13th Annual Report

2013-2014

Table of Contents Corporate Vision ........................................................................................................................................... 1

Letter of Transmittal ..................................................................................................................................... 2

Chairperson’s Message ................................................................................................................................. 3

President’s Message ..................................................................................................................................... 3

Key Activities in 2013-2014 ........................................................................................................................... 5

Outlook for 2014-2015 and Beyond ............................................................................................................. 5

Corporate Profile........................................................................................................................................... 6

Organizational Structure ........................................................................................................................... 7

Board of Directors ................................................................................................................................. 8

Litigation ................................................................................................................................................. 11

Contributing to our Communities ........................................................................................................... 12

Report on Performance .............................................................................................................................. 14

Safety ...................................................................................................................................................... 14

Environment ........................................................................................................................................... 15

Operations .............................................................................................................................................. 16

Reliability ............................................................................................................................................. 16

Efficiency ............................................................................................................................................. 16

Generation .......................................................................................................................................... 17

Distribution ......................................................................................................................................... 18

Engineering ............................................................................................................................................. 19

Alternative Energy and Renewable Energy ......................................................................................... 19

People ..................................................................................................................................................... 21

Inuit Employment Plan ........................................................................................................................ 21

Organizational Accountability ............................................................................................................. 22

Employment Summary........................................................................................................................ 23

Finance .................................................................................................................................................... 25

2014-2015 Capital Plan Summary ....................................................................................................... 25

Highlights of Operations and Accumulated Surplus ........................................................................... 28

Highlights of Operations and Maintenance Expenses ........................................................................ 28

Highlights of Financial Position ........................................................................................................... 29

Key Performance Indicators ................................................................................................................ 30

Disclosure of Electricity Account Receivable Write-offs over $500 for 2013-2014 ............................ 31

Management Statement ............................................................................................................................. 33

Independent Auditor’s Report .................................................................................................................... 34

Financial Statements ................................................................................................................................... 36

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Corporate Vision

OUR VISION

Qulliq Energy Corporation’s vision is to provide the communities of Nunavut with safe, reliable, sustainable and economical energy supply and service. Our foundation to achieve our vision is based on an empowered and accountable workforce, representative of Nunavut’s population, and reflective of Inuit Societal Values, Inuit Qaujimajatuqangit and Sivumut Abluqta, the mandate document of the fourth Legislative Assembly of the Government of Nunavut. We operate as an enterprise with transparency, accountability and integrity.

MISSION STATEMENT

QEC provides safe, reliable and efficient electricity and plans long term affordable energy for Nunavummiut.

GUIDING PRINCIPLES

QEC is guided in every facet of its operations by Inuit Societal Values and adheres to the Inuit Guiding Principles set out by the Government of Nunavut’s Sivumut Abluqta.

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Letter of Transmittal

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Chairperson’s Message

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President’s Message The continuing challenge for Qulliq Energy Corporation to provide safe and reliable power for Nunavummiut is one of fiscal capacity. In 2013-2014, the Corporation was able to secure mid-term financing in the amount of $74 million to finance its capital plan. This means that multi-year capital projects, such as new plants in Grise Fiord, Qikiqtarjuaq and Taloyoak can continue to move forward. It also means that genset replacements, distribution upgrades, and other important infrastructure needs in our communities are occurring in a timely manner. In 2012-2013 the 25kV distribution upgrade in Iqaluit was completed. The upgrade will accommodate future growth in Iqaluit for the foreseeable future and simplify power integration from other sources such as the potential for renewable energy projects. The Corporation expects that it will be commissioned in early 2014-2015. The Corporation also embarked on its third general rate application (GRA). The GRA process allows the Corporation to secure the necessary revenues for its rate base to fund its operations and to earn a reasonable rate of return on its capital. As such, an increase in 7.1 per cent across all rate classes and communities was approved effective May 1, 2014. Ratepayers are critical to our survival as a Corporation and as such, a customer care committee was formed. The intent of the customer care committee is to renew our relationship with ratepayers and to ensure that bills are paid on a timely basis to ensure that the Corporation has the necessary cash flow to finance its operations. In order to leave a better environmental footprint and to reduce the Corporation’s reliance on fossil fuels, the Corporation continues to explore alternative sources of power generation as well seek opportunities for district heat projects. There are a number of potential alternative energy initiatives that could lead to pilot projects. There was turnover in the Corporation’s management team, but the changes have brought in individuals with experience and expertise which they will impart onto our staff. These individuals will be leaders and mentors in developing Inuit on the Corporation’s management team. The Corporation has many long-serving employees who care deeply about the jobs that they do on a daily basis. I have had the priviledge of meeting some of our close to 200 employees and thank them for their hard work and dedication. The continued support of our sole shareholder, the Government of Nunavut, will be crucial for the Corporation to advance the priorities of Sivumut Abluqta: Stepping Forward Together. The key role for the Corporation will be to provide opportunities for Inuit for employment, training, and advancement. I am looking forward to being a part of the Corporation as we address future energy needs.

Peter Ma President and CEO Dated: June 25, 2014

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Key Activities in 2013-2014 - Newly appointed Board of Directors - $74 million bank financing for carrying out QEC’s three year capital plan - Third filing of a General Rate Application - Near completion of Iqaluit main power plant - Providing reliable electricity through the 25 kV upgrade in Iqaluit - 99.74 per cent reliability rate - 3.72 kWh per litre efficiency rate - The Advanced Metering Infrastructure Smart Grid Project in Iqaluit is underway - 174 staffed positions in the Corporation - 57 per cent Inuit employment - Continued commitment to Inuit Employment Plan training and education - Continued commitment to training in Operations to facilitate all plant operators throughout

Nunavut - Commitment to providing publications in all of Nunavut’s official languages - Creation of an internal Ethics Committee - North American Occupational Safety and Health award

Outlook for 2014-2015 and Beyond QEC is committed to continuous improvement and sustainable development within the territory. While QEC has unique regulatory and market constraints, we continue to address training, customer service and stakeholder needs – with the timeless goal of providing Nunavummiut safe and reliable electricity.

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Corporate Profile Following Nunavut’s division from the Northwest Territories, the Nunavut Power Corporation took up the mandate to supply electricity to communities in the territory of Nunavut on April 1, 2001. Renamed Qulliq Energy Corporation (QEC) in 2003, this territorial corporation is 100 per cent owned by the Government of Nunavut, and operates at arm’s length from the government, reporting to the territorial Minister responsible for QEC. The Corporation is the only generator, transmitter and distributor of electrical energy in Nunavut. QEC is incorporated and operates under the Qulliq Energy Corporation Act and its energy pricing is regulated pursuant to the Utility Rates Review Council Act. The Corporation is committed to supplying safe, reliable and efficient energy through responsive and respectful interaction with all stakeholders. QEC delivers electricity to approximately 14,400 electrical customers across Nunavut. QEC generates and distributes power to Nunavummiut through the operation of 25 stand-alone diesel power plants in 25 communities, with a total installed capacity of 84, 033 kW. The Corporation also provides mechanical, electrical and line maintenance from three regional centres, Iqaluit, Rankin Inlet and Cambridge Bay. The Corporation’s business activities are maintained at the headquarters office located in Baker Lake and corporate offices in Iqaluit. All electricity needs in Nunavut are met by imported fossil fuel supplies. Each community in Nunavut has its own independent electricity generation and distribution system. There is no back-up grid. QEC is the only energy corporation in Canada without developed local energy resources or regional electricity transmission capability, creating a situation of huge fossil fuel dependency.

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Organizational Structure

As of March 31, 2014

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Board of Directors 2013-2014 marked a new year for QEC’s Board of Directors. Five new directors were appointed on the advice of the Honourable Paul Okalik, Minister responsible for QEC; Joshua Arreak, Elijah Evaluardjuk, Roy Mullins, Julie-Anne Miller and David Omilgoitok, joined George Hickes Sr. to comprise the new board. Four additional directors, Philip Clark, Nelson Pisco, Bert Rose and Allysha Sateana were appointed after year-end.

The new directors have a legacy of strong leadership and accountability, as evidenced by their experience and expertise. They are long-serving members of the North and inject a fresh, yet traditional perspective into the Corporation moving forward.

The terms for board members are staggered at two or three year terms, which help the Corporation, maintain business continuity, allowing for growth in experience and knowledge. Pursuant of the Qulliq Energy Corporation Act, the Corporation’s board may be comprised of not fewer than six and not more than ten directors.

David Omilgoitok – Chair David Omilgoitok is President and Chief Executive Officer of Kitikmeot Corporation. He has extensive public service experience at municipal, territorial and federal levels. Mr. Omilgoitok graduated with an accounting diploma from Northern Alberta Institute of Technology, business administration program.

Julie-Anne Miller – Vice-Chair Julie-Anne Miller served as chairperson to the Employment Insurance Board of Referees for six years. Prior to that, Ms. Miller served as Senior Advisor to Members of Parliament for thirteen years. Mrs. Miller has served in community volunteerism and governance for more than 20 years and is a graduate of Carleton University, Bachelor of Arts program. Currently Mrs. Miller is a small business owner and operates Iqaluralaaq Pairivik in Iqaluit.

Joshua Arreak Joshua Arreak has thirty years of progressive financial and management experience and is currently the Supervisor for the North Baffin region for the Department of Justice. With a long history of volunteering he understands the needs of the communities. He has a breadth of experience in governance, including serving for seven years on hamlet council, and serving as Diocese of the Arctic’s executive council for six years. He studied at Algonquin College.

Philip Clark Philip Clark has more than twenty five years of progressive corporate financial experience serving public companies, government entities and owner managed businesses. For twelve years he served as a partner of Lester Landau (formerly MacKay Landau). He also served as the Chief Financial Officer for the Oxford City Football Club, Incorporated and the American Rare Earths and Materials Corporation. In the past he has served as a director for the Qulliq Energy Corporation’s Board of Directors. Mr. Clark brings an extensive wealth of financial knowledge to the Board. Mr. Clark holds a degree from McMaster University. Mr. Clark currently resides in Mississauga, Ontario.

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Elijah Evaluardjuk Elijah Evaluardjuk owns and operates Tujurmivik Hotel and Pizzeria in Igloolik, a business he’s run since 2002. He is a shareholder of Savik Enterprises Limited and is currently a board member representing Baffin Business Development Corporation and Nunavut Business Credit Corporation. In the past he has served on the board of Nunasi Corporation and Norterra, and served a four-year term as mayor of Igloolik.

George Hickes Sr. George Hickes Sr. was an elected Member of the Legislative Assembly of Manitoba for 21 years from 1990 until his retirement in 2011. He was elected by the House members to serve as Speaker of the Legislative Assembly for 12 years and prior to this, he served as Party Whip, Deputy House Leader. Mr. Hickes Sr. also served as critic for Manitoba Hydro a crown corporation for nine years.

