “SEC”) from time to time for a detailed discussion of the risks and uncertainties affecting Atlantic Power. Examples of such statements in this document include, but are not limited to, statements with respect to the following:

the anticipated benefits of the Arrangement to the parties, the Common Shareholders and the Preferred Shareholders;

the anticipated receipt of the Required Regulatory Approvals, Court and securityholder approvals for the Arrangement;

the ability of the parties to satisfy the other conditions to, and to complete, the Arrangement;

the inherent uncertainty with financial or other forecasts or projections;

the anticipated size of the markets and continued demand for our products and services;

our ability to generate sufficient cash flow to implement our business plan, including financing internal or external growth opportunities;

our ability to renew or into new power purchase agreements on favorable terms or at all after the expiration of our current agreements;

fluctuations in foreign exchange rates;

current and ongoing global economic instability, political unrest and related sanctions;

intense competition; and

the impact of the Arrangement not being completed on Atlantic Power, its subsidiaries and their respective securities and securityholders.
These statements reflect our current views with respect to future events and are based on assumptions and factors and subject to risks and uncertainties, including the assumptions that the conditions to complete the Arrangement will be satisfied, that the Arrangement will be completed within the expected time frame at the expected cost and that the parties to the Arrangement Agreement will not fail to complete the Arrangement for any other reason, including but not limited to the matters discussed under the “Risk Factors” section of this information circular and proxy statement. Although the forward-looking statements contained in this document are based upon what are believed to be reasonable assumptions, you cannot be assured that actual results will be consistent with these forward-looking statements, and the differences may be material. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth in this information circular and proxy
 
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statement and the documents to which we refer you in this information circular and proxy statement. These forward-looking statements are made as of the date of this information circular and proxy statement and, except as expressly required by applicable law, Atlantic Power assumes no obligation to update or revise them to reflect new events or circumstances.
 
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THE ARRANGEMENT
This discussion of the Arrangement Agreement is qualified by reference to the Arrangement Agreement, which is attached to this information circular and proxy statement as Annex D. You should read the entire Arrangement Agreement carefully as it is the legal document that governs the Arrangement.
Background to the Arrangement
The Company’s senior management and Board regularly reviews and evaluates, with the assistance of financial and legal advisors, the Company’s operations, financial performance and potential strategic options, with the goal of enhancing shareholder value. As part of this process, the Company and the Board regularly reviews a broad range of opportunities, including strategic external investments, internal investments, such as share repurchases and investments to optimize the Company’s existing projects, and aggressively reducing debt. Through their evaluation of these various opportunities, the Company’s senior management and the Board have developed a well-informed knowledge of the market in which the Company operates, including with respect to commercial power operations and maintenance, project development, asset management, mergers and acquisitions, capital raising and management and financial controls.
While actively pursuing opportunities to enhance shareholder value, the Company has explored on a number of occasions the possibility of a sale of the Company to a third party. In 2014, the Company engaged a financial advisor and ran a sale process involving multiple parties. That process, however, ultimately did not result in an acceptable offer from a potential acquirer. Since then, the Company has been approached by multiple parties that have expressed an interest in exploring an acquisition of the Company. Some of these discussions extended beyond a preliminary stage, with some potential bidders signing confidentiality agreements and conducting preliminary due diligence on the Company. However, through the second quarter of 2020, none of these discussions resulted in an offer that the Company’s senior management and the Board believed represented fair value to the Company’s shareholders.
In March 2020, the Company’s senior management received an unsolicited expression of interest from representatives of I Squared Capital regarding a possible acquisition of the Company. Following several discussions between the Company’s senior management and representatives of I Squared Capital over the next two months, and consistent with prior approaches by other potential bidders, the Company’s senior management and the Board determined to allow I Squared Capital to conduct preliminary due diligence on the Company and its assets in the event I Squared Capital might propose a value-enhancing transaction on acceptable terms that would be of interest to the Company. As such, the Company entered into a confidentiality and standstill agreement with I Squared Capital on June 3, 2020. That same day, the Company granted I Squared Capital and its representatives access to a virtual data room and provided operational and financial information in order for I Squared Capital to begin its due diligence review and evaluate the Company.
From June 2020 through September 2020, representatives of the Company and I Squared Capital engaged in various discussions regarding I Squared Capital’s due diligence review of the Company. During this time, the Company’s senior management regularly kept the Board, four of the five members of which are independent (within the meaning of all applicable securities laws) and experienced directors, informed on the status of I Squared Capital’s due diligence review and management’s preliminary discussions with I Squared Capital regarding a potential acquisition of the Company, including through email communications and during scheduled Board meetings on August 4, 2020 and August 25, 2020.
During the August 25, 2020 Board meeting, as part of its regular update regarding the ongoing discussions with I Squared Capital, the Company’s senior management discussed, among other things, I Squared Capital’s preliminary valuation of the Company of between $2.75 and $3.00 per Common Share. At that meeting, the Company’s senior management provided the Board with management’s analysis of the potential range of intrinsic value for the Common Shares in best-case, worst-case, and most-likely case scenarios. Management discussed with the Board certain risks facing the Company, including risks associated with future power prices, re-contracting outcomes and other risks associated with remaining a standalone public company. Following the presentation of this analysis, the Board and the Company’s senior management discussed their views on the Company’s potential value and the Board directed James Moore, the Chief Executive Officer of the Company, to pursue further negotiations with I Squared Capital based on the Board’s
 
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discussions with the Company’s senior management at the meeting. On August 26, 2020, Mr. Moore conducted a call with representatives of I Squared Capital in which he communicated the Board’s expectations regarding valuation and associated terms.
On August 28, 2020, representatives of I Squared Capital called Mr. Moore to indicate that while it would be challenging, I Squared Capital believed there was a path to achieving the Board’s request. Representatives of I Squared Capital also told Mr. Moore that I Squared Capital would continue to work internally on potential structures for the proposed transaction, valuation and timing, with the goal of providing a written, non-binding letter of intent the following week.
On September 7, 2020, representatives of I Squared Capital delivered to the Company a non-binding letter of intent (the “September 7th LOI”) to acquire the Company through a plan of arrangement. The September 7th LOI contemplated a cash purchase price of between $2.75 and $3.00 per Common Share and indicated that, subject to the completion of its due diligence review, I Squared Capital’s preference was to take out and refinance all other elements of the Company’s capital structure other than the Company’s project-level debt. The September 7th LOI noted, however, that the final structure of the proposed transaction would be determined at a later date on the basis of tax, securities and corporate law advice. I Squared Capital also requested an exclusivity period of 45 days to complete its due diligence review of the Company and negotiate definitive agreements.
The following day, the Board and the Company’s senior management discussed I Squared Capital’s offer provided in the September 7th LOI. Following a discussion in which the Board asked detailed questions of senior management, the Board determined that it was not interested in further negotiations with I Squared Capital regarding the potential transaction if I Squared Capital’s proposed purchase price could only be expressed at this stage as a range of potential purchase prices per Common Share. The Board then directed Mr. Moore to communicate the Board’s reservations regarding the September 7th LOI to I Squared Capital.
On September 10, 2020, Mr. Moore participated in a call with a representative of I Squared Capital in which he detailed the Company’s response to I Squared Capital’s offer provided in the September 7th LOI and communicated that, assuming the Company and I Squared Capital could agree to a structure and other terms related to the proposed transaction, the Company and the Board would proceed with discussions related to the proposed transaction if I Squared Capital increased its offer to US$3.03 per Common Share.
On September 11, 2020, representatives of I Squared Capital contacted Mr. Moore and indicated that I Squared Capital would be prepared to increase its offer to US$3.03 per Common Share. The representatives of I Squared Capital also requested a 60-day period of exclusivity to complete diligence and negotiations regarding a proposed transaction. I Squared Capital indicated that given the complex nature of the Company’s capital and financial structure, and the cross-border nature of its operations, I Squared Capital required time to design an acquisition and reorganization structure which would allow it to continue to propose a transaction at the desired valuation. I Squared Capital resolved to deliver to the Company a revised non-binding letter of intent a few days thereafter.
On September 14, 2020, representatives of I Squared Capital delivered to the Company a non-binding letter of intent (the “September 14th LOI”) to acquire the Company thorough a plan of arrangement, pursuant to which I Squared Capital proposed a purchase price of US$3.03 per Common Share. The September 14th LOI also contemplated, in particular: (i)a potential sale of a small number of the Company’s projects to an unaffiliated third party (the “Potential Asset Sale”), though the Potential Asset Sale would not be a condition to closing of the proposed transaction, (ii) the Company’s existing term loans would be taken out at par per the terms of the existing term loan facility agreement, (iii) I Squared Capital’s preference was to take out and refinance all other elements of the Company’s capital structure other than the Company’s project-level debt, which would remain in place, and (iv) the Company would grant I Squared Capital a 60-day exclusivity period to negotiate the proposed transaction. The September 14th LOI indicated that the refinancing of the Company’s capital structure would not be a condition to closing of the proposed transaction.
During contemporaneous discussions with Mr. Moore, representatives of I Squared Capital indicated that I Squared Capital would be prepared to offer (a) a cash purchase price of between C$21.00 and C$22.00
 
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per Preferred Share, (b) to redeem the MTNs for consideration equal to 101% of the principal amount of the MTNs held as of the closing of the proposed transaction and (c) to convert the Company Debentures into Common Shares immediately prior to the closing of the proposed transaction based on the conversion ratio then in effect (including the “make whole premium shares” issuable under the terms of the Company Debenture Indenture following a cash change of control). Under the September 14th LOI, such elements of the Company’s capital structure could have been left outstanding following the consummation of the proposed transaction, including the Potential Asset Sale, potentially leaving holders of Preferred Shares and MTNs with a smaller base of assets to support these obligations.
The next day, on September 15, 2020, the Board held a meeting to discuss the September 14th LOI, including whether the Board should grant an exclusivity period to I Squared Capital. The Board considered the efforts that I Squared Capital had undertaken to date, the fact that the price proposed by I Squared Capital was in excess of any proposals that the Company had received over the past six years and the potential benefits and risks of engaging with other parties, including the risk that I Squared Capital would not be willing to undertake further work without an exclusivity period. The Board also discussed Mr. Moore’s conversations with representatives of I Squared Capital related to I Squared Capital’s proposal for the other elements of the Company’s capital structure, noting (i) that the price I Squared Capital was prepared to offer for the Preferred Shares was significantly in excess of the average price APPEL had paid over the last several years to repurchase Preferred Shares under APPEL’s normal course issuer bids and (ii) the Board’s belief that I Squared Capital’s intention to retire all of the Preferred Shares and MTNs was a better outcome for the Preferred Shareholders and MTN Noteholders than remaining in the capital structure of the Company post-closing because it provided the Preferred Shareholders and MTN Noteholders with immediate liquidity without further exposure to the risks facing the Company. Following discussion, the Board unanimously determined that it was in the best interests of the Company (taking into account the interests of all affected stakeholders) to approve the non-binding September 14th LOI, including the grant of exclusivity to I Squared Capital. The Company executed the September 14th LOI later that same day.
During the September 15, 2020 meeting of the Board, Kevin Howell, Chairman of the Board, led a discussion addressing the formation of a special committee (the “Special Committee”) of the Board comprised of independent directors of the Board to assist the Board in connection with its evaluation of the proposed transaction proposed by the September 14th LOI. The Board unanimously determined to form the Special Committee and appointed Mr. Howell as Chairman of the Special Committee and Foster Duncan, Danielle Mottor and Gilbert Palter as the initial members of the Special Committee.
Later that day, the Special Committee held a meeting to discuss engaging Goldman Sachs & Co. LLC (“Goldman Sachs”) as financial advisor to the Special Committee, including to opine on whether the consideration in cash per Common Share to be paid to the Common Shareholders (other than I Squared Capital and its affiliates) pursuant to the proposed transaction was fair from a financial point of view to such holders. The Special Committee unanimously approved the engagement of Goldman Sachs as financial advisor to the Special Committee and, subject to final approval from the Special Committee, delegated to its counsel and members of the Company’s senior management the authority to negotiate the terms and conditions of an engagement letter with Goldman Sachs. During this time, the Board and the Special Committee also engaged Cleary Gottlieb Steen & Hamilton LLP (“Cleary Gottlieb”) as U.S. legal counsel to the Special Committee and the Company and Goodmans LLP (“Goodmans”) as Canadian legal counsel to the Special Committee and the Company.
On September 17, 2020, the Special Committee held a meeting with representatives of Cleary Gottlieb and Goodmans, during which representatives of Goodmans provided a summary of the key Canadian fiduciary duties of directors in the context of change of control transactions such as the proposed transaction. The representatives of Goodmans and Cleary Gottlieb also provided background on the Canadian and U.S. processes that would be necessary in order to consummate the proposed transaction. The Special Committee also requested that Goodmans prepare a formal mandate of the Special Committee for approval by the Board.
On September 25, 2020, the Board held a meeting during which Mr. Howell presented the recommendation of the Special Committee that the Board approve a draft mandate of the Special Committee circulated previously by representatives of Goodmans (the “Special Committee Mandate”). The Special Committee Mandate provided the Special Committee with a robust mandate to review, supervise and
 
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negotiate the proposed transaction with I Squared Capital and to review any other strategic alternatives that may be available to the Company (including remaining as an independent, publicly-traded company). The Board unanimously determined to approve and adopt the Special Committee Mandate.
On October 2, 2020, Goldman Sachs and the Company executed an engagement letter for Goldman Sachs to act as financial advisor to the Special Committee in connection with the possible sale of all or a significant portion of the Company.
Representatives of Sidley Austin LLP (“Sidley Austin”), U.S. legal counsel to I Squared Capital, and Stikeman Elliott LLP (“Stikeman”), Canadian counsel to I Squared Capital, prepared an initial draft of the arrangement agreement which was provided to the Company through representatives of I Squared Capital on October 11, 2020. On October 16, 2020, representatives of Cleary Gottlieb and Goodmans delivered to the Special Committee a list of key issues presented by the draft arrangement agreement distributed by I Squared Capital’s legal counsel. On October 19, 2020, representatives of Cleary Gottlieb circulated a revised draft of the arrangement agreement to I Squared Capital and its legal counsel. During the week of October 11, 2020, members of the Special Committee also asked a number of questions and convened calls with representatives of Goodmans regarding the proposed treatment of the Preferred Shares under the proposed transaction, including the potential risks Preferred Shareholders may face if the Preferred Shares remain publicly-traded securities of a company owned and controlled by I Squared Capital.
On October 28, 2020, representatives of I Squared Capital called Mr. Moore to provide an update on I Squared Capital’s internal discussions with its investment committee regarding the proposed transaction and detail I Squared Capital’s preferred structure for the proposed transaction. Specifically, the representatives of I Squared Capital detailed that I Squared Capital had determined that, in order to achieve the valuation set forth in the September 14th LOI, a reorganization of the Company’s complex structure for its subsidiaries and their respective projects would be required. As a result, I Squared Capital (i) communicated that the repurchase of the MTNs and the Preferred Shares would be a condition precedent to the closing of the proposed transaction in order to allow I Squared Capital to implement its proposed reorganization and achieve a complete retirement of the existing capital structure of the Company, and (ii) advised that it was no longer contemplated that the Potential Asset Sale would occur prior to closing. The representatives of I Squared Capital indicated they would provide a revised draft of the arrangement agreement during the week of November 9, 2020.
On November 3, 2020, the Board held a meeting, attended by senior management of the Company, to discuss Mr. Moore’s October 28, 2020 call with representatives of I Squared Capital and the potential timeline to signing and closing of the proposed transaction.
On November 11, 2020, representatives of I Squared Capital called Mr. Moore to provide an update on their process and proposed structure and to detail certain further proposed terms of the proposed transaction. The representatives of I Squared Capital reaffirmed I Squared Capital’s commitment to the previously-proposed price of US$3.03 per Common Share, but indicated that to maintain such price, the transaction would need to be structured to address additional components of the Company’s capital structure. I Squared Capital’s proposal contemplated that in the transaction MTN Noteholders and Preferred Shareholders would receive a premium to their market price, and that the approval of MTN Noteholders, Preferred Shareholders and Company Debentureholders would be conditions precedent to the closing of the proposed transaction. The representatives indicated that, as part of its proposed reorganization of the Company’s cross-border structure, each of the Company’s U.S. and Canadian businesses would be acquired by different entities affiliated with I Squared Capital. The representatives indicated that I Squared Capital remained committed to the proposed transaction, and requested that the period of exclusivity with I Squared Capital be extended for an additional 30 days to complete negotiations.
On November 13, 2020, representatives of the Company and I Squared Capital and their respective legal and financial advisors had a call to further discuss the updated structure discussed on the November 11, 2020 call between Mr. Moore and representatives of I Squared Capital. During the November 13, 2020 call, representatives of I Squared Capital and their advisors proposed a plan to obtain the support of a fund manager (the “Substantial Holder”) which, to the knowledge of I Squared Capital based on review of public information, held a substantial amount of the outstanding MTNs. The plan called for the Substantial
 
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Holder to commit to vote in favor of the proposed transaction or otherwise consent to amendments to the Company Debenture Indenture and MTN Indenture prior to the Company and I Squared Capital executing the arrangement agreement.
The Special Committee held a meeting on November 18, 2020, during which Mr. Moore provided the Special Committee with an update on the status of negotiations with I Squared Capital, including a detailed overview of I Squared Capital’s revised structure and its proposal with respect to the conditions precedent to closing of the proposed transaction. During the meeting, the Special Committee, after considering, among other things, the potential benefits of the proposed transaction to all securityholders and the potential execution risk associated with the additional conditionality, determined to grant a 30-day extension of I Squared Capital’s period of exclusivity to continue to explore the proposed transaction.
On November 25, 2020, I Squared Capital’s legal counsel circulated revised drafts of the arrangement agreement. In the following days, representatives of Cleary Gottlieb and Goodmans circulated to the Special Committee a list detailing the key issues presented by the November 25, 2020 draft of the arrangement agreement, including I Squared Capital’s proposals that (i) the Company would be required to pay a termination fee (the “Termination Fee”) of US$37 million under certain circumstances, including if the Company terminated the agreement in order to accept a Superior Proposal (as defined below), which I Squared Capital presented as being commensurate with the proposed enterprise value of the Company, (ii) the Equity Investor’s liability in connection with breaches of the arrangement agreement would be capped at US$37 million, and (iii) closing of the proposed transaction would be conditioned upon the receipt of certain unidentified third-party consents and dissent rights in respect of not more than 5% of each of the Common Shares and Preferred Shares being exercised.
On December 2, 2020, the Company’s legal counsel circulated revised drafts of the arrangement agreement.
On December 3, 2020, representatives of I Squared Capital sent an email to Mr. Moore in which the representatives of I Squared Capital indicated that they understood the importance of maintaining the offer of US$3.03 per Common Share and recognized the Company’s concerns regarding execution risk. They indicated, however, that given the need to implement a significant reorganization of the Company’s and its subsidiaries’ capital and cross-border structure, their proposed transaction terms, including the approval of the Common Shareholders, Preferred Shareholders, MTN Noteholders and Company Debentureholders as conditions precedent, was the only structure they had identified that would allow I Squared Capital to maintain its offer of US$3.03 per Common Share and provide a premium to each other class of security in the Company’s capital structure.
On December 4, 2020, Mr. Moore participated on a call with representatives of I Squared Capital in which Mr. Moore responded to the proposal reflected in I Squared Capital’s most recent draft agreement, including by indicating that any Termination Fee payable by the Company pursuant to the arrangement agreement would need to be significantly lower than US$37 million and that the Company would be proposing a reverse termination fee (the “Reverse Termination Fee”) payable by the Purchasers under certain circumstances in the Company’s next draft of the arrangement agreement. Mr. Moore also indicated that time was of the essence to complete negotiations regarding the transaction and a call between the Company’s and I Squared Capital’s respective legal counsel should be scheduled in the next few days to discuss the remaining open issues in the arrangement agreement.
Later that same day, the Special Committee held a meeting, during which the Company’s senior management and legal counsel provided the Special Committee with an update regarding the status of negotiations with I Squared Capital. During this time, the Special Committee and the Board determined that it would be advisable to retain another financial advisor to undertake a fairness review and opine on whether the consideration to be received by the Common Shareholders, Company Debentureholders and Preferred Shareholders pursuant to the proposed transaction was fair from a financial point of view to such holders. The Special Committee and the Board identified Blair Franklin as a potential financial advisor and delegated to its counsel and members of the Company’s senior management the authority to negotiate the terms and conditions of an engagement letter with Blair Franklin, subject to final approval from the Special Committee.
 
