40-F

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 40-F

(Check one)
o	Registration statement pursuant to Section 12 of the Securities Exchange Act of 1934
	or
x	Annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934

    For the fiscal year ended December 31, 2002

    Commission file number 033-81500

GREAT LAKES POWER INC.
(Exact name of registrant as specified in its charter)

ONTARIO, CANADA
(Province or Other Jurisdiction of
Incorporation or Organization) 4991, 4931
(Primary Standard Industrial
Classification Code Number) Not Applicable
(IRS Employer Identification Number)

Suite 300, BCE Place, 181 Bay Street, P.O. Box 762, Toronto, Ontario Canada M5J 2T3
(416) 363-9491
(Address and Telephone Number of Registrant’s Principal Executive Offices)

c/o Torys, 237 Park Avenue, New York, New York 10017-3142
(212) 880-6000
(Name, Address and Telephone Number of Agent for Service in the United States)

Securities registered or to be registered pursuant to Section 12(b) of the Act:	None
Securities registered or to be registered pursuant to Section 12(g) of the Act:	None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:	Term debentures

For annual reports, indicate by check mark the information filed with this Form:

x Annual Information Form x Audited annual financial statement

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Common Shares 101,383,135

Indicate by check mark whether the registrant by filing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934 (the “Exchange Act”). If “Yes” is marked, indicate the file number assigned to the registrant in connection with such rule.

Yes o No x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

CONTROLS AND PROCEDURES

(a)

Evaluation of disclosure controls and procedures. As of a date within the 90-day period prior to the filing of this report, an evaluation of the effectiveness of the Company’s “disclosure controls and procedures” (as such term is defined in Rules 13a-14(c) and 15d-14(c) of the United States Securities Exchange Act of 1934 (the “Exchange Act”)) was carried out by the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) of the Company. Based on that evaluation, the CEO and CFO have concluded that as of such date the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in United States Securities and Exchange Commission rules and forms.

(b)

Changes in Internal Controls. Subsequent to the completion of their evaluation, there have been no significant changes in the Company’s internal controls or in other factors that could significantly affect the internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses.

UNDERTAKING AND CONSENT TO SERVICE OF PROCESS

A.	Undertaking.
	The Company undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Securities and Exchange Commission (the “Commission”) staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to: the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities.
B.	Consent to Service of Process.
	The Company has previously filed a Form F-X in connection with the class of securities in relation to which the obligation to file this report arises.
	Any change to the name or address of the agent for service of process of the registrant shall be communicated promptly to the Securities and Exchange Commission by an amendment to the Form F-X referencing the file number of the relevant registration statement.

SIGNATURES

     Pursuant to the requirements of the Exchange Act, the registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized, on May 20, 2003.

GREAT LAKES POWER INC.
By:	/s/ Alan V. Dean
	Name: Alan V. Dean Title: Senior Vice-President and Secretary

CERTIFICATION

I, Harry A. Goldgut, certify that:

1.	I have reviewed this annual report on Form 40-F of Great Lakes Power Inc.;
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
	a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
	b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and
	c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
	a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
	b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6.	The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 20, 2003
	/s/ Harry A. Goldgut
	Harry A. Goldgut Co-Chairman and Chief Executive Officer

CERTIFICATION

I, Donald Tremblay, certify that:

1.	I have reviewed this annual report on Form 40-F of Great Lakes Power Inc.;
2.	Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.	Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
	a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
	b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and
	c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
	a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
	b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
6.	The registrant’s other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 20, 2003
	/s/ Donald Tremblay
	Donald Tremblay Senior Vice-President and Chief Financial Officer

EXHIBIT INDEX

Exhibit	Description
99.1	Annual Information Form
	Annual Information Form of Great Lakes Power Inc. (the “Company”) for the fiscal year ended December 31, 2002
99.2	Management’s Discussion and Analysis
	Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended December 31, 2002
99.3	Consolidated Financial Statements
	Consolidated Financial Statements for the fiscal year ended December 31, 2002
99.4	Consent of Deloitte & Touche, LLP
99.5	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.6	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Page 1 EX-99.1 3 t09928exv99w1.htm ANNUAL INFORMATION FORM

