Community Report

2014

We provide a safe, healthy and fulfilling work environment for our employees, with fair remuneration, fair management and opportunities for learning and professional development. We value our relationships with our customers and work to win their trust and support.

We interact with customers, employees, the public, and our business partners with integrity and respect, and at all times act in a responsible and professional manner.

We are good corporate citizens and take pride in making significant contributions to community programs in which we can add value such as energy conservation projects, business development activities, school safety programs, crime prevention programs, and other community giving such as blood donor clinics.

We value the long term health and sustainability of Burlington Hydro and will assure availability of a future electricity supply to meet customer needs and growth.

We value a fully integrated business model: we deliver superior products to our customers in a safe and efficient manner, striving for excellence and continuous improvement in all aspects of our business.

Cares about PEOPLE

Cares about COMMUNITY

Cares about STEWARDSHIP

Cares about PERFORMANCE

Cares about SHAREHOLDER VALUE

We create sustainable value for our shareholder by understanding and addressing customer needs, focusing on and promoting core business strengths, and pursuing appropriate business opportunities.

Burlington Hydro Electric Inc. (BHEI) provides essential electricity services and community investment to benefit our community of owners. BHEI oversees two subsidiary companies: a regulated local distribution company, Burlington Hydro Inc. (BHI), and an unregulated affiliate, Burlington Electricity Services Inc. (BESI). Burlington Hydro Electric Inc. is wholly owned by the City of Burlington.

Burlington Hydro Inc. manages all aspects of the electricity distribution business and is regulated by the Ontario Energy Board (OEB). Its mandate is to deliver electricity within the municipal boundaries of the City of Burlington.

Burlington Electricity Services Inc. is a non-regulated company, whose business activities include: GridSmartCity®; water billing; and entrepreneurial projects that are complimentary to BHI (i.e. micro turbine generation). BESI gives back to the community through its coordination of Burlington’s annual Lakeside Festival of Lights.

Burlington Hydro Electric Inc

Energizing our community™Table of Contents

1

Our Value Proposition 2

Investing in Reliability 4

Outage Management 6

Delivering Customer Value 8

Sustainable Communities 10

Mission Produce 12

Conservation Programming 14

GridSmartCity 15

Investing in People 16

Shareholder Report 18

Auditors Report 20

Consolidated Financials 21

Board of Directors 24

Leadership Team 24

Laying the Foundation 25

Number of Customers: 66,700

Distribution Service Area: City of Burlington

Total Size of Service Area: 188 square km

Total km of Electricity Line: 1,518 km

Electricity is integrated into the fabric of our lives and is an essential ingredient in the prosperity of the communities in which we live. It powers almost every aspect of our lives – keeping our businesses running, supporting our emergency services, our schools and our institutions.

Burlington Hydro’s priority, first and foremost, is to provide a safe and reliable source of power for our community. It’s part and parcel of maintaining and investing in infrastructure, strategically mapping out our short and long-term capital expenditures, and ensuring a financially responsible approach in conducting our business.

Albeit, we also realize that true customer value comes from providing services that go beyond wires and poles. Affordability, effective and timely communications, customer care, energy conservation, community partnerships, and social/corporate responsibility, all contribute to delivering value. We reached some important milestones in this respect in 2014.

Burlington Hydro is continually seeking out greater efficiencies, the benefits of which we are able to pass on to our customers. We’re very proud of the fact that while many of the province’s utility rates are increasing, a decrease in Burlington Hydro’s distribution rates was approved by the Ontario Energy Board (OEB) in 2014.

In addition, the integration of a new state-of-the-art Outage Management System (OMS) is a prominent centerpiece of Burlington Hydro’s efforts. Launched in July 2014, the investment in a new OMS has yielded improvements to our internal protocols when managing power interruptions, both planned and unplanned. Greater efficiencies, improved internal communications, and quicker response times have resulted. Importantly, improvements in our outage communications are also being realized, including a cutting-edge web-based outage map that pinpoints the extent of the outage in real time, gives estimated restoration times, and provides insight into the cause of the outage.