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On December 5, 2020, representatives of Cleary Gottlieb circulated to representatives of Stikeman and Sidley Austin an initial draft of the Company Disclosure Letter to be delivered in connection with the Company’s execution of the arrangement agreement.
On December 7, 2020, the Company, I Squared Capital and their respective legal counsel participated on a call to discuss the material open issues in the arrangement agreement.
On December 8, 2020, representatives of Blair Franklin circulated an initial draft of an engagement letter.
On December 9, 2020, representatives of the Company and its legal counsel participated on a call with representatives of Stikeman and Sidley Austin to discuss the Company Disclosure Letter. During the course of that call, representatives of Stikeman and Sidley Austin proposed that every material contract to which the Company was a party that would require consent from the contractual counterparty in connection with the consummation of the proposed transaction would be a “Required Consent” under the arrangement agreement would thus be a condition precedent to the closing of the proposed transaction. Representatives of the Company stated that they would need to limit the number of “Required Consents” which would be conditions precedents to a subset of such contracts. Following the call, representatives of Stikeman and Sidley Austin circulated a revised draft of the arrangement agreement.
On December 10, 2020, representatives of I Squared Capital indicated to Mr. Moore that I Squared Capital would hold an investment committee meeting to obtain final internal approvals with respect to the proposed transaction on December 16, 2020, after which I Squared Capital would be prepared to engage in discussions with the Substantial Holder regarding its willingness to support the transaction. During this time, the Company, I Squared Capital and their respective legal counsel drafted forms of the confidentiality agreement and voting agreement that the Substantial Holder would be requested to execute. Representatives of Goodmans and Cleary Gottlieb also held a number of calls with I Squared Capital’s legal advisors to discuss and negotiate certain terms of the arrangement agreement and ancillary documentation.
Subsequently, representatives of Cleary Gottlieb and Goodmans sent to Blair Franklin a revised draft of its proposed engagement letter and executed an engagement letter dated December 14, 2020.
On December 19, 2020, the Special Committee held a meeting with members of management and representatives of Blair Franklin in which the representatives of Blair Franklin reviewed with the Special Committee a preliminary financial analysis regarding the consideration to be received by Common Shareholders, Preferred Shareholders and Company Debentureholders.
Throughout the rest of December 2020 and early January 2021, senior management of the Company, representatives of I Squared Capital and their respective legal counsel discussed the material open issues in the arrangement agreement, including (i) the quantum of the Termination Fee and Reverse Termination Fee, (ii) the scope of the “Required Consents” closing condition, (iii) certain employee benefits issues and issues with respect to the Company’s ability to continue to grant compensation under its incentive and bonus plans in the ordinary course until closing of the proposed transaction, and (iv) the proposed closing condition relating to the exercise of dissent rights. Senior management of the Company and the Special Committee’s legal counsel regularly apprised the Special Committee and Board on the status of discussions with I Squared Capital and its advisors. During this time, the Special Committee’s and I Squared Capital’s legal counsel continued to circulate revised drafts of the arrangement agreement and negotiated ancillary documentation in connection with the proposed transaction.
On December 16, 2020, representatives of I Squared Capital reported to the Company that I Squared Capital had received investment committee approval and, with the Company’s approval, would be willing to engage in discussions with the Substantial Holder. The parties thereafter contacted the Substantial Holder and, following execution of a confidentiality agreement on January 4, 2021, engaged in discussions with the Substantial Holder regarding its willingness to support a transaction where the MTNs would be repurchased at their principal amount plus accrued interest. As part of such discussions, the parties were advised by the Substantial Holder that it held approximately 66% of the outstanding principal amount of MTNs and approximately 19% of the outstanding principal amount of the Company Debentures. Following a series of discussions and negotiation calls among the parties, the Substantial Holder indicated on January 11, 2021 that it would be prepared to support a transaction in which (i) the MTNs would be
 
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redeemed for consideration equal to 106.071% of the principal amount of the MTNs held as of the closing of the proposed transaction, plus accrued and unpaid interest on the MTNs up to, but excluding, the closing date of the proposed transaction, as well as an additional consent fee equal to 0.25% of the principal amount of MTNs held by MTN Noteholders who deliver a written consent to the MTN Indenture, conditional on closing of the proposed transaction and (ii) the Company Debentures would be mandatorily converted by the Company into Common Shares in accordance with their terms and the holders of Company Debentures would receive a payment in cash of all accrued and unpaid interest on the Company Debentures up to, but excluding, the closing date of the proposed transaction. The Substantial Holder was provided with the Voting Support Agreement, which it executed on January 14, 2021.
During the course of negotiations with the Substantial Holder, representatives of I Squared Capital contacted Mr. Moore several times to discuss whether the purchase price for the Common Shares and Preferred Shares could be reduced from the US$3.03 per Common Share and C$22.00 per Preferred Share purchase price that had previously been proposed by I Squared Capital. Mr. Moore regularly updated the Board and the Special Committee regarding these discussions, and in each case communicated to I Squared Capital that it would need to maintain the consideration of US$3.03 per Common Share and C$22.00 per Preferred Share in order for the Board to be willing to agree to the proposed transaction. The representatives of I Squared Capital eventually confirmed I Squared Capital’s commitment to the respective purchase prices of US$3.03 per Common Share and C$22.00 per Preferred Share.
During the week of January 11, 2021, the Company, I Squared Capital and their respective legal and financial advisors, resolved the remaining open issues on, and agreed to final forms of, the arrangement agreement and the other documents related to the proposed transaction. Following receipt of the fully executed Voting Support Agreement, meetings of the Special Committee, the Board, the board of directors of APPEL (the “APPEL Board”) and the board of directors of the general partner of APLP were held on the evening of January 14, 2021. During the meeting of the Special Committee, Goldman Sachs reviewed with the Special Committee its analysis of the financial terms of the Arrangement, during which the Special Committee had the opportunity to ask questions and discuss Goldman Sachs’ analysis. After Goldman Sachs’ presentation, Goldman Sachs rendered to the Special Committee an oral opinion, which was subsequently confirmed by delivery of a written opinion dated January 14, 2021 (attached as Annex F to this management information circular and proxy statement), that, as of such date, and based upon and subject to the factors and assumptions set forth therein, the US$3.03 in cash per Common Share to be paid to the holders (other than I Squared Capital and its affiliates) of Common Shares pursuant to the Arrangement Agreement was fair from a financial point of view to such holders. Following the presentation by Goldman Sachs, representatives of Blair Franklin reviewed with the Special Committee, the Board and the APPEL Board its analysis of the financial terms of the Arrangement, during which the Special Committee, the Board and the APPEL Board had the opportunity to ask questions and discuss Blair Franklin’s analysis. After Blair Franklin’s presentation, Blair Franklin rendered its oral opinion, subsequently confirmed by delivery of a written opinion dated January 14, 2021 (attached as Annex G to this management information circular and proxy statement), that, subject to the various assumptions, qualifications and limitations set forth therein, with respect to the consideration to be paid pursuant to the Arrangement and the Company Debenture Transaction (as applicable): (i) the Common Share Consideration is fair, from a financial point of view, to the Common Shareholders; (ii) the Preferred Share Consideration is fair, from a financial point of view, to the Preferred Shareholders; and (iii) the Company Debenture Consideration is fair, from a financial point of view, to the Company Debentureholders.
After due and careful consideration and for the reasons set forth in the section entitled “Recommendation of the Special Committee of the Board of Atlantic Power and the Special Committee’s Reasons for Making its Recommendation,” the Special Committee unanimously determined to recommend (i) to the Board, the APPEL Board and the board of directors of the general partner of APLP that they approve the Arrangement Agreement, in substantially the form considered by the Special Committee at that meeting, and the transactions contemplated thereby, (ii) that the Board recommend to the Common Shareholders that they vote in favor of the Arrangement Resolutions approving the Arrangement at the Common Shareholders Meeting, (iii) that the Board recommend to the Company Debentureholders that they vote in favor of or otherwise consent to the Company Debenture Transaction, (iii) that the APPEL Board recommend to the Preferred Shareholders that they vote in favor of the Preferred Shareholder Resolution approving the Continuance and Arrangement at the Preferred Shareholders Meeting and (iv) that the board of directors
 
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of the general partner of APLP recommend to the MTN Noteholders that they vote in favor of, or otherwise consent to, the MTN Transaction. Thereafter, after due and careful consideration and for the reasons set forth in the section entitled “Recommendation of the Board of APPEL and its Reasons for the Transaction”, the APPEL Board unanimously determined that (i) the transactions contemplated by the Arrangement Agreement (including the Continuance) are in the best interests of APPEL (taking into account the interests of all affected stakeholders) and (ii) the Preferred Share Consideration to be received by the Preferred Shareholders pursuant to the Arrangement is fair to such Preferred Shareholders, and accordingly recommended that the Preferred Shareholders vote in favor of the Preferred Shareholder Resolution approving the Arrangement and the Continuance. Thereafter, after due and careful consideration and for the reasons set forth in the section entitled “Recommendation of the Board of Atlantic Power and its Reasons for the Transaction”, the Board unanimously determined that (i) the Arrangement Agreement, substantially in the form provided to the Board, together with all exhibits and schedules thereto, including the Plan of Arrangement which implements the Arrangement, were authorized and approved with such changes as may be agreed by the Chairman of the Special Committee and the Chairman of the Board, in each case with the advice of outside counsel, (ii) the transactions contemplated by the Arrangement Agreement are in the best interest of the Company (taking into account the interests of all affected stakeholders), (iii) the Common Share Consideration to be received by Common Shareholders pursuant to the Arrangement is fair to the Common Shareholders, (iv) the consideration to be received by the Company Debentureholders pursuant to the Company Debenture Transaction is fair to the Company Debentureholders, and accordingly recommended that the Common Shareholders vote in favor of the Arrangement Resolution approving the Arrangement and the Company Debentureholders vote in favor of the resolution approving the Company Debenture Transaction or otherwise consent to the Company Debenture Transaction. Thereafter, after due and careful consideration, the board of directors of the general partner of APLP determined that the transactions contemplated by the Arrangement Agreement are in the best interest of APLP (taking into account the interests of all affected stakeholders) and recommended that the MTN Noteholders vote in favor of a resolution approving the MTN Transaction or otherwise consent to the MTN Transaction.
On January 14, 2021, the Company, APPEL, APLP, Tidal Power Holdings Limited and Tidal Power Aggregator, L.P. signed the Arrangement Agreement, and, later that evening, the Company and I Squared Capital issued a press release announcing the transaction.
Recommendation of the Special Committee to the Board of Atlantic Power and Its Reasons for the Recommendation
Recommendation of the Special Committee
At a meeting of the Special Committee held on January 14, 2021, the Special Committee, after consultation with its outside legal and financial advisors and on the basis of the fairness opinions unanimously determined to recommend (i) to the Board, the APPEL Board and the board of directors of the general partnership of APLP that they approve the Arrangement Agreement, substantially in the form presented to and considered by the Special Committee at this meeting, together with all exhibits and schedules thereto, and the transactions contemplated thereby, (ii) that the Board recommend to the Common Shareholders that they vote in favor of the Arrangement Resolution approving the Arrangement at the Common Shareholders Special Meeting, (iii) that the Board recommend to the Company Debentureholders that they vote in favor of the Debentureholder Resolution approving the Company Debenture Transaction at the Debentureholder Meeting or otherwise consent to the Company Debenture Transaction, and (iv) that the APPEL Board recommend to the Preferred Shareholders that they vote in favor of the Preferred Shareholder Resolutions approving the Continuance and Arrangement at the Preferred Shareholders Special Meeting.
Reasons for Recommendation
In evaluating the Arrangement Agreement and the transactions contemplated by the Arrangement Agreement, including the Arrangement and the Preferred Shareholders Resolution, the Special Committee consulted with Atlantic Power’s senior management and outside legal and financial advisors and considered a
 
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variety of factors with respect to the transactions contemplated by the Arrangement Agreement, including the factors described below (not necessarily in order of importance):

Understanding of the Power Generation Market.   The Special Committee’s knowledge and understanding of Atlantic Power and the industry and markets in which Atlantic Power operates, and the Special Committee’s review of Atlantic Power’s business, strategy, current and projected financial condition, and current and prospective levels of EBITDA and cash flow generation.

Risks of Remaining a Public Company.   The risks associated with Atlantic Power’s execution of its strategy as an independent, publicly-traded company.

Consideration and Terms of the Arrangement Agreement.   The nature and amount of consideration offered under the proposed transaction, as well as the terms and conditions of the Arrangement Agreement.
In the course of reaching its determination, the Special Committee considered various substantive factors of the proposed transaction, each of which the Special Committee believed supported its decision, including (not necessarily in order of importance):

Significant Premiums.   The Special Committee’s belief that:

the US$3.03 per Common Share consideration exceeded the price that the Common Shares have traded in the prior 52-week and five-year periods and represented a 19% premium to the 52-week high and a 48% premium to the 30-day volume weighted average price immediately preceding the announcement of the transaction on January 14, 2021;

the C$22.00 per Preferred Share consideration (i) exceeded the price that each series of Preferred Shares had traded in the previous 52-week and eight-year periods, ii) represented a 40% premium to the average repurchase price of the Preferred Shares repurchased by APPEL between 2017 and 2020 under APPEL’s normal course issuer bids and (iii) represented a premium of 19.5% to the average 52-week high for each series of Preferred Shares immediately preceding the announcement of the transaction on January 14, 2021;

the conversion of the Company Debentures into Common Shares would be effected in accordance with the terms of the Company Debenture Indenture as amended in accordance with the Company Debenture Transaction; and

the consideration equal to 106.071% of the principal amount of the MTNs outstanding as of the closing of the Arrangement, plus the payment of accrued and unpaid interest on the MTNs up to, but excluding, the closing date of the Arrangement, as well as an additional consent fee, conditional upon the closing of the Arrangement, equal to 0.25% of the principal amount of MTNs held by holders of MTN Noteholders who deliver a written consent to the amendments to the MTN Indenture required to give effect the MTN Transaction, represented a significant premium to the par value of the MTNs.

Compelling Value Relative to Alternatives.   The Special Committee’s belief that it was unlikely that the trading price of the Common Shares or Preferred Shares would, in the near to medium term, yield greater value to Common Shareholders or Preferred Shareholders, as applicable, compared to the immediate and certain consideration to be received by Common Shareholders and Preferred Shareholders, as applicable, if the Arrangement is completed.

Prospects of Future Trading Price.   The Special Committee’s belief that in order for the trading price of the Common Shares to exceed the US$3.03 per Common Share consideration to be received by the Common Shareholders in the near to medium term, power prices would need to significantly recover from current levels, which belief was formed following a review of a discounted cash flow analysis provided by the Company’s senior management using current energy prices, which implied a lower per Common Share price than the US$3.03 per Common Share consideration to be received by the Common Shareholders.

Highest Possible Price and Best Possible Terms.   The Special Committee’s belief that the consideration negotiated with I Squared Capital represented the highest price I Squared Capital was willing to pay, and that the terms of the Arrangement Agreement were the most favorable that I Squared Capital
 
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would be willing to agree to, which belief was based on, among other things, the extensive negotiations with I Squared Capital and its legal counsel, the increase in price obtained from I Squared Capital for the Common Shares, Preferred Shares and MTNs, and the final terms of the Arrangement Agreement, all as detailed above under the section entitled “Background to the Arrangement”.

Higher Price than Previous Proposals.   The US$3.03 per Common Share to be received by Common Shareholders is greater than any of the final non-binding indicative proposals received in at least the past five years from potential acquirers of Atlantic Power, as described above under the section entitled “Background to the Arrangement”.

Low Likelihood of Another Proposal.   The Special Committee’s belief that there was not a significant likelihood that another potential buyer would be interested in acquiring 100% of Atlantic Power at a price in excess of US$3.03 per Common Share, based on the Special Committee’s knowledge and experience, including the fact that no potential acquirer had made any non-binding proposals in excess of such amount in recent years; and senior management’s on-going and active dialogue with industry participants and investors.

Immediate Liquidity.   The consideration to be received by Common Shareholders and Preferred Shareholders pursuant to the transactions contemplated by the Arrangement Agreement is payable entirely in cash and provides Common Shareholders and Preferred Shareholders with immediate liquidity and certain value for their investment, and removes the risks and volatility associated with owning securities of Atlantic Power as an independent, publicly-traded company.

