Industry Analysis:UtilitiesReginald-Michel Koizumi & Florentina Onisor

February 2014

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Table of ContentsIndustry Trends..............................................................................................................4

Consumer Demand............................................................................................4Regulatory Environment..................................................................................6Technological Innovation.................................................................................6

Performance on Key ESG Issues..................................................................................7Greenhouse Gas Emissions..............................................................................7Effluents, Emissions and Waste......................................................................8Sustainable Products and Services................................................................9Community Relations........................................................................................9Health and Safety.............................................................................................10Human Capital..................................................................................................11Product/Service Quality and Safety............................................................12

Implications for Investors..........................................................................................13Regulatory Environment................................................................................13Innovation........................................................................................................14Operational Efficiency....................................................................................14

Company Performance Evaluation...........................................................................15Case Studies......................................................................................................15

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UtilitiesThe utilities sector encompasses a wide range of services, including water, gas, public sanitation management, and power. Depending on the level of market liberalisation, a company may engage in the production, trade, transmission, distribution, or sale of utilities, or any combination of those. As such, the widespread customer base, countries, and demographics dilute major recessionary impacts. While the global economy shows signs of slow recovery, the utilities sector remains particularly robust.

While energy demand in developed markets has grown modestly due to rising fuel costs, environmental concerns, and slower economic growth, production and demand for energy is increasing rapidly in developing countries. This demand is driven mainly by rapid industrialisation, urbanisation, and rising population. In Europe, companies generally strive for efficiency and clean technology solutions, while North American markets are experiencing strains on resources and infrastructure, driving companies to refine existing technologies and ensure reliable and affordable access to basic services. The United States has energy independence as its long-term strategic goal, enthused by the shale gas revolution and coal renaissance.

Though the industry has historically been tightly regulated, there is an increasing trend to liberalise markets and open networks to competition. In developed markets, these trends have often created new cross-industry entrants to the market, thus offering more options to consumers. In a number of developing markets access to basic utility services has rapidly expanded, however, universal access would require several decades of continued work due to the lack of coverage in rural areas or inadequate infrastructure that has not matched the demographic change.

The utilities industry has a direct stake in various environmental issues. As major emitters of carbon dioxide (CO2), nitrogen oxides (NOx), sulphur dioxide (SO2), mercury, dioxin, and other pollutants, energy-related utilities generate significant direct and indirect environmental impacts. These emissions are strongly related to global and local issues such as climate change, acid rain and smog.

As energy markets rush to meet increasing global demands, companies’ ability to oversee community and employee relations, emission reductions, resource use and product innovation will fundamentally determine their overall environmental, social and governance (ESG) performance and related opportunities. Given a significant degree of regulatory and technological uncertainty, companies will need to be strategic and flexible as they plan for future utility needs.

Industry TrendsConsumer DemandWith a few exceptions, energy demand is in an increasing trend as the world economy re-emerges from the credit shock of 2007-08. It is estimated that by 2015, most nations will return to their pre-recession rates of long-term growth. As world GDP rises by an average of 3.2 per cent per year from 2007 to 2035, the U.S. Energy Information Administration estimates that world energy consumption will increase simultaneously, by 49 per cent, or 1.4 per cent per year, until 2035.

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Historically, OECD member countries have accounted for the largest share of energy consumption, however, in 2007, energy use amongst non-OECD nations exceeded that of their OECD counterparts for the first time. The discrepancy between OECD and non-OECD energy consumption will continue to grow in the future. The Middle East, for example, is expected to become the most energy-intensive region in the world, due to fast-paced population growth and access to rich resources. Since 1990, China’s energy demand has increased by 150 per cent, and it became the world’s largest consumer of power. Similarly, India’s power demands are expected to match those of China by 2035.

Business Environment

InnovationLabour Force

Regulatory Environment

Community Relations

Consumer Demand

The McKinsey Global Institute estimates that, in addition to industry, consumers will play an increasing role in energy consumption driving 57 per cent of energy demand growth until 2020. In the coming years, rising global oil prices will encourage consumers to turn to natural gas and renewable energy sources. New hydraulic fracturing technologies have supplied cheap gas to North America in recent years. Utilities companies are rapidly shifting their focus from pure energy provision to efficiency gains underpinned by massive investments in technology. The International Energy Agency (IEA) estimates that to meet electricity demand in 2030, Canada alone must invest approximately USD 230 billion into upgraded electricity generation, transmission and distribution facilities.

The growth in energy consumption also results in an increase in water usage. Thermoelectric generation from fossil fuels such as coal, oil and natural gas, as well as nuclear power, is one of the most water intensive industrial operations. It is imperative that companies have access to a reliable, abundant, and predictable source of water, a resource that is becoming scarce in many parts of the world. By 2025, the United Nations predicts that two-thirds of the world population could be living under water-stressed conditions. Water supply will be one of the determining factors of the viability of many utility companies. The U.S. electric power industry alone requires an estimated 136 billion gallons of water per day for power generation and then cooling the steam that propels the turbines. Each kilowatt hour (kWh) generated requires approximately 25 gallons of water on average.

