1. 1 Courtney Pratt President & CEO July 14, 2003 The Dynamic Tension Between Ideas and Solutions Toronto Hydro Corporation

2. 2 OPENING REMARKS  Great ideas range from products to technology to public policy  Managing innovation is a tough leadership and management challenge  Dynamic tension between empowering ideas and practical solutions  Where is the line between ‘leading edge’ and ‘bleeding edge’?

3. 3 EMPOWERING IDEAS  Willingness to invest in people and technology  Canada ranks 15 th in OECD for R&D spending  Risk tolerance  Mistake tolerance  “Champion” tolerance  Culture of trust, openness, confidence  Executive leadership

4. 4 PRACTICAL SOLUTIONS  Management controls  Hurdles or gateways  Technology  Markets  Talent  Competency ‘fit’  Executive leadership

5. 5 CASE STUDIES  Magnola plant, Noranda Inc.  Interval metering  Biodiesel fuel project, Toronto Hydro

6. 6 MAGNOLA PLANT - NORANDA INC.  New idea:  Proprietary technology to extract magnesium from serpentine tailings in Asbestos, Quebec  63,000 tonnes to be produced each year  $733 million in construction costs  Lab and pilot plant testing  Market studies  Push to build full-scale plant

7. 7 MAGNOLA PLANT – NORANDA INC.  Challenges:  Increased, pervasive competition from low-cost Chinese producers  Depressed global prices  Outcomes:  Shut-down of plant in 2003 for one year  Permanent closure is likely  $811 million in write-down costs

8. 8 MAGNOLA PLANT – NORANDA INC.  Lessons learned:  Excitement for a great idea was not tempered by a strong and independent process of review  Mistakes were made because of “project momentum”  No such thing as asking too many questions

9. 9 INTERVAL METERING  New idea:  Moving interval metering from large commercial customers to the mass market to manage demand  Barriers:  Government policy – prices fixed through 2006  Unit costs of meters - $300  Consumer education and behavior

10. 10 INTERVAL METERING  Challenges:  Burning platform  Technology Cost reduction Billing issues  Market Mass installation  People Lifestyle change

11. 11 BIODIESEL FUEL  New idea:  Use soybean oil, canola oil, animal fats and recycled cooking oil as a clean, renewable substitute for diesel fuel  30% less ground-level ozone  Barriers:  Availability of fuel, storage issues  Make green initiative cost neutral  Challenges:  Fleet size and emissions  Shareholder Direction

12. 12 BIODIESEL FUEL  Outcomes:  Pilot program started in Sept ‘01with 80 vehicles  400 biodiesel fuelled trucks now  First fleet in Canada to implement

13. 13 BIODIESEL FUEL  Lessons learned:  Empowering ideas Practical solutions  Risk tolerance  Mistake tolerance  ‘Champion’ tolerance  Culture of trust, openness and confidence  Executive leadership

14. 14 THE POWER OF A GOOD IDEA  Spin-off effects:  Removal of 14.7¢ / litre road tax by provincial government  Removal of 4 ¢ / litre excise tax by federal government  Federal government commitment to produce 5 million litres in Canada by 2006, part of Kyoto commitment

15. 15 THE POWER OF A GOOD IDEA  New plant in Sudbury will provide $13 million in economic growth to region, crops grown locally  Full implementation by City of Brampton, City of Toronto, Kingston Transit, City of Guelph, Bruce Power  Pilot program: Winnipeg transit system, Montreal transit system, Calgary fire department

16. 16 CLOSING REMARKS  New ideas become great ideas when they are managed effectively and the stars align  “If you don’t drill wells, you won’t find oil”  Great champions and great execution  Great ideas can produce a domino effect  Industry growth  Product extensions  New technology  Changes in public policy