Those communications have been further enhanced by new after-hours call centre support and a new mobile application that provides access to our new outage map and other web-based services, all from the convenience of a smart phone or tablet. Our presence on social media has also grown and matured, providing a platform for us to communicate in new ways. Whether it is a tool to help customers manage their electricity costs under a Time-of-Use pricing regime, or delivering conservation and demand management programs to help residents and businesses conserve energy and realize savings, Burlington Hydro invests in resource tools with customer value as the benchmark.

We believe we are heading in a positive direction. In 2014 overall customer satisfaction came in at a 92% approval rating - a score that is 10 percentage points higher than other Ontario utilities. Our forward progress is in line with an emerging customer-centric regulatory regime that rewards greater transparency and delivers customer value.

It is with a great deal of pride that we operate within such a vibrant and livable community, where aligning our priorities with the strategic direction of the City contributes to something greater – that we are, in some measure, helping to keep Burlington a great place to live, work and play.

Our commitment to the City’s ongoing and future success remains resilient. The installation of a micro turbine cogeneration plant at the south end of our office building began in late 2014, and is expected to be fully operational this spring. The pilot project is an important step forward in implementing the Community Energy Plan, while providing heat and electricity to most of our head office. This district heating pilot demonstrates technologies that we believe could help fuel the City’s future energy needs, particularly in commercial and larger residential buildings.

How we manage emerging challenges and risks will be critical to our future success. That’s why in going forward we will be implementing a risk management tracking program to ensure financial and operational risks are fully monitored and adjusted to meet current corporate needs.

It is a question of balance – complementing the needs of our customers, our shareholder and our community. We believe that we are on a path that will continue to strengthen our company in ways that respond to customer needs, meet shareholder expectations, and give back in a progressive way to the community. With the guidance and oversight of a dedicated Board of Directors, and with a talented and committed leadership team, we look forward to our collective future with a great deal of optimism.

C. Keizer

G. Smallegange

Charles Keizer Chair

Gerry Smallegange President and CEO

Our Value Proposition

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Investing in ReliabilityBurlington Hydro continues to follow the best practices of the electricity distribution industry, adhering to the Ontario Energy Board’s (OEB) Distribution System Code (DSC) that sets out good utility practice and performance standards for the industry, including inspection requirements. Consistent with best practices, BHI has replaced or upgraded equipment as is economically viable. The net result - while the average age of the system has increased slightly, the reliability of the system has steadily improved to meet customer expectations.

Burlington Hydro’s maintenance approach is a key part of its overall strategy to minimize the life cycle costs of assets by minimizing reactive and emergency repairs. Our work practices are designed to promote a positive experience for customers with regard to safety, security of supply, continuity of service, and the timely restoration of service.

91% of respondents in Burlington Hydro’s 2014 Customer Satisfaction Survey indicated that BHI provided consistent, reliable energy, while 86% responded that BHI quickly restored power during outages – both rank well above the provincial average.

The City of Burlington has prepared high level plans for the redevelopment of the downtown core, including some significant high-rise projects that will impact electrical load densities in the area. In 2014, BHI undertook preliminary work with the developer of the Bridgewater project, a lakefront property which will combine residential and hotel amenities. This, and other potential projects, will influence the expansion of the underground distribution system and are expected to realize increased reliability through distribution automation. This work is anticipated to continue over the next number of years.

With the completion of the Tremaine Transformer Station in 2013, work continues to connect feeders across Highway 407 into the community. In addition to increasing power capacity, the feeders are being fitted with automated switches so that faults can be identified quickly and repairs made in mere seconds. In 2014, a main trunk connecting into the core of the Appleby community was completed after intensive construction to accommodate watermain work at the Bronte Creek crossing.

Through careful and pragmatic investments in technology, BHI has developed an effective and functional set of systems that meet the needs of the company. Work to incorporate these systems into a fully integrated enterprise solution continued in 2014. Among other initiatives, integration of an outage management system solution was implemented (see page 6), as well as a new Enterprise Resource Planning System. With each initiative, IT protocols continue to ensure that Cyber Security is addressed, and that organizational risks continue to be managed appropriately.

