Nunavut Energy Infrastructure Today & Tomorrow

1. Nunavut Energy Infrastructure Today & Tomorrow Presentation by Qulliq Energy Corporation Iqaluit, NU October 2010

2. Presentation Overview • Qulliq Energy Corporation (QEC) – FAQs • Background – QEC Capital Program • Assessment of QEC Infrastructure • Long Term Sustainable Planning • Infrastructure Drivers • Immediate Needs • Alternative Energy Solutions • Conclusion • Discussion / Questions

3. Qulliq Energy Corporation (QEC) - FAQs • Service to Canada’s largest Territory or Province at approx. 2 million sq kms. • 33,000 people in 25 isolated communities • Approximately 11,000 residential and commercial customers • Primarily power diesel generation.

4. Qulliq Energy Corporation - FAQs • 2009/10 production – approximately 161 GWH • Produced by 93 diesel generator-sets with ratings of 150 kW – 4,280 kW • One AOC 15/50 wind turbine operating in Rankin Inlet (65kW) • QEC utilized approximately 45M litres of diesel fuel in 2009/10 at a cost of $39M

5. Qulliq Energy Corporation - FAQs • 2 Main Corporate Offices • 3 Regional Offices • 27 Power Plants in 25 communities • 275 kms of distribution lines • Approximately 185 employees

6. Background - QEC Capital Programs • Since creation of Nunavut, only one new power plant has been constructed – Baker Lake • Capital programs have been reactive – focused on keeping the lights on • Program built around immediate priorities • Limitations on capital expenditures

7. Background - QEC Capital Programs • Baker Lake Power Plant has been the only major project (exceeding $5M) • In 2010/11, first year of multi-year major project to upgrade Iqaluit distribution system - $14M total • Annual capital programs have not kept pace with aging infrastructure / increased demands • Capacity increase requirements are now starting to exceed the physical constraints of existing structures / systems.

8. Assessment of QEC Infrastructure • Major infrastructure is aging and demands on infrastructure are stressing it to the point of failure. • A number of assessments and proposals have been completed over the years recommending the replacement and/or upgrade of facilities. • Majority of existing plants built without security features such as fencing to protect the public and company property.

9. Assessment of QEC Infrastructure - Qikiqtaaluk

10. Assessment of QEC Infrastructure - Kivalliq

11. Assessment of QEC Infrastructure - Kitikmeot

12. Assessment of QEC Infrastructure - General • Assessment is strictly for power plants. • Power plants typically designed for 40 year life • 6 plants – 40-50+ years old • 11 plants – 30-40 years old • 1 plant – 20-30 years old • 4 plants – 10-20 years old • 3 plants – 0-10 years old. • 17 of 25 power plants are near or at the end of their design life.

13. Long Term Sustainable Planning • 5 Year Capital plan should have: • 1-3 plants in plan • 200-250 poles replaced annually • 5-7 gensets replace annually based on hours. • 6-7 light vehicles replaced annually.

14. Infrastructure Drivers • Design life of equipment • Community growth / increased • QEC has a “Duty to Serve” as the sole power provider • Provision of electricity is an essential service • Community / Territorial Infrastructure Additions • Alternative Energy Initiatives – desire to reduce reliance on fossil fuels

15. Infrastructure Drivers • Legislative / Regulatory Changes – QEC forced to comply with new legislative / regulatory requirements • Residual Heat (RH) Recovery – utilizing RH can improve plant efficiency by 100%; cost effective method to displace fossil fuels utilized for space heating.

16. Immediate Needs • New Power Plants – Cape Dorset, Qikiqtarjuak, & Taloyoak • Poor condition • Increased capacity • Improved efficiency • Iqaluit Plant Expansion / Capacity Increase

17. Other Identified Needs • Immediate needs address 4 power plants; 17 power plants in total are at or near the end of design life • Other power plants identified as priorities: • Grise Fiord • Chesterfield Inlet • Arviat • Gjoa Haven • Pangnirtung • Kugaaruk • 5 Year Capital Plan - $145M; 10 Year Capital Plan - $250M

18. Alternative Energy Solutions • QEC / GN looking into alternative energy options to reduce reliance on fossil fuels and reduce GHG • Public expectation • Who pays? • Hydro & Wind currently being explored

19. Hydro • QEC and its predecessors have investigated hydro development extensively • Desktop studies completed and some field work for Baffin and Kivalliq Region • Cost of development and transmission very expensive given the environment, distances and small loads • Iqaluit may be one community where hydro-development may be feasible / economically viable

20. Hydro - Overview • City of Iqaluit – largest center in Nunavut; approximately 8,000 people with projected population of 13,000 within 10 years. • Energy requirements are rapidly increasing; increasing demand for fossil fuelled power generation. • Potential to displace 13-15 million litres of diesel fuel annually • Annual Energy requirement: • 1999/00 = 38 GWH; 4.3 MW ave.; 6.9 MW peak • 2009/10 = 57 GWH; 6.5 MW ave.; 9.5 MW peak • 2019/20 = 80 GWH; 9.1 MW ave.; 12.5 MW peak

21. Hydro - Location Assessment • Significant hydro potential within 100 km of Iqaluit to help meet energy requirements • Projects ranged in size from 4 MW to 30 MW • Projects appear to be price competitive with diesel generators • Initial Capital Cost Estimates of $80 - $550 million for the various sites • 14 Sites investigated – short listed • Jaynes Inlet selected

23. Jaynes Inlet / Work to Date • 2005 Site visits by hydropower consultants • 2006/07 Environmental baseline studies continued on short-listed sites; WSC installed stream gauges at 14 sites • 2008 April -Hydro committee recommendation -Akulikutaaq (Armshow River) • June - Preliminary hydrology results – Knight Piesold • July - QEC Board selected preferred site for feasibility study • 2009 Final Environmental Baseline Studies completed for Qikiqgijavik (Jaynes Inlet)(4 seasons ) - info required to produce Environmental Impact Statement.

24. Hydro - Next Steps • Pursue Funding for Feasibility studies • Continue Data Collection • Land use permits for feasibility study activities (i.e., drilling) • Initiate process to obtain land control • Initiate environmental assessment and licensing processes • Retain University of Ottawa for methyl mercury study • Climate Change Impact Study • Continue Public consultation

25. Next Steps cont… • Critical next step is to get funding for feasibility study • Upon completion of feasibility study, QEC will need to find partners for the project • Potential for private sector or land claim groups to become involved – P3 • Estimated Project Cost $180M

26. Wind • QEC has applied for funding to INAC to complete wind studies in 5 communities. • QEC/PEI Energy (WEICan) are exploring the feasibility of a wind-hydrogen-diesel power hybrid system for deployment in Nunavut. • The wind-hydrogen-diesel capacity would be integrated in Cape Dorset when upcoming power plant upgrades are undertaken. • The anticipated cost is $25 million. • Federal funding support is critical for this project to move forward.

27. Conclusion • Infrastructure is aging and the integrity of QEC’s assets must be improved and/or maintained to ensure the delivery of safe, reliable, economic energy. • Deferring capital has a domino effect and has a tendency to require huge expenditures all at one time as infrastructure begins to fail. • Current levels of funding - $10M-$12M annually – will not be sufficient to replace aging infrastructure or to maintain the integrity of QEC’s generating / distribution infrastructure. • Current rate structure / customer base can not bear total cost of capital program • QEC / GN cannot implement long-term Alternative Energy solutions without a healthy injection of human and fiscal capital.