Prepared for Waterpower XIV July 20, 2005 Austin, Texas Lorne Sivertson, President Columbia Power Corporation lorne.

1. Prepared for Waterpower XIV � July 20, 2005 Austin, Texas Lorne Sivertson, President Columbia Power Corporation lorne.sivertson@columbiapower.org

2. Waterpower XIV � July, 2005 2 INTRODUCTION The Company I represent, Columbia Power Corporation (CPC), is a unique venture, capitalizing on new opportunities for hydro development. Our new opportunities have been in the areas of: - developing a new public sector business model for power development; - developing new power from existing dams; and - creating new environmental benefits from existing dams. I will give you some background on CPC and then discuss these opportunity areas.

3. Waterpower XIV � July, 2005 3 BACKGROUND 1964 Canada/U.S. Columbia River Treaty: B.C agrees to build three new storage dams in the Canadian section of Columbia River � Keenleyside (1968), Duncan (1970) and Mica (1973). New dams created 15.5 million acre feet of water storage to control flooding in Washington and Oregon and allowed states to produce 2400 MW/year additional power known as downstream benefits (�DSBs�). B.C. received $64.4 million for dam construction and half of DSBs, which it sold to U.S. utilities for 30 years, expiring in 1998. Since 1998, BC Hydro�s subsidiary Powerex has been re-selling DSBs in the U.S. on a short-term basis; DSBs thru 2025 estimated at C$7.0 billion. Dams benefited Province but cost residents of Columbia Basin Region. In 1995, Province created unique program to compensate Region � 8% of DSBs� value allocated for new power project development in Region.

4. Waterpower XIV � July, 2005 4 COLUMBIA POWER CORPORATION 1995 Financial Agreement: Columbia Basin Trust (CBT, a regional entity) and CPC (a Crown corporation), receive $500 million over 10 years for equity investment in new power projects. 3 core hydroelectric projects designated � Arrow Lakes Generating Station, Brilliant Expansion and Waneta Expansion. CPC designated manager of project development and operations for CBT and Province, with following mandate: Develop cost-competitive core power projects; Earn acceptable rate of return; Finance projects on commercial terms without government guarantees; Promote economic development through power project development; and Pay dividends to Region and Province. CPC/CBT have 330 MW hydroelectric capacity in operation, 125 MW under construction and 435 MW in permitting, making them the 4th largest power producer in B.C. with $800 million in assets.

5. Waterpower XIV � July, 2005 5 LOCATION OF TREATY DAMS & PROJECTS

6. Waterpower XIV � July, 2005 6 ARROW LAKES PROJECT AT KEENLEYSIDE DAM Photo of by-pass channel and new powerhouse completed in 2002

7. Waterpower XIV � July, 2005 7 BRILLIANT EXPANSION UNDER CONSTRUCTION

8. Waterpower XIV � July, 2005 8 WANETA EXPANSION IN PERMITTING

9. Waterpower XIV � July, 2005 9 BUSINESS MODEL Business of CPC is to plan, develop and operate commercially viable, environmentally sound and safe power projects in the Columbia Basin Region, with the first priority being the core projects. In carrying out this mission CPC relies to a great extent on the private sector. Planning, design, financing, construction, operation and power sales involve private sector firms wholly or in part. CPC follows a public-private-partnership (P3) model. Allows CPC to allocate, manage risks, realize innovation and efficiency through competition. Model has five components involving design, evaluation, construction (build), operation and management of power assets.

10. Waterpower XIV � July, 2005 10 BUSINESS MODEL Design Involves assessment of over-all financial, economic and environmental feasibility. Includes basic engineering design, capital cost estimates, market price forecasts, stakeholder consultations, regulatory submissions and solicitation of contractor interest. Concludes with an initial go, no go decision based on critical criteria. Carried out by CPC with its consultants. .

11. Waterpower XIV � July, 2005 11 BUSINESS MODEL Evaluate All the information obtained in the design component, including fixed-price design-build bids assessed and taken, along with negotiated power sales agreements and permits received, to determine if project can proceed and a design-build contract can be executed. CPC, on behalf of the Joint Venture, is responsible for this evaluation and due diligence.

12. Waterpower XIV � July, 2005 12 BUSINESS MODEL Build With signing of a design-build contract many responsibilities transferred to the contractor. CPC, however, engages an �Owners Consultant� to ensure compliance with contract terms, including monitoring of quality control and environmental permit requirements.