Roy Mullins Roy Mullins is the Chief Financial Officer of Chesterfield Inlet Holding Corporation, a position he has held for the past six years. Since the early 80s, he has held various levels of government and government related jobs throughout Nunavut. He studied Community Administration at Thebacha College.

Nelson Pisco Nelson Pisco currently works for the Government of Nunavut’s Department of Community and Government Services. He has extensive public service experience at the territorial level. Prior to working for the government, Mr. Pisco worked as an engineer in Iqaluit, Nunavik and Montreal. His extensive background in leadership, engineering and experience in the energy industry will be valuable assets to the Board of Directors. He is a graduate of Concordia University and holds a bachelor of Civil Engineering. Mr. Pisco currently resides in Iqaluit.

Bert Rose Bert Rose has lived and worked in the north for forty nine years. Mr. Rose has worked for the Department of Education for the Government of Northwest Territories for twenty four years in various management roles. Following that, he became Dean of Campus Programs at Nunavut Arctic College. From 2000 to 2013 he successfully ran Graybeard Consulting. He is currently retired and sits as Chair of the Nunavut Surface Rights Tribunal. Mr. Rose brings his knowledge of working in the north, his strong leadership skills and management background to QEC’s Board. Mr. Rose was trained in Education at the post-secondary level. Mr. Rose currently resides in Iqaluit. Allysha Sateana Allysha Sateana is from Rankin Inlet and has worked for the Government of Nunavut since 2008. Currently Ms. Sateana works for the Department of Community and Government Services. She brings to the board a sound background in management. She is a graduate of Nunavut Arctic College, Management Studies and Human Services.

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Board Committees In 2013-2014 the new Board of Directors along with directors for QEC struck two committees, the Finance and Audit Committee and the Human Resources Committee. During this time, the Board of Directors identified several other areas of priority, including alternative energy and governance and policy in which new terms of reference will be developed.

Finance and Audit Committee The Finance and Audit Committee’s primary function is to assist the Board of Directors in fulfilling its oversight and financial responsibilities and accountabilities to the Corporation and its stakeholders; the Government of Nunavut and the ratepayers of Nunavut. The Committee facilitates communication between the Board and the external auditor and is the presiding body related to the activities of the internal auditor.

Human Resources Committee The Human Resources Committee of the Board reviews and brings forward recommendations to the Board as they relate to the following initiatives:

• the performance goals, remuneration, benefits and conditions of employment of the President and the Senior Management Team reporting directly to the President;

• succession plans and development plans of individuals moving into critical corporate positions in the future;

• reviews organizational workforce numbers for inclusion in the annual budget; • reviews employee and labour relation environments as well as the implementation of any and

all collective agreements in effect from time to time; • reviews programs and initiatives related to Inuit employment, training and development that

are consistent with Article 23 of the Nunavut Land Claims Agreement; • reviews initiatives that continuously improve the capability and capacity of employee

performance results; • as required, provides guidance, advice or recommendations to management with respect to

Qulliq Energy’s work environment.

Ethics Committee In March, 2014 the QEC Board approved the creation of an Ethics Committee and a revised Code of Ethics. Composed of both members of the Board and staff within the Corporation, the purpose of the committee is to provide a formally designated standing structure on issues that pertain to the QEC Code of Ethics. The committee also ensures that the Corporation complies to the basic code of ethical behaviour that includes activities such as compliance with the law; conflicts of interests; confidentiality; accountability; trust; transparency; honesty; loyalty to the organization; respect of other people; open communication; integrity; good work ethic; and activity.

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Litigation During the past year, the Corporation defended two legal claims from former employees. One of the legal claims resulted in the Corporation paying approximately $220,000 in total costs. The Corporation chose not to appeal the decision of the Nunavut Court of Justice. The Corporation was successful in defending the second legal claim. However, the plaintiff has chosen to appeal the decision of the Nunavut Court of Justice. The Nunavut Court of Appeal may hear this appeal in September 2014. There are no other significant litigation matters.

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Contributing to our Communities To provide safe, reliable electricity throughout Nunavut’s geographical expanses means hiring and retaining staff that are committed to a high level of service within each community. Through the dedication of our employees, QEC continues to have a profound presence in each of the communities and is dedicated to helping and supporting Nunavummiut across this vast territory.

Contributing to our communities through Inuit Guiding Principles As a territorial corporation operating in all 25 of Nunavut’s communities, QEC aims to conduct its business in a socially responsible manner. Our practice is conducted following the Inuit Guiding Principles of:

- Pijitsirniq: serving and providing for family and/or community - Ikajuqtigiinniq: working together for a common cause - Pilimmaksarniq: development of skills through observation, mentoring, practice and effort - Avatittinnik Kamatsiarniq: respect and care for the land, animals and the environment

QEC is strongly committed to providing financial contributions to non-profit and community organizations.

Pijitsirniq In 2013-2014 QEC supported community initiatives through donations. Here are the ways QEC has participated in our communities:

- Hamlet of Cambridge Bay’s Omingmak Frolic - Iqaluit Community Greenhouse Society - Aqsarniit Middle School’s French Trip - Masiit Committee’s Elders Gathering - Northern Youth Abroad - Alianait Arts Festival and programming

Ikajuqtigiinniq The Corporation participated in two corporate challenges that were employee led initiatives. Each year QEC encourages its employees to get involved in community activities. This year employees participated in The Canadian Cancer Society’s Relay for Life and the Movember Foundation’s Movember campaign. In June 2013, a team of 15 QEC employees participated in Iqaluit’s first ever Relay for Life event in support of the Canadian Cancer Society. The QEC Power Walkers raised a total of $3,995 in eight days.

In November, QEC also participated in the Movember campaign and raised over $5,000 in support of men’s health. The team, Generating Mo-Power hosted a number of events including a shave down at the Corporate office and a skating event for those who were able and willing to donate to Movember in exchange for skate time.

Pilimmaksarniq Skills Canada Nunavut

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QEC has been a proud sponsor of Skills Canada Nunavut for seven years and has been an active member on their Board of Directors. Each year QEC contributes $10,000 to Skills Canada Nunavut to help with programming for Nunavut’s youth in the skilled trades and technology sector. QEC is committed to education and training and is proud of the accomplishments of the students that have participated and continue to flourish through Skills Canada.

Laura Ulluriaq Gauthier Scholarship Award 2013-2014 was the 12th year that QEC offered the Laura Ulluriaq Gauthier Scholarship. Every year, the $5,000 scholarship is awarded to a Nunavummiut student, pursuing a postsecondary education that best represents the characteristics that helped make Ms. Gauthier a successful young Nunavummiut. Ms. Gauthier was an instrumental force behind a made-in-Nunavut electrical utility at the time of territorial division.

In 2013-2014 Mr. Ronald Oolooyuk of Rankin Inlet was the recipient of the Laura Ulluriaq Gauthier Scholarship. Mr. Oolooyuk has been an active role model in his community by sharing his experiences, and encouraging youth in his home community to take advantages of educational opportunities. Mr. Oolooyuk is in his 2nd year at the University of Manitoba, enrolled in the Engineering Access Program.

Avatittinnik Kamatsiarniq QEC along with the Government of Nunavut is an avid supporter of the territorial-wide community clean-ups, both through financial contributions and employee volunteer support. QEC’s presence across Nunavut makes the corporation a responsible partner in each of the 25 communities. QEC is proud to support environmentally sound, community-building initiatives.

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Report on Performance

Safety The safety of our staff and customers is QEC’s number one priority when generating and supplying power. It is for this reason that QEC continues to build upon the Health, Safety and Environment (HS&E) department. In January 2013 QEC was awarded the Certificate of Recognition (COR) accreditation from the Northern Safety Association (NSA), becoming the first company in Nunavut to achieve this designation. QEC's participation in the development and operation of the COR program with the NSA and the Workers Safety & Compensation Commission (WSCC) will substantially contribute to the reduction of workplace accidents, ill health and their associated costs both to QEC and, more importantly, to our employees and the public. In order to obtain a COR, QEC has made significant improvements to the existing health and safety program. In qualifying for the certificate, QEC has prepared a written health and safety program that is applicable to every level of the organization; developed and implemented safe work practices, procedures, guidelines and codes of practices for critical tasks; prepared and delivered ongoing health and safety awareness training for all our staff and contractors; identified, assessed and controlled hazards on an ongoing basis and developed a review process for changes and ongoing improvements to the program. To ensure that QEC's safety program is based on continuous improvement and to maintain the COR accreditation, QEC will undergo an external audit of the program every three years and must also successfully pass an internal audit of the entire health and safety program on an annual basis. Every year during North American Occupational Safety and Health Week the Workers Safety and Compensation Commission gives out awards to participating employers in Nunavut and the Northwest Territories. In 2013 QEC won the “Employer Challenge” award which is the overall award for an employer in Nunavut with more than 51 employees. This marks the third year QEC has been awarded a territorial award. QEC’s Safety division of the HS&E department focuses on developing work procedures around safe job practices, hazard analysis, and updating the corporate safety manual to ensure that information is current and that the safety manual meets or exceeds national standards. The HS&E department has established and documented a procedure for the systematic assessment of risk through the assessment of the severity, occurrence and probability of each hazard. The results of these assessments and the effects of these controls are considered when setting HS&E objectives.

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During 2013-2014, QEC’s Safety staff trained: - Eight employees in Fall Protection – requirement of any employee that works above 10 feet in

height. - 38 employees in Go Safe: Work Smart – a requirement of all employees, the program must be

completed within first month of employment. - 24 employees in Standard First Aid, Level A – QEC has at least one employee trained in First Aid

in every workplace we operate and several trained employees in our larger centers. - 90 employees in Workplace Hazardous Materials Information System (WHMIS) – All employees

complete WHMIS within the first month of employment and the plant staff receives annual refreshers.

- 14 employees in fire extinguisher inspection and maintenance – All plant staff across the Territory have been trained.

The Corporation continues to ensure new and existing staff receive safety training as required in their positions. It is our goal that this training will help reduce incidents in the workplace and every employee has a long injury-free career at QEC.

Environment QEC’s environmental team works hard to ensure that our environmental footprint on the land on, around our power plants, and the surrounding areas is minimized. In the electrical generation industry there are many everyday items that if mishandled, could result in contamination of the land and water surrounding our communities. During 2013-2014, QEC’s environmental team completed the submission of the air emissions data for all 25 power plants to Environment Canada under the National Pollutant Release Inventory. In a continued effort to mitigate historical contaminant damage in Baker Lake, the Waterloo Emitter Barrier System was engaged in July 2013 to help protect the Hamlet’s water supply from hydrocarbon contamination. QEC’s environmental staff completed a due diligence soil sampling project for all Nunavut communities during August and September 2013. As well, to help reduce the volume of waste to be removed from these communities new filter crushers were purchased for the communities of Coral Harbor, Gjoa Haven, Kugaaruk, Pangnirtung and Qikiqtarjuaq. Waste oil burners were purchased for Cambridge Bay, Clyde River, Igloolik and Pangnirtung. QEC also performed annual environmental inspections at all of its power plants, including soil sampling and the removal of waste products, as well as four Environmental Site Assessments at its Cambridge Bay, Gjoa Haven, Kugaaruk and Kugluktuk facilities. This was completed as a part of the Corporation’s efforts to determine potential environmental liabilities associated with operating power facilities. QEC continues to determine the environmental liabilities for contamination at all its sites throughout Nunavut and work in concert with the Government of Nunavut.