ANNUAL INFORMATION FORM
May 20, 2003

TABLE OF CONTENTS

THE COMPANY	1
CORPORATE PROFILE	1
SELECTED FINANCIAL AND OPERATING INFORMATION	1
RECENT DEVELOPMENTS	2
THE CORPORATION’S POWER BUSINESS	3
OTHER BUSINESS OPERATIONS	9
POWER GENERATION OUTLOOK	9
POWER GENERATING FACILITIES	13
INVESTMENT ACTIVITIES	14
FINANCING ARRANGEMENTS	15
ENVIRONMENTAL MANAGEMENT	15
CAPITAL BASE AND DIVIDEND POLICY	17
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	17
CONSOLIDATED FINANCIAL INFORMATION	18
QUARTERLY OPERATING RESULTS	19
DIRECTORS AND OFFICERS	19
SUBSIDIARIES	20
ADDITIONAL INFORMATION	21

THE COMPANY

Great Lakes Power Inc. was formed on March 2, 2001 by the amalgamation under the Business Corporations Act (Ontario) of Great Lakes Power Inc. and a subsidiary of Brascan Corporation (“Brascan”), pursuant to a going-private transaction approved by the shareholders of Great Lakes Power Inc. on February 28, 2001. References to the “Company” or “Great Lakes” include Great Lakes Power Inc. and its predecessors and subsidiaries unless otherwise indicated or unless the context otherwise requires.

Great Lakes is wholly owned, directly and indirectly, by Brascan, a company operating in the real estate, power generation and financial sectors, with investments in the resource sector. Brascan’s common shares are listed on the Toronto and New York stock exchanges.

The registered and principal office of Great Lakes is BCE Place, 181 Bay Street, Suite 300, P.O. Box 762, Toronto, Ontario M5J 2T3. Unless otherwise indicated, the information appearing herein is stated as at December 31, 2002 and all dollar amounts are in Canadian dollars.

CORPORATE PROFILE

The primary business of Great Lakes and its subsidiaries is the development and management of electricity generating facilities in Canada and the United States. These operations employed approximately 320 people at April 30, 2003. Great Lakes also holds a portfolio of financial investments.

Great Lakes is an independent electric power company with operations in Canada and the United States. The company operates 39 power generating stations with a combined generating capacity of 1,684 megawatts (“MW”). Great Lakes is also involved in power transmission and distribution.

Great Lakes conducts its power generating operations primarily in Ontario, Quebec and the northeastern United States, with other power operations in British Columbia and Louisiana. These operations are mainly wholly owned, either directly or through the Great Lakes Hydro Income Fund (“Income Fund”), in which the company owns a 50% interest.

SELECTED FINANCIAL AND OPERATING INFORMATION

The following table sets forth selected financial and operating information with respect to Great Lakes as at and for the five years ended December 31, 2002:

millions, except per share amounts	2002		2001		2000		1999		1998
Financial position
Total assets	$	3,500	$	2,930	$	2,642	$	2,405	$	2,256
Debt		1,498		1,152		1,002		890		816
Capital base
Convertible debentures		248		248		248		248		248
Common shares		1,126		1,051		1,001		968		936
		1,374		1,299		1,249		1,216		1,184
Revenue and net income
Power revenues	$	340	$	270	$	246	$	188	$	191
Net income		167		131		116		113		104
Net income per common share (1)	$	1.32	$	1.04	$	0.92	$	0.90	$	0.83
Dividends per common share		0.64		0.64		0.64		0.64		0.64
Operating results
Installed capacity (megawatts) (2, 4)		1,636		991		905		899		659
Electricity generation (gigawatt hours)(3)		5,584		3,959		4,003		4,222		2,361

(1)	Fully diluted
(2)	At 100%
(3)	Reflects proportionate ownership
(4)	Following the completion of two new hydroelectric generating stations during April and May 2003, the installed capacity of the Company’s generating stations increased to 1,684 MW.

1

Over the past five years, Great Lakes has not incurred any extraordinary income or expense items, nor has it made any acquisitions requiring full consolidation of results, other than the following: Hydro-Pontiac Inc. (“Pontiac Power”), which was acquired in December 1996; and the Income Fund, in which 40% of the units were acquired in 1999 and a further 10% in 2000.

Summary information on the Company’s power operations as at April 30, 2003 is shown below:

		Generating		Generating		Installed
		Stations		Units		Capacity
						(megawatts)
Ontario
	Great Lakes Power (1)		12		21		349
	Mississagi Power		4		8		488
	Valerie Falls Power		1		2		10
	Lake Superior Power		1		3		110
			18		34		957
Quebec
	Lièvre River Power		3		10		238
	Pontiac Power		2		7		28
			5		17		266
Northeast – United States
	Maine Power		6		31		126
	New Hampshire Power		6		21		31
			12		52		157
Other Power Operations
	Powell River Energy		2		7		82
	Pingston Creek (2)		1		2		30
	Louisiana HydroElectric Power		1		8		192
			4		17		304
Total			39		120		1,684

(1)	Reflects commercial operation of the Robert A. Dunford Generating Station in April 2003.
(2)	Reflects substantial completion of the Pingston Creek Generating Station in April 2003.