Downtown Intensification

Connecting to the Community

Towards an Integrated Enterprise Solution

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Distribution Poles installed: 214Locates delivered to customers: 10,614Transformers installed: 150New services installed: 359Suite Metering Retrofit: 230 units, 456 meter points

Deploying a State-of-the-Art Outage Management System

In the wake of increasingly extreme and frequent weather events, plans were escalated to upgrade Burlington Hydro’s Geographic Information System (GIS) with a new Outage Management System (OMS). The goal: to adopt a system that would not only enhance internal response protocols, but improve customer outage communications.

To accomplish this goal, Burlington Hydro partnered with mapping vendor AGSI to develop a state-of-the-art OMS and after extensive testing launched its new Go360 Outage Management System in July 2014.

The new system aggregates data and produces a comprehensive central information repository of current system outages. The cutting-edge technology integrates smart metering and GIS map platforms and has enhanced Control Room Operators’ ability to coordinate and deploy crews, and track power outages. The intelligent software aggregates the trouble reports and identifies possible or suspected faults in the system.

Additionally, it has streamlined and improved internal customer service processes as it relates to power outages – both planned and unplanned. Gone are the days of handwritten trouble reports. Customer service representatives (CSRs) can now link customer outage reports directly to the Control Centre 24/7. As each incident is updated, CSRs now have immediate access to information, enabling them to provide real-time and accurate updates to customers.

The system software also creates a web-based outage map. This powerful new feature is a highlight of Burlington Hydro’s mobile site. The outage map allows customers to enter their address or to simply zoom in on the map’s hard hat icon to get updates during power interruptions. With 11,500 views over a six month period - of which 63% were accessed from a mobile device – the new self-serve tool is a popular and convenient way for customers to retrieve the latest outage updates. It gives users information about where the power is out, the cause of the outage, and an estimated restoration time. Use of the tool has proven to be a particularly popular choice during widespread and severe weather events.

Go360 software is also being developed to help Burlington Hydro organize, group and pinpoint outage communications via social media. It will allow the monitoring of social media activity and the ability to respond to specific locales with outage and safety messaging. The new software tool is expected to go live in the spring of 2015.

“The introduction of the Outage Map reflects Burlington Hydro’s customer communications commitment, and in particular, our focus on making it as convenient as possible for customers to stay informed during power interruptions and extreme weather events.”

Gerry Smallegange, President and CEO

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Pursuing opportunities to improve the customer experienceFrom knowledgeable customer service representatives, administrative staff and professional engineers, to highly-skilled trades staff in the field, Burlington Hydro is continually re-visiting and enhancing its training and services to ensure that customer expectations are being met. In an increasingly complex utility environment, customers are seeking more information than ever before – from how to better manage their power usage and conserve energy to safe electrical practices and better understanding their bills.

Burlington Hydro understands the importance of taking the pulse of its community and customers. That’s why the company conducts a yearly Customer Satisfaction Survey, through its partner UtilityPULSE. Not only does the survey provide a window into what is working, but it helps to support discussions around improving customer care at every level in the company.

Survey SnapshotBurlington Hydro consistently scored well, and often above the provincial benchmark in the 2014 Satisfaction Survey:

Delivering Customer Value By the Numbers

98

91% agree BHI provides consistent reliable electricity

86% agree BHI quickly handles outages and restores power

86% agree BHI deals professionally with customers’ problems

85% agree that BHI quickly deals with issues that affect customers

86% Overall quality service excellence score

92% Overall customer satisfaction score

Connecting with Customers Number of calls handled by customer service: (6,333 reporting outages) 58,685 Responses to inbound mail/faxes/emails: 8,045

Website Stats www.burlingtonhydro.com

Total 2014 website visitors: 179,154 By PC: 123,088 By Smartphone: 37,382 By Tablet: 18,684

Twitter Feed @BurlingtonHydro

Followers 1,732 Tweets 473

E-Services

e-billing customers: 12,490 Time-of-Use Toolkit subscribers: 10,510

“The plan [Community Energy Plan] helps us identify areas where conservation and efficiency measures can be focused. It also assesses the potential for local generation, particularly through renewable energy, and the use of smart grid technology. We will find ways to move forward with initiatives identified in the plan this year.”

City of Burlington Mayor Rick Goldring (from the State of the City Address, February 2015)

Investing in Sustainable Communities Connecting Renewables

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Implementing the Community Energy PlanBy aligning its business priorities with the City of Burlington’s long-term strategic planning - as it relates to responsible power management and energy sustainability - Burlington Hydro is contributing to the growth and prosperity of the community it serves.