Risks of Remaining a Public Company.   The near-term, medium-term and long-term risks associated with execution of Atlantic Power’s strategic plan as an independent, publicly-traded company, including:

significantly depressed power prices, both with respect to capacity and energy, due to decreased rates of demand growth and continuing growth of supply, particularly from renewable energy sources, which have resulted in a highly challenging environment with respect to re-contracting power purchase agreements (“PPAs”) with respect to all of Atlantic Power’s power generating projects, including its hydro projects, which the Board believes is unlikely to improve in the near term;

Atlantic Power’s status as a micro-cap power generating company and Atlantic Power’s declining EBITDA profile, with PPAs for nine of Atlantic Power’s power generating projects representing 57% of Atlantic Power’s net megawatts of generating capacity and 59% of Atlantic Power’s 2020 Project Adjusted EBITDA expiring through 2025;

industry conditions and competition increasing the likelihood that Atlantic Power will not be able to secure new PPAs on acceptable terms or timing, if at all, or only on terms with significantly reduced pricing;

that if Atlantic Power fails to negotiate a new PPA for a project, the relevant project may be required sell into the electricity wholesale market, in which case the prices for electricity will depend on market conditions at the time, which may not be favorable;

that Atlantic Power may not have sufficient cash to finance acquisitions or other growth opportunities given increased competition in the North American power generating industry for external investment opportunities and that a significant portion of Atlantic Power’s cash flow is used to service its debt obligations;

increased competition and consolidation in the power generating industry and the fact that Atlantic Power faces significant competition from companies with greater size and resources; and

despite improvements in business fundamentals at Atlantic Power since 2014, including the reduction of its debt obligations by nearly $1.2 billion, restructuring of its debt maturities resulting in a reduction of cash interest payments of more than 70%, the sales and acquisitions of power generating assets at attractive process and the reduction of corporate overhead expenses by nearly 50%, the market prices of Atlantic Power’s publicly-traded securities have remained depressed since 2014.
 
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Risks to the Preferred Shareholders of not Being Acquired in the Arrangement.   The Special Committee’s belief that, as compared to a transaction in which only the Common Shares were acquired by a third party, which would result in the Preferred Shares remaining outstanding and being subject to risks currently faced by the Company and those associated with how the acquirer of the Common Shares may operate the business post-acquisition, including the potential for the acquirer to take a more aggressive approach to liability management than Atlantic Power’s approach since 2014, the proposed transaction was a better outcome for the Preferred Shareholders.

Likelihood of Consummation of the Arrangement.   The Special Committee’s belief that the Arrangement Agreement offered reasonable assurances as to the likelihood of the consummation of the transactions contemplated thereby, based on:

the fact that I Squared Capital has experience in and a successful history of consummating transactions in the U.S. and other jurisdictions;

the fact that the Arrangement Agreement is not subject to a financing condition;

the fact that Purchasers have committed equity financing for the Arrangement, and that Atlantic Power is entitled to receive the Reverse Termination Fee if the Arrangement Agreement is terminated under certain circumstances (see the section entitled “The Arrangement Agreement — Reverse Termination Fee” beginning on page 109); and

the likelihood of receiving the Required Consents and Required Regulatory Approvals within the timeframe set out in the Arrangement Agreement, including by the Outside Date, as it may be extended.

Financial Opinions.   The respective opinions of Goldman Sachs and Blair Franklin to the effect that, as of the date of their respective opinions and based upon and subject to the factors and assumptions set forth therein, (i) the US$3.03 in cash per Common Share to be paid to the holders (other than I Squared Capital and its affiliates) of Common Shares pursuant to the Arrangement Agreement was fair from a financial point of view to such holders, in the case of the opinion delivered by Goldman Sachs, and (ii) that, with respect to the consideration to be paid pursuant to the Arrangement and the Company Debenture Transaction (as applicable), (a) the Common Share Consideration is fair, from a financial point of view, to the Common Shareholders; (b) the Preferred Share Consideration is fair, from a financial point of view, to the Preferred Shareholders; and (c) the Company Debenture Consideration is fair, from a financial point of view, to the Company Debentureholders, in the case of the opinion delivered by Blair Franklin. Such respective opinions are more fully described in the section entitled “The Arrangement — Opinions of Financial Advisors” beginning on page 42.

Support of Substantial Holder.   A fund manager representing approximately 19% of the outstanding principal amount of Company Debentures and 66% of the outstanding principal amount of MTNs has agreed to vote in favor of or otherwise consent to the amendments to the trust indentures governing those securities.
In addition, the Special Committee also considered various procedural factors and terms of the Arrangement Agreement, each of which supported its decision, including (not necessarily in order of importance):

Independent Special Committee.   The Special Committee is comprised entirely of directors who are independent of the Company (within the meaning of applicable securities laws).

Arm’s Length Negotiations.   The Arrangement Agreement is the result of arm’s-length negotiations between the Company and I Squared Capital which lasted for several months.

The Special Committee’s Oversight of Negotiations.   The Special Committee met frequently to consider I Squared Capital’s proposals, and that negotiation of the Arrangement Agreement and other transaction agreements was conducted under the oversight of the Special Committee.

Restrictions on I Squared Capital.   I Squared Capital was prohibited under the terms of its confidentiality agreement with Atlantic Power from engaging in discussions or entering into
 
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agreements or arrangements of any kind with Atlantic Power employees (including executive officers) who were involved in discussions related to the Arrangement;

Ability to Respond and Enter Into Superior Proposals.   The Arrangement Agreement allows the Board to engage in discussions with respect to an unsolicited, bona fide Acquisition Proposal if the Board determines in good faith, after consultation with its financial advisors and outside legal counsel, that such Acquisition Proposal constitutes or would reasonably be expected to constitute or lead to a Superior Proposal.

Ability to Change Recommendation.   The Arrangement Agreement allows the Board, the APPEL Board and the board of directors of the general partner of APLP to change its recommendation supporting the transactions contemplated by the Arrangement Agreement following such board’s good faith determination, after consultation with its outside counsel and financial advisors, that an alternative acquisition proposal constitutes a Superior Proposal, subject to certain notice requirements and “matching” rights in favor of Purchasers and Purchasers’ right to receive the Termination Fee of US$12.5 million (see the section entitled “The Arrangement Agreement —  Termination of the Arrangement Agreement” beginning on page 108).

Termination Fee.   The Termination Fee of US$12.5 million payable by the Company under certain circumstances, including if the Arrangement is not completed as a result of the Company accepting an unsolicited Superior Proposal, is reasonable under the circumstances and should not preclude an interested buyer from pursuing an alternative transaction with Atlantic Power.

Determination by the Court.   The completion of the Arrangement will be subject to a judicial determination by the Court that the Arrangement is fair and reasonable.

Securityholder Approvals.   The (i) Arrangement must be approved by no less than two-thirds of (A) the votes cast by Common Shareholders present in person or represented by proxy at the Common Shareholder Meeting, (B) the votes cast by Preferred Shareholders present or represented by proxy at the Preferred Shareholder Meeting, (ii) Company Debenture Transaction must be approved by no less than two-thirds of the principal amount of Company Debentures voted at the Debentureholder Meeting or otherwise consented to by holders of Company Debentures holding no less than two-thirds of the principal amount of Company Debentures outstanding and (iii) the MTN Transaction must be approved by no less than two-thirds of the principal amount of MTNs voted at a meeting of the MTN Noteholders or otherwise consented to by holders of MTNs holding no less than two-thirds of the principal amount of MTNs outstanding.

Board Composition.   The Board is composed of five directors, four of whom are independent of the Company (within the meaning of applicable securities laws).

Dissent Rights.   The availability of Dissent Rights to the registered Common Shareholders and Preferred Shareholders.
The Special Committee also considered a variety of risks and other potentially negative factors concerning the Arrangement Agreement and the transactions contemplated thereby, including (not necessarily in order of importance):

that the Special Committee had decided not to engage in a formal sales process, but rather had agreed to enter the Arrangement Agreement following a period of 90 days of exclusive negotiations with I Squared Capital. This decision of the Special Committee, however, was informed by the fact no potential acquirer had made any non-binding proposals in excess of the amount offered to Common Shareholders in recent years and the Special Committee’s view that the failure to grant such exclusivity would create a meaningful risk that Common Shareholders would lose the opportunity offered by the Purchasers, without the assurance of obtaining a comparable opportunity;

that Common Shareholders will not benefit from any appreciation of in the value of Atlantic Power to the extent those benefits exceed the benefits reflected in the consideration to be received by the Common Shareholders pursuant to the Arrangement;

that Preferred Shareholders will no longer be entitled to regular quarterly dividends on the Preferred Shares, that Company Debentureholders will no longer be entitled to regular quarterly interest
 
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payments on the Company Debentures and MTN Noteholders will no longer be entitled to regular semi-annual interest payments on the MTNs;

the substantial time, effort and costs are associated with entering into the Arrangement Agreement and completing the proposed transaction, which, among other things, has the potential risk of diverting management attention and resources from the operation of Atlantic Power’s business, including other strategic opportunities and operational matters, while working toward the completion of the Arrangement;

the potential negative effect on Atlantic Power’s business, including its relationships with employees, suppliers and customers, of the pendency of the Arrangement;

the restrictions on the conduct of Atlantic Power’s business prior to completion of the Arrangement;

the possibility that the Required Regulatory Approvals may not be obtained in a timely manner, which could result in the Outside Date being extended, and the risk that the Required Regulatory Approvals may never be obtained;

the possibility that the Required Consents may not be obtained in a timely manner, and the risk that the Required Consents may never be obtained;

the possibility that the Requisite Securityholder Approval may not be obtained;

that Purchasers are newly-formed entities with no assets other than their respective rights under the Equity Commitment Letter (as defined below);

the risk that the Arrangement may not be completed despite the parties’ efforts or that completion of the Arrangement may be unduly delayed, including the possibility that conditions to the parties’ obligations to complete the Arrangement may not be satisfied, and the potential resulting disruptions to Atlantic Power’s business;

the conditions to the Purchasers’ obligation to complete the Arrangement and the rights of the Purchasers to terminate the Arrangement Agreement in certain circumstances;

the limitations contained in the Arrangement Agreement on Atlantic Power’s ability to solicit competing acquisition proposals from third parties, as well as the fact that if the Arrangement Agreement is terminated in certain circumstances, Atlantic Power must pay, or cause to be paid, the Termination Fee (see the section entitled “The Arrangement Agreement — Termination Fee” beginning on page 109);

because the consideration to be paid for the Common Shares will be paid in U.S. dollars and that the exchange rate between U.S. dollars and Canadian dollars will fluctuate prior to the closing of the Arrangement, Canadian Common Shareholders and Company Debentureholders cannot be certain of the value in Canadian dollars of the consideration they will receive for their Common Shares (including Common Shares issued on a conversion of Company Debentures in connection with the Company Debenture Transaction);

that the consideration to be received by Common Shareholders in the Arrangement is expected to be taxable for U.S. federal income tax purposes and Canadian federal income tax purposes (see the sections entitled “The Arrangement — Material U.S. Federal Income Tax Consequences” beginning on page 73 and “The Arrangement — Material Canadian Federal Income Tax Consequences” beginning on page 74); and

that Atlantic Power’s directors and officers have interests in the Arrangement that are different from, or in addition to, those of other Common Shareholders (see the section entitled “The Arrangement — Interests of the Company’s Directors and Executive Officers in the Arrangement” beginning on page 67).
The Special Committee concluded that the potential negative factors associated with the acquisition of Atlantic Power by the Purchasers were outweighed by the potential benefits that the Special Committee expects Atlantic Power and the Common Shareholders and Preferred Shareholders and MTN Noteholders to achieve as a result of such acquisition. Accordingly, the Special Committee recommended (i) to the Board, the APPEL Board and the board of directors of the general partnership that they approve Arrangement
 
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Agreement, substantially in the form considered by the Special Committee, together with all exhibits and schedules thereto, and the transactions contemplated thereby, (ii) that the Board recommend to the Common Shareholders that they vote in favor of the Arrangement Resolution approving the Arrangement at the Common Shareholder Special Meeting, (iii) that the Board recommend to the Company Debentureholders that they vote in favor of the resolutions of Company Debentureholders approving the Company Debenture Transaction at the Debentureholder Meeting or otherwise consent to the Company Debenture Transaction, and (iv) that the APPEL Board recommend to the Preferred Shareholders that they vote in favor of the Preferred Shareholders Resolution approving the Continuance and Arrangement at the Preferred Shareholders Special Meeting.
In considering the recommendation of the Special Committee, Common Shareholders and Preferred Shareholders should be aware that directors and officers of Atlantic Power have interests in the Arrangement that are different from, or in addition to, those of other Common Shareholders and Preferred Shareholders (see the section entitled “The Arrangement — Interests of the Company’s Directors and Executive Officers in the Arrangement” beginning on page 67).
The foregoing discussions of factors considered by the Special Committee is not meant to be exhaustive, but includes the material factors considered by the Special Committee in approving the Arrangement Agreement and the transactions contemplated by the Arrangement Agreement, including the Arrangement. The Special Committee did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination. Rather, the members of the Special Committee made their respective determinations based on the totality of the information presented to them, including the input from Atlantic Power’s management and outside legal and financial advisors, and the judgments of individual members of the Special Committee may have been influenced to a greater or lesser degree by different factors. The Special Committee did not undertake to make any specific determinations as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. The Special Committee based its determination on the totality of information presented.
Recommendation of the Board of Atlantic Power and its Reasons for the Recommendation
Recommendation of the Board of Atlantic Power
Upon receipt of the recommendation of the Special Committee, at a meeting held on January 14, 2021 to act on the Special Committee’s recommendation, the Board unanimously determined that (i) the Arrangement Agreement, substantially in the form considered by the Board at this meeting, together with all exhibits and schedules thereto, including the plan of arrangement which implements the Arrangement, were authorized and approved with such changes as agreed by the Chairman of the Special Committee and the Chairman of the Board, in each case with the advice of outside counsel, (ii) the transactions contemplated by the Arrangement Agreement are in the best interest of Atlantic Power (taking into account the interests of all affected stakeholders), (iii) the Common Share Consideration to be received by Common Shareholders pursuant to the Arrangement is fair to the Common Shareholders, and (iv) the consideration to be received by the Company Debentureholders pursuant to the Company Debenture Transaction is fair to the Company Debentureholders, and accordingly recommended that (A) the Company Shareholders vote in favor of the resolution approving the Arrangement and (B) the Company Debentureholders vote in favor of the resolution approving the Company Debenture Transaction or otherwise consent to the Company Debenture Transaction (the “Atlantic Power Board Recommendation”).
Reasons for Recommendation
In reaching its determinations, the Board considered and adopted the analyses and conclusions of the Special Committee, including the factors described above and the recommendation of the Special Committee that the Board adopt resolutions approving the Arrangement Agreement, substantially in the form considered by the Special Committee and the Board, together with all exhibits and schedules thereto, and the transactions contemplated thereby and recommending to (i) the Common Shareholders that they vote in favor of the Arrangement Resolution approving the Arrangement at the Common Shareholder Special Meeting and (ii) the Company Debentureholders vote in favor of the resolution approving the Company Debenture Transaction or otherwise consent to the Company Debenture Transaction.
 
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In addition to the factors described above, the Board also considered a variety of factors weighing positively in favor of the Arrangement Agreement and the transactions contemplated thereby, including the following (not necessarily in order of importance):

the fact that an active and engaged Special Committee composed entirely of independent members of the Board approved the Arrangement Agreement and the transactions contemplated thereby; and

the belief of the Board, based on its knowledge of Atlantic Power’s long-term strategic goals and opportunities, industry trends, competitive environment and performance in light of Atlantic Power’s standalone plan, including the potential impact of those factors on the trading price of the Common Shares (which cannot be precisely quantified numerically), and discussions with Atlantic Power’s senior management and the Special Committee’s financial advisors, that the value offered to the Common Shareholders pursuant to the Arrangement is more favorable to the Common Shareholders than the potential value that might reasonably be expected to result from remaining an independent, publicly-traded company.
In considering the recommendation of the Board, Common Shareholders should be aware that directors and officers of Atlantic Power have interests in the Arrangement that are different from, or in addition to, those of other Common Shareholders (see the section entitled “The Arrangement — Interests of the Company’s Directors and Executive Officers in the Arrangement” beginning on page 67).
The foregoing discussions of factors considered by the Board is not meant to be exhaustive, but includes the material factors considered by the Board in approving the Arrangement Agreement and the transactions contemplated by the Arrangement Agreement, including the Arrangement. The Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination. Rather, the members of the Board made their respective determinations based on the totality of the information presented to them, including the input from Atlantic Power’s management and outside legal and financial advisors, and the judgments of individual members of the Board may have been influenced to a greater or lesser degree by different factors. The Board did not undertake to make any specific determinations as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. The Board based its determination on the totality of information presented.
The Board unanimously recommends that Common Shareholders vote “FOR” the Arrangement Resolution.
Recommendation of the Board of APPEL and its Reasons for the Recommendation
Recommendation of the APPEL Board
Upon receipt of the recommendation of the Special Committee, at a meeting held on January 14, 2021 to act on the Special Committee’s recommendation, the APPEL Board unanimously determined that (i) the transactions contemplated by the Arrangement Agreement (including the Continuance) are in the best interests of APPEL (taking into account the interests of all affected stakeholders) and (ii) the Preferred Share Consideration to be received by the Preferred Shareholders pursuant to the Arrangement and the Continuance is fair to such Preferred Shareholders, and accordingly recommended that the Preferred Shareholders vote in favor of the Preferred Shareholder Resolutions approving the Arrangement and the Continuance at the Preferred Shareholders Meeting (the “APPEL Board Recommendation” and collectively with the Atlantic Power Board Recommendation, the “Board Recommendation”).
Reasons for Recommendation
In reaching its determinations, the APPEL Board considered and adopted the analyses and conclusions of the Special Committee (as such analyses and conclusions are applicable to APPEL), including the factors described above and the recommendation of the Special Committee that the APPEL Board adopt resolutions approving the Arrangement Agreement, substantially in the form considered by the Special Committee and the APPEL Board, together with all exhibits and schedules thereto, and the transactions contemplated thereby and recommending to the Preferred Shareholders that they vote in favor of the Preferred Shareholders Resolutions approving the Arrangement and the Continuance at the Preferred Shareholders Meeting.
 