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Operations

Reliability Reliability falls only behind safety in QEC’s corporate vision. In 2013-2014, QEC maintained power 99.74 per cent of the time, just below the previous year’s reliability rate of 99.84 per cent. The Corporation was able to provide reliability while meeting an increase in demand for electrical energy and at the same time improves fuel efficiency. QEC calculates its reliability mainly on the number of planned and unplanned outages that occur during the year, and the length of time that customers are without power. Planned outages are usually required when work is needed on the distribution system, in order to ensure safety for our line technicians or to complete regular maintenance on gensets. Unplanned outages are more likely to occur due to extreme weather or outside influences, mechanical, electrical or electronic issues within the plant and distribution system faults. There have been numerous extreme weather occurrences, most notably the 2014 January winter storm with hurricane force winds that affected Nunavut’s capital, Iqaluit. QEC is committed to providing a reliable supply of electricity, and upgrades are being done to the system to help increase reliability throughout the communities. QEC has been working on the Iqaluit main plant capacity increase and facility upgrade that will reach final completion by the fall of 2014. This project involved increasing the generating capacity in our largest power plant in the territory. In addition, the voltage regulation and protective relays have been upgraded and the line fusing and control system has been reviewed to ensure increased generation and distribution reliability. The main plant construction also involved expanding and retrofitting the facility to accommodate our regional trades staff and provide them with adequate workspace and tooling to support all of the power plants in the region. Both of the aforementioned items will help QEC increase the reliability in Iqaluit and the Baffin region.

Efficiency QEC’s improved efficiency comes from a combination of upgraded generators, the improvements in generator maintenance and Programmable Logic Controller modifications to balance daily load schedules. Iqaluit’s all-time peak load was 10.008 MW on January 31, 2011. Even though the number of customers has increased, the peak has remained the same due to the 25kV upgrade, minimizing line loss. QEC’s fuel efficiency was 3.72 kWh per litre at fiscal year-end 2014, up from 3.68 kWh per litre last year. This is due to the increased efficiency of newly installed gensets in various communities in an effort to increase overall efficiency. The Iqaluit main power plant capacity increase has improved QEC’s territorial

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efficiency numbers; due to the installation of two new, more fuel efficient gensets in September of 2013. The 25kV distribution system upgrade for Iqaluit has been installed and commissioning will be completed in 2014-2015. In preparing for Iqaluit’s anticipated growth over the next 35 years, the system upgrade will aid in improving fuel efficiency by minimizing line loss. Some other large undertakings that occurred during the year included a new air-handling unit upgrade at QEC’s facility in Rankin Inlet. Overall the installation of the air-handling unit will help with the efficiency of the plant. The Corporation also continues to improve fuel efficiency through our district heating systems (DHS) across the territory. DHS collect the remaining heat generated through the combustion of diesel fuel, and sends it to customer buildings in a glycol solution via a series of pipes. This process allows institutional and commercial customers to heat their buildings without having to burn heating fuel and therefore conserves fuel and minimizes the required maintenance on customers’ heating systems. The typical savings for a customer would be approximately a ten per cent savings on their monthly bill. All of QEC’s efficiency efforts aim to minimize the amount of imported diesel fuel the Corporation needs to generate electricity, thereby reducing the amount of greenhouse gas emissions released into the atmosphere.

Generation Safety and reliability remain QEC’s top priorities, and the Operations department takes every step to ensure that the power remains on for our customers. In 2013, gensets were replaced in the communities of Pond Inlet and Igloolik. The gensets were at the end of their useful life. QEC’s Operations department faces two major challenges in day-to-day operations. On the human capital side, the Corporation continues to face barriers in the recruitment and retention of skilled tradespersons, as demand for skilled trades in Southern Canada remains high. QEC’s Apprenticeship program has helped to alleviate some of this stress, as we invest in Nunavummiut to help us meet our future need for skilled tradespersons. The other major challenge faced by the Operations department is aging infrastructure across the territory. QEC is consistently working to address this problem by adhering to a strict maintenance schedule on all of the gensets within the Corporation’s fleet, while also collaborating with the Engineering department for plant upgrades and the construction of new plants in a number of communities. Aging infrastructure is an issue that will continue to be addressed over the next decade in order to ensure safety while maintaining reliable service and searching for diesel alternatives, as Nunavut’s population and industry grows.

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Distribution In a location such as Nunavut, where our 25 communities are spread out across 1,932,255 square kilometers of land and 160,955 square kilometers of water, where temperatures can drop below -50°Celsius and wind can gust up to over 150 kilometres per hour, distributing the electricity that we produce to our customers can be a significant challenge. QEC’s line technicians spend most of the winter flying into our outlying communities and repairing downed power lines and poles, most often damaged by blizzards and wind storms. During the spring and summer months, the line technicians are busy preparing and erecting new poles and power lines as demand for electricity continues to grow in our communities. In 2013 at the community level, QEC has been involved in a variety of distribution projects in an effort to minimize line loss and to meet demand in each community. Most notably, in 2013, QEC’s Operations and Engineering departments began the Advanced Metering Infrastructure Smart Grid Project in Iqaluit. Smart meters have been purchased and will be installed in 2014 at test sites throughout Iqaluit, then progressively as per the project management plan. This two year project will use a two way power line carrier to automatically read meters. This Smart system will also be able to send alarms for localized outages and reduce response time by field staff. Other completed distribution projects in 2013-2014 took place in the communities of Arviat and Kugaaruk. QEC upgraded the feeders and substations in an effort to improve overall distribution and reliability in these communities. QEC is planning future distribution projects to grow with Nunavut’s communities, to minimize line loss and to ensure each community will be able to meet future electricity demands.

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Engineering The Engineering department is responsible for: engineering planning, design and life cycle analysis for new infrastructure and upgrading and replacing of existing infrastructure for the Corporation. The Engineering department is also responsible for developing and implementing technical standards, administering project management procedures, conducting project coordination with appropriate stakeholders, providing drafting and document support a service which includes maintaining project documentation.

The department has been challenged in recruiting key internal professional positions which has impacted project delivery and operational support services. With the addition of consultant resources, the department has delivered and sustained key milestones.

In order to achieve its accomplishments, the Engineering department works closely with the Operations department to deliver the core functions and implement the Corporate Plan. During 2013-2014 the department’s accomplishments included:

- Substantial completion of the Iqaluit main power plant expansion and upgrade project, a significant infrastructure improvement for QEC. The upgraded power plant will provide sufficient capacity to accommodate future growth and will benefit the City of Iqaluit.

- Completion of the power plant structural, mechanical and electrical designs for the Qikiqtarjuaq and Taloyoak power plants. Implementation is slated to commence with the pile installation in the summer of 2014.

- Capacity increases and engine replacement projects have been completed for the communities of Igloolik and Pond Inlet, improving system reliability and efficiency.

- The Major Project Permit Application has been approved for a new Grise Fiord power plant. Planning and design work will commence in summer 2014.

- Further discussion is required with QEC, Government of Nunavut and the Hamlet of Cape Dorset concerning the selection of an industrial zoned building lot within Cape Dorset.

- Progress is being made towards the full implementation of the Iqaluit Smart Grid Project which will enable the automatic meter reading of QEC customers in Iqaluit. Installation of new meters will commence in 2014.

- Planning for the expansion of DHS within Nunavut. The existing DHS sites include: Arviat, Iqaluit, Kugluktuk, Pangnirtung and Rankin Inlet.

Alternative Energy and Renewable Energy QEC has continued to pursue alternative and renewable energy opportunities throughout the territory in an effort to decrease the reliance on imported fossil fuels. This in turn reduces greenhouse gas emissions and environmental hazards associated with fuel transportation. QEC has engaged and collaborated with the Federal Government of Canada, the Government of Nunavut’s Energy Secretariat and other government agencies to facilitate alternative and renewable energy initiatives and policy development for the territory.

District Heating Systems QEC has been active over the last year in evaluating and assessing the current DHS infrastructure throughout the territory in an effort to improve the overall function of these systems. Currently QEC has

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21 customer accounts for district heat in the communities of Arviat, Iqaluit, Kugluktuk, Pangnirtung and Rankin Inlet utilizes DHS.

Many of QEC’s DHS infrastructures are between ten and fifteen years old. In order to continue to utilize DHS in an efficient way, many upgrades to the existing mechanical and control systems are being completed. In 2013-2014, upgrades and maintenance has taken place in Rankin Inlet, Arviat and Iqaluit with ongoing work to DHS in other communities.

An external assessment has been completed for existing DHS in Iqaluit. The external assessment has identified how much heat is available from the power plant with the current genset lineup. This assessment will be beneficial for QEC and the City of Iqaluit in heating the aquatic center through QEC’s DHS.

In 2013, QEC coordinated with the Hamlets of Hall Beach and Taloyoak through Aboriginal Affairs and Northern Development’s (AANDC) ecoENERGY to complete feasibility studies for potential DHS integration in these communities. Funding for the projects was provided by the ecoENERGY program. In the future QEC will be coordinating similar studies with the Hamlets of Baker Lake, Cambridge Bay and Sanikiluaq.

Wind The viability of wind energy has been studied in the community of Cape Dorset. This project was initiated in 2011, with original wind monitoring infrastructure partially funded by AANDC’s ecoENERGY and QEC. Data monitoring started in 2012, with study completion in 2013-2014. In 2014, QEC received the final report and is reviewing the recommendations for further understanding and implementation of wind energy in Canada’s north. QEC is considering collaborating with other interested communities such as Rankin Inlet and Taloyoak.

Smart remote micro-grids Natural Resources Canada’s (NRCan) canmetENERGY is currently conducting research in the community of Cambridge Bay. QEC has identified potential commercial customers in Cambridge Bay and is facilitating the installation of monitoring devices to monitor smart Micro-grids as a part of a bigger project taking place in remote communities. The objective of the program is to monitor consumption through real-time data gathering for one year from installation.

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People Qulliq Energy’s Human Resources and Organizational Development team (HROD) operates as a corporate business partner, working in collaboration with each department to support the organization’s vision, mission and business goals. HROD’s high level of service delivery is grounded in the growth and promotion of accountability and respect in the work place.