Consistent with this approach, Burlington Hydro partnered with the City and other key stakeholders to develop a Community Energy Plan (CEP) which was endorsed by City Council in January 2014. The plan aims to ensure stable and safe distribution networks and offer up sustainable energy options to accommodate the City’s planned growth and economic development. Its governance structure includes a steering committee – on which Burlington Hydro continues to play a leadership role – helping to oversee implementation. This includes ongoing stakeholder collaboration, budgeting and management, reporting and measurement, and periodic updating.

An important feature of community energy planning is the exploration of options for potential district heating and cogeneration. As a key partner in the development of the CEP, BHEI has committed to demonstrating technologies and evaluating their effectiveness in commercial and larger residential buildings by undertaking certain pilot projects through its affiliate, Burlington Electricity Services Inc.

In late 2014, work to install a micro turbine cogeneration plant as part of a pilot project began at the south side of the company’s head office. Once interconnections into the building’s electrical supply and heating system are completed, the unit will commence operating, producing 90 kW of electricity and sufficient heat for most of the BHEI building. It’s a positive step forward in implementing an important piece of the CEP.

District heating provides heat for multiple buildings from a single plant. Hot water or steam is distributed to a building(s) through underground piping. This is an efficient source of energy as district heating systems operate at higher efficiencies than individual heating systems in buildings. The plant is self-contained and portable, which is suitable for permanent relocation in the future.

Solar Feed-in Tariff (FIT) ProjectsFIT projects include renewable installations with a generating capacity greater than 10 kilowatts (kW). Solar projects connected by Burlington Hydro in 2014 included, among others:

• Two 100 kW solar installations at Longo’s – one at Fairview, one at the Walkers Line location

• 50 kW solar panel array at the City of Burlington’s Parks and Recreation facility on Harvester Rd

• 60 kW solar installation at Port Nelson Untied Church

2014 Burlington Connections: 9 (installed capacity - 1,660 kW*)*This is equivalent to the electricity it takes to power 196 homes for a year.

Solar MicroFIT ProjectsMicroFIT projects include renewable installations with a generating capacity less than 10 kW. All microFIT generation projects connected by Burlington Hydro have been solar installations.

2014 Burlington Connections: 19 (installed capacity - 170 kW*)*This is equivalent to the electricity it takes to power 20 homes for a year.

Refrigeration System Upgrade NetsMission Produce Power Savings

“The saveONenergy program made it financially practical to send additional money upfront to upgrade the refrigeration and controls system design for our new facility in order to reduce our annual energy consumption, and ultimately, reduce our utility payments.”

Jake Nixon, Vice President of Engineering & Process Improvement, Mission Produce Inc.

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Mission Produce didn’t become a global entity in the avocado industry without the foresight of good business judgment and attention to operational efficiency. That’s why the refrigeration system upgrade at its newly expanded Burlington Plant on Howard Road is giving them an edge and providing energy efficiencies that improves the bottom line.

Mission Produce received an incentive cheque for $71,400, as part of the saveONenergyOM Process and Systems Upgrade Initiatives Program, a Conservation and Demand Management (CDM) program tailored for business and delivered by Burlington Hydro.

Mission Produce installed a refrigeration system consisting of eight reciprocating compressors, two air cooled condensers and eleven fan coil evaporators. Electricity savings are realized by lower energy consumed by fan motors using VFDs (Variable Frequency Drives) and the control system which optimizes the compressors and fans of the condensers and evaporators, providing enhanced efficiency.

Post project analysis has shown that actual savings are almost double that forecast – over 660 MWh. It’s equivalent in savings to the electricity it takes to power over 35 Burlington homes for an entire year. That represents some impressive numbers with approximate savings of $55,000 on Mission’s annual electricity bill. Just as importantly, the program incentives are helping Mission Produce reduce their payback period for the upgrade to just over one year.

Mission Produce is a local business that has taken advantage of concrete financial incentives to undertake a major energy retrofit project. Burlington Hydro delivers a portfolio of saveONenergy programs for every size and description of business.

