Presentation by Qulliq Energy CorporationIqaluit, NU

October 2010

1

Presentation OverviewQulliq Energy Corporation (QEC) – FAQs

Background – QEC Capital Program

Assessment of QEC Infrastructure

Long Term Sustainable Planning

Infrastructure Drivers

Immediate Needs

Alternative Energy Solutions

Conclusion

Discussion / Questions

2

Qulliq Energy Corporation (QEC) - FAQsService to Canada’s

largest Territory or Province at approx. 2 million sq kms.

33,000 people in 25 isolated communities

Approximately 11,000 residential and commercial customers

Primarily power diesel generation.

3

Qulliq Energy Corporation - FAQs2009/10 production –

approximately 161 GWH

Produced by 93 diesel generator-sets with ratings of 150 kW – 4,280 kW

One AOC 15/50 wind turbine operating in Rankin Inlet (65kW)

QEC utilized approximately 45M litres of diesel fuel in 2009/10 at a cost of $39M

4

Qulliq Energy Corporation - FAQs2 Main Corporate

Offices3 Regional Offices 27 Power Plants in

25 communities275 kms of

distribution linesApproximately 185

employees

5

Background - QEC Capital ProgramsSince creation of

Nunavut, only one new power plant has been constructed – Baker Lake

Capital programs have been reactive – focused on keeping the lights on

Program built around immediate priorities

Limitations on capital expenditures

6

Background - QEC Capital ProgramsBaker Lake Power Plant has been the only

major project (exceeding $5M)In 2010/11, first year of multi-year major

project to upgrade Iqaluit distribution system - $14M total

Annual capital programs have not kept pace with aging infrastructure / increased demands

Capacity increase requirements are now starting to exceed the physical constraints of existing structures / systems.

7

Assessment of QEC InfrastructureMajor infrastructure is aging and demands

on infrastructure are stressing it to the point of failure.

A number of assessments and proposals have been completed over the years recommending the replacement and/or upgrade of facilities.

Majority of existing plants built without security features such as fencing to protect the public and company property.

8

Assessment of QEC Infrastructure - QikiqtaalukPlant Constructe

dAddition Condition

Arctic Bay 1974 Increased capacity required; no room to install more capacity

Cape Dorset 1964 1973 / 1992 Poor condition; gensets require replacement; increased capacity required

Clyde River 1999 OK

Grise Fiord 1963 Poor condition; foundation degradation; flooding, too small

Hall Beach 1974 1993 OK

Igloolik 1974 2005 OK

Iqaluit 1964 Structurally OK; additional capacity required; no space

Kimmirut 1992 OK

Pangnirtung 1971 OK – limited space

Pond Inlet 1992 OK

Qikiqtarjuaq 1963 1975 / 1986 Poor condition; structural, electrical, & mechanical need work

Resolute Bay 1971 OK

Sanikiluaq 2001 OK9

Assessment of QEC Infrastructure - KivalliqPlant Constructio

nAddition Condition

Arviat 1971 1979 Poor; foundation issues; capacity issues

Baker Lake 2003 OK

Chesterfield Inlet

1975 Poor; small, poorly constructed

Coral Harbour 1988 OK

Rankin Inlet 1973 1986 / 1993

Structurally OK but running out of space

Repulse Bay 2000 OK

Whale Cove 1991 OK – foundation issue

10

Assessment of QEC Infrastructure - KitikmeotPlant Constructio

nAddition Condition

Cambridge Bay

1967 1970 OK – tank farm needs work

Gjoa Haven 1977 Fair

Kugluktuk 1968 1989 OK

Kugaaruk 1974 Poor

Taloyoak 1972 1986 / 1993

Very poor; foundation & fuel system issues; capacity and space issues; “eyesore”.

11

Assessment of QEC Infrastructure - GeneralAssessment is strictly for power plants. Power plants typically designed for 40 year life

6 plants – 40-50+ years old11 plants – 30-40 years old1 plant – 20-30 years old4 plants – 10-20 years old3 plants – 0-10 years old.

17 of 25 power plants are near or at the end of their design life.

12

Long Term Sustainable Planning5 Year Capital plan

should have:

1-3 plants in plan 200-250 poles

replaced annually5-7 gensets replace

annually based on hours.

6-7 light vehicles replaced annually.

