v2.4.0.6
Defined benefit plan
 12 Months Ended
Dec. 31, 2012
Defined benefit plan  
Defined benefit plan

15. Defined benefit plan

        As a result of our acquisition of the Partnership on November 5, 2011, we will continue to sponsor and operate a defined benefit pension plan that is available to certain legacy employees of the acquired company. The Atlantic Power Services Canada LP Pension Plan (the "Plan") is maintained solely for certain eligible legacy Partnership participants. The Plan is a defined benefit pension plan that allows for employee contributions. We expect to contribute $1.4 million to the pension plan in 2013.

        The net annual periodic pension cost related to the pension plan for the years ended December 31, 2012 and 2011 includes the following components:

 
   2012   2011  

Service cost benefits earned

   $ 782   $ 103  

Interest cost on benefit obligation

     613     91  

Expected return on plan assets

     (622 )   (89 )
           

Net period benefit cost

   $ 773   $ 105  
           

        A comparison of the pension benefit obligation and related plan assets for the pension plan is as follows:

 
   2012   2011  

Benefit obligation at January 1

   $ (12,725 ) $ (11,909 )

Service cost

     (782 )   (103 )

Interest cost

     (613 )   (90 )

Actuarial loss

     (2,301 )   (599 )

Employee contributions

     (74 )   (11 )

Benefits paid

     27     —  

Foreign currency translation adjustment

     (282 )   (13 )
           

Benefit obligation at December 31

     (16,750 )   (12,725 )
           

Fair value of plan assets at January 1

   $ 10,482   $ 10,525  

Actual return on plan assets

     815     (65 )

Employer contributions

     363     —  

Employee contributions

     74     11  

Benefits paid

     (27 )   —  

Foreign currency translation adjustment

     232     11  
           

Fair value of plan assets at December 31

     11,939     10,482  
           

Funded status at December 31—excess of obligation over assets

   $ (4,811 ) $ (2,243 )
           

        Amounts recognized in the balance sheet were as follows:

 
   2012   2011  

Non-current liabilities

   $ 4,811   $ 2,243  

        Amounts recognized in accumulated OCI that have not yet been recognized as components of net periodic benefit cost were as follows, net of tax:

 
   2012   2011  

Unrecognized loss

   $ 1,263   $ 489  

        We estimate that there will be no amortization of net loss for the pension plan from accumulated OCI to net periodic cost over the next fiscal year.

        The following table presents the balances of significant components of the pension plan:

 
   2012   2011  

Projected benefit obligation

   $ 16,750   $ 12,725  

Accumulated benefit obligation

     13,061     9,900  

Fair value of plan assets

     11,939     10,482  

        The market-related value of the pension plan's assets is the fair value of the assets. The fair values of the pension plan's assets by asset category and their level within the fair value hierarchy are as follows:

 
   December 31, 2012  
 
   Level 1   Level 2   Level 3   Total  

Canadian equity investments

   $ —   $ 3,555   $ —   $ 3,555  

U.S. equity investments

     —     1,618     —     1,618  

International equity investments

     —     1,658     —     1,658  

Corporate bond investment-fixed income

     —     4,745     —     4,745  

Other fixed income

     —     363     —     363  
                   

Total

   $ —   $ 11,939   $ —   $ 11,939  
                   


 

 
   December 31, 2011  
 
   Level 1   Level 2   Level 3   Total  

Canadian equity investments

   $ —   $ 3,166   $ —   $ 3,166  

U.S. equity investments

     —     1,429     —     1,429  

International equity investments

     —     1,383     —     1,383  

Corporate bond investment-fixed income

     —     4,200     —     4,200  

Other fixed income

     —     304     —     304  
                   

Total

   $ —   $ 10,482   $ —   $ 10,482  
                   

        We determine the level in the fair value hierarchy within which each fair value measurement in its entirety falls, based on the lowest level input that is significant to the fair value measurement in its entirety. The fair value of the common/collective trusts is valued at a fair value which is equal to the sum of the market value of all of the fund's underlying investments, and is categorized as Level 2. There are no investments categorized as Level 1 or 3.

        The following table presents the significant assumptions used to calculate our benefit obligations:

 
   2012   2011  

Weighted-Average Assumptions

              

Discount rate

     4.00%     4.75%  

Rate of compensation increase

     3.00% - 4.00%     3.00% - 4.00%  

        The following table presents the significant assumptions used to calculate our benefit expense:

 
   2012   2011  

Weighted-Average Assumptions

              

Discount rate

     4.00%     4.75%  

Rate of return on plan assets

     5.50%     5.50%  

Rate of compensation increase

     3.00% - 4.00%     3.00% - 4.00%  

        We use December 31 as the measurement date for the Plan, and we set the discount rate assumptions on an annual basis on the measurement date. This rate is determined by management based on information provided by our actuary. The discount rate assumptions reflect the current rate at which the associated liabilities could be effectively settled at the end of the year. The discount rate assumptions used to determine future pension obligations as of the year ended December 31, 2012 and 2011, was based on the CIA / Natcan curve, which was designed by the Canadian Institute of Actuaries and Natcan Investment Management to provide a means for sponsors of Canadian plans to value the liabilities of their postretirement benefit plans. The CIA / Natcan curve is a hypothetical yield curve represented by extrapolating the corporate AA-rated yield curve beyond 10 years using yields on provincial AA bonds with a spread added to the provincial AA yields to approximate the difference between corporate AA and provincial AA credit risk. The CIA / Natcan curve utilizes this approach because there are very few corporate bonds rated AA or above with maturities of 10 years or more in Canada.

        We employ a balanced total return investment approach, whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration of plan liabilities, and the plan's funded status. Plan assets are currently invested in a diversified blend of equity and fixed-income investments. Furthermore, equity investments are diversified across Canadian, U.S. and other international equities, as well as among growth, value and small and large capitalization stocks.

        The pension plan assets weighted average allocations were as follows:

 
   2012   2011  

Canadian equity

     30 %   30 %

U.S. equity

     13 %   14 %

International equity

     14 %   13 %

Canadian fixed income

     40 %   40 %

International fixed income

     3 %   3 %
           

 

     100 %   100 %

        Our expected future benefit payments for each of the next five years and in the aggregate for the five years thereafter, are as follows in Cdn$:

 
   2012  

2013

   $ 252  

2014

     293  

2015

     319  

2016

     362  

2017

     412  

2018-2022

     3,003