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In addition to the factors described above, the Board also considered a variety of factors weighing positively in favor of the Arrangement Agreement and the transactions contemplated thereby, including the following (not necessarily in order of importance):

the fact that an active and engaged Special Committee composed of independent members of the Board approved the Arrangement Agreement and the transactions contemplated thereby; and

the belief of the Board and the APPEL Board, based on its knowledge of Atlantic Power’s long-term strategic goals and opportunities, industry trends, competitive environment and performance in light of Atlantic Power’s standalone plan, including the potential impact of those factors on the trading price of the Preferred Shares (which cannot be precisely quantified numerically), and discussions with Atlantic Power’s senior management and the Special Committee’s financial advisors, that the value offered to the Preferred Shareholders pursuant to the Arrangement is more favorable to the Preferred Shareholders than the potential value that might reasonably be expected to result from remaining an independent, publicly-traded company.
In considering the recommendation of the APPEL Board, Preferred Shareholders should be aware that directors and officers of APPEL have interests in the Arrangement that are different from, or in addition to, those of other Preferred Shareholders (see the section entitled “The Arrangement — Interests of the Company’s Directors and Executive Officers in the Arrangement”).
The foregoing discussions of factors considered by the APPEL Board is not meant to be exhaustive, but includes the material factors considered by the APPEL Board in approving the Arrangement Agreement and the transactions contemplated by the Arrangement Agreement, including the Arrangement and the Continuance. The APPEL Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination. Rather, the members of the APPEL Board made their respective determinations based on the totality of the information presented to them, including the input from Atlantic Power’s management and advisors, and the judgments of individual members of the APPEL Board may have been influenced to a greater or lesser degree by different factors. The APPEL Board did not undertake to make any specific determinations as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. The APPEL Board based its determination on the totality of information presented.
The APPEL Board unanimously recommends that the Preferred Shareholders vote “FOR” the Preferred Shareholder Resolution.
Voting Agreements and Support Agreement
Effective January 14, 2021, the Purchasers entered into voting agreements (the “Voting Agreements”) with each of the directors and officers of Atlantic Power. The Voting Agreements set forth, among other things, the agreement of Atlantic Power’s officers and directors to (i) vote or caused to be voted (A) the Common Shares owned (beneficially or otherwise) by such officers and directors as of January 14, 2021 and as of the record date for the Common Shareholder Meeting in favor of the Arrangement Resolution, (B) the Preferred Shares owned (beneficially or otherwise) by such officers and directors as of January 14, 2021 and as of the record date for the Preferred Shareholder Meeting in favor of the Continuance and Preferred Shareholder Resolution and (C) the Company Debentures owned (beneficially or otherwise) by such officers and directors as of January 14, 2021 and as of the record date for the Debentureholder Meeting in favor of the Debentureholder Resolution and (ii) consent or cause to be consented (A) the Company Debentures owned (beneficially or otherwise) by such officers and directors to the Debentureholder Consent if the Debentureholder Consent Solicitation is commenced and (B) the MTNs owned (beneficially or otherwise) by such officers and directors if the MTN Noteholder Consent Solicitation is commenced.
Effective January 14, 2021, Atlantic Power, APLP and Tidal Power Holdings Limited entered into a support agreement (the “Support Agreement”, and together with the Voting Agreements, the “Voting and Support Agreements”) with the Substantial Holder. The Support Agreement sets forth, among other things, the agreement of the Substantial Holder to either (i) consent or cause to be consented (A) the Company Debentures owned (beneficially or otherwise) by the Substantial Holder to the Company Debenture Transaction if the Debentureholder Consent Solicitation is commenced and (B) the MTNs owned (beneficially or otherwise) by the Substantial Holder to the MTNs Transaction if the MTN Noteholder
 
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Consent Solicitation is commenced or (ii) to vote or cause to be voted (Y) the Company Debentures owned (beneficially or otherwise) by the Substantial Holder in favor of the Debentureholder Resolution at the Debentureholder Meeting, if any, and (Z) the MTNs owned (beneficially or otherwise) by the Substantial Holder in favor of the MTNs Transaction at any meeting of the holders of MTNs in respect thereof.
As of (i) the record date for the Common Shareholder Meeting, 3,743,207 of the 89,222,568 Common Shares were subject to the Voting and Support Agreements, representing 4.20% of the votes which may be cast by Common Shareholders at the Common Shareholder Meeting, (ii) the record date for the Preferred Shareholder Meeting, 20,500 of the 6,864,863 Preferred Shares were subject to the Voting and Support Agreements, representing 0.30% of the votes which may be cast by Preferred Shares at the Preferred Shareholder Meeting, (iii) the record date for the Debentureholder Meeting, approximately 19% of the principal amount of the outstanding Company Debentures were subject were subject to the Voting and Support Agreements and (iv) the record date of the MTN Noteholder Consent Solicitation, approximately 66% of the principal amount of the outstanding MTNs were subject to the Voting and Support Agreements.
Opinions of Financial Advisors
Opinion of Goldman Sachs
Goldman Sachs rendered its oral opinion to the Special Committee on January 14, 2021, which was subsequently confirmed by delivery of a written opinion dated January 14, 2021, that, as of such date and based upon and subject to the factors and assumptions set forth therein, the US$3.03 in cash per Common Share, to be paid to the Common Shareholders (other than I Squared Capital and its affiliates) pursuant to the Arrangement Agreement was fair from a financial point of view to such Common Shareholders.
The full text of the written opinion of Goldman Sachs, dated January 14, 2021, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex F. Goldman Sachs provided advisory services and its opinion for the information and assistance of the Special Committee in connection with its consideration of the transactions contemplated by the Arrangement Agreement. The Goldman Sachs opinion is not a recommendation as to how Common Shareholders should vote with respect to the Arrangement Resolution or any other matter.
In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:

the Arrangement Agreement;

annual reports to stockholders and Annual Reports on Form 10-K of Atlantic Power for the five years ended December 31, 2019;

certain interim reports to stockholders and Quarterly Reports on Form 10-Q of Atlantic Power;

certain other communications from Atlantic Power to its stockholders;

certain publicly available research analyst reports for Atlantic Power; and

certain internal financial analyses and forecasts for Atlantic Power prepared by its management, which projections are summarized below in the section entitled “— Projected Financial Information” beginning on page 57, including certain adjustments by Atlantic Power to include in the Adjusted EBITDA (as defined below) certain corporate general and administrative expenses and cash flow from growth capital investments as approved for Goldman Sachs’ use by Atlantic Power (the “Forecasts”).
Goldman Sachs also held discussions with members of the senior management of Atlantic Power regarding their assessment of the past and current business operations, financial condition and future prospects of Atlantic Power; reviewed the reported price and trading activity for the Common Shares; compared certain financial and stock market information for Atlantic Power with similar information for certain other companies the securities of which are publicly traded; reviewed the financial terms of certain recent business combinations in the power industry; and performed such other studies and analyses, and considered such other factors, as Goldman Sachs deemed appropriate.
 
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For purposes of rendering its opinion, Goldman Sachs, with Atlantic Power’s consent, relied upon and assumed the accuracy and completeness of all of the financial, legal, regulatory, tax, accounting and other information provided to, discussed with or reviewed by, it, without assuming any responsibility for independent verification thereof. In that regard, Goldman Sachs assumed with Atlantic Power’s consent that the Forecasts had been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Atlantic Power. Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of Atlantic Power or any of its subsidiaries and it was not furnished with any such evaluation or appraisal. Goldman Sachs assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Arrangement will be obtained without any adverse effect on the expected benefits of the Arrangement in any way meaningful to its analysis. Goldman Sachs also assumed that the Arrangement will be consummated on the terms set forth in the Arrangement Agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to its analysis.
Goldman Sachs’ opinion does not address the underlying business decision of Atlantic Power to engage in the Arrangement, or the relative merits of the Arrangement as compared to any strategic alternatives that may be available to Atlantic Power; nor does it address any legal, regulatory, tax or accounting matters. Goldman Sachs was not requested to solicit, and did not solicit, interest from other parties with respect to an acquisition of, or other business combination with, Atlantic Power or any other alternative transaction. Goldman Sachs’ opinion addresses only the fairness from a financial point of view to Common Shareholders (other than I Squared Capital and its affiliates), as of the date thereof, of the US$3.03 in cash per Common Share to be paid to such Common Shareholders pursuant to the Arrangement Agreement. Goldman Sachs did not express any view on, and its opinion does not address, any other term or aspect of the Arrangement Agreement or the Arrangement or any term or aspect of any other agreement or instrument contemplated by the Arrangement Agreement or entered into or amended in connection with the Arrangement, including any allocation of the aggregate consideration payable pursuant to the Arrangement Agreement among Common Shareholders and Preferred Shareholders, Company Debentureholders and MTN Noteholders, the fairness of the Arrangement to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors, or other constituencies of Atlantic Power, APPEL, APLP or APLP Holdings Limited Partnership (including the Preferred Shareholders, the Company Debentureholders and the MTN Noteholders); nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of Atlantic Power, or class of such persons, in connection with the Arrangement, whether relative to the US$3.03 in cash per Common Share to be paid to the Common Shareholders (other than I Squared Capital and its affiliates) of Common Shares pursuant to the Arrangement Agreement or otherwise. Goldman Sachs did not express any opinion as to the prices at which the Common Shares will trade at any time, as to the potential effects of volatility in the credit, financial and stock markets on Atlantic Power or I Squared Capital or the Arrangement, or as to the impact of the Arrangement on the solvency or viability of Atlantic Power or I Squared Capital or the ability of Atlantic Power or I Squared Capital to pay their respective obligations when they come due. Goldman Sachs’ opinion is necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to it as of, the date of the opinion and Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date thereof. Goldman Sachs’ advisory services and the opinion expressed therein were provided for the information and assistance of the Special Committee in connection with its consideration of the Arrangement and such opinion does not constitute a recommendation as to how any holder of Common Shares should vote with respect to the Arrangement Resolution or any other matter. Goldman Sachs’ opinion was approved by a fairness committee of Goldman Sachs.
The following is a summary of the material financial analyses delivered by Goldman Sachs to the Special Committee in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following
 
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quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before January 13, 2021, the last completed trading day prior to the date of the Arrangement Agreement, and is not necessarily indicative of current market conditions.
Implied Premia and Multiples.   Goldman Sachs analyzed the consideration to be paid to the Common Shareholders (other than I Squared Capital and its affiliates) pursuant to the Arrangement Agreement relative to (a) the closing price per Common Share as of January 13, 2021, the last completed trading day prior to the date of the Arrangement Agreement and (b) the highest closing price per Common Share for the 52-week period ended January 13, 2021. This analysis indicated that the price per Common Share to be paid to such Common Shareholders pursuant to the Arrangement Agreement represented a premium of 43.6% based on the closing price per Common Share of US$2.11 as of January 13, 2021, the last completed trading day prior to the date of the Arrangement Agreement and a premium of 20.2% based on the highest closing price per Common Share of US$2.52 for the 52-week period ended January 13, 2021. In addition, Goldman Sachs calculated an implied equity value of the Company by multiplying the US$3.03 per Common Share price to be paid to the Common Shareholders (other than I Squared Capital and its affiliates) pursuant to the Arrangement Agreement by the total number of fully diluted Common Shares as of January 13, 2021, as provided by Atlantic Power’s management and approved for Goldman Sachs’ use by the management of Atlantic Power. Goldman Sachs then calculated the implied enterprise value of the Company by adding to the implied equity value, the Company’s net debt (defined for this purpose as the Company’s debt less cash, including the value of non-controlling interest) as of September 30, 2020, as reflected in the Company’s publicly available filings. Using the foregoing, Goldman Sachs calculated the implied enterprise value for the Company as a multiple of the estimated earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) of the Company for calendar years 2021, 2022 and 2023 as reflected in the Forecasts. The results of these calculations are as follows:
Multiples
Implied Enterprise Value as a Multiple of:
2021E Adjusted EBITDA
5.7x
2022E Adjusted EBITDA
6.0x
2023E Adjusted EBITDA
7.3x
Illustrative Discounted Cash Flow Analysis.   Using the Forecasts, Goldman Sachs performed an illustrative discounted cash flow analysis on Atlantic Power to derive a range of illustrative present values per Common Share. Using discount rates ranging from 4.00% to 5.00%, reflecting estimates of Atlantic Power’s weighted average cost of capital, and a mid-year convention, Goldman Sachs derived a range of illustrative enterprise values for Atlantic Power, by discounting to present value as of January 13, 2021, (a) the estimates of the unlevered free cash flow to be generated by Atlantic Power for the period from January 13, 2021 to December 31, 2036, as reflected in the Forecasts, and (b) a range of illustrative terminal values for Atlantic Power, which were calculated by applying an illustrative value of US$2,000 to US$3,000 per kilowatt (“US$/kW”) to Atlantic Power hydroelectric generating assets and discounting incremental unlevered free cash flow from Atlantic Power natural gas generating assets post-2036 through 2043, as reflected in the Forecasts (analysis which implied terminal year EBITDA exit multiples ranging from 8.0x to 12.0x). Goldman Sachs derived such discount rates by application of the capital asset pricing model (which is referred to in this section as “CAPM”), which requires certain company-specific inputs, including the company’s target capital structure weightings, the cost of long-term debt, future applicable marginal cash tax rate and a beta for the company, as well as certain financial metrics for the United States financial markets generally. The illustrative terminal value US$/kW multiple range for Atlantic Power hydroelectric generating assets was derived by Goldman Sachs utilizing its professional judgment and experience, taking into account, among other things, the Forecasts and the US$/kW multiples calculated by Goldman Sachs for certain other transactions in the power industry.
Goldman Sachs derived ranges of illustrative enterprise values for Atlantic Power by adding the ranges of present values it calculated for the unlevered free cash flow and illustrative terminal values, as described above. Goldman Sachs then subtracted Atlantic Power’s net debt of US$741 million, as provided by Atlantic Power management, from the range of illustrative enterprise values to derive a range of illustrative equity values for Atlantic Power. Goldman Sachs then divided the range of illustrative equity values by the implied
 
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total number of fully diluted Common Shares outstanding of 93.674 million as of January 13, 2021 as provided by the management of Atlantic Power and approved for Goldman Sachs’ use by the management of Atlantic Power, to derive a range of illustrative present values per Common Share of US$1.81 to US$3.13.
Illustrative Present Value of Future Common Share Price Analysis.   Goldman Sachs performed an illustrative analysis of the implied present value of an illustrative future value per Common Share. For this analysis, Goldman Sachs used the Forecasts for each of the years 2024 through 2026. Goldman Sachs first calculated the implied enterprise values for Atlantic Power for each of the fiscal years 2023 to 2025, by applying a range of illustrative one-year forward EV / EBITDA multiples of 4.5x to 6.5x to EBITDA estimates for Atlantic Power for each of fiscal years 2024 to 2026 based on the Forecasts. These illustrative EV / EBITDA multiple estimates were derived by Goldman Sachs using its professional judgment and experience, taking into account Atlantic Power’s current next twelve month EV / EBITDA multiple and the range of Atlantic Power’s next twelve month EV / EBITDA multiples in the five-year period ended January 13, 2021. Goldman Sachs then subtracted the amount of Atlantic Power’s forecasted net debt for each of the fiscal years 2023 to 2025, as of the relevant year-end, each as provided by Atlantic Power’s management and approved for Goldman Sachs’ use by the management of Atlantic Power, from the respective implied enterprise values in order to derive a range of illustrative equity values for Atlantic Power as of December 31 of each of the fiscal years of 2023 to 2025. Goldman Sachs divided the range of illustrative equity values it derived for Atlantic Power by the forecasted number of fully diluted outstanding Common Shares for each of the fiscal years 2023 to 2025, as of the relevant year-end, as provided by Atlantic Power’s management and approved for Goldman Sachs’ use by the management of Atlantic Power, to derive a range of implied future share prices. Goldman Sachs then discounted the December 31, 2023 to 2025 implied future share price values back to January 13, 2021, using an illustrative discount rate of 6.5%, reflecting an estimate of Atlantic Power’s cost of equity. Goldman Sachs derived the discount rate used in the foregoing analysis by application of the CAPM, which requires certain company-specific inputs, including a beta for the company, as well as certain financial metrics for the United States financial markets generally. This analysis resulted in a range of illustrative implied present values per Common Share of US$1.62 to US$3.39.
General.   The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to Atlantic Power, I Squared Capital or the Arrangement.
Goldman Sachs prepared these analyses for purposes of providing its opinion to the Special Committee as to the fairness from a financial point of view of the US$3.03 in cash per Common Share to be paid to the Common Shareholders (other than I Squared Capital and its affiliates) pursuant to the Arrangement Agreement. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of Atlantic Power, I Squared Capital, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.
The US$3.03 in cash per Common Share was determined through arm’s-length negotiations between Atlantic Power and I Squared Capital and was approved by the Board. Goldman Sachs provided advice to the Special Committee during these negotiations. Goldman Sachs did not, however, recommend any specific amount of consideration to Atlantic Power or the Special Committee or that any specific amount of consideration constituted the only appropriate consideration for the Arrangement.
As described above, Goldman Sachs’ opinion to the Special Committee was one of many factors taken into consideration by the Special Committee in making its determination to recommend that the Board approve the Arrangement Agreement and the Board in making its determination to approve the Arrangement Agreement. The foregoing summary does not purport to be a complete description of the analyses
 
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performed by Goldman Sachs in connection with its fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Annex F.
Goldman Sachs and its affiliates are engaged in advisory, underwriting and financing, principal investing, sales and trading, research, investment management and other financial and non-financial activities and services for various persons and entities. Goldman Sachs and its affiliates and employees, and funds or other entities they manage or in which they invest or have other economic interests or with which they co-invest, may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments of Atlantic Power, I Squared Capital, ISQ Fund II, any of their respective affiliates and third parties, and, as applicable, portfolio companies, or any currency or commodity that may be involved in the Arrangement. Goldman Sachs acted as financial advisor to Atlantic Power in connection with, and participated in certain of the negotiations leading to, the Arrangement. Goldman Sachs has provided certain financial advisory and/or underwriting services to Atlantic Power and/or its affiliates from time to time for which its Investment Banking Division has received, and may receive, compensation, including having acted as lead arranger to Atlantic Power with respect to the re-pricing and amendment of an existing senior secured term loan (aggregate principal amount US$380,000,000) of APLP Holdings Limited Partnership, a subsidiary of Atlantic Power, in January 2020. During the two year period ended December 31, 2020, Goldman Sachs has recognized compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to Atlantic Power and/or its affiliates of approximately US$500,000. Goldman Sachs also has provided certain financial advisory and/or underwriting services to I Squared Capital, ISQ Fund II and/or their affiliates and portfolio companies from time to time for which its Investment Banking Division may receive, compensation, including having acted as financial advisor to I Squared Capital in connection with the pending sale of its portfolio company, Grupo T-Solar Global, S.A., announced December 2020. During the two year period ended December 31, 2020, Goldman Sachs has not recognized any compensation for financial advisory and/or underwriting services provided by its Investment Banking Division to I Squared Capital, ISQ Fund II and/or their respective affiliates and portfolio companies.
Goldman Sachs may also in the future provide financial advisory and/or underwriting services to Atlantic Power, I Squared Capital, ISQ Fund II and their respective affiliates and, as applicable, portfolio companies for which its Investment Banking Division may receive compensation. Affiliates of Goldman Sachs & Co. LLC also may have co-invested with I Squared Capital, ISQ Fund II and their respective affiliates from time to time and may have invested in limited partnership units of affiliates of I Squared Capital and ISQ Fund II from time to time and may do so in the future.
The Special Committee selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the Arrangement. Pursuant to a letter agreement dated October 2, 2020, the Special Committee engaged Goldman Sachs to act as its financial advisor in connection with the Arrangement. The engagement letter between Atlantic Power, the Special Committee and Goldman Sachs provides for fees for Goldman Sachs’ services in connection with the Arrangement that are estimated, based on the information available as of the date of the announcement, at approximately US$3.0 million, US$200,000 of which was payable upon execution of the engagement letter, US$450,000 of which was payable upon announcement of the transaction and the remainder of which is contingent upon consummation of the Arrangement. In addition, Atlantic Power has agreed to reimburse certain of Goldman Sachs’ expenses arising, and to indemnify Goldman Sachs against certain liabilities that may arise, out of its engagement.
Opinions of Blair Franklin
The Special Committee has retained Blair Franklin to act as its non-exclusive financial adviser, to provide opinions to the Special Committee and the Board as to the fairness, from a financial point of view, of the Common Share Consideration to be paid to the Common Shareholders and the Company Debenture Consideration to be paid to the Company Debentureholders. Blair Franklin has also been retained to provide an opinion to the Board, the Special Committee and the APPEL Board as to the fairness, from a financial point of view, of the Preferred Share Consideration to be paid to Preferred Shareholders as a class pursuant to the Arrangement.
 