All the Company’s power operations listed above consist of hydroelectric generating facilities except for the Lake Superior Power cogeneration plant.

RECENT DEVELOPMENTS

The Company’s primary emphasis since 1990 has been the development and expansion of its power generating business. In 1992, the Company’s name was changed from Great Lakes Group Inc. to its present name, Great Lakes Power Inc., to reflect this business emphasis. The following is a summary of recent developments since January 1, 2000.

In December 2000, the Company’s major shareholder, Brascan, announced a going private transaction for Great Lakes, which was approved by the Company’s shareholders at a Special Meeting held on February 28, 2001. Pursuant to this offer, Brascan acquired in February 2001 the outstanding 4.3 million publicly held common shares of Great Lakes in exchange for approximately $250,000 in cash and 3.9 million Class A Limited Voting Shares of Brascan. The successor private company established on March 2, 2001 carries on the affairs of the Company under the name Great Lakes Power Inc. As a result of this transaction, the Company is no longer listed on the Toronto Stock Exchange or on any other public securities market. The Company, however, continues as a reporting issuer in Canada and the United States since it has issued public debt in the United States.

In February 2001, the Company acquired, through the Income Fund, a 50% interest in Powell River Energy in British Columbia, which owns two hydroelectric stations with an aggregate installed capacity of 82 MW and related transmission facilities having a total cost of $113 million.

2

In December 2001, Great Lakes maintained its 50% interest in the Income Fund following a public offering of 11,286,000 units of the Income Fund.

In February 2002, the Company acquired, through the Income Fund, a hydroelectric generating system in northern Maine for US$156.5 million. This system includes six hydroelectric generating stations with a combined generating capacity of 126 MW and related transmission facilities.

On May 1, 2002, the electricity market in Ontario opened to competition. As a result, Great Lakes’ power purchase agreement with Ontario Power Generation Inc. (“OPG”) terminated.

In May 2002, the Income Fund filed a preliminary prospectus for the issue of 14,700,000 units. The Company purchased 50% of the issued units and thereby maintained its 50% ownership interest in the Income Fund. The other units in the Income Fund are currently held by the public.

In May 2002, the Company acquired, through the Income Fund, four hydroelectric generating stations located on the Mississagi River in northern Ontario with a combined generating capacity of 488 MW from OPG for $340 million.

Also in May 2002, the Company extended its power operations in the northeastern United States through the purchase of six hydroelectric generating stations in northern New Hampshire having a combined generating capacity of 31 MW for US$32 million.

In November 2002, the Company increased its ownership in Lake Superior Power from 50% to 100% by acquiring from its partner, Duke Energy, its 50% interest for $65 million.

In April 2003, the new Robert A. Dunford generating station in northern Ontario started commercial operations. This 45 MW $75 million redevelopment project, which started construction in December 2001, replaces an older 28 MW facility and is expected to enhance the Company’s peak period generating capability in Ontario.

Also in April 2003, the 30 MW Pingston Creek generating station in British Columbia was substantially completed. This 30 MW $65 million project was developed in a 50/50 joint venture with Canadian Hydro Developers Inc. and commenced commercial operations in May 2003. The completion of this project increased the Company’s total power generating capacity to 1,684 MW.

THE CORPORATION’S POWER BUSINESS

Summary

The Company operates its power business in four business groups: Ontario, Quebec, Northeast United States and Other Power Operations. The Company’s principal operating units in each business group are described below.

Ontario

Great Lakes Power includes a generating business with 12 hydroelectric stations located on the Magpie, Michipicoten, Montreal and St. Mary’s Rivers in northern Ontario, having a combined generating capacity of 349 MW. Great Lakes Power also includes a separate transmission and distribution business, which has supplied power to the city of Sault Ste. Marie and the Algoma District for almost 90 years.

Mississagi Power includes four hydroelectric generating stations in northern Ontario, located on the Mississagi River north and east of Sault Ste. Marie, with a combined generating capacity of 488 MW. These facilities were acquired by the Income Fund in May 2002.

Valerie Falls Power is a 65% owned 10 MW hydroelectric generating station located on the Seine River in northwestern Ontario.