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Regulatory EnvironmentLegislators around the world are introducing stringent environmental regulations aimed at mitigating climate change and controlling pollution. According to the IEA, a dozen policies in the U.S., EU, and Japan will account for roughly 40 per cent of the global emissions reduction targets by 2030. The Canadian federal government has set the objective of producing 90 per cent of Canada’s electricity from low-emitting technologies by 2020. In Europe and Japan, strict environmental control laws successfully nullified acid rain and urban smog caused largely by emissions of the utilities industry; however, the Kyoto Protocol failed to render tangible results on curbing greenhouse gas (GHG) emissions. Although the European Union still holds its quantitative targets to reduce carbon emissions, its feasibility is contested. The United States has no such GHG legislation at the federal level, yet initiatives and emissions trading markets exist at the state level, such as the California Global Warning Solutions Act.

Effects of FukushimaIn terms of regulatory changes, the effects of the Fukushima nuclear power plant incident in 2011 on nuclear power regulations have been relatively limited on the world scale. While countries such as Germany, Italy, and Japan have either cancelled or idled nuclear power generation, most other countries have opted to pursue further development of nuclear power, particularly in Asia. The regulatory safety protocols have become more stringent and various forms of stress tests have been performed, nonetheless, construction commissions continue to grow. Nevertheless, the incident has made the general public aware of the inherent risks of the nuclear power generation, and popular disapproval has become more severe.

As regulators in major economies increase pollution controls, the competitive landscape will continue to shift and companies proactively embracing sustainability can promote this approach to leverage investments. Risks will be greatest for firms most dependent on fossil fuel-based energy sales. The regulatory environment will also impact operational costs, mainly by requiring companies to make major capital investments. Although these necessary upgrades will likely enhance efficiencies in the long run, the initial investment and compliance costs are high and technologically uncertain. According to the Carbon Disclosure Project, utility companies remain unsure of their ability to recover the significant costs associated with capital investments for new large-scale emission reduction projects, such as offshore wind, nuclear energy, or carbon capture and storage.

Regulatory regimes related to water are particularly important to the utilities industry. Gas and electric power facilities are major sources of pollution in waterways due to their hazardous effluents. The most significant impact is in the form of priority spills – major spills which contain petroleum or polychlorinated biphenyls (PCBs) – that enter a body of water. These spills not only result in surface water pollution, but also cause underground contamination. Companies need to implement advanced prevention mechanisms, including measures to steward unforeseen risks and collateral damage. In case of spills, it is vital that companies mobilise immediate and organised response efforts, and begin remediation procedures. The handling of wastewater is also an issue as many water utilities have insufficient treatment facilities to meet the urban demand. Untreated wastewater from households and industries then flows directly back into rivers, some of which are sources of drinking water.

Technological InnovationCurrently the industry is challenged to enhance reliability, reduce costs, and stimulate revenues while using materials and energy more efficiently. The industry rapidly embraces

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Best Practices:• Implement environmental management systems, such as preventative

programmes and ISO 14001 or EMAS-compliant systems• Transition to less carbon-intensive sources of energy• Improve the efficiency rate of generation and transmission• Properly separate non-carbon GHGs, such as methane and sulphur hexafluoride

information technology that enables dynamic real-time demand response and supply optimisation. However, such “smart” infrastructure requires sustained investments and multi-stakeholder collaboration. At the same time, these technological innovations create opportunities for small-scale utility providers, generating competitive threats to the industry’s major players. Furthermore, as shareholders advocate for enhanced transparency and accountability regarding emerging regulations, consumers are increasingly imposing their demands for greener products and services. Existing technologies such as photovoltaic generation, combined gas turbines, biomass, or coal-fired plants are becoming more efficient as well.

The Canadian Electricity Association’s 2010 overview states that in the power and utilities sector, two specific trends are dominating innovation. The first is a need for commercial-scale carbon capture and storage (CCS) technology, which involves capturing CO2 from industrial plants and injecting it underground for permanent storage in deep geological formations. The second trend is the adoption of a smart grid, whereby electricity is delivered using two-way digital technology to control appliances at consumers’ homes to save energy, reduce costs, and increase reliability and transparency. Better technologies aim to ensure, among other things, cleaner factories, improved residential and commercial efficiency, and better access to alternative energies. While adaptation costs remain high, they will be supported by government subsidies and incentives. Electricity suppliers that deliver low-carbon power efficiently will be well-positioned to increase their market share, uphold security and reliability, and maintain a competitive advantage.