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On January 14, 2021, Blair Franklin delivered certain of its written analyses and its oral opinions to the Special Committee, the Board and the APPEL Board, subsequently confirmed in writing as of the same date, and subject to the various assumptions, qualifications and limitations set forth therein, that as of January 14, 2021, with respect to the consideration to be paid pursuant to the Arrangement and the Company Debenture Transaction (as applicable): (i) the Common Share Consideration is fair, from a financial point of view, to the Common Shareholders; (ii) the Preferred Share Consideration is fair, from a financial point of view, to the Preferred Shareholders; and (iii) the Company Debenture Consideration is fair, from a financial point of view, to the Company Debentureholders.
The full text of the Blair Franklin Letter containing the Opinions, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Blair Franklin in rendering the Opinions, is attached to this information circular and proxy statement as Annex G and is incorporated by reference herein in its entirety. The summary of the Opinions contained in this information circular and proxy statement are qualified in their entirety by reference to the full text of the Blair Franklin Letter. You are encouraged to read the Blair Franklin Letter carefully and in its entirety. The Opinions were delivered to the Special Committee, the Board and the APPEL Board and address only the fairness, from a financial point of view, of the Common Shares Consideration to be paid to Common Shareholders, the Company Debenture Consideration to be paid to the Company Debentureholders and the Preferred Share Consideration to be paid to the Preferred Shareholders as a class pursuant to the Arrangement and the Company Debenture Transaction, as applicable, as of the date of the Blair Franklin Letter. The Opinions do not address the relative merits of the Arrangement as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or are available. The Opinions are not intended to, and do not, constitute advice or a recommendation as to how the Common Shareholders, the Company Debentureholders or the Preferred Shareholders should vote at any meeting of securityholders that may be held in connection with the Arrangement or the Company Debenture Transaction, or whether the securityholders should take any other action in connection with the Arrangement or the Company Debenture Transaction. The Common Share Consideration, the Preferred Share Consideration and the Company Debenture Consideration were determined through negotiations between I Squared Capital and Atlantic Power, and not pursuant to recommendations of Blair Franklin.
In preparing the Opinions, Blair Franklin has reviewed and relied upon, among other things:

interviews conducted by Blair Franklin with management of Atlantic Power;

certain financial analyses of Atlantic Power, its subsidiaries and assets prepared by Atlantic Power’s management, including the projections summarized below in the section entitled “— Projected Financial Information” beginning on page 57, including certain adjustments by Atlantic Power to include in the Adjusted EBITDA certain corporate general and administrative expenses and cash flow from growth capital investments;

access to a data site containing non-public material relating to Atlantic Power and its investments including financial details, forecasts, generation/asset specific information, tax information, contracts, shareholder agreements, HR matters, legal matters, third party reports and other items;

audited financial statements and related management’s discussion and analysis (“MD&A”) of Atlantic Power for the last three years ended December 31, 2019;

unaudited quarterly financial statements and related MD&A of Atlantic Power for the three, six and nine-month periods ended March 31, June 30, and September 30, respectively for the last three fiscal years ended December 31, 2019 and to the date of the Blair Franklin Letter;

Atlantic Power’s most recent Management Information Circular (definitive proxy statement) and Annual Information Form (annual report on Form 10-K) to the date of the Blair Franklin Letter;

press releases issued by Atlantic Power for the last three fiscal years and to the date of the Blair Franklin Letter;

the terms of the Common Shares, the Company Debentures and the Preferred Shares;

public information relating to the business, operations, financial performance and trading price history of the Common Shares, the Company Debentures, the Preferred Shares, and other selected public entities whose businesses Blair Franklin believed to be relevant;
 
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securityholder and insider information available on The System for Electronic Disclosure by Insiders (SEDI);

comparable trading multiples and comparable transaction multiples for selected companies and transactions considered relevant;

publicly available general industry and company specific research reports prepared by equity research analysts;

publicly available credit ratings and research reports regarding various securities of Atlantic Power and other comparable companies prepared by credit rating agencies;

industry and financial market information including power price curve forecasts provided by Atlantic Power;

the September 14th LOI;

drafts of the Arrangement Agreement, including the latest draft dated January 13, 2021 available prior to delivery of the Opinions; and

such other information, documentation, analyses and discussions that Blair Franklin considered relevant in the circumstances.
Blair Franklin has conducted such analyses, investigations and testing of assumptions as were considered by Blair Franklin to be appropriate in the circumstances for the purposes of arriving at its Opinions, but has not otherwise independently verified any of the assumptions contained in the financial information publicly disclosed by Atlantic Power or APPEL, or provided by their representatives.
Blair Franklin has not been asked to prepare, and has not prepared, a formal valuation or appraisal of Atlantic Power or APPEL or any of their respective securities or assets, and the Opinions should not be construed as such. Blair Franklin has, however, conducted such analyses as Blair Franklin considered necessary in the circumstances. In addition, the Opinions are not, and should not be construed as, advice as to the price at which the Common Shares, the Company Debentures or the Preferred Shares may trade at any time. Blair Franklin was not engaged to review any legal, tax or regulatory aspects of the Arrangement and the Opinions do not address any such matters. Blair Franklin has relied upon, without independent verification, the assessment by Atlantic Power and its legal advisors with respect to such matters. Blair Franklin was not requested to opine on Atlantic Power’s or APPEL’s underlying business decision to effect the Arrangement or the relative merits of the Arrangement as compared to other business strategies or transactions that might be available to Atlantic Power or APPEL, and was not requested to solicit, and did not solicit, interest from other parties with respect to any alternative transaction or arrangement.
With the Special Committee’s approval and as provided in the engagement letter dated December 14, 2020 pursuant to which Blair Franklin has provided the Opinions (the “Engagement Letter”), Blair Franklin has relied upon, without independent verification, the completeness, accuracy and fair presentation in all material respects of all financial information and the completeness and accuracy of the other information, data, advice, opinions and representations obtained by it from public sources, Management and affiliates and advisors, or otherwise (collectively, the “Information”). Blair Franklin has assumed that the historical information included in the Information did not omit to state any material fact or any fact necessary to be stated or necessary to make that Information not misleading in light of the circumstances in which it was made. The Opinions are conditional upon the completeness, accuracy and fair presentation of such Information. Subject to the exercise of professional judgment and except as described herein, Blair Franklin has not attempted to verify independently the completeness, accuracy or fair presentation of any of the Information. With respect to the forecasts, projections or estimates provided to Blair Franklin and used in the analysis supporting the Opinions, Blair Franklin has assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of Management as to the matters covered thereby at the time of preparation and, in rendering the Opinions, Blair Franklin expresses no view as to the reasonableness of such forecasts or budgets or the assumptions on which they are based.
Senior officers of Atlantic Power represented to Blair Franklin in a letter of representation delivered as at the date of the Blair Franklin Letter, among other things, that (i) with the exception of those portions of
 
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the Information provided to Blair Franklin that constituted forecasts, projections or estimates referred to in clause (ii) below, the Information provided orally by, or in writing by, Atlantic Power or any of its subsidiaries or its agents to Blair Franklin relating to Atlantic Power, APPEL or the Arrangement Agreement for the purpose of preparing the Opinions was, at the date that the Information was provided to Blair Franklin and at the date of the Blair Franklin Letter, complete, true and correct in all material respects (except to the extent superseded by more current Information) and did not at such dates contain any untrue statement of a material fact in respect of Atlantic Power, APPEL or the Arrangement Agreement and did not at such dates omit to state a material fact in respect of Atlantic Power, APPEL or the Arrangement Agreement necessary to make the Information not misleading in light of the circumstances under which the Information was made or provided; (ii) any portions of the Information provided to Blair Franklin that constituted forecasts, projections, estimates, budgets or other prospective information or data were prepared using the assumptions identified therein, which, in the reasonable opinion of Atlantic Power, were at the time of preparation and continue to be reasonable in the circumstances in light of the assumptions used therefor; and that (iii) since those dates on which the Information was provided to Blair Franklin, except as was disclosed in writing to Blair Franklin, there had been no material change, financial or otherwise, in the financial condition, assets, liabilities (contingent or otherwise), business, operations or prospects of Atlantic Power or its subsidiaries and no material change had occurred in the Information or any part thereof which would have or which would reasonably be expected to have a material effect on the Opinions.
Senior officers of Atlantic Power have also represented to Blair Franklin that, as of the date of the Blair Franklin Letter, to the best of their knowledge, after reasonable inquiry, there had been no valuations or appraisals of Atlantic Power or any material property of Atlantic Power or any of its subsidiaries made in the 24 months preceding the date of the Blair Franklin Letter and in the possession or control of Atlantic Power other than those which had been provided to Blair Franklin or, in the case of valuations known to Atlantic Power which it did not have within its possession or control, notice of which had been given to Blair Franklin.
Blair Franklin has made several assumptions in connection with its Opinions that it considers reasonable, including that the conditions required to implement the Arrangement Agreement will be met. In preparing the Opinions, Blair Franklin assumed that the executed Arrangement Agreement would not differ in any material respect from the form that Blair Franklin reviewed, that the representations and warranties of each party contained in the Arrangement Agreement were true and correct as of the date of the Blair Franklin Letter, that each party would perform all of its covenants and agreements required to be performed under the Arrangement Agreement and that the Arrangement Agreement would be consummated in accordance with the terms and conditions of the most recent draft of the Arrangement Agreement provided to Blair Franklin without waiver of, or amendment to, any term or condition that is in any way material to Blair Franklin’s analyses.
The Opinions were rendered on the basis of the securities markets, economic, financial and general business conditions prevailing as at the date of the Blair Franklin Letter and the conditions, financial and otherwise, of Atlantic Power and its subsidiaries, as they were reflected in the Information and as they were represented to Blair Franklin in discussions with Management. In its analyses and in preparing the Opinions, Blair Franklin made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of Blair Franklin or any party involved in the Arrangement.
The Opinions have been provided to the Special Committee, the Board and the APPEL Board, for their exclusive use only in considering the Arrangement. Blair Franklin has not been asked to opine as to, and the Opinions do not address, the fairness of the amount or nature of the compensation to any of Atlantic Power’s officers, directors or employees, or class of such persons, relative to the compensation to the public holders of securities of Atlantic Power or APPEL. The Opinions do not constitute a recommendation as to how any Common Shareholders, Company Debentureholders or Preferred Shareholders, or any other person, should vote or act on any matter relating to the Arrangement. It was understood that except for: (i) the inclusion of the Blair Franklin Letter in its entirety and a summary of the Opinions (in a form acceptable to Blair Franklin) in disclosure documents that Atlantic Power or APPEL is required to file and mail under the proxy solicitation and information circular requirements of Canadian securities laws and under the Exchange Act and the filing of such disclosure documents and the Blair Franklin Letter on SEDAR
 
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in Canada and on EDGAR in the United States, and (ii) the submission by Atlantic Power of the Blair Franklin Letter to any relevant court or regulatory agency in connection with the approval of the Arrangement, the Blair Franklin Letter and the Opinions contained therein are not to be used, relied upon, disclosed, summarized or quoted from without the express prior written consent of Blair Franklin.
In support of the Opinions, Blair Franklin has performed certain financial analyses with respect to Atlantic Power and APPEL based on those methodologies and assumptions that Blair Franklin considered appropriate in the circumstances. The following is a summary of the principal financial analyses performed by Blair Franklin to arrive at the Opinions. Some of the summaries of financial analyses include information presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data set forth in the tables without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analysis, could create a misleading or incomplete view of the financial analysis. Blair Franklin performed certain procedures, including each of the financial analyses described below, and reviewed with Management the assumptions on which such analyses were based and other factors, including the historical and projected financial results of Atlantic Power and APPEL. No limitations were imposed by the Special Committee, the Board or the APPEL Board with respect to the investigations made or procedures followed by Blair Franklin in rendering the Opinions.
Opinion Regarding the Common Share Consideration
Approach Overview
Blair Franklin focused on the discounted cash flow (“DCF”) approach in assessing the fairness of the Common Share Consideration, as it provided the ability to directly evaluate the unique attributes of Atlantic Power and its power generating assets. Blair Franklin also considered information from precedent transactions involving a variety of independent power producers as well as multiples of publicly-traded independent power producers which were judged to be comparable.
DCF Analysis
Blair Franklin reviewed Management’s detailed cash flow projections, including the assumptions underlying these projections. These assumptions included the terms of existing power purchase agreements, the terms under which power purchase agreements would be re-contracted as existing arrangements expire, the useful life of individual assets, decommissioning costs, forecasts regarding power prices, fuel and other operating costs, corporate overhead, capital expenditures and the acquisition or disposition of specific assets throughout the forecast period. Where it deemed appropriate, Blair Franklin modified certain of Management’s assumptions and adjusted the forecasts accordingly. The DCF analysis included a review of certain precedent transactions that Blair Franklin, in its professional judgment, considered relevant, to arrive at a terminal value.
All forecast cash flows, as well as the terminal values, were discounted at an estimated weighted average cost of capital (“WACC”) for Atlantic Power, determined by Blair Franklin in its professional judgment to be in the range of 6.5% to 7.5%. The WACC estimation was informed by a review of comparable power producing companies considered relevant, as well as other market data.
Blair Franklin’s DCF analysis considered three distinct cases: (i) a base case analysis; (ii) a transaction case analysis; and (iii) a current price case analysis.
(i)
DCF Base Case Analysis
Blair Franklin’s DCF base case analysis was based on Management’s forecast contracted and re-contracted cash flow assumptions, with adjustments made to re-contracted cash flows on certain assets as Blair Franklin considered appropriate in its professional judgment. Other key assumptions made for the purposes of this analysis included: (i) a terminal multiple of 12.0x on the Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) generated by Atlantic Power’s Hydro projects in 2036 and expected to continue operations beyond 2036, including corporate general and administrative costs, as selected by Blair Franklin in its professional judgment, based on its review of select precedent transactions
 
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involving North American hydro assets, and other factors it considered relevant; (ii) the realization of a range of sale proceeds from Atlantic Power’s 50% interest in the 129 MW natural gas-fired combined-cycle cogeneration facility located in Orlando, Florida in 2024, based on Management’s estimates; (iii) the occurrence of potential accretive asset acquisitions; and (iv) reductions in general and administrative expenses as assets are retired through the forecast period.
Unlevered free cash flows were discounted to December 31, 2020 and then adjusted as Blair Franklin considered appropriate to arrive at an implied price per Common Share. Blair Franklin performed this analysis by taking low-end and high-end estimated enterprise values, as determined by Blair Franklin in its professional judgment, subtracting the total debt (based on Management’s forecast for December 31, 2020) and the liabilities associated with the Preferred Shares, and adding cash and cash equivalents to determine equity value. Total debt included cash adjustments for incentive awards under the Company LTIP at their implied price, as well as outstanding unfunded pension liabilities. The low-end equity value estimate valued the Company Debentures at market value, and all other debt securities and preferred securities at their face value. The high-end equity value estimate valued the Company Debentures at market value, the Term Loan B and project-level debt at face value, and MTNs and the Preferred Shares at the average of their face value and market value. To calculate the implied price per Common Share, Blair Franklin divided the equity value estimate by the total number of Common Shares outstanding.
Blair Franklin’s base case DCF analysis, which is based on Management’s cash flow forecast as adjusted by Blair Franklin it its professional judgement, implied a price per Common Share range of US$2.39 to US$3.41. The base case DCF analysis conducted using Management’s cash flow forecast, with no adjustments made by Blair Franklin, implied a price per Common Share range of US$2.23 to US$3.24.
Blair Franklin also applied a sensitivity analysis using several variables to demonstrate the impact that changes in those variables would have on the implied price per Common Share, using the implied price per Common Share at the low-end of the base case DCF range, as follows:
SENSITIVITY ANALYSIS (BASE CASE)
Variable
Impact on
Implied Share Price
+/- 1.0x Terminal Multiple
+/-US$ 0.08
+/- 0.5% Discount Rate
+/-US$ 0.28
+/- 10% Change in the Frederickson Project Re-contracted Cash Flows
+/-US$ 0.12
+/- 10% Change in the Curtis Palmer Facility Re-contracted Cash Flows
+/-US$ 0.19
(ii)
DCF Transaction Case Analysis
Blair Franklin’s DCF transaction case analysis used similar methodologies as used in the DCF base case analysis, except for adjustments for synergies and change of control costs of Atlantic Power to a financial buyer, similar to I Squared Capital, resulting in an annual reduction of US$2.0 million in public company costs commencing in 2021, with cost savings being shared on a 50-50 basis with the financial buyer, as determined by Blair Franklin in its professional judgment following discussions with Management. For the high-end of the transaction case, Blair Franklin assumed a sale to a strategic buyer that could absorb a large portion of Atlantic Power’s corporate overhead expenses, resulting in a reduction in public company costs and incremental general and administrative expense savings greater than those that could reasonably be expected to be achieved by a financial buyer, with 1.0x cost of savings in the year immediately prior to the initial effect, with cost savings being shared on a 50-50 basis with the strategic buyer, as determined by Blair Franklin in its professional judgment following discussions with Management. In both cases, certain change of control costs were also assumed, including the cost of payment of a make-whole premium on the Company Debentures, costs associated with the Term Loan B change of control provision (estimated at 1% of the loan amount outstanding) and transaction costs, based on information from Management and Blair Franklin’s professional judgment.
 