Incentive Amount: $71,400

Expected electricity savings: 357MWh/Year

Actual electricity savings: 663MWh/Year

Project Benefit: Based on actual $55,000/Year

Pre-retrofit electricity consumption: 1,746MWh/Year

Post-retrofit electricity consumption: 1,083MWh/Year

Project Payback (w/o incentives): 3.08 Years

Project Payback (with incentives): 1.14 Year

As a partner in the evolving GridSmartCity (GSC) partnership (a 32-partner consortium of industry organizations formed in 2009), Burlington Hydro is also engaging and sharing its expertise as it relates to self-healing grids, electric vehicle infrastructure, conservation program implementation, renewable energy initiatives, cooperatives and community energy planning, among others.

The group’s ten utility partners formed the GSC Cooperative in 2013 - an entity that is bringing greater efficiencies and broader scope to the purchasing power of partner utilities. The Co-op is providing opportunities to share knowledge, skills and expertise, as well as enhance the effectiveness of service delivery and operational activities. In 2014, as a result of work undertaken by the Benefits Committee, co-op members realized substantive savings from the industry’s benefits provider. Ultimately, it is customers who will benefit from the anticipated savings and value-add that the co-op approach brings to the table.

Conservation at HOME Investing in Partnerships

The Science of Dealing with Extreme Weather Events

2014 Overall Savings

Conservation at WORK

saveONenergyOM Residential Programs• Over 200 old fridges and freezers collected and disposed of in an environmentally responsible way.

• 1,042 peaksaver PLUS® participants and programmable thermostats installed

• Over 1,500 homeowners took advantage of the Heating and Cooling incentive, installing energy efficient furnaces and air conditioners

• Over 23,000 coupons redeemed for energy efficient products – from LED light bulbs and power bars to ENERGY STAR® qualified light fixtures

• 500 residences participated in the Home Assistance Program (HAP), assisting low-income residents with energy efficiency retrofits and audit services

saveONenergyOM Business ProgramsIn 2014, over $700,000 was paid in incentive monies to participating Burlington businesses.

• Over 90 businesses participated in system and equipment retrofits

• 40 businesses participated in the small business lighting program

• 229 peaksaver PLUS® small commercial participants and thermostats installed, helping to reduce critical peak demand

• 12 companies participated in the Demand Response 3 program, an incentive-based demand program designed specifically for larger commercial customers

GridSmartCity RoundtableLeading experts on weather and catastrophic events, together with 200 plus stakeholders from the electricity and smart grid sectors, gathered in Oakville for the 5th annual GridSmartCity Round Table in November 2014. The forum examined the potential for more frequent extreme weather events, how to mitigate risk and costs, and other weather-related preparedness strategies.

Keynotes included Dr. Erwann Michel-Kerjan, Executive Director, Wharton Risk Management Centre; Chris St. Clair, Meteorologist, The Weather Network; and, Paul Kovacs, Executive Director, Institute of Catastrophic Loss Reduction.

Over 6,500 kWs of peak demand Over 5.8 million kWh in electricity consumptionBurlington Hydro had met 87% of its 2011-2014 Energy Consumption Target by the beginning of 2014, the only Halton Region utility to have met 80% or better of their consumption target. (Ontario Energy Board, “CDM Report – 2013 Results,” Dec 2014)

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Investing in People

Safety FirstBurlington Hydro embraces the safety – of employees, contractors, customers and the general public – as a number one priority.

On-the-JobIn an industry where powerline crews and other electrical field staff not only have to prepare for the dangers associated with working with high voltage electrical equipment, but have to often deal with extreme weather conditions, ensuring worker safety is paramount. Burlington Hydro training programs focus on maintaining a highly skilled and proficient workforce that supports a proactive and preventative safety culture within the organization. In 2014, a portfolio of 14 safety training programs were undertaken by trades employees, from new employee safety orientation and standard first aid/annual CRP/AED, to rescue practice drills and Utility Work Protection Code training.

In recognition of the company’s proven safety excellence, the Infrastructure Health and Safety Association (IHSA) awarded Burlington Hydro the ZeroQuest® Gold Award Outcomes Level 3 in 2014.