Inuit Employment Plan Our Inuit Employment Plan (IEP) builds on the foundation of QEC’s vision of an empowered and accountable workforce, representative of Nunavut’s population, and reflective of Inuit Societal Values, Inuit Qaujimajatugangit and Pilimmaksarniq, the development of skills through observation, mentoring, practice and effort. QEC continues to be one of the most successful organizations in Nunavut in hiring, training and retaining beneficiary employees. QEC has an Inuit employment rate of 57 per cent, as of March 31, 2014. This reflects an increase from 54 per cent in 2012-2013. In an increasing effort to retain and foster our own workforce, QEC is committed to corporate training. As of March 31, 2014, 33 per cent of QEC beneficiary employees were enrolled in long term career development plans, an increase of five percent from 2012-2013. QEC continues to put its efforts in increasing its Inuit employment. We are on our way to meeting our plan of 65 per cent set out in the Corporation’s Inuit Employment Corporate Strategy, 2014-2017. The QEC IEP consists of programs that foster the education and training of beneficiaries. Each program has been developed in line with our strategy of growing corporate capacity for today and into the future. The overall mandate is to move both current Inuit employees and new Inuit hires to planned levels of skill growth and career opportunity. The Inuit Leadership Development Program (ILDP) aims to increasing employment for beneficiaries at the professional, management, and senior management levels. As part of this program, QEC provides financial sponsorship in each of the degree streams. The sponsorship is intended to remove the financial barriers from obtaining a post-secondary degree, allowing students to focus on their academic success, and subsequently, their career at QEC. 2013 marked the first year this program was implemented. QEC had three students enrolled in university leading to degrees in accounting, engineering and human resource management. Inuit Employee Development Plans are designed to be self-directed with support from an employee’s manager and the IEP Administrator. Completing the development plan process helps to ensure employees have the knowledge, skills, leadership competencies and abilities to achieve these individual career and organizational goals. Through formal education, on-the-job learning, gaining new and different experiences, employees will work towards the next step on their career ladder as identified in their career development plan. Lateral moves within the Corporation and between departments and positions also provide significant opportunities for cross training. The QEC Inuit Summer Student Employment Program (ISSEP) provides students with an opportunity to work in our two main offices or the plants in our communities. This experience has proven to give

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students a valuable opportunity to explore their career options. The ISSEP supported nine summer students in 2013. The Apprenticeship Program was developed to reduce the dependency of hiring trades people outside of Nunavut. The recruitment of northern talent is at the heart of the Apprenticeship Program. It is a way to foster talent and skills development of Nunavummiut. As of 2013 QEC graduated five apprentices, with three more nearing the final stages of their respective apprenticeships. Taking a planned approach allows us to develop our current employees into more senior level roles as part of their career development, develop our corporate succession plan, and attract and employ students interested in furthering their education and career choices with QEC.

Organizational Accountability

QEC Leadership and Development With a goal of identifying and developing talent including rising leaders, individual performance is attached completely to QEC’s corporate plan, creating performance accountability within QEC while increasing organizational effectiveness and building individual capacity. Our corporate and leadership training is defined within our five tiered platform anchored to our functional plans. Extensive needs assessments are conducted to determine the most efficient and effective solutions. Within the training curriculum we continue to build on our commitment to cultural awareness and respect. In 2013 we released the highly customized e-learning program ‘Building a Respectful Workplace’ to all employees. We will further our commitment to a respectful workplace by publishing our e-learning program in all of Nunavut’s official languages. Performance Management: Performance management is a corporate initiative that is fundamental in creating performance accountability for everyone at QEC. HROD is committed to evolve the program with best practices and our changing business requirements towards organizational and individual performance success.

23

Employment Summary Qulliq Energy Corporation March 31, 2014

Employment Summary, by category:

Total Positions

Beneficiaries

Total Positions Vacancies Filled %

Capacity

Hired % IEP

Executive

2 0 2 100%

1 50% Senior Management

7 1 6 86%

0 0%

Middle Management

24 3 21 88%

3 14% Professional

65 9 56 86%

14 25%

Paraprofessional

44 4 40 91%

34 85% Administrative Support

52 3 49 94%

47 96%

Total Department 194 20 174 90% 99 57%

Employment Summary, by Community:

Arctic Bay 200

2 0 2 100%

2

100%

Qikiqtarjuaq 205

2 0 2 100%

2

100%

Cape Dorset 210

2 0 2 100%

2

100%

Clyde River 215

2 0 2 100%

2

100%

Grise Fiord 220

2 0 2 100%

2

100%

Hall Beach 225

2 0 2 100%

2

100%

Igloolik 230

2 0 2 100%

2

100%

Iqaluit 235

79 10 69 87%

20 29%

Kimmirut 240

2 1 1 50%

1

100%

Nanisivik 245

0 0 0 0%

0 0%

Pangirtung 250

2 0 2 100%

2

100%

Pond Inlet 255

2 0 2 100%

2

100%

Resolute Bay 260

2 0 2 100%

2

100%

Sanikiluaq 265

2 0 2 100%

2

100%

Arviat 300

2 0 2 100%

2

100%

Baker Lake 305

43 3 40 93%

23 58%

Chesterfield Inlet 310

2 0 2 100%

2

100%

Coral Harbor 315

2 0 2 100%

2

100%

24

Rankin Inlet 320

18 3 15 83%

11 73%

Repulse Bay 325

2 0 2 100%

2

100%

Whale Cove 330

2 0 2 100%

2

100%

Bathurst Inlet 400

0 0 0 0%

0 0%

Umingmakotok 405

0 0 0 0%

0 0%

Cambridge Bay 410

12 2 10 83%

5 50%

Gjoa Haven 415

2 1 1 50%

1

100%

Kugluktuk 420

2 0 2 100%

2

100%

Kugaaruk 425

2 0 2 100%

2

100%

Taloyoak 430

2 0 2 100%

2

100%

Total Community 194 20 174 90% 99 57%

Employment summary, by Headquarters & Region

Headquarters

53 5 48 91%

22 46%

Regions

141 15 126 89%

77 61%

Total 194 20 174 90% 99 57%

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Finance Each year as QEC continuously improves its financial reporting and internal controls, the Office of the Auditor General of Canada puts forth its recommendations for improvements to enhance our internal controls and financial accountabilities.

QEC’s Finance department is located at the head office in Baker Lake. The department is responsible for Financial Accounting, Regulatory Affairs, Customer Care, Supply Chain Management, and Payroll, Pension and Benefits. Finance also has employees in regional offices in Cambridge Bay, Iqaluit and Rankin Inlet.

It has been a very busy year for QEC with major undertakings including a 2014-2015 General Rate Application (GRA); two Fuel Stabilization Fund (FSR) applications; a Major Project Permit (MPP) for Grise Fiord; the formation of an internal Customer Care Committee; implementation of a Fixed Assets System; and implementation of a new Requisition System. In addition to all these undertakings, QEC has secured a new credit facility of $74 million.

In April 2013, QEC was approved for a new credit facility amount of $74 million to finance capital expenditures for three fiscal years for 2013-2014 to 2015-2016. In the fiscal year ending March 31, 2014, QEC has received capital financing of $14 million and another $2 million in April 2014, leaving a balance of $58 million for the next two years’ capital expenditures. To date the Government of Nunavut has provided a limited guarantee amount of $144 million for QEC.

2014-2015 Capital Plan Summary 2014-2015 Revised Capital Plan Summary ($ IN THOUSANDS)

Region Multi-Year Single-Year All Projects Increase (Decrease)

Kitikmeot $6,838 $156 $6,994 $1,576

Kivalliq $3,780 $2,956 $6,736

Qikiqtaaluk $12,864 $8,727 $21,591 $3,445

Nunavut $213 $1,565 $1,778

Revised Total $23,695 $13,404 $37,099 $5,021

Status updated in June 2014

Region Multi-Year Single-Year All Projects

Kitikmeot $5,262 $156 $5,418

Kivalliq $3,780 $2,956 $6,736

Qikiqtaaluk $10,690 $7,456 $18,146

Nunavut $213 $1,565 $1,778

Original Total $19,945 $12,133 $32,078

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The Corporation filed its third GRA with the Utility Rates Review Council (URRC) in December 2013 requesting for an average rate increase of 5.1 per cent. The GRA filed included two phases:

• Phase I – Seeking approval of revenue requirement of $131.2 million • Phase II – Rate rebalancing between communities and rate classes

The original instruction to file Phase II was issued in February 2012 by the former Minister responsible for QEC, the Honourable Lorne Kusugak. In January 2014, Minister Okalik, Minister responsible for QEC instructed QEC to retract the Instruction for Phase II.

During the URRC review process, application revisions were made to the revenue requirement to reflect adjustments to expense projections. One major component was the fuel price increase announced by the Government of Nunavut’s Department of Community and Government Services, effective January 1, 2014.

The final URRC’s recommendation was a 7.1 per cent increase for effective May 1, 2014 for all electricity rate classes and communities, which allows QEC to generate $130.9 million to cover:

$Millions Fuel and Lubricants 56.4 Operations and Maintenance Expenses 53.5 109.9 Amortization 8.9 Return on Debt (4.81 per cent) 5.3 Return on Equity (9.00 per cent) 6.8 130.9

QEC continues to maintain the FSR in accordance with Ministerial Instruction dated March 28, 2011, as a part of QEC’s 2010-2011 Phase I GRA. In May 2013, QEC filed a FSR application and received Ministerial Instruction to implement a 5.31 cent per kWh rider for the period June 1, 2013 to November 30, 2013. In December 2013, QEC filed another FSR application for the period December 1, 2013 to March 31, 2014, and was approved for a 3.92 cent per kWh rider. Subsequently, QEC requested for the FSR to be extended to April 30, 2014 to coincide with the third GRA implementation date of May 1, 2014. As of May 1, 2014, the FSR of 3.92 cent per kWh rider has been removed as the current fuel prices have been reflected in the May 1, 2014 GRA rates.

The Corporation administers the Public Housing Power Support Program for the Government of Nunavut. This program subsidizes qualifying residential customers living in public housing by supplementing the customer the difference between the approved residential rate and 6.0 cents per kWh. The Corporation invoices the Nunavut Housing Corporation on a monthly basis for the power subsidies and applies the amounts to the individual customer invoices.

The Corporation administers the Nunavut Electricity Subsidy Program for the Government of Nunavut. This program subsidizes qualifying residential customers up to 50 per cent of the Iqaluit

27

base rate on the first 700 kWh consumed each month between April and September, and on the first 1,000 kWh consumed each month between October and March. The Corporation invoices the Government of Nunavut on a monthly basis for the power subsidies and applies the amounts to the individual customer invoices. In December 2013, a MPP application was submitted to the URRC requesting approval to build a new power plant in Grise Fiord. The existing power plant was constructed in 1963. Given that the typical design life of a power generating facility is 40 years, the existing facility is past its expected service life. This capital project will have no impact on rates until the next GRA application, which is expected to be no earlier than the 2016-2017 fiscal year. In February 2014, QEC received the MPP approval for construction of the new power plant in Grise Fiord for the amount of $7.9 million.

In our continuous endeavour to provide excellent customer service to Nunavummiut, the Corporation has established an internal Customer Care Committee comprising of committee members from various function areas including: Customer Care, Regulatory Affairs, Operations, and Corporate Affairs. Some of the prominent initiatives that will be rolled out to customers in the upcoming year are customer care guides and customer satisfaction surveys. We will also be looking at the possibility of equal payment billings, increasing choices of payment options for customers, and online services for self-help.