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Unlevered free cash flows were discounted to December 31, 2020 and then adjusted as Blair Franklin considered appropriate to arrive at an implied price per Common Share. Blair Franklin performed this analysis by taking low-end and high-end estimated enterprise values, as determined by Blair Franklin in its professional judgment, subtracting the total debt (based on Management’s forecast for December 31, 2020), and the liabilities associated with the Preferred Shares, and adding cash and cash equivalents using the same methodology as the base case DCF analysis to determine an equity value estimate. The transaction case DCF analysis also included adjustments for change of control costs for the Company Debenture make-whole premium, the Term Loan B change of control provision and other transaction costs, prior to arriving at an equity value estimate. To calculate the implied price per share, Blair Franklin divided the equity value estimate by the total number of Common Shares outstanding.
Blair Franklin’s transaction case DCF analysis, which is based on Management’s cash flow forecast as adjusted by Blair Franklin it its professional judgement, implied a price per Common Share range of US$2.46 to US$3.62. The transaction case DCF analysis conducted using Management’s cash flow forecast, with no adjustments made by Blair Franklin, implied a price per Common Share range of US$2.30 to US$3.46.
Blair Franklin also applied a sensitivity analysis using several variables to demonstrate the impact that changes in those variables would have on the implied price per Common Share using the transaction case analysis, as follows:
SENSITIVITY ANALYSIS (TRANSACTION CASE)
Variable
Impact on
Implied Share Price
+/- 1.0x Terminal Multiple
+/-US$ 0.13
+/- 0.5% Discount Rate
+/-US$ 0.41
+/- 10% Change in the Frederickson Project Re-contracted Cash Flows
+/-US$ 0.17
+/- 10% Change in the Curtis Palmer Facility Re-contracted Cash Flows
+/-US$ 0.28
(iii)
DCF Current Price Case Analysis
Blair Franklin’s DCF current price case analysis used similar methodologies as used in the DCF base case analysis, except that the current price case assumed that Atlantic Power would not make any acquisition due to insufficient cash flow to support such a transaction. Further, for the purposes of the current price case analysis, Blair Franklin substituted for Management’s power price forecasts (which are based on the average of consultant forecasts over the past six years) the most current power price curves which approach reflects the current market environment and outlook for power costs and prices.
Unlevered free cash flows were discounted to December 31, 2020 and then adjusted as Blair Franklin considered appropriate to arrive at an implied price per Common Share. Blair Franklin performed this analysis by taking low-end and high-end estimated enterprise values, as determined by Blair Franklin in its professional judgment, subtracting the total debt (based on Management’s forecast for December 31, 2020) and the liabilities associated with the Preferred Shares, and adding cash and cash equivalents using the same methodology as the base case DCF analysis to determine an equity value estimate. To calculate the implied price per share, Blair Franklin divided the equity value estimate by the total number of Common Shares outstanding.
Blair Franklin’s transaction case DCF analysis, which is based on Management’s cash flow forecast as adjusted by Blair Franklin it its professional judgement, implied a price per Common Share range of US$1.32 to US$2.10. The transaction case DCF analysis conducted using Management’s cash flow forecast, with no adjustments made by Blair Franklin, implied a price per Common Share range of US$1.07 to US$1.82.
 
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Blair Franklin also applied a sensitivity analysis using several variables to demonstrate the impact that changes in those variables would have on the implied price per Common Share using the current price case analysis, as follows:
SENSITIVITY ANALYSIS (CURRENT PRICE CASE)
Variable
Impact on
Implied Share Price
+/- 1.0x Terminal Multiple
+/-US$ 0.04
+/- 0.5% Discount Rate
+/-US$ 0.22
+/- 10% Change in the Frederickson Project Re-contracted Cash Flows
+/-US$ 0.11
+/- 10% Change in the Curtis Palmer Facility Re-contracted Cash Flows
+/-US$ 0.13
Select Precedent Transactions
Blair Franklin reviewed precedent transactions involving a variety of independent power producers, selected by Blair Franklin in its professional judgment as the most appropriate for comparison. The transactions implied Enterprise Value (“EV”) / EBITDA multiples ranging from 5.2x to 13.1x, with an average multiple of 7.3x for companies with no material renewable energy generation, an average of 10.1x for companies with mixed generation and an overall average multiple of 8.4x. However, Blair Franklin noted that it was unable to find a precedent representing a true comparison to Atlantic Power as it exists today, particularly given the unique geographic and fuel-type mix of its power-generating asset portfolio and the portfolio’s power purchase agreement expiry and useful asset life profile, as well as the current power price environment.
The precedent transactions included in Blair Franklin’s review were: Allegheny Energy acquisition by FirstEnergy; RRI Energy acquisition by Mirant Corp.; Dynegy acquisition by Blackstone (not completed); Constellation Energy acquisition by Exelon Corporation; Capital Power Income LP acquisition by Atlantic Power; GenOn Energy acquisition by NRG Energy; Edison Mission Energy acquisition by NRG Energy; MACH Gen acquisition by Talen Energy; Talen Energy acquisition by Riverstone Holdings; Calpine Corporation acquisition by Energy Capital Partners; Dynegy acquisition by Vistra Energy and PNM Resources acquisition by Avangrid.
The information used by Blair Franklin to conduct the select precedent analysis was obtained from public disclosure documents and equity research reports.
In its professional judgment, Blair Franklin determined an implied price per Common Share ranging from US$2.18 to US$3.40 using the select precedent transaction analysis.
Comparable Company Analysis
Blair Franklin compared Atlantic Power to select publicly-traded independent power producers with renewable and non-renewable focused companies, selected for comparison by Blair Franklin in its professional judgment. The review of renewable focused comparable companies implied EV / EBITDA multiples ranging from 11.4x to 25.4x, with an average multiple of 16.5x. The review of non-renewable focused comparable companies implied EV / EBITDA multiples ranging from 5.4x to 12.3x, with an average multiple of 8.7x. However, Blair Franklin noted the inability to find a true comparison to Atlantic Power in terms of its size, geographic location, liquidity, fuel type mix, profit margins, power purchase agreement expiry and useful asset life profile, capitalization and other factors.
The renewable focused companies selected for the purposes of this comparison were: Brookfield Renewable Partners, Innergex, Algonquin Power and Utilities, Boralex, Northland Power, TransAlta Renewables, Atlantica Sustainable Infrastructure and Clearway Energy. The non-renewable focused companies selected for the purposes of this comparison were: The AES Corporation, Covanta Holding Corporation, TransAlta, Capital Power and Vistra Energy.
Blair Franklin noted that renewable energy companies attract premium valuations in the current market environment as the increased demand for renewable assets has led to higher valuations by investors.
 
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The information used by Blair Franklin to conduct this analysis was obtained from public disclosure documents and equity research reports, with 2020 and 2021 forward multiples based on equity research analyst consensus estimates.
In its professional judgment, Blair Franklin determined an implied price per Common Share ranging from US$1.31 to US$2.53 using the comparable company analysis.
Other Factors
Blair Franklin also reviewed and considered other factors that were not considered part of its financial analyses in connection with rendering the Opinion regarding the Common Share Consideration, but were referenced for informational purposes, including, among other things, current trading metrics, historical trading price ranges and equity research analysts’ price targets, described below.
(i)
Historical Trading Price Ranges
Blair Franklin reviewed the 52-week trading price range for the Common Shares on the NYSE, noting that the trading prices had ranged from a low of US$1.70 to a high of US$2.54. Blair Franklin also observed that both the 20 day and 30 day volume-weighted average trading price (“VWAP”) of the Common Shares on the NYSE was US$2.05, noting that the Common Share Consideration of US$3.03 per Common Share represents an approximate 48% premium to each of the 20-day and 30-day VWAP.
(ii)
Equity Research Analysts’ Future Price Targets
Blair Franklin reviewed publicly available equity research analyst price targets for the Common Shares, and noted that the price targets ranged from US$2.50 to US$3.07 per Common Share.
Opinion Regarding the Preferred Share Consideration
Approach Overview
Blair Franklin reviewed other publicly traded securities that, in its professional judgment, were comparable to the Preferred Shares. In doing so Blair Franklin primarily relied on the Preferred Share price implied by applying comparable security effective yields to the series of Preferred Shares being analysed. Blair Franklin also considered market data points it viewed as appropriate in its professional judgment, including current trading values, VWAP over various periods of time and the 52-week trading range, noting the limitations imposed by the relatively low liquidity of the Preferred Shares.
Comparable Security Analysis
Blair Franklin reviewed a comparison group other non-investment grade publicly-traded perpetual preferred shares issued by Canadian issuers, selecting that comparison group using its professional judgment, to conduct a comparable security analysis of each series of Preferred Shares. Each series of Preferred Shares was then compared to similar types of securities issued by other issuers having a similar credit rating, payment type (such as fixed, variable or floating) and, in the case of the Series 2 Preferred Shares, a similar reset date. Blair Franklin noted the difficulty of finding a true direct comparable security for each series of the Preferred Shares, given the variety of industries in which the issuers of such securities operate, the unique features of these types of perpetual preferred shares, and the small sample sizes available for specific ratings and payment type categories.
 
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The table below outlines the implied current yield for Atlantic Power’s Preferred Shares based on fixed, variable and floating comparable yields.
Implied Current Yield
Low
High
Comparable Yields (Fixed – Series 1, Preferred Shares)
Pfd-3H / P-3H / BB+
5.1% 5.6%
Pfd-3 / P-3 / BB
4.9% 5.6%
Pfd-5 / P-5 / CC
12.8% 12.8%
Comparable Yields (Variable – Series 2, Preferred Shares)
Pfd-3H / P-3H / BB+
5.3% 7.9%
Pfd-3 / P-3 / BB
5.3% 7.7%
Pfd-3L / P-3L / BB-
5.4% 7.1%
Comparable Yields (Floating – Series 3, Preferred Shares)
Pfd-3H / P-3H / BB+
4.5% 5.1%
Pfd-3 / P-3 / BB
3.9% 5.8%
Pfd-3L / P-3L / BB-
4.6% 5.1%
Pfd-4H / P-4H / B (+/-)
6.1% 6.1%
Note: The Series 1 Preferred Shares and Series 2 Preferred Shares, as of January 14, 2021, were rated P-4L/B-
Blair Franklin calculated that the current yields implied by the trading prices for each of the Series 1, Series 2 and Series 3 Preferred Shares were 7.0%, 7.6% and 6.3%, respectively. Blair Franklin calculated that the yields implied by the Preferred Share Consideration of C$22.00 for the Series 1 Preferred Shares, Series 2 Preferred Shares and Series 3 Preferred Shares were 5.5%, 6.5% and 4.8%, respectively.
Opinion Regarding the Company Debenture Consideration
Approach Overview
Blair Franklin used an intrinsic value convertible debenture pricing model to analyze the value of the Company Debentures. Blair Franklin also considered certain market data points it viewed to be appropriate in its professional judgment, including current trading value, VWAP over various periods of time and the 52-week trading range, noting the limitations imposed by the relatively low liquidity of the Company Debentures.
Intrinsic Value Convertible Debenture Pricing Model
Blair Franklin considered the implied value of the Company Debentures taking into account an assumed number of Common Shares per each C$1,000 face value of Company Debentures to be issued to Company Debentureholders on the effective date of the Arrangement as a result of the make-whole premium to which they are entitled, and the Common Share Consideration of US$3.03 per Common Share that Company Debentureholders would receive following conversion of the Company Debentures. The reference price assumed for the purpose of the illustrative make-whole premium calculation shown below is C$3.85 per Common Share, based on the spot US$ / C$ exchange rate as at January 13, 2021.
 
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ILLUSTRATIVE CHANGE OF CONTROL MAKE-WHOLE CALCULATION
Spot US$ /
C$ Rate
30-Day
Average US$ /
C$ Rate
Reference Price per Common Share
Common Share Consideration
US$ 3.03 US$ 3.03
x U.S.$/ C$Exchange Rate 1.27 1.28
C$Common Share Consideration
C$ 3.85 C$ 3.87
Conversion Ratio
Basic Conversion Rate
238.1 238.1
Change of Control Make-Whole
Premium (to Conversion Ratio)
34.9 34.2
Total Adjusted Conversion Ratio
273.0 272.3
Illustrative Value of Company Debentures
C$Common Share Consideration
C$ 3.85 C$ 3.87
x Total Conversion Ratio
273.0 272.3
Illustrative Debenture Value (per C$1,000 Face Value)
C$ 1,051 C$ 1,054
Blair Franklin noted that the illustrative debenture value and change of control make-whole premium will vary based on the US$ / C$ exchange rate and the effective date of the Arrangement.
Blair Franklin made various assumptions in applying the intrinsic value convertible debenture pricing model, as it considered appropriate in its professional judgment, including with respect to credit spread, Common Share price and Common Share volatility. The assumptions with respect to credit spread were based in part on a review of Canadian and U.S. high-yield bond indices, and information regarding Common Share price and volatility was derived from information provided by Bloomberg.
INTRINSIC VALUE CONVERTIBLE DEBENTURE MODEL SUMMARY
Low
Mid
High
Current Trading
Price (cents on dollars)
102.1 102.1 102.1
Yield to Maturity
5.4% 5.4% 5.4%
Yield to Call
4.9% 4.9% 4.9%
Current Yield
5.9% 5.9% 5.9%
Model Inputs
Credit Spread
425 bps
400 bps
375 bps
Underlying Common Share Price (C$)
$    2.69 $    2.69 $    2.69
Underlying Common Share Volatility
33.3% 33.3% 33.3%
Model Output
Theoretical Price (cents on dollar)
104.3
104.9
105.4
The underlying Common Share Price of C$2.69 was based on the market closing price on the TSX on January 13, 2021. The underlying Common Share volatility was based on Bloomberg’s estimate of Atlantic Power’s flat 180-day history.
Based on the intrinsic value convertible debenture model, Blair Franklin concluded, in its professional judgment, that the implied value per C$1,000 face value of the Company Debentures as of January 14, 2021 was C$1,043 to C$1,054.
Historical Trading Price Ranges
Blair Franklin also reviewed and considered the 30-day VWAP trading price of the Company Debentures on the TSX, which ranged from a low of C$1,021 to a high of C$1,033, and the 52-week trading range for the Company Debentures on that exchange, which ranged from C$850 to C$1,070.
 
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Blair Franklin believes that its analyses must be considered as a whole and that selecting portions of the analyses or the factors considered by Blair Franklin, without considering all factors and analyses together, could create a misleading view of the process underlying the Opinions. The preparation of a fairness opinion is a complex process and is not necessarily amenable to partial analysis or summary description. Any attempt to do so could lead to undue emphasis on any particular factor or analysis. The Blair Franklin Letter should be read it its entirety.
The Opinions were given as of January 14, 2021 and Blair Franklin disclaims any undertaking or obligation to advise any person of any change in any fact or matter affecting the Opinions which may come or be brought to the attention of Blair Franklin after the date of the Blair Franklin Letter. It was understood that in the event there is any material change in any fact or matter affecting the Opinions after the date of the Blair Franklin Letter, Blair Franklin reserved the right to change, modify or withdraw the Opinions.
Blair Franklin is an independent investment bank providing a full range of financial advisory services related to mergers and acquisitions, divestitures, minority investments, fairness opinions, valuations and financial restructurings. Blair Franklin was selected by the Special Committee to render the Opinions because Blair Franklin has been a financial advisor in a significant number of transactions throughout Canada and North America involving public and private companies in various industry sectors and has extensive experience in preparing fairness opinions in transactions similar to the arrangement contemplated by the Arrangement Agreement.
The Opinions expressed herein are the opinions of Blair Franklin as a firm and the form and content herein has been approved for release by a committee of Blair Franklin’s principals, each of whom is experienced in mergers and acquisitions, divestitures, restructurings, minority investments, capital markets, fairness opinions and valuation matters.
During the two years preceding the date of the Blair Franklin Letter, Blair Franklin and its affiliates were not engaged to provide financial advisory or other services to any party to the Arrangement Agreement, and during such period Blair Franklin did not receive any fees from any party to the Arrangement Agreement, other than fees payable to Blair Franklin pursuant to the Engagement Letter.
The Engagement Letter provides for the payment to Blair Franklin of fixed fees in respect of the preparation and delivery of the Opinions. No portion of the fees payable to Blair Franklin is or was contingent upon the completion of the Arrangement, or any other transaction of Atlantic Power or APPEL, or on the conclusions reached by Blair Franklin in the Opinions. In addition, Blair Franklin is to be reimbursed for its reasonable out-of-pocket expenses and is to be indemnified by Atlantic Power in certain circumstances, including liabilities under U.S. and Canadian securities laws. The terms of the fee arrangement with Blair Franklin, which are customary in transactions of this nature, were negotiated at arm’s length.
Projected Financial Information
Other than annual and certain other limited financial guidance provided to investors, Atlantic Power does not as a matter of course publish projections as to the future performance, earnings or other results of its business due to, among other reasons, the uncertainty of the underlying assumptions and estimates. Atlantic Power’s senior management provided certain financial forecasts to the Special Committee, the Board and the APPEL Board in connection with their consideration of the Arrangement, which financial forecasts, including certain adjustments by Atlantic Power to include in the Adjusted EBITDA certain corporate general and administrative expenses and cash flow from growth capital investments were also provided to and used by Goldman Sachs and Blair Franklin in connection with their respective financial analyses and opinions described under “The Arrangement — Opinions of Financial Advisors”, beginning on page 42. Such information may not be suitable for any other purpose. None of the financial forecasts were intended for public disclosure. Nonetheless, we have included a summary of these financial forecasts because certain of the financial forecasts were made available to the Special Committee, the Board and the APPEL Board. The inclusion of the financial forecasts in this information circular and proxy statement does not constitute an admission or representation by the Special Committee, the Board, the APPEL Board, Goldman Sachs, Blair Franklin or any other recipient of this information that the information is material.
 
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In the opinion of Atlantic Power management, the financial forecasts as a whole (1) were prepared on a reasonable basis; and (2) reflect the best estimates and judgments available at the time they were made. However, this information is not fact and should not be relied upon as being necessarily indicative of future results.
The financial forecasts are subjective in many respects. Although presented with numerical specificity, the financial forecasts reflect and are based on numerous assumptions and estimates with respect to industry performance, power prices, general business, economic, political, market and financial conditions, competitive uncertainties, tax laws and other matters, all of which are difficult to predict and beyond Atlantic Power’s control. As a result, there can be no assurance that Atlantic Power’s future performance depicted in the forecasts will be realized or that actual results will not be materially more favorable or less favorable than projected and inclusion of the financial forecasts in this information circular and proxy statement should not be regarded as a representation that the financial forecasts will be achieved. The financial forecasts are forward-looking statements and should be read with caution. See the section entitled “Cautionary Note Regarding Forward-Looking Information”, beginning on page 24 of this management information statement and proxy statement as well as the section entitled “Risk Factors” in Atlantic Power’s annual report on Form 10-K for the year ended December 31, 2019, which is incorporated by reference in this information circular and proxy statement. The financial forecasts cover multiple years and such information by its nature becomes less reliable with each successive year. In addition, the financial forecasts will be affected by Atlantic Power’s ability to achieve strategic goals, objectives and targets over the applicable periods. The financial forecasts also reflect varying assumptions under different scenarios as to certain business matters that are subject to change or beyond Atlantic Power’s control.
The financial forecasts were prepared for internal use and to assist the financial advisors to Atlantic Power with their respective financial analyses of Atlantic Power and the Common Share Consideration and Preferred Share Consideration and not with a view toward public disclosure or toward complying with U.S. or Canadian generally accepted accounting principles, the published guidelines and policies of the SEC and Canadian securities commissions regarding forecasts, including the guidelines relating to future oriented financial information, or the guidelines established by the American Institute of Certified Public Accountants or the Canadian Institute of Chartered Accountants for preparation and presentation of prospective financial information. Our independent registered public accounting firm has not examined, reviewed, audited, compiled or performed any procedures with respect to any of the financial forecasts, expressed any conclusion or opinion or provided any form or assurance with respect to the financial forecasts and, accordingly, assumes no responsibility for them. The financial forecasts do not take into account any circumstances or events occurring after the date they were prepared.
By including the financial forecasts in this information circular and proxy statement, neither Atlantic Power nor any other person (or their respective representatives) has made or is making any representation to any person regarding the information included in the forecasts or the ultimate performance of Atlantic Power compared to the information contained in the forecasts. Similarly, Atlantic Power has not made any representation to Purchasers in the Arrangement Agreement or otherwise concerning the forecasts. The financial forecasts provided below have not been updated since the time of their preparation, are not facts and the inclusion of this information should not be regarded as an indication that the Special Committee, the Board, the APPEL Board, Atlantic Power or any other recipient of this information considered, or now considers, the forecasts to be predictive of the actual future results. Some or all of the assumptions that have been made in connection with the preparation of the financial forecasts may have changed since the date the financial forecasts were prepared. None of Atlantic Power, the Purchasers or any of their respective affiliates, advisors or other representatives assumes any responsibility for the validity, reasonableness, accuracy or completeness of the financial forecasts. The financial forecasts are not included in this information circular and proxy statement in order to induce any Common Shareholder or Preferred Shareholder to vote in favor of any proposal to be considered at the Special Meetings and you are cautioned not to rely on the financial forecasts.
For the foregoing reasons, as well as the bases and assumptions on which the financial forecasts were compiled, the inclusion of specific portions of the financial forecasts in this information circular and proxy statement should not be regarded as an indication that such forecasts will be an accurate prediction of future events, and they should not be relied on as such.
 