Another focus of innovation within the sector is efficiency. Improving efficiency is a relatively low-risk and cost-effective solution to achieve short-term results, since efficiency can be achieved by adding incremental improvements to already familiar technologies. Across the industry companies have invested substantial efforts to attain higher efficiencies in fossil fuel power generation, conductance, heat insulation and energy recycling technologies. Efficiency through innovation is one of the European Union’s energy goals for 2020. Technological innovations are also focused on water. Across the globe, water is becoming commoditised and more expensive. In the coming years, as regulations and increased water prices make using large amounts of water more costly, the market for efficiency solutions will grow dramatically.

Performance on Key ESG IssuesGreenhouse Gas Emissions

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Power generation is the most carbon intensive activity in the sector’s value chain. Accessing a centralised power supply from concentrated power stations is still the most efficient way to power the electrified civilisation. In this sector, GHG emissions are commonly associated with the fuel combustion at power generation, rather than emissions from office-based operations or logistical activities. Coal and lignite are particularly carbon-rich sources of fuel, and they remain amongst the primary energy sources used globally. In 2013, China consumed four billion tonnes of coal, equivalent to 47 per cent of the world demand. To meet its energy needs, China builds a new coal-fired power plant on a weekly basis. Significant amounts of other Kyoto Protocol-regulated greenhouse gases such as sulphur hexafluoride and methane are emitted during dispensation and combustion processes.

With governments imposing a growing number of environmental demands on the sector, companies should be driven to perform beyond a compliance-oriented approach. Along with oversight, companies can attempt to mitigate risks associated with environmental releases by implementing environmental management systems (EMS), such as preventative maintenance programmes and ISO 14001-compliant systems. Environmental leaders will disclose clear, company-wide targets to reduce planned emissions and discharges and will increase their use of renewable energy. In light of this regulatory impetus, utilities companies are forming board-level environmental committees tasked with overseeing environmental performance. In 2012, the Carbon Disclosure Project reported that 95 per cent of participating utilities companies had board or executive-level oversight for climate change, exceeding that of other sectors.

Effluents, Emissions and Waste

Best Practices:• Reduce the release of liquid, solid and gaseous pollutants through investments

in facility upgrading• Adopt landfill mitigation strategies to reduce waste outputs• Maintain readiness teams for quick response at spill over incidents

Throughout the entire energy supply, utilities operations release airborne pollutants, including sulphur oxides, nitrogen oxides, dioxin, and mercury. However, various other forms of industrial waste, such as fly ash, overburden, nuclear waste, asbestos, outdated cables and pipelines, remains an issue. These emissions pose a threat to local communities, employees, and the overall vitality of the natural environment. At the same time, emissions and other pollutants are increasingly subject to stringent regional and national regulations, in both developed and emerging markets. Companies need to be proactive in implementing facility upgrades that will reduce emissions and waste, such as fluid gas desulphurisation, limestone injection, and low nitrogen oxide burners.

Power companies are subject to high levels of regulatory oversight with respect to the waste and emissions they generate. Thus companies need to have landfill mitigation strategies in the form of recycling, substitution, filters, and compensation. Besides relevant EU Directives and the U.S. Clean Air Act, other international accords such as the Montreal Protocol on ozone-depleting gases or the Basel Convention on the transfer of waste may

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also apply, depending on the company’s activities. Based on the polluter-pays principles, an introduction of environmental taxes is a regulatory risk to utility companies as large emitters of various pollutants. In China, the world’s largest energy consumer, air pollution nationwide has been steadily worsening, with no Chinese cities meeting the minimum air quality recommendation of the World Health Organisation in 2013. While the legislative reaction has been slow in China, it is expected that a number of new rules that could pose operational risks to utilities will be introduced in the coming years.

Many companies have reduced their water consumption as an adjunct to other objectives such as reducing energy consumption. Yet, few companies in this sector have adopted comprehensive water management systems. In developing countries, more dams are planned to boost the freshwater supply, as well as for carbon-neutral power generation. However, inadequate environmental impact assessments have resulted in diminished water quality, negative effects on agricultural activities, and alterations in water flows, water volume and fish habitats. In the cases of operations accessing international waterways, imperfect multi-party coordination would create political and communal conflicts, which would also affect utility companies.

Sustainable Products and Services

Best Practices:• Implement strong demand-side management programmes, and offer upgraded

metering and renewable energy options for consumers • Demonstrate a high degree of commitment through diversification of product

and service offerings• Develop collaborative network with other industry partners for innovations in

services and technologies

Innovative products and services with a lower environmental footprint are transforming the utilities sector and advancement will be supported in part by increased demand for alternative, efficiency-based services. Early adapters will be the first to tap in to new consumer markets, as public sentiment and demand patterns shift towards low-carbon and alternative energy options. Noteworthy sustainable services include demand-side management programmes, upgrading metering, and renewable options for consumers. Improving efficiency and transitioning to greener, renewable energy resources would confer long-term prestige, however, these actions come at their own unique risks due to the relative instability of renewable power generation. Utilities must also fulfil their responsibilities to maintain a stable base supply of power, water, and gas. The speed and trajectory with which a utility transitions to sustainable offerings depends on a number of factors, such as its current asset composition, commodity prices, the level of technological and financial investments, customer demand, and the level of cross-industry collaboration.