In Our SchoolsPromoting electrical safety in the community starts with educating our kids. That’s why every year Burlington Hydro goes into area elementary schools to teach electrical safety and conservation topics to a variety of age groups. In 2014, we provided interactive electrical safety programming in 10 Burlington schools, reaching over 4,600 elementary grade students.

With Trade Contractors In May 2014, Burlington Hydro partnered with Oakville Hydro to offer a free safety seminar for construction workers whose work exposes them to live powerlines and an increased risk of accidental contacts. The “Powerline Safety Seminar – Look Up, Look Out” targeted roofers, siding and eaves trough installers, landscapers, construction workers, excavators and operators of dump trucks and all types of high-lift booms. The session was timed as construction activities were ramping up for the season.

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Our employees are our best ambassadors. At Burlington Hydro we understand that at the core of a talented and inspired company is a highly trained workforce that goes the extra mile and takes pride in serving our customers and the community. Attracting, developing and retaining talent is an investment in our future. That’s why we take pride in providing a safe and respectful workplace where employees are highly valued, treated fairly, and challenged with meaningful work. It’s an environment where talent and dedication is recognized and rewarded.

Skills’ training is a critical part of an employee’s professional development. Whether that includes offerings such as Effective Supervisory Skills for Technical/Trades Staff, or a professional development process for Leadership Evolution, BHI offers a robust training portfolio. Corporate funding is also available for those qualified employees pursuing college or university level courses in work-related programs through the company’s Educational Reimbursement Program.

Not unlike other electricity distributors in the province, an aging workforce poses challenges for Burlington Hydro. Within the next five years, 33% of the company’s workforce is due to retire. The in-depth, specialized knowledge of the distribution system that has been accumulated over many years now needs to be passed to a new generation of workers. For trades’ personnel, it takes four years of apprenticeship or formal training, and several more years of hands-on experience to hone the skills that are necessary to perform work on an electrical distribution system. With this in mind, over the past five years BHI has hired 8 trades/technical apprentices and two engineering professionals.

2014 BHEI Consolidated Financial Performance at a GlanceIn 2014, execution of our operating and capital plans delivered healthy financial results that enabled us to meet all of our targets for the year. We continued to build a competitive cost structure with a sharp focus on cost savings and operational efficiency as a primary goal.

Financial Highlights 2014 2013

For the year ended December 31

(Canadian $ in millions)

Financial Results

Gross Revenue 216.1 206.6

Operating Expenses 19.3 18.9

Net Income 6.1 5.4

Balance Sheet Information

Total Assets 173.4 173.7

Total Shareholder’s Equity 75.5 71.4

Financial Measures

Return on Equity 8.0% 7.6%

Operating Expenses as a % of Gross Revenue 8.9% 9.2%

Interest Coverage 2.7 2.4

Value Measures

Dividend Yield 4.4% 6.0%

Net income $6.1 millionStable Earnings (millions)

Shareholder Report

Taking a Long-Term ViewWith a strong financial foundation that underpins the execution of our operating and capital programs, we are committed to delivering strong returns to our Shareholder while undertaking the strategic investments required to ensure a safe and reliable distribution electricity grid. The 2015 business plan maintains our momentum by investing over $7.8M in new capital.

We view ROE as an important measure of our effective use and deployment of shareholder’s capital. Our business model is the backbone of our value proposition, consistently achieving financial results within a tight band. Return on Equity in 2014 was 8.0%.

BHEI has made dividend payments to our Shareholder, the City of Burlington for 14 consecutive years. Since 2001, total interest and dividends provided to our Shareholder have exceeded $89 million. In 2014, the City of Burlington received $2.0 million in dividends from Burlington Hydro Electric Inc. and interest revenue from Burlington Hydro Inc. of $2.5 million for a total return of $4.5 million.

Annual Energy Sales

Return on Equity 8.0%Profitable Growth

Dividends and Interest $4.5 millionDelivering Shareholder Returns (millions)

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Burlington Hydro’s focused strategy has guided us in delivering consistent and sustainable profitability year after year. Net Income in 2014 was $6.1million, providing the cash flow to both reinvest in our business and provide a return to our Shareholder.

Burlington Hydro has worked hard to assist customers to reduce their electricity consumption over the years. While the community continues to grow, overall electricity consumption has been reduced through the promotion of successful conservation and demand initiatives.