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Except as required by applicable securities laws, Atlantic Power does not intend to update, or otherwise revise the financial forecasts or the specific portions presented to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions are shown to be in error or no longer appropriate.
Atlantic Power provided forecasts, including certain adjustments by Atlantic Power to include in the Adjusted EBITDA certain corporate general and administrative expenses and cash flow from growth capital investments as summarized below, to Goldman Sachs on December 7, 2020 and to Blair Franklin on December 12, 2020.
Forecasts (US$ in thousands)
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
Total Contracted EBITDA(1)(2)
180,820 194,747 187,749 145,561 100,260 92,217 54,764 52,353 39,487 32,618
Total Recontracted EBITDA(3)
1,388 (24) (596) 11,842 12,674 13,479 29,387 31,529 28,726 37,638
Total EBITDA
182,208 194,723 187,153 157,403 112,934 105,696 84,151 83,883 68,213 70,256
(1)
“EBITDA” means project income (loss) plus interest, taxes, depreciation and amortization (including non-cash impairment charges) and changes in fair value of derivative instruments.
(2)
“Contracted EBITDA” means projected EBITDA for projects under PPAs in the respective year.
(3)
“Recontracted EBITDA” means projected EBITDA for projects that have expired PPAs in the respective year (assuming Atlantic Power successfully negotiates a new PPA following expiration of the existing PPA), discounted by the probability that Atlantic Power, in Atlantic Power’s management’s judgment, will successfully negotiate a PPA following expiration of the existing PPA.
Forecast EBITDA by Segment (US$ in thousands)
Hydro(1)
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
Total Contracted
EBITDA
45,956 50,284 49,121 44,629 50,147 49,331 10,378 10,149 2,036 2,163
Total Recontracted EBITDA
821 1,052 57 16,764 18,460 25,409 25,833
Total Hydro EBITDA
45,956 50,284 49,121 45,450 51,199 49,388 27,141 28,609 27,444 27,833
(1)
Includes Atlantic Power’s Curtis Palmer, Mamquam, Moresby Lake and Koma Kulshan projects.
Natural Gas (1)
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
Total Contracted
EBITDA
97,360 105,837 92,006 55,986 16,067 11,872 11,792 11,043 13,598 15,559
Total Recontracted EBITDA
1,388 (24) (596) 11,021 11,622 13,422 12,624 13,070 3,317 11,967
Total Natural Gas EBITDA
98,748 105,813 91,409 67,007 27,689 25,294 24,416 24,113 16,914 27,526
(1)
Includes Atlantic Power’s Kenilworth, Frederickson, Morris, Orlando, Kapuskasing, Nipigon, North Bay, Tunis, Naval Station, Naval Training Center, North Island, Oxnard and Manchief projects.
Biomass (1)
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
Total Contracted EBITDA
26,436 25,210 28,821 28,605 30,176 31,014 32,594 31,161 23,854 14,897
Total Recontracted EBITDA
Total Biomass EBITDA
26,436 25,210 28,821 28,605 30,176 31,014 32,594 31,161 23,854 14,897
 
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(1)
Includes Atlantic Power’s Williams Lake, Cadillac, Piedmont, Calstock, Allendale, Dorchester, Craven and Grayling projects.
Coal (1)
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
Total Contracted EBITDA
11,067 13,416 17,801 16,341 3,870
Total Recontracted EBITDA
Total Coal EBITDA
11,067 13,416 17,801 16,341 3,870
(1)
Includes Atlantic Power’s Chambers project.
Certain Effects of the Arrangement
Upon consummation of the Arrangement, (i) each Common Share issued and outstanding immediately prior to the Effective Time will be deemed transferred to Tidal Power Holdings Limited in exchange for the right to receive the Common Share Consideration, except that Common Shareholders who are entitled to and who properly exercise their Dissent Rights under the terms of the Interim Order instead shall have the right to receive the fair value for their Common Shares pursuant to and in the manner set forth in Division 2 of Part 8 of the BCBCA and (ii) each Preferred Share issued and outstanding immediately prior to the Effective Time will be deemed transferred to APPEL in exchange for the right to receive the Preferred Share Consideration, except that Preferred Shareholders who are entitled to and who properly exercise their Dissent Rights under the terms of the Interim Order instead shall have the right to receive the fair value of their Preferred Shares pursuant to and in the manner set forth in Division 2 of Part 8 of the BCBCA.
Upon consummation of the Arrangement, (i) all outstanding Incentive Securities will vest in full (to the extent not already vested), (ii) the Company LTIP, Director DSU Plan and Transition Grant Agreement will be terminated and (iii) each vested Incentive Security will be cancelled and each holder of vested Incentive Securities will be entitled to receive US$3.03 in cash, without interest and less any applicable withholding taxes, for each Common Share underlying such Incentive Securities.
Following the consummation of the Arrangement, the equity in Atlantic Power will be owned by the Purchasers. If the Arrangement is completed, the Purchasers will be the sole beneficiaries of our future earnings and growth, if any, and the Purchasers will be the sole persons entitled to vote on corporate matters affecting Atlantic Power following the Arrangement. Similarly, the Purchasers will also bear the risks of ongoing operations, including the risks of any decrease in our value after the Arrangement and operation and other risks.
Atlantic Power’s Common Shares are currently registered under the Exchange Act and listed and traded on the NYSE under the symbol “AT”. Atlantic Power is also a reporting issuer in each province and territory of Canada and its Common Shares are listed on the TSX under the symbol “ATP”. APPEL is also a reporting issuer in each province and territory of Canada and (i) the Series 1 Preferred Shares are listed on the TSX under the symbol “AZP.PR.A”, (ii) the Series 2 Preferred Shares are listed on the TSX under the symbol “AZP.PR.B” and (iii) the Series 3 Preferred Shares are listed on the TSX under the symbol “AZP.PR.C”. As a result of the Arrangement, the Common Shares will cease to be listed and traded on the NYSE and TSX and the Preferred Shares will cease to be listed and traded on the TSX, and sales of Common Shares and Preferred Shares in the public market will no longer be available. In addition, the registration of the Common Shares under the Exchange Act will be deregistered and Atlantic Power will cease to file reports with the SEC. Atlantic Power and APPEL will each cease to be reporting issuers in each province and territory of Canada.
Effects on the Company if the Arrangement is Not Completed
If the Arrangement Resolution is not approved by the Common Shareholders, if the Preferred Shareholder Resolution is not approved by the Preferred Shareholders or if the Arrangement is not completed for any other reason, Common Shareholders will not receive the Common Share Consideration for their Common Shares and Preferred Shareholders will not receive the Preferred Share Consideration for
 
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their Preferred Shares in connection with the Arrangement. Instead, Atlantic Power will remain an independent public company and the Common Shares will continue to be listed and traded on the NYSE under the symbol “AT” and on the TSX under the symbol “ATP” and (i) the Series 1 Preferred Shares will continue to be listed and traded on the TSX under the symbol “AZP.PR.A”, (ii) the Series 2 Preferred Shares will continue to be listed and traded on the TSX under the symbol “AZP.PR.B” and (iii) the Series 3 Preferred Shares will continue to be listed and traded on the TSX under the symbol “AZP.PR.C”. In addition, if the Arrangement is not completed, we expect that management will operate the business in a manner similar to that in which it is being operated today and that Common Shareholders and Preferred Shareholders will continue to be subject to the same risks and opportunities as they currently are, including, among other things, general industry, economic, regulatory and market conditions. Accordingly, if the Arrangement is not consummated, there can be no assurance as to the effect of these risks and opportunities on the future value of your Common Shares and/or Preferred Shares. Furthermore, if the Arrangement is not completed, and depending on the circumstances that caused the Arrangement not to be completed, the price of our Common Shares and Preferred Shares may decline significantly. If that were to occur, it is uncertain when, if ever, the prices of our Common Shares and Preferred Shares would return to the prices at which our Common Shares and Preferred Shares trade as of the date of this information circular and proxy statement. From time to time, the Board will evaluate, among other things, the business operations, properties, dividend policy and capitalization of Atlantic Power and make such changes as are deemed appropriate and continue to seek to identify strategic alternatives to enhance shareholder value. If the Arrangement Resolution is not approved by the Common Shareholders, if the Preferred Shareholder Resolution and Continuance Resolution are not approved by the Preferred Shareholders or if the Arrangement is not completed for any other reason, there can be no assurance that any other transaction acceptable to Atlantic Power will be offered, or that the business, prospects or results of operations of Atlantic Power will not be adversely impacted.
Delisting and Deregistration of Common Shares and Preferred Shares
Delisting and Deregistration of Common Shares
If the Arrangement is completed, the Common Shares will cease to be listed and traded on the NYSE and the TSX, and the sales of Common Shares in the public market will no longer be available. In addition, registration of the Common Shares under the Exchange Act will be terminated and Atlantic Power will cease to be a reporting issuer in each of the provinces and territories in Canada under which it is currently a reporting issuer (or equivalent).
Delisting and Deregistration of Preferred Shares
If the Arrangement is completed, the Preferred Shares will cease to be listed and traded on the TSX, and the sales of Preferred Shares in the public market will no longer be available. In addition, APPEL will cease to be a reporting issuer in each of the provinces and territories in Canada under which it is currently a reporting issuer (or equivalent).
Court Approval of the Arrangement and Completion of the Arrangement
The Plan of Arrangement requires Court approval under the BCBCA. On February 23, 2021, the Company and APPEL obtained the Interim Order, which provides for the calling and holding of the Special Meetings, Dissent Rights and other procedural matters. A copy of the Interim Order is attached hereto as Annex H. Subject to the approval of the Arrangement Resolution by Common Shareholders at the Common Shareholder Meeting and the Preferred Shareholder Resolution and the Continuance Resolution by Preferred Shareholders at the Preferred Shareholder Meeting, the hearing in respect of the Final Order is scheduled to take place by MS Teams (as determined by the Court) at the Supreme Court of British Columbia located at 800 Smithe Street, Vancouver, British Columbia on April 19, 2021 at 9:45 a.m. (Pacific Daylight Time), or as soon after such time as counsel may be heard. At the hearing, any holder of Common Shares or Preferred Shares or any other interested party who wishes to appear or to be represented and to present evidence or arguments must (i) serve and file with the Court and serve upon the solicitors for the Company and the solicitors for the Purchasers, a Response to Petition and any additional affidavits or other materials upon which any such party intends to rely, on or before 4:00 p.m. (Pacific Daylight Time) on April 12, 2021
 
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all as provided in the Interim Order and (ii) satisfy any other requirements of the Court. Only those persons who file a Response to Petition in compliance with the Petition to the Court and Notice of Hearing of Petition and the Interim Order will be provided with notice of the materials filed by the Company in support of the application for the Final Order.
The Court has broad discretion under the BCBCA when making orders with respect to plans of arrangement. The Court, when hearing the application for the Final Order, will consider, among other things, the fairness and reasonableness of the Arrangement. The Court may approve the Arrangement in any manner the Court may direct, subject to compliance with any terms and conditions that the Court deems fit. In the event that the hearing is postponed, adjourned or rescheduled then, subject to further order of the Court, only those persons having previously served a Response to Petition in compliance with the Petition to the Court and Notice of Hearing of Petition and the Interim Order will be given notice of the postponement, adjournment or rescheduled date. For further information regarding the Court hearing and stakeholders rights in connection with the Court hearing, see copy of the Petition to the Court and Notice of Hearing of Petition, which includes the relief sought in the Final Order, copies of which are attached as Annex I. The Notice of Hearing of Petition constitutes notice of the Court hearing of the application for the Final Order and Common Shareholders and Preferred Shareholders only notice of the Court hearing.
It is a condition to the completion of the Arrangement that the Final Order be granted on terms acceptable to the Company, the APPEL and the Purchasers, each acting reasonably. The Court may approve the Arrangement, either as proposed or as amended. Depending upon the nature of any required amendments, the Company, the APPEL and the Purchasers may determine not to proceed with the Arrangement.
Notwithstanding the approval by Common Shareholders of the Arrangement Resolution and the Preferred Shareholders of the Preferred Shareholder Resolution, the Company and APPEL reserve the right not to proceed with the Arrangement to the extent permitted under the terms of the Arrangement Agreement.
The Continuance
Pursuant to the terms of the Arrangement Agreement, the continuance of APPEL from the jurisdiction of the Province of Alberta to the jurisdiction of the Province of British Columbia pursuant to Section 302 of the BCBCA and Section 189 of the ABCA must occur in order for the Final Order to be obtained and the Arrangement to become effective. Accordingly, Preferred Shareholders will be asked at the Preferred Shareholder Meeting to consider and, if deemed advisable, pass the Continuance Resolution, authorizing the Continuance. The full text of the Continuance Resolution is set forth in Annex C. See the section entitled “The Continuance” beginning on page 117.
Canadian Securities Law Matters
The Company and APPEL are reporting issuers (or its equivalent) in all provinces and territories of Canada and accordingly are subject to the applicable Canadian securities laws of such provinces and territories that have adopted Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (“MI 61-101”).
MI 61-101 is intended to regulate certain transactions to ensure equality of treatment among securityholders, generally requiring enhanced disclosure, approval by a majority of securityholders excluding interested or related parties, independent valuations and, in certain instances, approval and oversight of the transaction by a special committee of independent directors. Such transactions include “issuer bids”, “insider bids”, “related party transactions” and “business combinations”.
The Arrangement does not constitute an “issuer bid”, an “insider bid” or a “related party transaction”. In assessing whether the Arrangement could be considered to be a “business combination” for the purposes of MI 61-101, the Company reviewed all benefits or payments which related parties of the Company are entitled to receive, directly or indirectly, as a consequence of the Arrangement to determine whether any constituted a “collateral benefit”. For these purposes, the only related parties of the Company that are entitled
 
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to receive a benefit, directly or indirectly, as a consequence the Arrangement are the directors and executive officers of the Company.
Each of the executive officers and directors of the Company hold Incentive Securities in the form of DSUs, TSUs and/or Transition Units. Upon consummation of the Arrangement, all outstanding Incentive Securities will vest in full (to the extent not already vested) and each vested Incentive Security will be cancelled and each holder of vested Incentive Securities will be entitled to receive US$3.03 in cash, without interest and less any applicable withholding taxes, for each Common Share underlying such Incentive Securities. The accelerated vesting of DSUs, TSUs and/or Transition Units may be considered to be “collateral benefits” received by the applicable executive officers and directors for purposes of MI 61-101.
Following disclosure by each of the directors and executive officers to the Board of the number of Common Shares, Preferred Shares and Incentive Securities held by them and the benefits or payments that they expect to receive pursuant to the Arrangement, the Board has determined, except as described below, that the aforementioned benefits or payments fall within an exception to the definition of “collateral benefit” for the purposes of MI 61-101, since the benefits are: (i) received solely in connection with the directors’ or officers’ services as employees of the Company or of any affiliated entities of the Company; (ii) not conferred for the purpose, in whole or in part, of increasing the value of the consideration paid to the directors or officers under the Arrangement; and (iii) not conditional on the directors or officers supporting the Arrangement in any manner. Further, at the time of the entering into of the Arrangement Agreement, none of the directors or officers of the Company entitled to receive such benefits, except as disclosed below, exercised control or direction over, or beneficially owned, more than 1% of the issued and outstanding Common Shares as calculated in accordance with MI 61-101.
James T. Moore, Jr. exercises control or direction over, or beneficially owns, more than 1% of the issued and outstanding Common Shares, as calculated in accordance with MI 61-101. As such, the acceleration of the Incentive Securities held by Mr. Moore in full and the transfer of such vested Incentive Securities to the Company in exchange for a cash payment equal to the Common Share Consideration (less applicable withholdings) may be considered to be a “collateral benefit” within the meaning of MI 61-101. Accordingly, the votes of Mr. Moore will be excluded from determining minority approval of the Arrangement Resolution in accordance with MI 61-101.
See the section entitled “The Arrangement — Interests of the Company’s Directors and Executive Officers in the Arrangement,” beginning on page 67 for detailed information regarding the payments to be received by each of the officers and directors in connection with the Arrangement.
Regulatory Approvals
HSR Act
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and the rules promulgated thereunder by the FTC, the Arrangement may not be completed until notification and report forms have been filed with the FTC and the Antitrust Division and the applicable waiting period has expired or been terminated. On February 5, 2021, the parties to the Arrangement Agreement each filed their notification and report forms with the FTC and Antitrust Division.
At any time before or after consummation of the Arrangement, notwithstanding clearance under the HSR Act, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the consummation of the Arrangement or seeking divestiture of substantial assets of the Company or Purchasers or an affiliate of Purchasers. At any time before or after the consummation of the Arrangement, and notwithstanding clearance under the HSR Act, any state could take such action under the antitrust laws as it deems necessary or desirable in the public interest. Such action could include seeking to enjoin the consummation of the Arrangement or seeking divestiture of substantial assets of Atlantic Power or the Purchasers or an affiliate of the Purchasers. Private parties may also seek to take legal action under the antitrust laws under certain circumstances.
While there can be no assurance that the Arrangement will not be challenged by a governmental authority or private party on antitrust grounds, Atlantic Power, based in part on a review of information provided by
 
