Presentation by Qulliq Energy Corporation Iqaluit, NU October 2010

1

Presentation Overview



Qulliq Energy Corporation (QEC) – FAQs



Background – QEC Capital Program



Assessment of QEC Infrastructure



Long Term Sustainable Planning



Infrastructure Drivers



Immediate Needs



Alternative Energy Solutions



Conclusion



Discussion / Questions

2

Qulliq Energy Corporation (QEC) - FAQs

 Service to Canada’s largest Territory or Province at approx. 2 million sq kms.

 33,000 people in 25 isolated communities  Approximately 11,000 residential and commercial customers  Primarily power diesel generation.

3

Qulliq Energy Corporation - FAQs

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

Qulliq Energy Corporation - FAQs

 2 Main Corporate Offices  3 Regional Offices  27 Power Plants in 25 communities  275 kms of distribution lines  Approximately 185 employees 5

Background - QEC Capital Programs

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

Background - QEC Capital Programs

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

7

Assessment of QEC Infrastructure

 Major infrastructure is aging and demands on infrastructure are stressing it to the point of failure.

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

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

8

Assessment of QEC Infrastructure - Qikiqtaaluk

Plant Constructed Addition Condition

Arctic Bay Cape Dorset Clyde River Grise Fiord Hall Beach Igloolik Iqaluit Kimmirut Pangnirtung Pond Inlet Qikiqtarjuaq Resolute Bay Sanikiluaq 1974 1964 1999 1963 1974 1974 1964 1992 1971 1992 1963 1971 2001 1973 / 1992 1993 2005 1975 / 1986 Increased capacity required; no room to install more capacity Poor condition; gensets require replacement; increased capacity required OK Poor condition; foundation degradation; flooding, too small OK OK Structurally OK; additional capacity required; no space OK OK – limited space OK Poor condition; structural, electrical, & mechanical need work OK OK 9

Assessment of QEC Infrastructure - Kivalliq

Plant Construction Addition Condition

1979 Arviat Baker Lake Chesterfield Inlet Coral Harbour Rankin Inlet Repulse Bay Whale Cove 1971 2003 1975 1988 1973 2000 1991 1986 / 1993 Poor; foundation issues; capacity issues OK Poor; small, poorly constructed OK Structurally OK but running out of space OK OK – foundation issue 10

Assessment of QEC Infrastructure - Kitikmeot

Plant Construction Addition Condition

Cambridge Bay Gjoa Haven Kugluktuk Kugaaruk Taloyoak 1967 1977 1968 1974 1972 1970 1989 OK – tank farm needs work Fair OK Poor 1986 / 1993 Very poor; foundation & fuel system issues; capacity and space issues; “eyesore”.

11

Assessment of QEC Infrastructure - General

  Assessment is strictly for power plants. Power plants typically designed for 40 year life     

6 plants – 40-50+ years old 11 plants – 30-40 years old

1 plant – 20-30 years old 4 plants – 10-20 years old 3 plants – 0-10 years old. 

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

12

Long Term Sustainable Planning

 5 Year Capital plan should have:  1-3 plants in plan    200-250 poles replaced annually 5-7 gensets replace annually based on hours.

6-7 light vehicles replaced annually. 13

Infrastructure Drivers

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

Infrastructure Drivers

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

Immediate Needs

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

Other Identified Needs

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

Alternative Energy Solutions

 QEC / GN looking into alternative energy options to reduce reliance on fossil fuels and reduce GHG  Public expectation  Who pays?

 Hydro & Wind currently being explored 18

Hydro

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

Hydro - Overview

 City of Iqaluit – largest center in Nunavut; approximately 8,000 people with projected population of 13,000 within 10 years.

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

 Potential to displace 13-15 million litres of diesel fuel annually  Annual Energy requirement:  1999/00 = 38 GWH; 4.3 MW ave.; 6.9 MW peak   2009/10 = 57 GWH; 6.5 MW ave.; 9.5 MW peak 2019/20 = 80 GWH; 9.1 MW ave.; 12.5 MW peak

     

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

Wind

     QEC has applied for funding to INAC to complete wind studies in 5 communities.

QEC/PEI Energy (WEICan) are exploring the feasibility of a wind-hydrogen-diesel power hybrid system for deployment in Nunavut. The wind-hydrogen-diesel capacity would be integrated in Cape Dorset when upcoming power plant upgrades are undertaken. The anticipated cost is $25 million.

Federal funding support is critical for this project to move forward. 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