Net Income

$8

$6

$4

$2

$0 2012 2013 2014

gWh

1,650

1,640

1,630

1,620

1,610

1,600

1,590 2010 2011 2012 2013 2014

Return on Equity

10.0%

5.0%

0.0% 2012 2013 2014

Dividends

$4

$2

$0 2012 2013 2014

Consolidated Balance SheetDecember 31, 2014, with comparative information for 2013

Report of the Independent Auditors on the Summary Financial Statements

To the Shareholder:The accompanying summary consolidated financial statements of Burlington Hydro Electric Inc., which comprise the summary consolidated balance sheet as at December 31, 2014, the summary consolidated statements of earnings and retained earnings and cash flows for the year then ended are derived from the audited consolidated financial statements, prepared in accordance with Canadian generally accepted accounting principles, of Burlington Hydro Electric Inc. as at and for the year ended December 31, 2014.

We expressed an unmodified audit opinion on those consolidated financial statements in our report dated March 25, 2015.

The summary consolidated financial statements do not contain all the disclosures required by Canadian generally accepted accounting principles applied in the preparation of the audited consolidated financial statements of Burlington Hydro Electric Inc. Reading the summary consolidated financial statements, therefore, is not a substitute for reading the audited consolidated financial statements of Burlington Hydro Electric Inc.

Management’s Responsibility for the Summary Consolidated Financial StatementsManagement is responsible for the preparation of a summary of the audited consolidated financial statements in accordance with Canadian generally accepted accounting principles.

Auditors’ ResponsibilityOur responsibility is to express an opinion on the summary consolidated financial statements based on our procedures, which were conducted in accordance with Canadian Auditing Standards (CAS) 810, “Engagements to Report on Summary Financial Statements.”

OpinionIn our opinion, the summary consolidated financial statements derived from the audited consolidated financial statements of Burlington Hydro Electric Inc. as at and for the year ended December 31, 2014 are a fair summary of those consolidated financial statements, in accordance with Canadian generally accepted accounting principles.

Chartered Professional Accountants, Licensed Public AccountantsMarch 25, 2015Hamilton, Canada

2014 2013

Assets

Current assets:

Cash and temporary investments $12,682,107 $18,038,271

Securities held as customers’ deposits 3,018,954 3,057,892

Accounts receivable 16,025,480 16,161,585

Unbilled revenue 24,574,572 25,143,933

Payment in lieu of taxes receivable 2,007,535 162,987

Inventories 2,238,799 2,261,813

Work orders in progress 418,529 320,039

Prepaid expenses 494,411 454,036

61,460,387 65,600,556

Property, plant and equipment 100,235,385 97,228,293

Intangible assets 6,746,526 6,277,372

Future payment in lieu of taxes 4,980,307 4,624,401

$173,422,605 $173,730,622

Liabilities and Shareholder’s Equity

Current liabilities:

Ontario Infrastructure loans $768,634 $735,753

Accounts payable and accrued liabilities 20,953,259 21,314,442

Customers’ deposits 3,018,954 3,057,892

Work order deposits 1,810,734 2,179,471

Deferred revenue 782,568 1,264,054

Other current liabilities 2,262,310 2,472,476

29,596,459 31,024,088

Other liabilities 1,806,362 4,125,763

Note payable 47,878,608 47,878,608

Ontario Infrastructure loans 14,987,758 15,756,392

Liability for future benefits 3,684,433 3,532,179

Shareholder’s equity:

Capital stock 45,639,338 45,639,338

Retained earnings 28,953,419 24,898,026

Paid in capital 876,228 876,228

75,468,985 71,413,592

$173,422,605 $173,730,622

2120

Consolidated Statement of Cash FlowsYear ended December 31, 2014, with comparative information for 2013

2014 2013

Revenue $216,072,769 $206,590,649

Cost of sales 185,207,995 173,889,461

30,864,774 32,701,188

Other operating revenue 1,647,470 2,394,642

Regulatory adjustment - (2,441,557)

32,512,244 32,654,273

Expenses

Operations and maintenance 8,729,583 8,902,473

Billing and collection 2,705,877 2,645,506

General administration 7,896,456 7,376,397

Depreciation and amortization 4,165,680 4,218,867

23,497,596 23,143,243

Earnings before interest expense and payment in lieu of taxes 9,014,648 9,511,030

