1. IMO 2004-2006 BUSINESS PLAN Financial Overview September 30, 2003 Regulatory Affairs Standing Committee

2. Agenda Assumptions utilized in business plan Changes impacting the IMO over the planning period Resource estimates 2003-2006 Questions

3. Planning Assumptions Load forecasts consistent with most recent IMO 18-month and 10-year forecasts. Cumulative surplus at the end of 2003 is carried forward to apply to usage fee in 2004, 2005 and 2006. Long-term debt with Province of Ontario is refinanced in 2005 at a floating rate with the ability for repayments at least twice annually. Floating interest rate on long-term debt assumed to be in the range of 3.25% to 4.5% over the planning period. Repayment of debt over the planning period - $100M in 2003, $50M in 2005 and $30M in 2006 Capital spending of $20M per year, in addition to $35M for Day Ahead Market. Shortened IT hardware service life changes reflected. Pension expense for 2004 based on actual returns to the end of August 2003 and 2005/2006 expense based on plan return of 7.25% annually, consistent with the assumed pension plan long-term rate of return.

4. Changes from Last Year’s Plan Introduction of Bill 210 –Increased complexity for settlements processes –Confirmation of need for Market Evolution Program –Recognition of an increased need for stakeholder and consumer understanding and –More comprehensive market consultation, internal and external to the wholesale market. North American blackout on August 14, 2003 –Represented an ‘eye-opener’ for the industry. –Affirmation of criticality of reliability standards, planning and industry coordination.

5. Resource Levels: 2003-2006 A net surplus of $0.8M is projected for 2003. Revenue requirements over the planning period are largely consistent with 2003 and lower than last year’s plan. Over the planning period, Day Ahead Market (“DAM”) can now be accommodated within the current fee. Budgeted staff levels are increasing modestly from current staff levels and the levels included in last year’s plan. Capital spending levels budgeted at levels consistent with 2003 estimated spending, except for DAM. The usage fee proposed over the planning period is consistent with the current level of $0.959/MWh, reflecting a fee level that has been in place since 2002.

6. Resource Estimates

7. Projected 2003 Results Projected operating surplus of $0.8M. Higher than planned revenues due to market activity and settlement clearing account. OM&A below budget due to: –lower than planned staff costs, resulting from: staff levels that were below budget; reduced overtime from 2002; and focused management of travel and training costs. –successful reduction of computer support, maintenance and equipment costs, resulting from contract renegotiations and consolidations, plus equipment and software rationalization. –Reduced telecommunication costs, a result of early completion of the Data Acquisitions and Computer Systems project and elimination of other telecommunication services. –Consultant and contract services costs below budget due to the deferral of some audit work and a credit rating, and the cancellation of other planned services. Market evolution program operating costs lower than planned, with some costs delayed to 2004. Amortization above budget due to the necessary shortening of service lives, primarily related to IT hardware. Interest below budget due to higher cash balances, higher interest rates on investments, and a reduction in the interest rate on the debt refinanced in November 2003.

8. Budgeted 2004 Requirement Total revenue requirements increasing by $1.5M, or less than 1%. OM&A is increasing by $7.8M in 2004 from 2003 projection. –Pension expense represents 43% of the increase. –Staff levels increasing in response to increased operating needs. –Consultant and contract services necessary to meet obligations and increasing demands. –Continued support of substantial infrastructure and applications. Market Evolution Program continuing in 2004, with operating costs within the level identified in last year’s plan. Amortization increasing due to continued capital spending and shortened service lives. Interest reducing due to lower debt levels and interest rates. Capital spending at $20M for ongoing capital, consistent with 2003. Capital of $35M planned for DAM - $25M in 2004, $10M in 2005.

9. OM&A - Program Costs

10. Budgeted 2005/2006 Requirements Staff levels and ongoing capital spending remain consistent with 2004. In 2005, revenue requirements increase by $1.8M (1%) due to pension expense. In 2006, revenue requirements increase by $7.1M (4%) due to pension expense and DAM related amortization.

11. Income Statements

12. Balance Sheets

13. Statements of Cash Flow

14. IMO Usage Fee