TRYING TIMESSystem Update

Central’s Perspective CUMA: September 19, 2001

Overview

The Economy: two views The Merger: two views Mandatory Pooling of Liquidity: two views Central’s Financials Y-T-D: two views

The Economy

War: good for the econ There is a war (?) There is re-building Armaments Medical supplies Computers & comm’ns Jobs

Terror: bad for the econ Different kind of war Consumer confidence Productivity More jobloss: eg airlines Economy already on ropes Body blow to economy

Centrals’ Merger

I Hate It Central will be too distant Smaller Board = less rep’n OPCO will be too powerful Haven’t seen Bus. Case:

Furtive Must be bad

like one of ceo’s canoe trips:don’t even know what river they’re on

I Love It Quicker national decisions Reduced backroom costs

eg, smaller Board; 1 CEO Higher dividend Better bond rating Stronger image in fin’l mkt Of course, have to see Bus.

Case

Never have to listen to another speech by Jonathan

Merger: Where we stand

Positive process and experience Challenges?

• Have been• Will be more – tough ones

Base case approved in July Positive case completed in August Joint Committee meeting delayed

• To negotiate final form and issues• To approve joint release of Bus. Case

Then need Regulatory approval and changes Timing Goal: Remains December 31, 2002

Mandatory Participation

Why not? Central is costly Never been a problem Power grab by Central BC pushing us around

Why introduce it? Good consumer protection Separate league and Opco Strong dividend in Bus. Case Have been liq’y challenges We have supported non-members Will we in the future? No power grab: I won’t be here Can create own Pool It’s time to join other provinces

The Great Dividend Debate

0

1000

2000

3000

4000

5000

6000

7000

8000

1996 1998 2000

BeforeRe-str'g& TaxAfter Re-Str'g& Tax

Dividend is a possibility Merger not complete How pay for it?

• Assessment?• Out of earnings?• Out of extraordinary gains?

Earnings are good• Methodologies are working• Well ahead of Budget

System growth => Capital call At yearend, Board decides;

something to play with

DISCUSSIONAND

COMMENT