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Community Relations

Best Practices:• Have community policies in place that include strong and unique provisions for

customs of indigenous peoples• Dedicated staff on site to ensure effective implementation and strengthening

of working partnerships with local communities to address potentially negative impacts of utility businesses

• Maintain steady and open information disclosure in accessible formats

Utility companies have large tangible assets in the forms of power plants, transmission lines and urban grid, converter stations, sewer and sewage pipes, dams, and storage facilities for fuel and waste. The construction and maintenance of such facilities have the potential to positively or adversely affect large areas of populated land, thus particular attention should be paid to vulnerable constituents such as indigenous communities and civilians in areas of armed conflict. In North America, the geographic distribution of indigenous populations means that native relations and utilities operations are inextricably linked, as native reserves are frequently found in areas of interest for utilities. At the same time, utilities may be one of few providers of jobs in the community. Today, it is common for utility companies to have community and human rights policies in place that include strong provisions for peoples of internationally protected status. These policies often commit companies to promoting the unique identities, customs and rights of indigenous peoples and to mitigating the direct and indirect impact of operations.

The most engaged companies go beyond policy design, ensuring effective implementation and proactively strengthening working partnerships with aboriginal communities. This often includes economic development assistance, employment and training opportunities and ongoing community support. One meaningful way for utilities companies to work alongside host communities is by providing opportunities through employment, contracting, education and capacity building. A noteworthy example from Canada is Transalta’s Aboriginal Bursary Program which supports aboriginal youth from across Alberta, helping them develop skills and abilities through post-secondary education. In Brazil, GDF Suez of France altered the construction plans for its USD 8 billion Jirau hydroelectric dam after local indigenous groups refused to back the project. This type of opposition to large-scale development is becoming more common and some companies are struggling to attain support from host communities.

In addition, the growing presence of utilities companies in developing countries with weak regulatory frameworks, poor infrastructure and restricted access to basic services for low-income populations presents a unique set of community relations challenges. Particularly for companies with cross-border operations, a utility will need systematic mechanisms to understand diverse and changing community demands that may be unique to each region of operation. Industry leaders are proactively addressing such local concerns through strong community involvement, differential pricing or the provision of basic needs through public-private partnerships. Such efforts are likely to reduce operating risks in these markets, while simultaneously strengthening brand value, local knowledge and long-term growth prospects.

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Best Practices:• Create diverse workforce that is prepared to address current and future technical

and non-technical challenges • Recruitment and selection activities are planned, promoted and reviewed to

ensure flexibility, reliability, fairness and validity• Have stable staff retention rates

Health and Safety

Best Practices:• Implement employee safety programmes that are certified to a recognised

standard such as OHSAS 18001 • Disclose annual key performance metrics and third-party audit results • Offer return-to-work programmes to injured workers, with an emphasis on

wellness • Extend all health and safety programmes to contract workers

Workers in the utilities industry often serve in demanding environments. Many are exposed to potentially hazardous conditions such as high voltage electrical conductors, radioactive radiation at nuclear power facilities, or high altitudes on cable towers. With the integration of renewable energy sources into mainstream energy production, a number of different work environments are being created which tend to be more demanding than traditional locations, as in the case of offshore wind turbines, volcanic fault lines for geothermal energy, or concentrated solar collectors in deserts, all with potentially unknown occupational hazards. Workplace injuries affect employee health, productivity, and job satisfaction and increase operational costs. On the other hand, as power and other basic amenities must be supplied without interruption, work must be performed at all hours of the day in all weather conditions. Therefore, addressing workforce health and safety issues is vital to the utilities’ performance.

Strong employee programmes including the protection of health, safety and employee wellness impacts a company’s ability to recruit and retain workers. The best health and safety programmes are usually in accordance with OHSAS 18001 criteria, and include key performance metrics, third-party audits, return-to-work programmes for injured workers and an emphasis on wellness. Effective health and safety programmes also provide continuous on-the-job and off-the-job training so that safety know-how on the field is effectively inherited and enhanced. As utility companies require more highly skilled workers to operate their ever sophisticated information and distribution systems, the use of contracted workers to perform more labour-intensive tasks has become a common practice. Cases of contract abuse, unfair remuneration, and treatment falling outside the company’s standard health and safety systems have all been reported. Given the labour-intensive nature of the work within the sector, occupational risks are intrinsic, and a relatively large number of severe accidents, including fatalities, are reported each year.