13. Waterpower XIV � July, 2005 13 BUSINESS MODEL Operate Once project completed and commissioned, operations and power sales begin, making sure all deficiencies are resolved and the facility is �fit for purpose�. CPC has in-house engineers but has chosen, for cost and efficiency purposes, to engage a contractor to operate and maintain the Joint Venture�s plants, with oversight by CPC. Contractor responsible for a number of activities, including compliance with dam safety and environmental requirements.

14. Waterpower XIV � July, 2005 14 BUSINESS MODEL Manage CPC is Manager for the Joint Venture and is responsible for all activities in the business model components. Includes negotiating and administering agreements, raising financing, paying lenders, paying taxes, complying with approvals, employing qualified staff and advisors and, overall, serving the public interest. CPC business model is represented below.

15. Waterpower XIV � July, 2005 15 BUSINESS MODEL

16. Waterpower XIV � July, 2005 16 NEW POWER FROM EXISTING DAMS Arrow Lakes Generating Station The H.L.Keenleyside storage dam on the mainstem of the Columbia River constructed in late 1960�s for flood control and downstream power generation purposes under Columbia River Treaty. In late 1990�s, CPC developed an environmentally friendly concept for a two-unit powerhouse compatible with the dam�s primary storage uses. Resulting 185 MW Arrow Lakes Generating Station completed in 2002 now providing economic and environmental benefits.

17. Waterpower XIV � July, 2005 17 NEW POWER FROM EXISTING DAMS Brilliant Expansion 145 MW Brilliant Dam built in 1940�s located on the Kootenay River near confluence with Columbia River. 42-meter high structure with 4-unit powerhouse, upgraded recently to add another 20 MW of capacity. Fully permitted and now under construction, Brilliant Expansion project will see the addition of a second powerhouse with a single 120 MW Kaplan unit. Combined capacities will bring generation at Brilliant into hydraulic balance with powerplants upstream.

18. Waterpower XIV � July, 2005 18 NEW POWER FROM EXISTING DAMS Waneta Expansion Waneta Dam, built in 1950�s, located on pend d�Oreille River near confluence with the Columbia River and close to H.L. Keenleyside Dam. Waneta Dam has existing 4-unit powerplant with capacity of 475 MW. Hydraulic capacity much less than the upstream powerplants on the same system. CPC�s working on addition of second powerhouse, Waneta Expansion Project, to bring generation into hydraulic balance. 435 MW Waneta Expansion Project currently undergoing federal and provincial environmental assessment and permitting.

19. Waterpower XIV � July, 2005 19 NEW ENVIRONMENTAL BENEFITS Greenhouse Gases CPC engaged the Pembina Institute to carry out full life-cycle analysis of greenhouse gases (GHG) that the Brilliant Expansion project would generate and save. Conclusion was 951 tonnes of CO2 per GWh of electricity or 375,000 tonnes of GWG avoided or offset annually. Including Arrow Lakes and proposed Waneta Expansion projects, three projects avoid or offset about 2 million tonnes of GHG annually. Equivalent to taking about 350,000 cars off the roads in B.C. At $5 per tonne of GHG, offset value on an annual basis, is $10 million.

20. Waterpower XIV � July, 2005 20 NEW ENVIRONMENTAL BENEFITS Dissolved Gases In Columbia River system, major water quality problem is formation of supersaturated water by air entrainment at dam spillways. As a result, total dissolved gas pressure (TGP) levels exceed Canadian guidelines and U.S. standards for fish health. Putting water through turbines reduces TGP. Figure below shows post-project TGP levels on Columbia River at the U.S. border. TGP benefits realized by CPC projects have been acknowledged by 9 regulatory agencies and aboriginal groups in the United States, including the EPA.

21. Waterpower XIV � July, 2005 21 NEW ENVIRONMENTAL BENEFITS

22. Waterpower XIV � July, 2005 22 CONCLUSION CPC is not following a standard model for hydro development in British Columbia, or in Canada, or perhaps many jurisdictions. So far it has worked relatively well. The new hydropower opportunities we are focusing on include: - a new P3 business model for engineering, procurement, financing, operations and risk management; - developing new efficient run-of-the-river power plants at existing dams; and - creating new fisheries and other environmental benefits from new generation projects at existing dams If you have any questions or would like more information about our next project, the Waneta Expansion please contact me.