Lake Superior Power is a 110 MW natural gas-fired cogeneration station located in Sault Ste. Marie, Ontario.

Quebec

Lièvre River Power consists of three hydroelectric generating stations located on the Lièvre River in western Quebec with a combined generating capacity of 238 MW. This operation has four transmission interconnections with the Quebec power grid and two with the Ontario power grid.

3

Pontiac Power includes two hydroelectric generating stations with a combined generating capacity of 28 MW, located on the Noire and Coulonge Rivers in western Quebec. This operation also has a transmission interconnections with the Ontario power grid.

Northeast United States

Maine Power consists of six hydroelectric generating stations having a combined generating capacity of 126 MW, located on the main and west branches of the Penobscot River in northern Maine. This operation also has a transmission interconnection with the New England power grid. These facilities were acquired by the Income Fund in February 2002.

New Hampshire Power includes six hydroelectric generating stations with a combined capacity of 31 MW, located on the Androscoggin River in northern New Hampshire. These facilities were acquired by the Income Fund in May 2002.

Other Power Operations

Powell River Energy consists of two 50% owned hydroelectric generating stations in southwestern British Columbia, with a combined generating capacity of 82 MW.

Pingston Creek consists of a 50% owned hydroelectric generating station located in south central British Columbia, with a generating capacity of 30 MW. This project commenced commercial operations in May 2003.

Louisiana HydroElectric Power owns and operates a 192 MW run-of the river hydroelectric generating station and sediment control facility on a diversion of the lower Mississippi River in Louisiana. The Company has a 75% residual interest in this facility.

Great Lakes is also participating in the development of hydroelectric stations in Brazil. Three stations are now under construction in southern Brazil, and will have a combined generating capacity of 61 MW. These stations are expected to be completed in 2003.

Great Lakes is committed to growing its power generation business by expanding its production base through developing greenfield sites and acquiring existing power generating assets, and by enhancing its capacity to access interconnected energy markets in Canada and the United States.

Most of the Company’s power businesses are wholly owned, either directly or through the Great Lakes Hydro Income Fund, an unincorporated open-ended trust created in 1999 in which the Company owns 50% interest. The Income Fund’s units are listed for trading on the Toronto Stock Exchange. The five operations owned by the Company through the Income Fund are wholly owned Mississagi Power, Lièvre Power, Maine Power and New Hampshire Power, and 50% owned Powell River Energy.

A description of each of the Company’s principal operating units follows.

Great Lakes Power

Great Lakes’ hydroelectric generation business and its transmission and distribution system in northern Ontario, (together “Great Lakes Power”) are held through wholly owned Great Lakes Power Limited (“GLPL”). Great Lakes Power generates electricity from its 12 wholly owned hydroelectric generating stations, which are located on the St. Mary’s, Montreal, Michipicoten and Magpie Rivers and have a total installed capacity of 349 MW.

Great Lakes Power’s 12 generating stations are operated by remote control from a control centre in Sault Ste. Marie. Substations on each river system are linked by 449 miles of 115 and 230 kilovolt (“kV”) transmission lines. The system is interconnected with the Ontario power grid at Wawa, Ontario, and via two 230 kV transmission lines at Mississagi, Ontario, 46 miles east of Sault Ste. Marie. Great Lakes Power supplies electricity to its direct customers through 1,064 miles of distribution lines. Great Lakes Power employs 137 people.

Up until May 1, 2002, Great Lakes Power’s stations generated, on average, approximately 65% of the power required to meet the historical needs of its customers. The balance of the electrical power required to serve these customers was purchased from OPG, formally part of Ontario Hydro. Following the opening of Ontario’s electricity market to competition on May 1, 2002, Great Lakes Power as a local distributor is required to deliver power within its service area, which is supplied from Ontario’s spot market. St. Marys Paper and PUC Inc. continue to be bilateral customers of Great Lakes Power. Great Lakes Power also continues to deliver power to its historical service area through its distribution division, serving approximately 11,600 customers. Great Lakes Power’s own power generation output can be sold into the spot market in Ontario, into neighbouring competitive electricity markets or under bilateral contracts.

4

Great Lakes Power has a comprehensive maintenance program to extend the operating life of its generating facilities and to maintain unit efficiency. This program includes annual examinations of major items of equipment, intensive reviews of dams, weirs and spillways every four to five years, and complete overhauls of generating units as required.