Human Capital

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Best Practices:• Decrease the instances of utility outage• Incorporate natural disaster risks in company production and maintenance

planning • Have responsible marketing policies and programmes for customer contracting,

dissemination of safety knowledge, and proper handling of customer data

In developed markets, the utilities sector is challenged to adopt new infrastructure and technologies with an increasingly insufficient supply of skilled workers. Across the EU, one-third or more of the utility workforce is aged 50. Although the United States has a relatively younger workforce in the sector, it is aging rapidly. The worker turnover rate is rising, and the utility industry is facing a crisis of an incoming workforce with inadequate skills and less work experience. As existing electric and water networks are being replaced with renewable energy and intelligent networks, more digital technology skills are needed. The sector and its workers are embarking on a shifting employment landscape. In the past, working for a utility firm was regarded as life-time employment. Now, the utilities must compete with other industries to attract and retain talents, while power demand increases by one per cent annually.

To build and operate new electricity infrastructure, the recruitment and retention of qualified workers is essential. Given the increasing shift to renewable energy sources, engineering and scientific personnel, as well as those with trade, craft and specialty skills are of particular importance. Through the globalisation of the energy trade, such as within the European Single Market or between the United States and Canada, energy integration and cooperation stands to benefit from a global approach to employing specialised talent. If the infrastructure supports it, energy can be generated where the natural and economic endowments are the best for the purpose. This has ramifications as to where and what kind of people will be employed.

Product/Service Quality and Safety

Historically, the utility sector has assumed providing uninterrupted essential services as its prominent social responsibility. Mass transit systems, factories, hospitals, water supply, home heating, computing, and food refrigeration all rely on the fail-proof supply of services by utilities. Utilities can minimise the risk of disruption due to natural disasters through regular network maintenance and robust systems. The service provided by the sector is of immense use for all modern human activities, yet, at the same time, these services can cause harm if used improperly. Thus it is essential that utility companies provide appropriate information on the safe use of power, gas, and water, so that accidents such as electrocution or poisoning can be avoided.

The demand for utilities is always dynamic and never stable. Companies must be capable of managing peak demand, and ensuring that the right amount of supply is circulating through the network at stable currents, or pressure in the case of water, at all times. This may be achieved by securing idle assets to be used in case of peak spikes, diversified production capacity, or trade agreements with peer companies. In instances of major supply disruptions, authorities often rule against utility operators, resulting in large fines. Companies may also face additional litigation.

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Access to Labour

Access to Natural

Resources

Regulatory Environment

Consumer Demand

InnovationOperational

EfficiencyReputation

Greenhouse Gas Emissions

Effluents, Emissions & Waste

Sustainable Products & Services

Community Relations

Health & Safety

HumanCapital

Product Quality & Safety

ESG Issue

Core Drivers

Negligible Link Moderate Link Strong Link

Envi

ronm

enta

lSo

cial

The following core business drivers are most intrinsically linked to key ESG issues for the industry:

Regulatory Environment• With climate change at the forefront of the political agenda, utilities are exposed

to stringent national and international environmental regulations, protocols and trading schemes. Utilities with the highest rates of emissions will face competitive disadvantages as risk-averse investors avoid companies with delayed adaptation and poor regulatory compliance.

• Air emissions can affect a large number of parties, resulting in claims and lawsuits from affected stakeholders. Failure to adequately respond can result in operational suspensions.

• Since utilities withdraw and consume large quantities of water, accelerated water scarcity means that these companies are more affected by water-saving regulatory reform. Utilities that respond to pending regulations with sustainable water management programmes will be attractive in investment circles. Investors understand that water will become more valuable in the future and that the lack of stable access to water may disrupt a utility’s operations.

Implications for Investors

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• A transition towards clean energy represents a compelling opportunity for utilities. Since emission standards are being applied more broadly across the materials and extractives sectors, diversification towards alternative energy is accelerating and continues to be supported by government subsidies.

• Newer regulations tend to be oriented toward more quantitative metrics as opposed to previous rules based on self-reporting. Similarly, regulators are more likely to issue fines to offenders instead of warnings.

Innovation• A changing regulatory environment will require utilities to employ state-of-the-art

technologies to reduce their emissions and toxic releases. Customers and investors are increasingly requesting transparency to ensure that innovative technologies, such as flue gas desulphurisation and leakage reduction devices, are minimising a company’s exposure to fines and closures related to non-compliance.

• Innovation will also be critical in generating new energy options. Companies must therefore be proactive in securing technology, expertise, and capital in order to enhance their renewable capacities and leverage emerging opportunities. Risks will be greatest for firms that remain entirely dependent on fossil fuel-based energy sales.

• The ability to offer innovative products, such as renewable energy or conservation technologies, greatly improves how a company is perceived by its end users. In turn, this positively affects a company’s brand value and market differentiation.

Operational Efficiency• By managing their consumption of resources, such as water, companies can better

insulate themselves from inefficiencies related to scarcity and rising costs. These risks are mitigated by introducing more efficient technologies and alternative energy into standard operations.

• Communities have heightened their scrutiny of utilities companies and demand greater transparency on upcoming and ongoing projects. Community opposition can significantly increase the risk that a project will be stalled due to disputes such as blockades, work stoppages and lawsuits. These delays increase the risk that a project will not be completed on time and on budget, or at all.

