INNERGEX RENEWABLE ENERGY INC. ANNUAL INFORMATION FORM For the year ended December 31, 2008 March 25, 2009 TABLE OF CONTENTS 1. CORPORATE STRUCTURE ................................................................................................................................1 2. GENERAL DEVELOPMENT OF THE BUSINESS ...............................................................................................2 GENERAL DEVELOPMENT OF BUSINESS........................................................................................................................2 THREE YEAR SUMMARY...............................................................................................................................................2 3. INDUSTRY OVERVIEW AND MARKET TRENDS...............................................................................................5 RENEWABLE POWER GENERATION INDUSTRY...............................................................................................................5 RENEWABLE POWER IN CANADA ..................................................................................................................................5 REGULATORY FRAMEWORK OF AND MARKET FOR RENEWABLE POWER IN THE CORPORATION’S KEY MARKETS ..............6 HYDROELECTRIC POWER GENERATING PROCESS.........................................................................................................9 ADVANTAGES OF HYDROELECTRIC POWER GENERATION..............................................................................................9 WIND POWER GENERATING PROCESS........................................................................................................................10 ADVANTAGES OF WIND POWER GENERATION .............................................................................................................10 FACTORS AFFECTING RENEWABLE ENERGY PRODUCTION PERFORMANCE ..................................................................11 4. DESCRIPTION OF THE BUSINESS AND ASSETS OF THE CORPORATION ................................................11 GENERAL OVERVIEW – SEGMENT INFORMATION.........................................................................................................11 PORTFOLIO OF ASSETS..............................................................................................................................................12 OPERATING FACILITIES ..............................................................................................................................................15 DEVELOPMENT PROJECTS .........................................................................................................................................18 PROSPECTIVE PROJECTS ..........................................................................................................................................26 RELATIONSHIP WITH THE FUND ..................................................................................................................................37 COMPETITIVE CONDITIONS.........................................................................................................................................39 SEASONALITY AND CYCLICALITY.................................................................................................................................39 ENVIRONMENTAL PROTECTION ..................................................................................................................................40 EMPLOYEES ..............................................................................................................................................................40 5. RISK FACTORS .................................................................................................................................................40 EXECUTION OF STRATEGY .........................................................................................................................................40 CAPITAL RESOURCES ................................................................................................................................................40 DERIVATIVE FINANCIAL INSTRUMENTS ........................................................................................................................41 CURRENT ECONOMIC AND FINANCIAL CRISIS..............................................................................................................41 HYDROLOGY AND WIND REGIME ................................................................................................................................41 INVESTMENT IN THE FUND..........................................................................................................................................41 CONSTRUCTION AND DESIGN .....................................................................................................................................42 DEVELOPMENT OF NEW FACILITIES ............................................................................................................................42 PROJECT PERFORMANCE ..........................................................................................................................................42 EQUIPMENT FAILURE .................................................................................................................................................42 INTEREST RATE AND REFINANCING RISK ....................................................................................................................42 FINANCIAL LEVERAGE AND RESTRICTIVE COVENANTS.................................................................................................42 SEPARATION AGREEMENT .........................................................................................................................................43 RELATIONSHIP WITH HYDRO-QUÉBEC ........................................................................................................................43 SENIOR MANAGEMENT AND KEY EMPLOYEES .............................................................................................................43 PERFORMANCE OF MAJOR COUNTERPARTIES............................................................................................................44 RELATIONSHIP WITH PARTNERS .................................................................................................................................44 i WIND TURBINE SUPPLY .............................................................................................................................................44 PERMITS ...................................................................................................................................................................44 REGULATORY AND POLITICAL.....................................................................................................................................44 OBTAINING NEW PPAS..............................................................................................................................................45 ABILITY TO SECURE APPROPRIATE LAND....................................................................................................................45 RELIANCE ON PPAS ..................................................................................................................................................45 RELIANCE UPON TRANSMISSION SYSTEMS .................................................................................................................45 WATER RENTAL EXPENSE .........................................................................................................................................46 ASSESSMENT OF WIND RESOURCES AND ASSOCIATED WIND ENERGY PRODUCTION ...................................................46 DAM SAFETY.............................................................................................................................................................46 HEALTH, SAFETY AND ENVIRONMENTAL RISKS ...........................................................................................................46 NATURAL DISASTERS; FORCE MAJEURE.....................................................................................................................47 FOREIGN EXCHANGE .................................................................................................................................................47 INSURANCE LIMITS.....................................................................................................................................................47 LITIGATION................................................................................................................................................................47 POTENTIAL UNDISCLOSED LIABILITIES ASSOCIATED WITH THE INNERGEX II ACQUISITION..............................................47 POTENTIAL UNDISCLOSED LIABILITIES ASSOCIATED WITH PRIOR DISPOSITION OF FACILITIES .......................................48 POTENTIAL CONFLICTS OF INTEREST..........................................................................................................................48 6. DIVIDENDS.........................................................................................................................................................48 7. DESCRIPTION OF CAPITAL STRUCTURE ......................................................................................................48