With upcoming major initiatives and activities in QEC’s capital budget plan, Finance has implemented a Fixed Assets System to ensure proper record keeping and timely reporting. This project was successfully completed in March 2014.

For the procurement area, we have implemented a web-based Requisition System to replace the existing in-house local purchase order system. Some of the key features of this new Requisition System include control security access, elimination of unauthorized transactions with approval workflow routing, and management exception reporting. As this is a corporation-wide project, it has been rolled out in stages to ensure a smooth transition. Baker Lake went live in January 2014 to be followed by Cambridge Bay, Rankin Inlet and Iqaluit in the spring and summer of 2014. Currently, there are no plans for the smaller communities due to internet bandwidth challenges.

The financial highlights and key performance indicators are presented below. Note that only four year comparisons are available as a result of adopting the Canadian public sector accounting standards effective fiscal year April 1, 2011.

28

Highlights of Operations and Accumulated Surplus

HIGHLIGHTS OF OPERATIONS AND ACCUMULATED SURPLUS ($ IN THOUSANDS)

For the year ended March 31st 2014 2013 2012 2011

Revenues

Sale of Power $115,334 $107,867 $104,833 $87,377

Other Revenue $7,035 $5,305 $6,453 $11,146

Funding from Government of Nunavut - $2,422 $2,349 $13,120

Capital Funding from Governments - $611 $396 $296

Total Revenues $122,369 $116,205 $114,031 $111,939

Total Expenses $118,809 $108,680 $106,557 $96,165

Surplus for the Year $3,560 $7,525 $7,474 $15,774

Revenue from sale of power increased by 6.9 per cent from $107.87 million to $115.33 million (2013: 2.9 per cent) with an increase in fuel and lubricants purchases of 3.7 per cent from $49.57 million to $51.42 million (2013: 3.5 per cent). Net increase in expenses excluding fuel and lubricants, interest expense, and bad debt expense was 9.7 per cent from $56.77 million to $62.27 million (2013: 5.2 per cent). The three components that contributed to this increase was a 6.2 per cent increase from salaries, wages and benefits; a 16.8 per cent increase from supplies and services with the majority increase from materials purchased for overhauls; and an 11.7 per cent increase in amortization of capital assets.

Highlights of Operations and Maintenance Expenses

HIGHLIGHTS OF OPERATIONS AND MAINTENANCE EXPENSES For the year ended March 31st

2014

2013

2012

2011

Expenses by Object or Type

Fuel and Lubricants 43.4 % 45.6% 44.9% 44.3%

Salaries, Wages and Benefits 24.4% 25.1% 25.1% 26.6%

Supplies and Services 17.7% 16.6% 16.4% 16.2%

Amortization and Disposals of Tangible Capital Assets 6.6% 6.5% 5.4% 7.0%

Travel and Accommodations 3.6% 4.0% 3.7% 4.2%

Interest Expense 4.2% 2.7% 3.4% 3.5%

Bad Debt Expense (Recoveries) 0.1% -0.5% 1.1% -1.8%

100% 100% 100% 100%

29

With a limited guarantee provided by the Government of Nunavut, QEC has secured borrowing of $74 million to fund planned capital expenditures over three years for fiscal periods 2013-2014 to 2015-2016. With this additional debt, the Corporation’s debt to accumulated surplus, referred to as the borrowing limit per Section 25 of the Qulliq Energy Corporation Act, will remain within the 3:1 ratio. Since March 31, 2004, QEC has been in compliance with this legislation.

Highlights of Financial Position

HIGHLIGHTS OF FINANCIAL POSITION ($ IN THOUSANDS) As At March 31st

2014

2013

2012

2011

Financial Assets $25,537 $29,559 $33,698 $42,609

Liabilities $161,225 $152,829 $136,614 $133,095

Net Debt $(135,688) $(123,270) $(102,916) $(90,486)

Non-financial Assets $234,792 $218,814 $177,196 $157,292

Accumulated Surplus $99,104 $95,544 $74,280 $66,806

In 2013-2014, QEC paid principal amounts totaling $6.46 million (2013: $5.50 million) towards the long-term debt. Interest paid on long-term debt was $4.67 million (2013: $4.93 million).

30

Key Performance Indicators

KEY PERFORMANCE INDICATORS ($ IN THOUSANDS) For the year ended March 31st

2014

2013

2012

2011

Interest Coverage Ratio

Surplus before Interest on Long-term Debt $7,876 $10,367 $10,747 $18,698

Interest on Long-term Debt $4,666 $4,931 4,327 $3,875

Debt Expense Burden (critical below 1.5) 1.69 2.10 2.48 4.83

Debt Ratio

Assets $260,329 $248,373 $210,894 $199,901

Liabilities $161,225 $152,829 $136,614 $133,095

Ability to pay Long-term Debt 1.61 1.63 1.54 1.50

Debt to Accumulated Surplus

Bank Indebtedness $14,665 $4,114 $1,894 $16,314

Long-term Debt $101,994 $94,451 $79,952 $66,727

Total Debt $116,659 $98,565 $81,846 $83,041

Accumulated Surplus $99,104 $95,544 $74,280 $66,806

Debt 0.54 0.51 0.52 0.55

Accumulated Surplus 0.46 0.49 0.48 0.45

Borrowing Requirement per QEC Act Sec.25

Maximum Borrowing 3:1 1.18 1.03 1.10 1.24

Under Section 84 of the Financial Administration Act of the Government of Nunavut, the Corporation is required to publicly disclose any asset, debt or obligation written off during the financial year that exceeds $500 in its annual report.

QEC wrote off bad debts amounting to approximately $400,000 (418 accounts) of which $353,413 (159 accounts) exceeds $500 in fiscal year ended March 31, 2014.

As part of our collections administration process, QEC had waived interest on late payments for customers in extreme financial distress and for corrections of past billing errors. For this reporting year, $18,640 for 22 accounts were waived and not included in the write off list below as they were not considered as electricity revenue write off.