• Poorly managed employee and contractor safety can affect operational efficiency in the form of lawsuits, decreased productivity, lower employee morale, union disruptions and high employee turnover.

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Company Performance Evaluation

Lead

ers

Electricité de France S.A.

TERNA S.p.A.

Acciona S.A.

Enagas S.A.

Cia Energetica de Minas Gerais

Guangdong Investment Ltd.

Tokyo Electric Power Co. Inc.

JSW Energy Ltd.

Energy World Corp. Ltd.

Huadian Energy Company

Laggards

Sustainalytics’ utilities universe covers more than 250 publicly traded companies, including 72 from North America, 76 from Europe, 72 from Asia-Pacific, and 32 from South America. They represent various sub-industries including water and energy producers, traders, and distributors. The Italian grid operator TERNA ranks highest, with strong programmes around community engagement and the promotion of energy efficiency. TEPCO ranks poorly due to severe ESG controversies surrounding the Fukushima incident. In emerging markets, CLP Holding of Hong Kong is a regional sector leader, notable for its emissions reductions commitment stipulated by various policies.  Case StudiesTransAlta Corp. - Project Pioneer (Canada)TransAlta’s Project Pioneer is a CAD 779 million carbon capture and storage (CCS) project that is being built as a retrofit to the company’s Keephills 3 coal-fired power plants. With this technology, carbon dioxide will be transported through a pipeline and stored in underground geological formations, where it is unable to escape. The initiative brings together Alstom, a global leader in energy technology, Capital Power Corporation and Enbridge. It is estimated that the company’s Keephills 3 plant will see overall carbon and nitrogen oxide emissions reductions of up to 90 per cent and will meet its capture target by 2015. In 2009, Project Pioneer received a commitment of over CAD 770 million in funding from federal and provincial governments indicating that emissions reductions through the development and application of new technologies is both a public and private imperative. In the context of increasing global energy demand, the International Panel on Climate Change has deemed CCS an important tool for meeting greenhouse gas reduction targets. G8 leaders at the 2008 Hokkaido Summit strongly supported launching large-scale CCS demonstration projects, with the aim to broadly deploy CCS by 2020. In February 2014, Global CCS Institute’s CCS Projects Database listed 60 large-scale integrated projects in various stages of development around the world.

Endesa - Combining Environmental Stewardship with Consumer Savings (Spain)Endesa, Spain’s largest electric utility company, initiated a programme that provides its

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customers with discounts on their electricity bills, in exchange for delivering waste to recycling collection points. The discounts are equivalent to the market value of the material collected for recycling. The Ecoelce programme simultaneously improves access to electricity and promotes recycling in regions where official waste recycling systems are not in place. The project has created a new segment of employment in waste management and has reduced disease caused by the inappropriate disposal of waste. Although the project was originally conceived with the lower income segment of the population in mind, it is currently available to all customers, ensuring widespread savings and recycling. Today, with over 60 waste collection points, more than 220,000 customers benefit from this programme. Ecoelce is now being used as a pilot scheme that will gradually be implemented across the company’s Latin American subsidiaries. The project received the United Nations’ World Business and Development Award and has been recognised as one of the projects developed in Latin America aligned with the principles of the Global Compact.

Centrica - Addressing the Fuel Poverty (United Kingdom)The company, one of the UK’s six largest utilities, has a strong community and local impact policy that addresses fuel poverty, access to education, skills development, and social exclusion. The company is committed to working with public and voluntary sector partners to support the most vulnerable customers, particularly those affected by fuel poverty, which is a growing issue in the country. The company prioritises the identification and support of these households with a tailored range of services including energy efficiency, debt alleviation, priority service, financial assistance, and support from partner organisations. Specifically, Centrica has a programme which combines a discounted tariff with different support mechanisms. In 2012, the company’s subsidiary, British Gas, helped 2.1 million vulnerable households meet their energy needs, spending more than USD 363 million providing assistance in the form of free debt, discounted tariffs and household grants.

Suez Environment - Global Water Management (France)Suez Environnement, a global water and waste utility, owns the water supply network in some of the regions in which it operates, while in others it manages the public grid under service contracts with municipalities. Under its Plan 2016 which stipulates increasing drinking water coverage as a sustainable development goal, Suez perceives its contracts with municipalities as private-public partnership opportunities. With its subsidiary Macao Water, the company has set targets within its concession contracts to reduce the water loss rate to 10 per cent by improving leakage detection and deploying faster repair responses in the city of Macao whose population is expected to grow rapidly. In Jeddah, Suez constructed seawater desalination facilities on behalf of the Saudi National Water Company to supply drinking water to the booming city and its surroundings. The vast energy needed for desalination is generated locally by solar power, by taking advantage of the local ecological conditions. In the U.K., energy is produced from the methanisation of wastewater treatment sludge, winning the company an Award for Alternative Fuel Supplier in 2013. The methanisation technology is rapidly improving its efficiency, and the company’s core business as a waste manager is leveraged for a more circular economy.