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the Purchasers relating to the businesses in which they and their affiliates are engaged, believes that the Arrangement can be effected in compliance with federal and state antitrust laws. The term “antitrust laws” means the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, and all other Federal and state statutes, rules, regulations, orders, decrees, administrative and judicial doctrines, and other laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade.
Competition Act (Canada)
Part IX of the Competition Act defines certain transactions that exceed the thresholds set out in Sections 109 and 110 of the Competition Act as “notifiable transactions.” Subject to certain limited exceptions, the parties to a notifiable transaction cannot complete the transaction until one of the following events shall have occurred (each of which shall constitute “Competition Act Approval” under the Arrangement): (a) an advance ruling certificate has been issued by the Commissioner of Competition under Section 102(1) of the Competition Act; (b) the parties have filed a Part IX notification with the Commissioner of Competition and the applicable waiting period under Section 123 of the Competition Act has expired or been terminated; or (c) a waiver has been provided by the Commissioner of Competition under paragraph 113(c) of the Competition Act.
The Arrangement constitutes a notifiable transaction under the Competition Act. It is a condition to closing of the Arrangement that a Competition Act Approval be obtained and has not been rescinded or modified. On January 26, 2021, I Squared Capital submitted a request for an advance ruling certificate to the Commissioner of Competition pursuant to Section 102(1) of the Competition Act. On February 2, 2021, the parties received an advance ruling certificate issued by the Commissioner of Competition under Section 102(1) of the Competition Act.
Federal Power Act
Section 203(a) of the FPA, as amended by the Energy Policy Act of 2005, provides that the Federal Energy Regulatory Commission (the “FERC”) shall approve a proposed transaction if it finds that the transaction will be “consistent with the public interest, and will not result in cross-subsidization of a non-utility associate company or the pledge or encumbrance of utility assets for the benefit of an associate company . . . .” Furthermore, in accordance with the Merger Policy Statement and Order No. 642, the FERC examines three factors in analyzing whether a proposed transaction is consistent with the public interest: (1) the effect on competition, (2) the effect on rates, and (3) the effect on regulation. As explained below, we believe the Arrangement is consistent with the public interest and will not result in cross-subsidization of a non-utility associate company or the pledge or encumbrance of utility assets for the benefit of an associate company.
The FERC reviews these factors to determine whether a proposed transaction is consistent with the public interest. If the FERC finds that the proposed transaction would adversely affect competition in wholesale electric power markets, rates for transmission or the wholesale sale of electric energy, or regulation, or that the proposed transaction would result in cross-subsidies or improper encumbrances that are not consistent with the public interest, FERC may, pursuant to the FPA, impose upon the proposed merger remedial conditions intended to mitigate such effects or it may decline to authorize the merger or related transaction. The FERC is required to rule on a completed application not later than 180 days from the date on which the completed application is filed. The FERC may, however, for good cause, issue an order extending the time for consideration of the merger application by an additional 180 days. If the FERC does not issue an order within the statutory deadline, and has not issued an order extending the time for consideration, then the transaction is deemed to be approved. We expect that the FERC will approve the Arrangement within the initial 180-day review period. However, there is no guarantee that the FERC will not extend the time period for its review or not impose conditions on its approval that are unacceptable to Atlantic Power or the Purchasers.
On February 5, 2021, the parties to the Arrangement Agreement filed their application under Section 203 of the FPA.
 
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Federal Energy Regulatory Commission
Three subsidiaries of Atlantic Power own electric generation facilities located within the PJM Balancing Authority Area. Two such subsidiaries have an effective revenue requirement for Reactive Supply and Voltage Control from Generator or Other Sources Service (Reactive Service Rate) on file with FERC. At least 90 days before deactivating or transferring ownership of a resource receiving compensation for reactive supply and voltage support, Schedule 2 of the PJM Tariff on file with the FERC requires the resource owner to: (1) submit a filing to either terminate or adjust its cost-based rate schedule to account for the deactivated or transferred unit; or (2) submit an informational filing explaining the basis for the decision by the reactive power supplier not to terminate or revise its cost-based rate schedule. Schedule 2 does not expressly address indirect upstream ownership transfers in reactive supply resources. However, the FERC has stated that “. . . the Schedule 2 filing requirement does in fact apply to transfers of interests in a company where, as a result, a facility is transferred from the downstream ownership of one company to another.” While each of Chambers and Morris will continue to directly own its respective facility following the Arrangement, on February 5, 2021 and February 8, 2021, Atlantic Power submitted the informational filings for each of Chambers and Morris, respectively, to ensure compliance with the requirements of Schedule 2 of the PJM Tariff.
The filing is a notice filing only and does not require action by either PJM or FERC. However, the FERC can use the receipt of the filing to investigate the continuing justness and reasonableness of the reactive supply rates. While there can be no assurance that FERC will not initiate an investigation of the continuing justness and reasonableness of the reactive service rates for these facilities, no further action by either PJM or FERC is required.
Federal Communications Commission
Various Atlantic Power subsidiaries are the holders of non-common carrier licenses in the Private Wireless Services, including licensed radio devices for internal communications and other purposes, issued by the Federal Communications Commissions (the “FCC”). Entities seeking to transfer such licenses or corporate control in mergers and acquisitions must first receive approval from the FCC. Section 310(d) of the Communications Act of 1934 and Section 1.948 of the FCC’s rules govern procedures for transfer of control applications. The FCC examines the public interest impact of a proposed transaction before consenting to approval.
As a condition to the consummation of the Arrangement, the FCC must approve the transfer of control of the FCC licenses held by Atlantic Power’s subsidiaries. In connection with such approval, the FCC must determine whether the transaction will serve the public interest, convenience and necessity. Specifically, the FCC will consider whether following the Arrangement, Atlantic Power will continue to be qualified to control such licenses and whether such transfer of control is consistent with applicable law and FCC rules.
Atlantic Power and the Purchasers plan to file applications with the FCC to obtain approval of the transfer of control of the FCC authorizations held by Atlantic Power by March 19, 2021. While there can be no assurance that the applications filed at the FCC to approve the transfer of the licenses will not be challenged by a governmental authority or private party, the parties expect that the license transfer requests will be approved and such applications are routinely granted.
The Purchasers must also, and intend to, notify the FCC once the Arrangement has been consummated.
Financing of the Arrangement
Atlantic Power anticipates that the total funds needed to complete the Arrangement (including the funds to pay Common Shareholders and Preferred Shareholders), which is expected to be approximately US$961 million (including Atlantic Power’s net debt), will be supported by an equity commitment from ISQ Global Fund II GP, LLC as general partner of the investment vehicles comprising ISQ Global Infrastructure Fund II (“ISQ Fund II”).
The Purchasers have received an equity commitment letter, dated as of January 14, 2021 (the “Equity Commitment Letter”) from ISQ Fund II in an aggregate amount not to exceed (i) in respect of the Preferred
 
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Shares, C$151,026,986 (or the U.S. dollar equivalent immediately prior to the Effective Time), plus (ii) in respect of the MTNs, (A) C$223,274,100 (or the U.S. dollar equivalent immediately prior to the Effective Time) and (B) such amount in Canadian dollars (or the U.S. dollars equivalent immediately prior to the Effective Time) as is sufficient to satisfy the aggregate amount of any accrued and unpaid interest on the MTNs up to but excluding the Effective Date, plus (iii) in respect of the Common Shares, US$283,832,859, plus (iv) in respect of the Company Debentures, such amount in U.S. dollars as is sufficient to satisfy Company Debenture Consideration, plus such amount necessary to repay Atlantic Power’s net indebtedness and to pay related fees and expenses incurred by the Purchasers in connection with the transactions contemplated by the Arrangement Agreement (collectively, the “Equity Commitment”). The Equity Commitment Letter provides that the amount actually funded through such Equity Commitment may be reduced in the event that Purchasers do not require the full Equity Commitment to fund the transaction by reason of Purchasers having obtained, directly or indirectly, funds from other sources, including debt financing from external sources.
The obligation of ISQ Fund II to fund its commitment pursuant to the Equity Commitment Letter will automatically terminate and immediately upon the earliest to occur of (a) the Effective Time; (b) the termination of the Arrangement Agreement; (c) the funding of the Equity Commitment in full; and (d) Atlantic Power or any of its affiliates asserting, filing or otherwise commencing, directly or indirectly, any lawsuit or other legal proceeding asserting a claim (i) that any of ISQ Fund II’s liabilities under or in respect of the Equity Commitment Letter, the Arrangement Agreement, the Limited Guaranty (as defined below), any of the transactions contemplated by the Equity Commitment Letter, the Arrangement Agreement, or the Limited Guaranty and/or any related matters is not limited to the amount of the Equity Commitment or the amount specified in the Limited Guaranty, as applicable, that the limitation of such liability under the Equity Commitment Letter or the Limited Guaranty, as applicable, is illegal, invalid or unenforceable, in whole or in part, or that any former, current or future direct or indirect equity holders, controlling person, director, officer, employee, agent, affiliate (including other funds and separately managed accounts by the general partner of ISQ Fund II, subsidiaries or portfolio companies, but excluding any assignee permitted under the Equity Commitment Letter as to which any obligations under the Equity Commitment Letter are actually assigned), member, manager or general or limited partner of ISQ Fund II or the Purchasers or any former, current or future stockholder, controlling person, director, officer, employee, general or limited partner, member, manager, affiliate or agent of any of the foregoing, other than ISQ Fund II and other than the Purchasers (each, an “ISQ Fund II Related Party”) has any liability under or in respect of the Equity Commitment Letter, the Limited Guaranty, the Arrangement Agreement or any of the transactions contemplated thereby and/or any related matters or (ii) against ISQ Fund II, an ISQ Fund II Related Party or the Purchasers relating to the Equity Commitment Letter, Limited Guaranty, the Arrangement Agreement or any transactions contemplated thereby other than (A) claims by Atlantic Power, APPEL and/or APLP against the Purchasers under and in accordance with and subject to all limitations set forth in the Arrangement Agreement, (B) claims under the Limited Guaranty under and in accordance with and subject to all limitations set forth in the Limited Guaranty, (C) with respect to the confidentiality agreement dated June 1, 2020 between Atlantic Power and ISQ Capital Advisors (the “Confidentiality Agreement”), claims by Atlantic Power against ISQ Capital Advisors under and in accordance with the Confidentiality Agreement, or (D) to the extent (but only to the extent) Atlantic Power, APPEL and APLP is expressly entitled to enforce, or cause the Purchasers to enforce, the Equity Commitment Letter in accordance with the terms of the Equity Commitment Letter and the Arrangement Agreement, and subject to all terms, conditions and limitations in the Equity Commitment Letter and the Arrangement Agreement, claims by Atlantic Power, APPEL and/or APLP against the Purchasers or ISQ Fund II seeking to enforce, or cause the Purchasers to enforce, the Equity Commitment Letter in accordance with the terms thereof.
The Company is an express third-party beneficiary of the Equity Commitment Letter for the purpose of causing the Equity Commitment to be funded, but solely to the extent Atlantic Power is entitled to seek specific performance with respect to the Purchasers’ obligation to cause the Equity Commitment to be funded.
Limited Guaranty
Concurrently with the execution of the Arrangement Agreement, and as a condition and inducement to Atlantic Power’s willingness to enter into the Arrangement Agreement, ISQ Fund II delivered to Atlantic
 
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Power a limited guaranty in favor of Atlantic Power (the “Limited Guaranty”), pursuant to which, and subject to the terms and conditions contained therein, ISQ Fund II is guaranteeing certain obligations of the Purchasers in connection with the Arrangement Agreement, including the $15,000,000 Reverse Termination Fee potentially payable by the Purchasers and reimbursement for certain fees and expenses which may be incurred by the Company in connection with (i) the Company’s cooperation with the Purchasers with respect to the Purchasers’ efforts to obtain the Debt Financing (as defined below) and (ii) any Pre-Acquisition Reorganization (as defined below).
Interests of the Company’s Directors and Executive Officers in the Arrangement
In considering the recommendation of the Special Committee and the Board to vote in favor of the Arrangement Resolution, Common Shareholders should be aware that certain of Atlantic Power’s directors and executive officers have interests in the Arrangement that are different from, and/or in addition to, the interests of Common Shareholders generally. These interests are described in more detail below, and with respect to the named executive officers of Atlantic Power, are individually quantified in the “Golden Parachute Compensation” table below. The Board and the APPEL Board were each aware of these potential conflicts of interest and considered them, among other matters, in reaching its decision to approve the Arrangement Agreement and to recommend that Common Shareholders and Preferred Shareholders vote in favor of approving the Arrangement Resolution.
All benefits received, or to be received, by directors, officers or employees of the Company and APPEL as a result of the Arrangement are, and will be, solely in connection with their services as directors, officers or employees of the Company and APPEL, other than as described under “The Arrangement — Canadian Securities Law Matters” beginning on page 62. No benefit has been, or will be, conferred for the purpose of increasing the value of consideration payable to any such person for the Common Shares, the Preferred Shares, the Company Debentures, the MTNs, and the Incentive Securities held by such persons and no consideration is, or will be, conditional on the person supporting the Arrangement.
Director Interests
With regard to the directors serving on the Board, these interests relate to the impact of the Arrangement on the directors’ outstanding equity awards and the provision of indemnification and insurance arrangements. Non-employee directors receive an annual retainer fee of $120,000, of which 50% is paid in cash and 50% is granted in DSUs. Directors may elect to receive all or a portion of their cash retainer in DSUs. Certain non-employee directors who serve in leadership roles on the Board receive additional annual fees, which are also paid 50% in cash and 50% in DSUs (subject to the director’s ability to elect to receive all or a portion of such additional cash fee in DSUs). Under the Director DSU Plan, DSUs are fully vested and redeemed in cash when the director ceases to serve on the Board for any reason, although (i) upon any “change in control event” within the meaning of Section 409A of the Code, all DSUs held by directors subject to U.S. income taxation with respect to the DSUs will be redeemed in cash, and (ii) Atlantic Power has the discretion to provide for the redemption or substitution of DSUs held by directors not subject to U.S. income taxation with respect to the DSUs upon a reorganization of the Company.
Executive Officer Interests
Under the SEC rules, Atlantic Power’s current named executive officers are: James J. Moore, Jr., President and Chief Executive Officer; Terrence Ronan, EVP, Chief Financial Officer and Principal Financial and Accounting Officer; Joseph E. Cofelice, EVP of Commercial Development; Jeffrey S. Levy, SVP, General Counsel and Corporate Secretary (who resigned from Atlantic Power effective January 1, 2021); and Daniel D. Rorabaugh (former SVP — Operations whose employment with the Company terminated on December 31, 2019). Mr. Rorabaugh no longer has any rights under any equity awards or other agreements with the Company. James P. D’Angelo, SVP, Chief Administrative Officer is also a current executive officer but not a named executive officer. With regard to our executive officers, these interests relate to the possible receipt of the following types of payments and benefits that may be triggered by or otherwise relate to the Arrangement, assuming the Effective Time of the Arrangement occurred on April 30, 2021 and, where applicable, the executive officer experiences a qualifying termination immediately thereafter, in each case as further described below:
 
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accelerated vesting of TSUs and Transition Units (see “— Golden Parachute Compensation” below for an estimate of the value of the unvested equity awards held by each of Atlantic Power’s named executive officers individually);

possible cash payments and other termination benefits (see “— Golden Parachute Compensation” below for an estimate of the value of the such payments and benefits for each of Atlantic Power’s named executive officers individually); and

the provision of indemnification and insurance arrangements.
Common Shares, Preferred Shares and the Intentions of Directors and Executive Officers
As of February 16, 2021, the directors and executive officers of the Company and APPEL beneficially owned, directly or indirectly, or exercised control or direction over, in the aggregate 3,370,020 Common Shares, which represents approximately 3.78% of the issued and outstanding Common Shares on an undiluted basis.
All of the Common Shares held by such directors and executive officers of the Company and APPEL will be treated in the same fashion under the Arrangement as Common Shares held by all other holders of Common Shares. Each director and executive officer of the Company and APPEL intends to vote all of such individual’s Common Shares FOR the Arrangement Resolution.
As of February 16, 2021, the directors and executive officers of the Company and APPEL beneficially owned, directly or indirectly, or exercised control or direction over, in the aggregate 20,500 Preferred Shares, comprised of 0 Series 1 Preferred Shares, 2,000 Series 2 Preferred Shares and 18,500 Series 3 Preferred Shares, which represents approximately 0.30% of the issued and outstanding Preferred Shares on an undiluted basis.
All of the Preferred Shares held by such directors and executive officers of the Company and APPEL will be treated in the same fashion under the Arrangement as Preferred Shares held by all other holders of Preferred Shares. Each director and executive officer of the Company and APPEL that holds Preferred Shares intends to vote all of such individual’s Preferred Shares FOR the Preferred Shareholder Resolution and FOR the Continuance Resolution.
Treatment of Director and Executive Officer Equity Awards
As described under “The Arrangement Agreement — Treatment of Incentive Securities,” beginning on page 96, the Arrangement provides that each of the Director DSU Plan, Company LTIP and Transition Grant Agreement will be terminated and outstanding Incentive Securities will be treated as set forth below.
Treatment of DSUs
All outstanding awards of DSUs (including any DSUs that are credited to the non-employee directors in respect of the completed portion of the quarter during which the Effective Time of the Arrangement occurs) will be cancelled and each non-employee director will be entitled to receive a cash payment from the Company equal to US$3.03 per Common Share subject to his or her DSU awards, without interest and less any applicable withholding taxes.
Treatment of TSUs
All outstanding awards of TSUs subject to vesting conditions will vest in full and all vested TSUs will be cancelled. Each holder of vested TSUs will be entitled to receive a cash payment from the Company equal to US$3.03 per Common Share subject to his or her TSU awards, without interest and less any applicable withholding taxes.
Treatment of Transition Units
The Transition Units outstanding under the Transition Grant Agreement will vest in full and be cancelled and Mr. Moore will be entitled to receive a cash payment from the Company equal to US$3.03 for each Common Share underlying the outstanding Transition Units, without interest and less any applicable withholding taxes.
 
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Consideration
The following table sets out the individuals who have been directors and/or executive officers of the Company or APPEL since the beginning of the Company’s and APPEL’s last financial year and having an interest in the Arrangement and the designation, number of the outstanding securities beneficially owned, directly or indirectly, or over which control or direction is exercised by each such current or former director or executive officer and, where known after reasonable enquiry, by their respective associates or affiliates, as of February 16, 2021 and the consideration to be received for such securities pursuant to the Arrangement.
Directors and named executive officers
Number of
Common
Shares
beneficially
owned
Number of
Preferred
Shares
beneficially
owned
Deferred
Share
Units
owned(1)
Transition
Units
owned
Total
estimated
amount of
consideration
to be received
(subject to
applicable