31

Disclosure of Electricity Account Receivable Write-offs over $500 for 2013-2014

Customer Name Amount Customer Name Amount Customer Name Amount

ANDREW BAILEY $ 504.05 ARLOOKTOO MOESESIE $ 868.18 RINES BRUCE $ 2,091.63

WATERS KIM $ 510.67 NINGEOK ANNIE/JOAMIE POASIE $ 882.31 PIWOWAR CRAIG/BRENT $ 2,140.17

CLAVEL DANICK $ 521.13 IVALU JULIE $ 882.84 ROGERS HAROLD $ 2,149.30

NUNGNIK DEIDRE $ 532.17 ISSAKIARK CAMERON $ 892.06 ULAYUK MANASEE $ 2,187.11

RIVERS WAYNE $ 536.24 SIMMS JACKIE $ 898.02 ASHOONA JOEMIE & AKSATUNGUA $ 2,284.71

ISLAND EQUIPMENT LTD $ 544.98 SHAW SAA $ 899.84 MATCHETTE CURT $ 2,288.22

TREFRY JONAH $ 564.69 KISARVIK SOCIETY $ 912.04 NAUYUK JONAH $ 2,374.61

SANGUYA MATTHEW $ 565.79 WHITE SARAH $ 912.51 SUQSLAK RACHEL $ 2,430.10

MONFETTE DANIEL $ 574.71 GREIG NEEVEE $ 941.46 KILABUK NUSHUPIK $ 2,437.37

IRKOOTEE JARVIS $ 579.76 TAQTU ANDREW $ 941.70 BORDEN KEITH $ 2,481.32

MACFARLANE MATT $ 579.95 KADLAK JOSEPH $ 949.68 MOORE LESLIE $ 2,481.39

SWAN KIM $ 580.25 MALLIKI MARTHA $ 964.49 INAC DIAND $ 2,536.02

SAINT STEPHEN WILLIAM $ 581.77 KAMOOKAK CHARLIE $ 977.66 AUDLAKIAK CHARLIE $ 2,621.75

NUNGAQ JIMMY $ 583.81 ATTAGUTALUKUTUK RACHEL $ 990.74 QAMANIQ MANASIE $ 2,720.64

TEGUMIAR ANDREW $ 586.65 QAQMAQ WOMEN GROUP $1,050.41 JAMES CRAIG $ 2,721.46

KUNNUK JASON $ 591.28 SAILA MARY O. $1,052.91 KINGWATSUAK KINGWATSUAK $ 2,722.35

ITTUSARDJUAT HEIDI $ 597.58 AQIGGIQ STORE $1,055.09 INNIUTT WOMEN GROUP $ 2,747.42

OKPATAUYAK LANNY $ 601.61 PUDLAT MARGARET $1,084.83 SAMMURTOK CHARLENE $ 2,764.07

CHARLIE INUK $ 603.60 OKPIK KEVIN $1,101.08 PIUNGITUQ ESA $ 2,860.97

NAGLINGNIQ SIMATA $ 622.48 HUTCHINGS FRED $1,103.55 KIGUKTAK JOSHUA $ 3,029.77

UNIOSHAGAK LUCY $ 623.52 EYAITUK ISAAC $1,125.00 DOIG ANGIE $ 3,040.14

WALL TOM $ 628.95 KEYOOKTAK LOANNA $1,133.08 KYAK MARTHA $ 3,128.84

KAAYAK PATSY $ 632.89 BARRETT BRADLEY $1,148.21 OTTOKIE PAULASSIE $ 3,132.79

OSHUTSIAQ SIMEONIE $ 637.66 HAY LINDA $1,160.53 AMAAQ TINA / UKKALIANUK LARRY $ 3,390.32

TULUGAK MINNIE $ 643.28 KEEPING JOHN $1,199.85 PUGH LEE ANN $ 3,398.78

SHOO SAQIQTAQ LEVI $ 644.39 FRAMPTON JEFF $1,259.31 IDLOUT VALERIE / CASEY PETER $ 3,420.13

MAATIUSI OOLOOTA $ 649.86 BOUCHARD SYLVAIN $1,261.80 ARNAQUQ JULIA $ 3,478.49

DONOVAN KELLY $ 651.68 NAMONOI SAMIAK $1,269.48 LEE-BOUCHARD KIMBERLY $ 3,604.91

KING BRIAN $ 654.67 LARAMIE PATRICIA $1,279.15 FANTASY PALACE $ 3,686.83

AKPIK GARY $ 659.35 TOOKTOO CHARLIE $1,287.41 TUMA METAL FABRICATORS $ 3,882.66

METUQ OLEEPEKA $ 663.47 KUKSUK JOHN $1,315.48 HALL BEACH DAYCARE $ 3,882.70

TC'HOUAFFI PAUL B $ 665.73 PIJAMINI LYMIEKY $1,337.77 EDWARDS SHAWN $ 3,975.37

QIATSUK TIIVI $ 680.87 BARTLEY MICHAEL $1,422.58 ALORUT KAILAPI $ 3,977.80

NOOLOOK NICKY $ 685.92 BRACKEN THOMAS $1,441.09 BROWNING CROCKER INC. $ 3,986.01

NICE MELODY $ 699.92 ANAWAK JOHN PAUL $1,507.89 PIQATITAARVIK DAYCARE $ 4,228.81

KULUGUQTUQ JOHNNY $ 703.06 HOBART STEADMAN $1,554.09 AQQUMIUT CANTEEN & POOL HALL $ 4,267.43

IMMINGARK CHRISTINE $ 703.87 TUNNILLIE ASHEVAK $1,592.44 AMAGOALIK LILY $ 4,304.26

NUNAVUT SPORTS INC $ 704.15 LEM JEFF $1,600.26 IQALUKJUAK JOAMIE/NOAH RASSIE $ 4,434.08

PIERCEY ELVIS $ 710.46 BERTRAND MAUDE $1,604.62 ANGUTAUTOK UNICE $ 4,951.71

GIBBONS KOWISHA $ 715.24 KABLAS-SHOP $1,613.90 DL TAXI $ 5,268.16

NAKOOLAK NANCY $ 731.17 IKUMMAQ THEO $1,674.65 WADDLETON DESMOND $ 5,403.92

ARREAK, JEREMY $ 734.72 NAKASHUK NANCY $1,698.92 AUDLAKIAK J ROSIE $ 5,913.60

NUNAVUT CRIME PREVENTION $ 735.75 KOLIT PAUL $1,730.80 AULUTJUT PETER $ 6,755.27

ADAMS NORMAN $ 741.48 KUKKIK NANCY $1,737.73 NANGMALIK MEEKA $ 6,805.96

PRESTON JUSTIN $ 773.40 AULAQIAQ ENA ANN $1,870.59 ROSE JEREMY $ 7,455.75

KEYOOTAK JACKIE $ 775.35 TUNUNIRUSIQ DAYCARE SOCIETY $1,883.55 GILHULY SAM $ 8,130.31

MICHAEL EELAI $ 784.33 VARGA TANYA $1,897.61 IGLOOLIK ISUMA PRODUCTS $ 8,246.16

HALINEN JODY $ 804.00 GIRVIN RYAN & WESTLEY MICHAEL $1,909.49 HAMLET OF BAKER LAKE $ 9,884.82

QUINANGNAQ ISAAC $ 820.56 TIRIAQ TAXI OFFICE $1,917.77 KRIPANIK KOVERK $10,498.52

PUDLAT CHRIS $ 823.57 AMMAKLAK SAM $2,013.35 PANIMERA AIME $10,546.53

SOPER AMANDA $ 824.50 KOLIT HEATHER $2,043.28 J & G AUTOMOTIVE $11,175.23

BLAIR STEVE $ 855.15 TAQTU LUCY $2,054.87 FORD HENRY $12,164.12 IPKANGNAK JEAN MARIE $ 857.18 ALOGUT JOHNNY $2,077.95 RESOLUTE BAY DAYCARE SOCIETY $16,953.04

32

QULLIQ ENERGY CORPORATION FINANCIAL STATEMENTS

March 31, 2014 Table of Contents Page

Management’s Statement

33

Independent Auditor's Report

34

Statement of Financial Position

36

Statement of Operations and Accumulated Surplus

37

Statement of Change in Net Debt

38

Statement of Cash Flow

39

Notes to the Financial Statements

40

Schedule A - Schedule of Tangible Capital Assets

49

33

Management Statement

34

Independent Auditor’s Report

35

36

Financial Statements

37

2014 2014 2013

Budget Actual Actual

114,565$ 115,334$ 107,867$ 1,763 1,820 1,659 4,713 5,215 3,646

121,041 122,369 113,172

68,684 69,219 68,169 12,768 14,350 6,738 7,505 5,868 6,292 5,731 6,432 5,738 5,675 6,142 5,732 4,279 4,069 3,740 2,779 3,204 2,579 3,340 2,792 2,472 2,974 2,149 2,253 2,725 1,213 1,732 2,404 1,712 1,678 1,807 1,329 1,298

436 330 259 121,107 118,809 108,680

(66) 3,560 4,492

- - 2,422 - - 611 - - 3,033

(66) 3,560 7,525

95,544 95,544 88,019

Accumulated surplus, end of the year 95,478$ 99,104$ 95,544$

QULLIQ ENERGY CORPORATION

Statement of Operations and Accumulated SurplusFor the year ended March 31(in thousands of dollars)

Revenues

Shared (Corporate)

Sales of power (Note 3)Sales of heatOther revenue (Note 4)

Total revenues

Expenses by department (Note 15)Plant Operations

Surplus (deficit) for the year

Accumulated surplus, beginning of the year

Total Government Funding

Territorial OperationsSafety & EnvironmentResidual Heat

Regional OperationsFinanceProperty Management

Surplus (deficit) for the year before GovernmentFunding

The accompanying notes and schedule are an integral part of these financial statements.

Government FundingTransfer from Government of NunavutOther government funding

Information TechnologyIqaluit Administration & Board

LineEngineering

Total expenses

Human Resources & Payroll

38

2014 2014 2013

Budget Actual Actual

(66)$ 3,560$ 7,525$

(30,507) (19,242) (42,899) (1,830) (350) (2,089) (2,990) (1,506) (2,628)

- 783 - 40 43 57

9,015 7,864 6,998

(26,272) (12,408) (40,561)

(51,000) (55,208) (52,379) 50,000 51,859 51,154

(100) (221) 168

(1,100) (3,570) (1,057)

(27,438) (12,418) (34,093)

(123,270) (123,270) (89,177)

(150,708)$ (135,688)$ (123,270)$

Tangible capital assets

Use of inventories

Transfer to inventory

QULLIQ ENERGY CORPORATION

Statement of Change in Net DebtFor the year ended March 31(in thousands of dollars)

(Deficit) surplus for the year

The accompanying notes and schedule are an integral part of these financial statements.

AdditionsCapitalized interest (Note 5)Capitalized overhead

DisposalsAmortization

Additions to inventories

Net (additions) use of prepaid expenses

Change in net debt for the year

Net debt, beginning of the year

Net debt, end of the year

39

2014 2013

125,162$ 114,518$ (89,535) (57,006) (28,253) (29,586) (4,965) (2,926)

- 2,422 2,409 27,422

(21,098) (47,616) 24 -

(21,074) (47,616)

1,081 3,985 1,081 3,985

14,000 20,000 (6,457) (5,501)

(510) (510) 7,033 13,989

(10,551) (2,220)

(4,114) (1,894)

(14,665)$ (4,114)$

Cash received from customers

Cash provided by investing activities

Cash paid to suppliers

Interest paidGovernment funding receivedCash provided by operating activities

Cash provided by (used for) capital activities:Tangible capital asset acquisitionsProceeds on disposition of tangible capital assetsCash (used for) capital activities

Cash provided by investing activities:Restricted Cash - (for future capital project) (Note 8)

Cash paid to employees

QULLIQ ENERGY CORPORATION

Statement of Cash FlowFor the year ended March 31(in thousands of dollars)

Cash provided by (used for) operating activities:

The accompanying notes and schedule are an integral part of these financial statements.

Bank indebtedness, beginning of year

Bank indebtedness, end of year

(Increase) in bank indebtedness

Cash provided by (used for) financing activities:Increase in debt (Note 11)Repayment of debt (Note 11)Repayment to the Government of Nunavut (Note 12)Cash provided by financing activities

40

QULLIQ ENERGY CORPORATIONNotes to the Financial Statements

March 31, 2014(in thousands of dollars)

1

2

(a) Budget

(b)

(c)

(d)

The Corporation

Authority - The Qulliq Energy Corporation (the Corporation) is a territorial corporation and operates in accordance with Part IX of theFinancial Administration Act of Nunavut and the Qulliq Energy Corporation Act . The Corporation is exempt from the payment of incometaxes.

Mandate - The Corporation’s mandate is to provide energy to residents and businesses in Nunavut on a safe, reliable and efficient basisand in a manner which minimizes the impact on the environment. The Corporation is also mandated to plan and provide for energy self-reliance for Nunavut and to inform consumers on conservation opportunities.

The Corporation supplies electricity to its customers through the operation of 25 independent diesel generation plants and distributionsystems in 25 communities in Nunavut. The Corporation supplies heat through 5 residual heat systems connected to 5 of those plants.

Economic dependence - The Corporation is economically dependent on the Government of Nunavut which, directly and indirectly,accounts for the majority of the Corporation’s sales of power. The Government of Nunavut also guarantees the Corporation’s debt.

Use of estimates and measurement uncertainty

The preparation of financial statements in accordance with PSAS requires the Corporation to make estimates and assumptions that affectthe amounts of assets, liabilities, revenues and expenses reported in the financial statements. By their nature, these estimates andassumptions are subject to measurement uncertainty. The effect on the financial statements of changes to such estimates andassumptions in future periods could be significant, although, at the time of preparation of these financial statements, the Corporationbelieves the estimates and assumptions to be reasonable.

The more significant management assumptions relate to employee future benefits liabilities, allowance for doubtful accounts,environmental liabilities and the useful life of tangible capital assets.

Bank indebtedness

Bank indebtedness is comprised of bank account balances in an overdraft position, net of outstanding cheques.

Accounts receivable

Significant accounting policies

These financial statements are prepared in accordance with Canadian public sector accounting standards (PSAS) as recommended bythe Public Sector Accounting Board (PSAB) of the Chartered Professional Accountants of Canada (CPA Canada). The following is asummary of significant accounting policies:

PSAS require a territorial corporation to present in its financial statements a comparison of the results of operations and changes in netdebt for the period with those originally planned. Budgeted figures have been provided for comparison purposes and have been derivedfrom the corporate plan approved by the Board of Directors and tabled before the legislature.

Accounts receivable are valued at cost. Valuation allowances, if necessary, are recorded based on all circumstances known at the datethe financial statements are prepared including past events and current conditions.

A provision for impairment of accounts receivable is established when there is objective evidence that the Corporation will not be able tocollect all amounts due, according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that thedebtor will enter into bankruptcy or financial reorganization, default or delinquency in payment and inability to locate the debtor areconsidered indicators that accounts receivable are impaired. The carrying amount of the asset is reduced through the use of an allowanceaccount, and the amount of the loss is recognized in the Statement of Operations and Accumulated Surplus as bad debt expense. Whenan account receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously writtenoff are credited against bad debt expense in the Statement of Operations and Accumulated Surplus.

The Corporation is subject to the Utilities Rate Review Council Act for the establishment of rates and terms and conditions of service.The purpose of the Utilities Rate Review Council (URRC) is to advise the Minister of Energy on rates and terms and conditions of service.Final approval of the rates and terms and conditions of service rests with the Minister and the Government of Nunavut. As the URRC isappointed by the Government of Nunavut and the Corporation is a territorial Corporation, the Corporation and the URRC are relatedparties. The rate recommendations of the URRC are based on a cost of service mechanism, where the objective is to i) establish revenuethat is sufficient to recover the forecasted operating costs of providing regulated services, including amortization; and ii) to provide a fairand reasonable return on utility investments.