Osaka Gas - Local Habitat and Biodiversity (Japan)Osaka Gas, a Japanese gas company, has a company-wide biodiversity policy that dictates programmes for each operating unit. Since 2008, under this policy all units maintain an inventory of biodiversity issues that address local ecological characteristics and challenges.

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The policy includes a commitment to ensuring employee awareness and long-term engagement, conservation at multiple levels, involvement of local communities and expert scientists, preference to native species and prevention of the introduction of foreign species where the company operates. As part of its commitment to biodiversity, Osaka Gas has created a nature reserve on its property. The company designed a fauna and flora sanctuary for endangered species and assesses the condition of the vegetation annually. The company’s biodiversity policies also extend to its suppliers. Osaka Gas’s supply chain environmental criteria include impact studies and rehabilitation consideration by new and existing suppliers.

Company Name Country

A2A SpA Italy

Aboitiz Power Corp. Philippines

Acciona SA Spain

AES Gener S.A. Chile

AES Tiete S.A. Brazil

AGL Energy Limited Australia

AGL Resources Inc. United States

Aguas Andinas S.A. Chile

Algonquin Power & Utilities Corp. Canada

Alliander N.V. Netherlands

Alliant Energy Corporation United States

Ameren Corporation United States

American Electric Power Co., Inc. United States

American Water Works Company, Inc. United States

Anglian Water Services Ltd. United Kingdom

APA Group Australia

APA Sub Group Australia

Aqua America Inc. United States

ATCO Ltd. Canada

Atlantic Power Corporation United States

Atmos Energy Corporation United States

Beijing Enterprises Water Group Limited Hong Kong

Bord Gais Eireann Ireland

Calpine Corp. United States

Canadian Utilities Ltd. Canada

Capital Power Corporation Canada

Celsia SA ESP Colombia

CenterPoint Energy, Inc. United States

Centrais Electricas Brasileiras S.A. Brazil

Centrica plc United Kingdom

CEZ, a.s. Czech Republic

Cheung Kong Infrastructure Holdings Ltd. Hong Kong

China Gas Holdings Ltd. Hong Kong

China Longyuan Power Group Corporation Limited China

China Resources Gas Group Limited Hong Kong

China Resources Power Holdings Co. Ltd. Hong Kong

18

Chubu Electric Power Co. Inc. Japan

Chugoku Electric Power Co. Inc. Japan

Cia Energetica de Minas Gerais Brazil

CLP Holdings Ltd. Hong Kong

CMS Energy Corp. United States

Codensa S.A. E.S.P Colombia

Colbun S.A. Chile

Companhia de Gas de Sao Paulo Brazil

Companhia de Saneamento Basico do Estado de Sao Paulo Brazil

Companhia De Saneamento De Minas Gerais. Brazil

Companhia De Transmissao De Energia Eletrica Paulista Brazil

Companhia Energetica de Sao Paulo SA Brazil

Companhia Paranaense de Energia Brazil

Conergy AG Germany

Consolidated Edison Inc. United States

Contact Energy Ltd. New Zealand

CPFL Energia S.A. Brazil

Datang International Power Generation Co. Ltd. China

Dominion Resources, Inc. United States

Drax Group plc. United Kingdom

DTE Energy Co. United States

DUET Group Australia

Duke Energy Corporation United States

Dynegy Inc. United States

E.ON SE Germany

E-CL S.A. Chile

Edison International United States

Edison SpA Italy

EDP - Energias do Brasil S.A. Brazil

EDP Renovaveis Spain

EDP-Energias de Portugal, S.A. Portugal

El Paso Electric Co. United States

Electric Power Development Co. Ltd. Japan

Electricite de France SA France

Electricity Generating Public Co. Ltd. Thailand

Electrificadora del Caribe S.A. E.S.P. Colombia

ELETROPAULO-Metropolitana Eletricidade de Sao Paulo SA Brazil

Elia System Operator SA Belgium

Emera Inc. Canada

Emgesa S.A. E.S.P. Colombia

Empresa de Energia de Bogotá S.A. ESP Colombia

Empresa Nacional de Electricidad S.A. Chile

Empresas Públicas de Medellín E.S.P. Colombia

Enagas SA Spain

EnBW Energie Baden-Wuerttemberg AG Germany

Endesa SA Spain

ENEA S.A. Poland

Enel Green Power S.p.A. Italy

19

Enel SpA Italy

Energy Development Corporation Philippines

Energy World Corp. Ltd. Australia

Enersis S.A. Chile

Eneva S.A. Brazil

Enexis Holding N.V. Netherlands

ENN Energy Holdings Limited China

Entergy Corporation United States

Envestra Ltd. Australia

EVN AG Austria

EWE AG Germany

Exelon Corporation United States

