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Presentation to the Windsor Chamber of Commerce

Presentation to the Windsor Chamber of Commerce. Helen Howes VP, Sustainable Development 19 April 2002. Outline. 1. Restructuring of Ontario’s Electricity Sector Price Setting De-control 2. Ontario Power Generation Vision Focus on Sustainable Development Actions

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Presentation to the Windsor Chamber of Commerce

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  1. Presentation to the Windsor Chamber of Commerce Helen Howes VP, Sustainable Development 19 April 2002

  2. Outline • 1. Restructuring of Ontario’s Electricity Sector • Price Setting • De-control • 2. Ontario Power Generation • Vision • Focus on Sustainable Development • Actions • 3. Future Challenges

  3. Ontario’s Evolving Electricity Industry • Restructuring commenced in 1998 with Energy Competition Act • Ontario Hydro restructured in April 1999 • Open Access in May 2002 • Rules require OPG to “decontrol” the market; decontrol process is underway

  4. April 1, 1999 – split into five entities GENERATION DISTRIBUTION DEBT AND SERVICE ENTITIES Who We Are

  5. Ontario Market Players Regulators Generators Transmission Distribution Retail Customer G • Spot Market Participants • Customers With Contracts • Direct Energy • Enbridge • Onsource • Toronto Hydro Energy Services • OPG • Etc. • Toronto Hydro • Hydro Ottawa • Enersource • Veridian • Etc. • Hydro One • IMO • OEB • OPG • Bruce Power • Great Lakes Power • TransAlta • Etc.

  6. Years after Open Access 2 4 6 8 10 4 years 42 months 10 years Promoting Competition: Price Protection, Decontrol • Transitional revenue cap of $38/MWH on a specified 75% of OPG Ontario sales • OPG to decontrol 4,000 MW of price setting capability • OPG to “decontrol” down to 35% of Ontario’s supply

  7. How Price Will be Set - an Example • If electricity demand • is 100 MWh and: • 1. Generator A bids • 50 MWh @ $10/MWh • 2. Generator B bids • 25 MWh @ $20/MWh • 3. Generator C bids 25MWh @ $30/MWh • 4. Generator D bids 25 MWh @ $40/MWh • The cut-off becomes Generator C; Generator D does not run • The price for all is 30/MWh, the “market clearing price”

  8. Price Protections • Under Market Power Mitigation Agreement, 85 TWh of OPG generation (about 75% of current generation) is subject to an average annual price cap of $38/MWh from May 1, 2002 to May 1, 2006 • A number of industrial customers which contracted for surplus marginal rates in the 1990s will pay transitional rates under a provincial regulation for 2 to 4 years after the market opens

  9. Factors Contributing to Price Stability • Generating capacity levels in Ontario and in those markets that we are interconnected with are adequate for the foreseeable future • A number of new electricity supply options on the horizon (Sithe, TransAlta, Coral, Pickering A, Bruce A, additional intertie capacity)

  10. Ontario Interties 300 MW 1,400 MW 100 MW 400 MW 1,450 MW 1,500 MW

  11. BRUCE BRASCAN MISSISSAGI RIVER PLANTS LAKEVIEW THUNDER BAY LENNOX ATIKOKAN Accelerated Decontrol a operating Bruce nuclear 3,000 MW 3,000 MW Mississagi R. hydro 500 MW Lakeview coal 1,140 MW Lennox oil/gas 2,140 MW Thunder Bay coal 310 MW Atikokan coal 215 MW laid up a

  12. OPG’s Vision • “To be a premier North American energy • company, focused on low-cost power • generation and energy sales, while • operating in a safe, open and • environmentally responsible manner.”

  13. OPG’s Response • To create shareholder value and build our brand • image by becoming, in the long run, a sustainable • electricity producer with a minimal impact on the • environment and a consistently positive influence • on society. • Benefits of this approach include: • reducing environmental impacts; • managing our environmental risks and liabilities • becoming a supplier and employer of choice; and • securing the trust of communities, the confidence of investors and respect of legislators.

  14. Sustainable Energy Development at OPG • The drive to achieve sustainability involves • work on three fronts: • 1. improving environmental performance in our own • operations; • 2. working with stakeholders and the communities • where we operate; • 3. creating value for our shareholder and customers.

  15. Improving our Performance • Meet all legislative requirements and voluntary commitments: • establish regulatory compliance and spill reduction targets as part of the AIP and Goalsharing programs • submit monthly environmental compliance reports to senior management and quarterly progress reports to the Board of Directors • Maintain a ISO 14001-consistent EMS • maintain ISO certification across all stations and plant groups

  16. Improving our Performance (2) • Apply the Precautionary Principle: • install SCR technology to further reduce NOx emissions at Lambton and Nanticoke • stabilize CO2 emissions at 1990 levels beyond 2000; engage in emission reduction credit trading • continue biodiversity initiatives including the planting of 1.6 million trees between 2000-2005 • invest in science to better understand our operations: 50% increase in R&D over next 5 years

  17. Improving our Performance (3) • Develop the use of renewable energy and energy-efficient technologies: • invest $50 million over the next five years to double green energy pool to 225 MW by 2003 and double it again to 2% of OPG’s mix by 2005; focus on small hydro, landfill gas and wind projects • set progressive energy efficiency targets; an additional 160 GWh annually for 2001-2005

  18. Working with stakeholders and the communities where we operate • Actively listen and respond to community concerns regarding their well-being • engage in regular plant site community surveys on important issues to the community • “Pickering Neighbourhood Walk” and “Nanticoke Neighbourhood Walk • expand open house tours, events, and activities that attract the community to plants • engage municipal councils, opinion leaders, and major stakeholders

  19. Working with stakeholders and the communities where we operate (2) • Brighton Beach Power Project • 580 MW CCGT power plant, • west of Windsor • March 2004 opening • Coral Energy owns/markets output • OPG/ATCO to build facility • enhances province’s power supply • increases competition and choice • creates jobs: • -- 500 construction • -- 25-30 permanent Proposed Brighton Beach Station Wetlands Restoration near Wallaceburg • $100,000 to help restore Sileno C. Corsini/Pigeon Marsh

  20. Creating value for our shareholder and customers • Be fiscally responsible: • $1.5 billion in goods and services purchased • $1 billion in annual salaries • $900 million in taxes, dividends and water rental payments • 14% Return on Equity -- long term goal • strategic partnerships to leverage key strengths in IT and R&D (New Horizon; Kinectrics) • $100 million venture fund (OPG Ventures Inc.) to invest in emerging energy technologies

  21. Future Challenges • Short Term • Introduce Competition/Decontrol Generation in Ontario • Remain competitive • Maintain a focus on Sustainable Development--Core Value • Long Term • Continue to pay the stranded debt • Increase value for the shareholder • Investigate longer-term generation options with lower environmental impacts

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