41

QULLIQ ENERGY CORPORATIONNotes to the Financial Statements

March 31, 2014(in thousands of dollars)

2

(e)

(f)

Rates

(g)

(h) Government funding

(i)

(j)

(k) Financial instruments

Tangible capital assets represent property, plant and equipment and are recorded at original cost less accumulated amortization. Costsinclude contracted services, direct labour, materials and supplies, development costs, a proportionate share of overhead costs and anallowance for interest capitalized on construction projects. Amortization of tangible capital assets is provided on a straight-line averagegroup useful life basis using the following range of rates:

Generation assets 2.75% - 5.40%Distribution assets

Significant accounting policies (continued)

Inventories for use

Tangible capital assets

Inventories consist mainly of fuel, supplies, lubricants and spare parts. Fuel is valued at the lower of cost and net realizable value, withthe cost being determined on a weighted average cost method. Supplies and lubricants are valued at the lower of cost and net realizablevalue, with the cost being determined on a first-in first-out basis. Spare parts are valued at the lower of cost or replacement value.

Sales of power and heat are recognized in the period in which the transactions and events have occurred and are calculated based onutility meters. The majority of other revenue is recognized when the services are provided and is calculated on a per unit, fee-for-servicebasis. Revenues include an accrual for services provided but not yet billed. Measurement of the estimate of these services is based onhistorical consumption.

The following is a list of the Corporation's financial instruments and their related measurement bases as at March 31, 2014.

The Corporation undertakes certain projects whose objective is to pursue development of alternate energy generation. While in progress,these development costs are included under work in progress in tangible capital assets. If it is later determined that a project will notproceed to completion, that project is closed out and recorded as an expense. The costs of completed projects are transferred to thecosts of the resultant tangible capital assets when that asset is placed into productive use.

Project development costs

Accounts receivable Cost

1.41% - 10.20%Warehouse, equipment and other assets 0.52% - 33.33%

Intangible assets are not recognized as assets in these financial statements.

Financial Assets Measurement Basis

Assets under construction are not amortized until put into production.

Government funding is obtained in relation to operations and is recognized as revenue when the funding is authorized and any eligibilitycriteria are met, except to the extent that funding stipulations give rise to an obligation that meets the definition of a liability. Funding isrecognized as deferred revenue when funding stipulations give rise to a liability. Funding revenue is recognized in the Statement ofOperations and Accumulated Surplus as the stipulation liabilities are settled.

Employee future benefits liabilities

(i) Pension plan - Eligible employees participate in the Public Service Pension Plan (the Plan), a multi-employer pension plan administered by the Government of Canada. The Corporation’s contributions to the Plan are expressed as a percentage of employees’ contributions.The percentage may fluctuate from year to year depending on the experience of the Plan. The Corporation’s contributions are recordedas an expense on a current year basis and represent the total pension obligations of the Corporation. The Corporation is not required tomake contributions with respect to any past service or funding deficiencies of the Plan. The Corporation’s contributions reflect the fullcosts as employer.

(ii) Severance for resignation and retirement and removal benefits - Under the terms and conditions of employment, eligible employeesmay earn severance and removal benefits for resignation, retirement and removal costs based on years of service and final salary. TheCorporation provides severance and retirement benefits to eligible employees based on years of service and final salary, and removalbenefits based on years of service and their community of residence. The benefits are paid upon resignation, retirement or death of anemployee. The expected cost of providing these benefits is based on management’s best estimates and is accrued as a liability asemployees render service. These benefits represent the only employee future benefit obligation of the Corporation that entails settlementby future payment.

Revenues

Cash-restricted Cost

42

QULLIQ ENERGY CORPORATIONNotes to the Financial Statements

March 31, 2014(in thousands of dollars)

2

(k) Financial Instruments (continued)

(l)

(m)

3 2014 2013

66,326$ 61,859$ 47,349 44,411 1,659 1,597

115,334$ 107,867$

2014 2013

24,353$ 20,615$ 12,938 15,049 10,058 8,747 47,349$ 44,411$

Financial Liabilities Measurement Basis

Significant accounting policies (continued)

The contingencies of the Corporation are potential liabilities which may become actual liabilities when one or more future events occur orfail to occur. If the future event is likely to occur and the costs can be reasonably estimated, an estimated liability is accrued. If thelikelihood is not determinable or the amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financialstatements and no liability is accrued. Contingent liabilities result from potential environmental contingencies or pending lawsuits and likeitems.

Sales of power

Commercial customers

As all financial instruments are measured at cost, there have been no remeasurement gains or losses. Therefore, the Statement ofRemeasurement Gains and Losses has been excluded.

All financial assets are tested annually for impairment. When financial assets are impaired, impairment losses are recorded in theStatement of Operations and Accumulated Surplus.

Transaction costs are incremental costs directly attributable to the acquisition or issue of a financial asset or a financial liability.Transaction costs are added to the carrying value of the instruments when they are initially recognized.

Environmental liabilities

Environmental liabilities consist of the estimated costs related to the management and remediation of environmentally contaminated sites.The Corporation recognizes environmental liabilities when the Corporation is obligated to incur such costs and the costs of remediationcan be reasonably estimated. The Corporation reviews its estimates of environmental liabilities on an on-going basis.

Contingencies

Due to Petroleum Products Division CostDebt Amortized costDue to the Government of Nunavut Cost

Bank indebtedness CostAccounts payable and accrued liabilities CostDeposits payable Cost

The Corporation is paid to administer the Public Housing Power Support Program for the Government of Nunavut. This programsubsidizes qualifying residential customers living in public housing by supplementing the customer the difference between the approvedresidential rate and 6.0 cents per kWh. The Corporation invoices the Nunavut Housing Corporation on a monthly basis for the powersubsidies and applies the amounts to the individual customer invoices.

The Corporation administers the Nunavut Electricity Subsidy Program for the Government of Nunavut. This program subsidizes qualifyingresidential customers up to 50% of the Iqaluit base rate on the first 700 kWh consumed each month between April and September, and onthe first 1,000 kWh consumed each month between October and March. The Corporation invoices the Government on a monthly basis forthe power subsidies and applies the amounts to the individual customer invoices.

Residential customersElectrical streetlights and private area lighting

Sales to residential customers are broken down as follows:

Earned from Public Housing Power Support Program on behalf of customersCharged directly to residential customersEarned from Territorial Power Support Program on behalf of customers

43

QULLIQ ENERGY CORPORATIONNotes to the Financial Statements

March 31, 2014(in thousands of dollars)

42014 2013

1,978$ 1,310$ 1,099 1,084 1,641 919

497 333 5,215$ 3,646$

52014 2013

4,666$ 4,931$ 649 85

(350) (2,089)

4,965$ 2,927$

62014 2013

Gross

Allowance for Doubtful

Accounts Net Net

30,774$ (5,294)$ 25,480$ 28,337$ 5 - 5 113

52 - 52 28

30,831$ (5,294)$ 25,537$ 28,478$

72014 2013

10,371$ 9,493$ 9,525 7,434 2,268 1,888

22,164$ 18,815$

8

92014 2013

10,566$ 11,544$ 1,895 2,527

12,461$ 14,071$

10 Deposits payable2014 2013447$ 1,170$

2,011 1,549 1,042 859

3,500$ 3,578$

Other revenue

Capital funding from customersHousing recoveries from employees

GST receivable

Inventories for use

FuelSpare partsSupplies and lubricants

Accounts receivable

Trade receivablesEmployee advances

Administration and other service feesPole rentals

Interest expense

Interest on debtInterest and bank chargesLess: Interest capitalized on construction projects

Trade payables and accrued liabilitiesPayroll taxes and benefits payable

Project deposits payableHoldbacksCustomer utility deposits payable

An allowance for obsolescence of $1,300 was recorded in 2014 (2013-NIL) to reduce net realizable value. There have been no reversalsof previous write-downs to net realizable value. No inventories have been pledged as security for liabilities.

Bank indebtedness and cash - restricted

The Corporation has a bank credit facility with a limit of $20,000 (2013 - $12,000). Interest charged on the overdraft is at prime minus0.5% (2014 - 2.50%; 2013 - 2.50%). The facility allows for the use of Bankers' Acceptances (BAs) for borrowing. The BAs have astamping fee of 50 basis points per annum and the interest rate is approximately prime minus 1.8%, subject to market, with terms not lessthan 7 days and not more than 365 days and issued and reissued in minimum aggregate amounts of Canadian $1,000 and multiplesthereof. The Corporation held $10,000 of the bank debt in BAs at year-end (2013-nil). The credit facility is secured by a CIBCindemnity/operating agreement and guaranteed by the Government of Nunavut. In 2013, the Corporation's bank balance included cashheld in trust as a guarantee of the Corporation's ability to pay an individual supplier for its capital commitments. The commitment has beenmet and the guarantee is no longer required.

Accounts payable and accrued liabilities

44

QULLIQ ENERGY CORPORATIONNotes to the Financial Statements

March 31, 2014(in thousands of dollars)

112014 2013

42,259$ 44,941$

3,089 3,451

3,943 4,404

5,539 6,182

4,454 4,618

10,043 11,188

18,667 19,667

14,000 -

101,994$ 94,451$

2015 20,763$ 2016 7,086 2017 7,429 2018 7,792 2019 8,169 2020 to 2032 50,755

Total 101,994$

12

Facility F non-revolving committed loan with interest calculated at a fixed rate of4.24% per annum, with blended payments of $133 due monthly, beginning on August1, 2011 with the final payment due on July 1, 2021.

Facility G non-revolving committed loan and this facility has an option to utilize BAswith stamping fees calculated at 50 bps per annum with terms not less than 7 daysand not more than 365 days and issued and reissued in minimum aggregate amountsof Canadian $1,000 and multiples thereof.

Scheduled principal debt repayment amounts are as follows:

Section 25 of the Qulliq Energy Corporation Act defines the Corporation’s borrowings not to exceed three times its accumulatedsurplus at any time. The Corporation’s borrowings were 1.18 times its accumulated surplus at March 31, 2014 (2013 - 1.03 times).

Debt

6.809% redeemable 20 year amortizing debenture, due September 27, 2021. Blendedsemi-annual payments of $2,848 with a balloon payment of $17,502 at the end of theterm.

Facility B non-revolving committed loan with interest calculated at a fixed rate of4.24% per annum, with blended payments of $42 due monthly, beginning on August1, 2011 with the final payment due on May 1, 2021.

Facility C non-revolving committed loan with interest calculated at a fixed rate of4.24% per annum, with blended payments of $53 due monthly, beginning on August1, 2011 with the final payment due on May 1, 2021.

Facility D non-revolving committed loan with interest calculated at a fixed rate of4.24% per annum, with blended payments of $74 due monthly, beginning on August1, 2011 with the final payment due on June 1, 2021.