13

Infrastructure DriversDesign life of equipmentCommunity growth / increased

QEC has a “Duty to Serve” as the sole power provider

Provision of electricity is an essential serviceCommunity / Territorial Infrastructure

AdditionsAlternative Energy Initiatives – desire to

reduce reliance on fossil fuels

14

Infrastructure DriversLegislative / Regulatory

Changes – QEC forced to comply with new legislative / regulatory requirements

Residual Heat (RH) Recovery – utilizing RH can improve plant efficiency by 100%; cost effective method to displace fossil fuels utilized for space heating.

15

Immediate NeedsNew Power Plants – Cape Dorset,

Qikiqtarjuak, & TaloyoakPoor conditionIncreased capacityImproved efficiency

Iqaluit Plant Expansion / Capacity Increase

16

Other Identified NeedsImmediate needs address 4 power plants; 17 power

plants in total are at or near the end of design lifeOther power plants identified as priorities:

Grise FiordChesterfield InletArviatGjoa HavenPangnirtungKugaaruk

5 Year Capital Plan - $145M; 10 Year Capital Plan - $250M

17

Alternative Energy SolutionsQEC / GN looking into alternative energy

options to reduce reliance on fossil fuels and reduce GHG

Public expectation

Who pays?

Hydro & Wind currently being explored

18

HydroQEC and its predecessors have investigated

hydro development extensivelyDesktop studies completed and some field

work for Baffin and Kivalliq RegionCost of development and transmission very

expensive given the environment, distances and small loads

Iqaluit may be one community where hydro-development may be feasible / economically viable

19

Hydro - OverviewCity of Iqaluit – largest center in Nunavut;

approximately 8,000 people with projected population of 13,000 within 10 years.

Energy requirements are rapidly increasing; increasing demand for fossil fuelled power generation.

Potential to displace 13-15 million litres of diesel fuel annually

Annual Energy requirement: 1999/00 = 38 GWH; 4.3 MW ave.; 6.9 MW peak2009/10 = 57 GWH; 6.5 MW ave.; 9.5 MW peak 2019/20 = 80 GWH; 9.1 MW ave.; 12.5 MW peak

Hydro - Location Assessment Significant hydro potential within 100 km of

Iqaluit to help meet energy requirements Projects ranged in size from 4 MW to 30

MW Projects appear to be price competitive

with diesel generators Initial Capital Cost Estimates of $80 - $550

million for the various sites 14 Sites investigated – short listed Jaynes Inlet selected

Jaynes Inlet / Work to Date• 2005 Site visits by hydropower consultants• 2006/07 Environmental baseline studies

continued on short-listed sites; WSC installed stream gauges at 14 sites

• 2008 April -Hydro committee recommendation -Akulikutaaq (Armshow River)• June - Preliminary hydrology results – Knight Piesold• July - QEC Board selected preferred site for feasibility study•2009 Final Environmental Baseline Studies completed for Qikiqgijavik (Jaynes Inlet)(4 seasons ) - info required to produce Environmental Impact Statement.

Hydro - Next Steps Pursue Funding for Feasibility studies

Continue Data Collection

Land use permits for feasibility study activities (i.e.,

drilling)

Initiate process to obtain land control

Initiate environmental assessment and licensing processes

Retain University of Ottawa for methyl mercury study

Climate Change Impact Study

Continue Public consultation

Next Steps cont…Critical next step is to get funding for feasibility

study

Upon completion of feasibility study, QEC will need

to find partners for the project

Potential for private sector or land claim groups to

become involved – P3

Estimated Project Cost $180M

WindQEC has applied for funding to INAC to complete

wind studies in 5 communities.QEC/PEI Energy (WEICan) are exploring the

feasibility of a wind-hydrogen-diesel power hybrid system for deployment in Nunavut.

The wind-hydrogen-diesel capacity would be integrated in Cape Dorset when upcoming power plant upgrades are undertaken.

The anticipated cost is $25 million.Federal funding support is critical for this project

to move forward.

26

Conclusion Infrastructure is aging and the integrity of QEC’s assets

must be improved and/or maintained to ensure the delivery of safe, reliable, economic energy.

Deferring capital has a domino effect and has a tendency to require huge expenditures all at one time as infrastructure begins to fail.

Current levels of funding - $10M-$12M annually – will not be sufficient to replace aging infrastructure or to maintain the integrity of QEC’s generating / distribution infrastructure.

Current rate structure / customer base can not bear total cost of capital program

QEC / GN cannot implement long-term Alternative Energy solutions without a healthy injection of human and fiscal capital.

27