Interest expense 3,284,208 3,971,806

Earnings before payment in lieu of taxes 5,730,440 5,539,224

Payment in lieu of taxes:

Current (2,095,988) 1,063,537

Future 1,771,035 (963,086)

(324,953) 100,451

Net earnings 6,055,393 5,438,773

Retained earnings, beginning of year 24,898,026 22,209,253

Dividends paid (2,000,000) (2,750,000)

Retained earnings, end of year $28,953,419 $24,898,026

2014 2013

Cash provided by (used in):

Operations $9,862,284 $11,092,406

Financing:

Ontario Infrastructure loans issued - 8,000,00

Repayment of Ontario Infrastructure loans (735,753) (6,658,046)

Securities held as customers deposits 38,938 (68,701)

Customers’ deposits (38,938) 68,701

Dividends paid (2,000,000) (2,750,000)

Contributions and grants 2,707,836 1,418,498

(27,917) 10,452

Investments:

Purchase of intangible assets (907,889) (3,365,978)

Purchases of property, plant and equipment (9,435,908) (9,592,854)

Purchase of contributed capital (403,300) (247,115)

Refund of contributed capital - 5,579,455

Proceeds on sale of property, plant and equipment 2,908 -

Other assets/liabilities (4,446,342) 877,483

(15,190,531) (6,749,009)

Increase (decrease) in cash and temporary investments (5,356,164) 4,353,849

Cash and temporary investments, beginning of year 18,038,271 13,684,422

Cash and temporary investments, end of year $12,682,107 $18,038,271

Consolidated Statement of Earnings and Retained EarningsYear ended December 31, 2014, with comparative information for 2013

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Board of Directors

Leadership Team

Burlington Hydro Electric Inc. is committed to strong corporate governance and accountability. Our Board of Directors are stewards of the public’s trust, working to govern Burlington Hydro Electric in the best interests of our customers and the Burlington community.

From left to right: Charles Keizer, Chair; Mayor Rick Goldring; Patrick Moyle; Darla Youldon; Don Dalicandro; John Maheu; and, Phil Nanavati.

From left to right: Gerry Smallegange, President and CEO; Michael Kysley, Executive Vice President and Chief Financial Officer; Dan Guatto, Chief Operating Officer; Jennifer Smith, Vice President, Corporate Relations and Chief Human Resources Officer; Joe Saunders, Vice President, Regulatory and Asset Management; Dan Lowry, Chief Information Officer.

Burlington Hydro Electric Inc. is led by a talented team of professionals dedicated to managing responsibly. Our leadership team is committed to achieving excellence and driving continuous improvement across all areas of our business.

Laying the Foundation for Future SuccessPerformance excellence is achieved by sustained effort. It’s an accumulation of vision and perseverance over a period of time - by our Board of Directors, leadership team and employees.

As a result we are achieving some measurable successes:

• Reliability has improved steadily year over year, for the past ten years.

• 5 years ago, Burlington Hydro served approximately 57,000 residential and 5,900 business customers. That number topped 60,000 residential customers and 6,300 businesses in 2014 – a customer increase of over 5%. Even though customer counts have increased, energy usage is largely unchanged due in large part to the uptake of conservation and demand management (CDM) programs.

• The company has invested over $50M in assets since 2010 – and over 90% of that investment is in ‘field’ assets - the wires, poles and underground conduits, transformers and meters that are needed to reliably and safely deliver power to our customers.

• In 2001 BHI had an installed capacity of 335 MW, which often approached 98-99% capacity on hot summer days. By 2013, BHI’s installed capacity was 495 MW, which is projected to serve a growing community until 2035.

• Like other utilities, BHI faces external cost pressures, such as inflation. Operating costs have increased by approximately 25% since 2010. With careful planning, the company has been able to lower expenses as it relates to interest charges and taxes. The result - total costs have remained largely unchanged since 2010.

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Burlington Hydro Electric Inc.1340 Brant Street, Burlington, Ontario, L7R 3Z7

905-332-1851 @burlingtonhydro

www.burlingtonhydro.com

www.gridsmartcity.com