Facility E non-revolving committed loan with interest calculated at a fixed rate of4.24% per annum, with blended payments of $30 due monthly, beginning on March 1,2012 with the final payment due on February 1, 2022.

Facility H non-revolving bridge loan and this facility has an option to utilize BAs withstamping fees calculated at 50 bps per annum with terms not less than 7 days andnot more than 365 days and issued and reissued in minimum aggregate amounts ofCanadian $1,000 and multiples thereof.

During the year the Corporation exercised its option on Facility G to convert the loan from a non-revolving committed loan to BAs.

The debt is guaranteed by the Government of Nunavut.

Due to the Government of Nunavut

The total long term payable of $1,031 (2013 - $1,541) due to the Government of Nunavut is for its payment, on behalf of the Corporation,of the amount needed to settle the division with Northwest Territories Power Corporation. The amount bears no interest and is repayableover 10 years via annual payments of $510 with a final payment of $521 on October 1, 2015.

45

QULLIQ ENERGY CORPORATIONNotes to the Financial Statements

March 31, 2014(in thousands of dollars)

13

2014 2013Accrued benefit obligation, beginning of year 1,621$ 1,550$ Costs for year 1,714 1,290 Benefits paid during year (963) (1,219)

Accrued benefit obligation, end of year 2,372$ 1,621$

Contributions to the Plan were as follows: 2014 2013

Employer's contributions 2,323$ 2,381$ Employees' contributions 1,419 1,286 Total contributions 3,742$ 3,667$

14

2015 2,242$ 2016 946 2017 596 2018 456 2019 198

Total 4,438$

The Corporation and all eligible employees contribute to the Public Service Pension Plan (the Plan). The Plan provides benefits based onyears of service and average earnings at retirement. The benefits are fully indexed to the increase in the Consumer Price Index.

Contractual obligations and contingencies

Operating leases

The Corporation has leased property and equipment under various long-term operating leases. The minimum annual payments for theseleases are as follows:

Fuel purchase commitments

Employee future benefits

The Corporation provides resignation, retirement and removal benefits to its employees based on years of service and final salary. Thesebenefits are not pre-funded and thus have no assets, resulting in a plan deficit equal to the accrued benefits obligation. The liability forthese benefits is as follows:

In the normal course of operations, the Corporation could become party to future claims and legal proceedings. Management is of theopinion that adequate provisions have been made for any disbursements that could stem from future legal actions and does not foreseeany adverse affect of such potential legal actions on the financial position or operating results of the Corporation.

Environmental liabilities

The Corporation's activities are subject to various federal and territorial laws and regulations governing the protection of the environmentor to minimize any adverse impact thereon. The Corporation conducts its operations so as to protect public health and the environmentand believes its operations are in compliance with all applicable laws and regulations. Liabilities will be recorded when the occurrence ofan environmental expenditure, related to past or present activities of the Corporation, is considered probable and the costs can bereasonably estimated. Significant environmental costs have been identified by the Corporation; however, a provision for environmentalliabilities was not recognized because the Corporation believes it is not responsible for these remediation costs. A provision forenvironmental liabilities will be accrued in the financial statements if it is determined that the Corporation is liable for the remediation of asite that is contaminated.

The Corporation has made purchase commitments of $9,972 (2013 - $8,117) to purchase fuel in the fiscal year ending March 31, 2015.This amount is due to be paid in fiscal 2015. The Corporation has committed to the purchase of an additional 54,830,000 litres of fuel(2013 - 53,910,000) in the next fiscal year.

Capital purchase commitments

Commitments in the amount of $841 (2013 - $8,875) have been made in relation to upcoming capital expenditures.

Litigation

Other operating commitments

Commitments in the amount of $2,857 (2013 - $2,271) have been made in relation to other upcoming operating expenditures.

46

QULLIQ ENERGY CORPORATIONNotes to the Financial Statements

March 31, 2014(in thousands of dollars)

15

2014 2013

51,422$ 49,566$ 29,004 27,311 21,081 18,047 7,864 6,998 4,307 4,356 4,965 2,927

19 57 147 (582)

118,809$ 108,680$

16

2014 2013

5,486$ 6,434$ (377) (401) 185 (547)

5,294$ 5,486$

31 - 60 61-90 Over 90 2014 2013

5,207$ 1,765$ 4,161$ 11,133$ 15,123$

Expenses

The following is a summary of the expenses by object or type:

Loss on disposal of assetsBad debt (recoveries) expense

Financial instruments

The Corporation is exposed to certain risks as a result of holding financial instruments. There has been no change to the level of riskcompared to prior year and no change in the methods and practises used to manage these risks. The following risks have no significantimpact on the Corporation's financial statements.

Credit risk

Fuel and lubricantsSalaries, wages and benefitsSupplies and servicesAmortization of tangible capital assetsTravel and accommodationsInterest expense (Note 5)

Increase (decrease) in allowance during yearBalance, end of year

The aging analysis of unimpaired accounts receivable, aged by billing date, is as follows:

Days Past Billing Date

March 31, 2014

With respect to accounts receivable past due but not impaired, based on credit history and credit ratings, there are no indications thatcustomers will not be able to meet their obligations.

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge anobligation. The Corporation is exposed to credit risk through cash deposits with financial institutions and the sale of electricity and relatedservices to domestic customers. For cash in interest-bearing accounts and accounts receivable, the maximum exposure to credit risk isthe carrying amount on the Statement of Financial Position. At the end of 2014, there were no known relevant concentrations of credit riskby type of customer or geography. Instead, the Corporation's credit risk exposure is mainly influenced by individual customercharacteristics.

The credit risk related to accounts receivable is reduced by taking cash deposits from new customers. The size of the deposit variesdepending on the risk exposure. Established customers or those with good credit are waived from having to provide a deposit.

Accounts receivable are generally due in 30 days and interest is charged after 60 days at the rate disclosed in the terms and conditions ofservice. The Corporation utilizes an allowance account for potential credit losses related to accounts receivable. The movement in theallowance account during the year was as follows:

Balance, beginning of yearReceivables written off

Management is not aware of any other impairment to financial assets. The Corporation’s policy is to write down the value of impairedassets at the time that the impairment becomes known.

Liquidity risk

Liquidity risk is the risk that the Corporation will not be able to meet its financial obligations as they fall due. The Corporation managesliquidity risk to ensure sufficient liquid financial resources to finance operations and to meet long-term debt repayments. The Corporationbelieves that it has access to sufficient capital through internally generated cash flows, government support and external resourcesincluding borrowing facilities to meet current spending forecasts.

47

QULLIQ ENERGY CORPORATIONNotes to the Financial Statements

March 31, 2014(in thousands of dollars)

16

Less than 1 year

Between 1 and 4 years

Greater than 4 years 2014 2013

Bank indebtedness $ 14,665 $ - $ - $ 14,665 $ - Accounts payable and accrued liabilities 12,461 - - 12,461 14,071 Deposits payable 2,011 1,489 - 3,500 3,578 Due to Petroleum Products Division 25,202 - - 25,202 33,453 Debt 25,169 32,991 66,922 125,082 94,451 Due to the Government of Nunavut 510 521 - 1,031 1,541

80,018$ 35,001$ 66,922$ 181,941$ 147,094$

2014 2013

69$ -$ 262 82 331$ 82$

17

2014 2013

27,968$ 27,023$ 31,670 29,010 1,708 797

- 2,422

727 544 42,997 42,157

537 603 1,500 1,468

7,694 8,360 1,736 1,683 2,052 1,897

1,031 1,541 145 1,573

25,202 33,453 - 32

Accounts receivable

The following table shows the maturity risk analysis of the financial liabilities based on the remaining contractual maturities (assuming norenewals):

Territorial and housing subsidiesOther revenueTerritorial transfer

ExpensesOperating expenses

The Corporation is not subject to other significant market risks pertaining to its financial instruments.

Related party transactions

Qulliq Energy Corporation is a territorial corporation and consequently is related to the Government of Nunavut (GN) and its agencies andterritorial corporations. The Corporation provides utility services to, and purchases fuel, primarily from the Petroleum Products Division,materials, supplies and other services from these related parties in the normal course of its operations. These transactions are at thesame rates and terms as those with similar unrelated customers.

Transactions with other related parties and balances at year end, not disclosed elsewhere in these financial statements, are as follows:

RevenuesSales of power, heat and other

Petroleum Products Division Other GN related entities

Territorial subsidies Housing subsidies

Liabilities Non-interest bearing loan due to the Government of Nunavut GN departments and agencies – excluding Petroleum Products Division

Purchase of fuel

Taxes paid to the Government of NunavutNunavut payroll taxNunavut fuel tax

Direct power supply and other to GN departments and agencies

Market Risk

Market risk is the risk that the fair value or cash flows of a financial instrument will fluctuate, because of changes in market prices. TheCorporation is exposed to interest rate risk on its fixed and variable rate long-term debt.

The Corporation's intention is to hold the fixed rate debt to maturity.

The Corporation is subject to interest rate cash flow risk on its variable rate debt and bank indebteness. For each 1% change in the rateof interest on loans subject to floating rates, the change in annual interest expense is as follows:

Financial instruments (continued)

Bank indebtedenessDebt

48

QULLIQ ENERGY CORPORATIONNotes to the Financial Statements

March 31, 2014(in thousands of dollars)

18 Comparative figures

Certain comparative figures have been reclassified to conform to current year's presentation.

49

SCHEDULE A

Land Generation Distribution

Warehouse, Equipment and Other 2014 2013

Cost of tangible capital assetsOpening balance 101$ 150,999$ 57,779$ 46,711$ 255,590$ 237,005$ Additions - - - - - 118 Assets transferred to Inventory at book value - - (1,240) - (1,240) - Transferred from work in progress - 40,477 2,135 1,461 44,073 19,107 Disposals - - - (422) (422) (640) Closing balance 101 191,476 58,674 47,750 298,001 255,590

Accumulated amortizationOpening balance - (72,401) (18,112) (15,574) (106,087) (99,672) Amortization - (6,018) (1,064) (782) (7,864) (6,998) Assets transferred to Inventory at book value - - 457 - 457 - Disposals - - - 379 379 583 Closing balance - (78,419) (18,719) (15,977) (113,115) (106,087)

Work in progressOpening balance - 48,918 308 716 49,942 21,551 Additions - 13,971 3,781 3,346 21,098 47,498 Transferred to cost of tangible capital assets - (40,477) (2,135) (1,461) (44,073) (19,107) Closing balance - 22,412 1,954 2,601 26,967 49,942

Net book value 101$ 135,469$ 41,909$ 34,374$ 211,853$ 199,445$

QULLIQ ENERGY CORPORATIONSchedule of Tangible Capital Assetsfor the year ended March 31, 2014(in thousands of dollars)

50

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Qulliq Energy Corporation P.O. Box 420 | Baker Lake, Nunavut X0C 0A0 www.qec.nu.ca