52 ANNUAL REPORT 2012 The following describes the components of longterm debt a The Company is involved in build fnance projects with Infrastructure Ontario These projects are being fnanced by nonrecourse project debt during the construction period through the use of a build fnance special purpose vehicle At December 31 2012 project fnancing for these projects totalled 19184 2011 52452 Repayments are entirely funded from lump sum payments by Infrastructure Ontario either entirely at the completion of construction or as project milestones are achieved The outstanding debt balance is scheduled to be repaid in 2014 The project debt which is secured by the assets of the respective project bears interest at an annual rate of 267 b Included in the Companys consolidated balance sheet at December 31 2012 is debt net of transaction costs of US148024 CA148783 2011 US139008 or CA141371 representing the Companys proportionate share of Quiport JV debt This debt is secured by the assets of Quiport JV and is without recourse to the Company The fnancing is denominated in US dollars with due dates up to December 2023 and with annual interest rates fuctuating between 450 and 1065 All interest costs are capitalized during construction see Note 14 Debt repayments commenced in 2010 and are scheduled to continue until 2023 c At December 31 2012 fnance leases of 96477 2011 86738 bore interest at fxed and foating rates averaging 466 2011 490 per annum with specifc equipment provided as security see Note 13 d At December 31 2012 equipment and other loans of 111470 2011 121533 bore interest at fxed and foating rates averaging 509 2011 554 per annum with specifc equipment provided as security see Note 13 The weighted average interest rate on total longterm debt outstanding excluding convertible debentures at December 31 2012 was 587 2011 604 19 CONVERTIBLE DEBENTURES Convertible subordinated debentures consist of December 31 December 31 2012 2011 Debt component reported as longterm liability Debenture maturing on October 31 2015 87041 85254 Debenture maturing on September 30 2014 164559 160325 251600 245579 Embedded derivative reported as longterm liability Debenture maturing on October 31 2015 1059 2872 Debenture maturing on September 30 2014 530 2978 1589 5850 Total convertible debentures 253189 251429 On October 8 2010 and September 29 2009 the Company issued 92000 and 172500 respectively of unsecured subordinated convertible debentures maturing October 31 2015 and September 30 2014 respectively The 2015 and 2014 convertible debentures bear interest at rates of 625 and 70 per annum respectively payable on a semiannual basis At the holders option both issuances of convertible debentures may be converted into common shares of the Company at any time up to the maturity dates at a conversion price of 1900 for each common share subject to adjustment in certain circumstances The 2015 and 2014 convertible debentures will not be redeemable before October 31 2013 and September 30 2012 respectively From October 31 2013 and September 30 2012 through to the maturity dates the Company may at its option redeem the convertible debentures in whole or in part at par plus accrued and unpaid interest provided the weighted average closing price of the common shares on the Toronto Stock Exchange during a specifed period prior to redemption is not less than 125 of the conversion price At December 31 2012 the face values of the 2015 and 2014 convertible debentures which remain outstanding were 92000 and 172500 respectively Subject to specifed conditions the Company has the right to repay the outstanding principal amount of the convertible debentures on maturity or redemption through the issuance of common shares of the Company The Company also has the option to satisfy its obligation to pay interest through the issuance and sale of additional common shares of the Company Additionally the Company has the option subject to the prior agreement of the holders to settle its obligations on conversion by way of a cash payment of equal value As noted above the convertible debentures contain a cash settlement feature which under IAS 32 Financial Instruments Presentation is accounted for as a compound instrument with two components a debt component and a derivative component the latter representing the fair value of the conversion option offered to the debenture holders Both the debt and embedded derivative components of these compound fnancial instruments are measured at fair value on initial recognition The debt component is subsequently accounted for at amortized cost using the effective interest rate method The embedded derivative is subsequently measured at fair value at each reporting date with gains and losses in fair value recognized through proft or loss Finance income costs associated with the debentures consists of December 31 December 31 2012 2011 Interest expense on face value 17825 17780 Notional interest representing accretion 6020 5947 Fair value gain on convertible debentures 4260 4269 19585 19458 As at December 31 2012 the convertible debentures have an estimated fair value of 274857 December 31 2011 272175 NOTES TO THE CONSOLIDA TED FINANCIAL ST A TEMENTS DECEMBER 31 2012 AND 2011 IN THOUSANDS OF CANADIAN DOLLARS EXCEPT PER SHARE AMOUNTS