Federal Grid Company of Unified Energy System JOINT-STOCK COMPANY Russia

FirstEnergy Corp. United States

Fortis Inc. Canada

Fortum OYJ Finland

Gail India Ltd. India

Gas Natural SDG SA Spain

GDF Suez SA France

Glow Energy Public Co., Ltd. Thailand

Great Plains Energy Incorporated United States

Guangdong Electric Power Development Co. Ltd. China

Guangdong Investment Ltd. Hong Kong

Hanergy Holdings Group Company Ltd. China

Hawaiian Electric Industries Inc. United States

Hera S.p.A. Italy

Hokkaido Electric Power Co. Inc. Japan

Hokuriku Electric Power Co. Japan

Hong Kong And China Gas Co., Ltd. Hong Kong

Huadian Energy Company Limited China

Huadian Power International Corporation Limited China

Huaneng Power International Inc. China

Hydro-Quebec Canada

Iberdrola SA Spain

Infigen Energy Australia

Infratil Ltd. New Zealand

Integrys Energy Group, Inc. United States

Inter RAO UES Russia

Interconexion Electrica SAESP Colombia

Isagen S.a. E.s.p. Colombia

ITC Holdings Corp. United States

Jaiprakash Power Ventures Ltd. India

Joint Stock Company E.ON Russia Russia

Joint Stock Company Russian Grids Russia

JSC TGC-1 Russia

JSW Energy Ltd. India

Just Energy Group Inc. Canada

Kansai Electric Power Co. Inc. Japan

20

Korea Electric Power Corp. South Korea

Korea Gas Corp. South Korea

Kyushu Electric Power Co. Inc. Japan

Light SA Brazil

Manila Electric Co. Philippines

Manila Water Co Inc. Philippines

MDU Resources Group Inc. United States

Mosenergo AO Russia

N.V. Nederlandse Gasunie Netherlands

National Fuel Gas Co. United States

National Grid plc United Kingdom

NextEra Energy, Inc. United States

NHPC Ltd. India

Nisource Inc. United States

Northeast Utilities United States

Northland Power Inc. Canada

NRG Energy, Inc. United States

NTPC Ltd. India

NV Energy, Inc. United States

OGE Energy Corp. United States

ONEOK Inc. United States

Open Joint Stock Company First Power Generating Company on the Wholesale Energy Market Russia

Open Joint-Stock Company RusHydro Russia

Ormat Technologies Inc. United States

Osaka Gas Co., Ltd. Japan

Pennon Group plc United Kingdom

Pepco Holdings, Inc. United States

Petronas Gas Bhd Malaysia

PG & E Corp. United States

PGE Polska Grupa Energetyczna S.A. Poland

Pinnacle West Capital Corporation United States

Portland General Electric Company United States

Power Assets Holdings Limited Hong Kong

PowerGrid Corporation of India Ltd. India

PPL Corporation United States

Progress Energy Inc. United States

Promigas SAESP Colombia

PT Perusahaan Gas Negara (Persero) TBK Indonesia

Public Power Corporation S.A. Greece

Public Service Enterprise Group Inc. United States

Questar Corporation United States

Ratchaburi Electricity Generating Holding Public Co. Ltd. Thailand

Red Electrica Corporacion S A. Spain

Reliance Infrastructure Ltd India

Reliance Power Limited India

Réseau de Transport d’Electricité France

Rubis SA France

21

RWE AG Germany

Scana Corp. United States

Sempra Energy United States

Severn Trent Plc United Kingdom

Shikoku Electric Power Co. Inc. Japan

Snam SpA Italy

Southern Company United States

Spark Infrastructure Group Australia

SSE plc United Kingdom

Statkraft AS Norway

Statnett SF Norway

Suez Environnement Company SA France

Tata Power Co. Ltd. India

Tauron Polska Energia SA Poland

TECO Energy, Inc. United States

Telecom Plus plc United Kingdom

Tenaga Nasional Bhd Malaysia

TenneT Holding B.V. Netherlands

Teollisuuden Voima Oy Finland

TERNA - Rete Elettrica Nazionale Società per Azioni Italy

The Abu Dhabi National Energy Company PJSC United Arab Emirates

The AES Corporation United States

The JSC “Third Generation Company of the Wholesale Electricity Market “ Russia

The Open Joint-Stock Second Generation Company of the wholesale electricity market Russia

The SP AusNet group Australia

Toho Gas Co. Ltd. Japan

Tohoku Electric Power Co. Inc. Japan

Tokyo Electric Power Co. Inc. Japan

Tokyo Gas Co. Ltd. Japan

Tractebel Energia S.A. Brazil

TransAlta Corp. Canada

UGI Corp. United States

United Utilities Group PLC United Kingdom

Vattenfall AB Sweden

Vector Ltd. New Zealand

Vectren Corporation United States

Veolia Environnement S.A. France

Verbund AG Austria

Westar Energy, Inc. United States

Wisconsin Energy Corp. United States

Xcel Energy Inc. United States

YTL Corp. Bhd Malaysia

YTL Power International Bhd Malaysia

Zhejiang Southeast Electric Power Co China