Permitting and preliminary engineering are under way for a $25 million high-voltage transmission interconnection with utilities in the adjacent US states of Michigan and Wisconsin. This involves building transmission lines with a capacity of up to 300 MW at 230 kV linking Ontario and these utilities. This interconnection would greatly enhance the feasibility of the proposed Montreal River pumped storage facility and other expansions to the system, and would provide the physical connections to enable the Company to sell its power in the United States.

Mississagi Power

On May 17, 2002, the Company acquired, through the Income Fund, four hydroelectric generating stations on the Mississagi River in northern Ontario (“Mississagi Power”) from OPG for $340 million. This system is owned by the Income Fund through its wholly owned subsidiary, Mississagi Power Trust.

The Mississagi Power system includes four generating stations containing 8 generating units with an aggregate installed capacity of 488 MW, located approximately 110 kilometres north and east of Sault Ste. Marie. The stations include Aubrey Falls (162 MW), George W. Rayner (46 MW), the first station built on the Mississagi River, Wells (239 MW) and Red Rock Falls (41 MW). These four stations were built by the former Ontario Hydro between 1947 and 1970. These operations employ 21 people.

Valerie Falls Power

Valerie Falls Power Limited Partnership (“Valerie Falls Power”) is a limited partnership formed in 1993 to develop a 10 MW hydroelectric station on the Seine River at Valerie Falls, three miles north of Atikokan in northwestern Ontario. Great Lakes holds a 65% controlling interest in the partnership through GLPL, the general partner. The other 35% interest in Valerie Falls Power is held by the limited partner, Seine River Power Inc., a company controlled by a local business partner. Development of the project was carried out jointly by Great Lakes and its local partner and, since commissioning in 1995, the project has been managed and operated by Great Lakes.

Valerie Falls Power is party to a power sales agreement dated June 1992 with Ontario Electricity Finance Corporation (“OEFC”) for the sale of power produced by the station, which terminates on December 31, 2042. Under the terms of the agreement, OEFC has agreed to purchase all of the power produced by the plant for 50 years, according to a fixed-price schedule based, in general, on the Ontario Consumer Price Index. If the plant fails to produce power for 24 consecutive months, the terms of the agreement allow OEFC to terminate the agreement upon 60 days written notice.

Lake Superior Power

Lake Superior Power Limited Partnership (“Lake Superior Power”) is a limited partnership formed in 1991 to develop and operate a 110 MW natural gas-fired cogeneration plant in Sault Ste. Marie, Ontario. In 2002, the Company increased its interest in this partnership from 50% to 100%. The general partner is Lake Superior Power Inc., which holds a 1% interest in the project. Great Lakes holds its interests in the general and limited partnerships through GLPL. Lake Superior Power employs 16 people.

The Lake Superior Power cogeneration plant, which commenced production in 1993. It uses two aero-derivative natural gas-driven turbines to generate electricity. Heat generated by the gas turbines is captured by two heat-recovery steam generators and the high-pressure steam they produce is in turn used to drive a steam turbine to generate additional electrical energy. Low-pressure steam is also available for sale to industrial customers. These operations employ 16 people.

Lake Superior Power has entered into gas supply agreements with each of Petro-Canada Inc. and Talisman Energy Inc. for the purchase of the natural gas required to run the cogeneration turbine engines. Each agreement is for a term of 15 years, which commenced on November 1, 1993, and is extendible on a year-to-year basis if mutually agreed by the parties. Lake Superior Power has also entered into 15-year transportation agreements, which commenced on January 1, 1994, with TransCanada Pipelines Limited and Centra Gas Ontario Inc. for the transportation of natural gas.

Lake Superior Power is party to a 20-year power sales agreement with OEFC (formerly part of Ontario Hydro), which commenced on April 1, 1994 under which OEFC has agreed to purchase all of the electric power produced by the cogeneration plant according to a fixed price schedule, subject to OEFC’s periodic right to require Lake Superior Power to curtail production within certain limits.

5

Low-pressure steam not used to produce electricity is available for sale to industrial customers. Lake Superior Power is currently able to sell low-pressure steam to St. Marys Paper under an agreement entered into with St. Marys Paper in October 1994.

The plant systems, equipment and facilities of Lake Superior Power are all designed for a 110 MW plant. However, the layout of the plant and site space have been designed to make it possible to double the plant’s capacity. This will be undertaken if and when additional long-term supply contracts can be arranged.

Lièvre River Power

The Lièvre River Power hydroelectric generation, transmission and distribution system is located in western Quebec on the Lièvre River system, a tributary of the Ottawa River. Lièvre River Power was developed by James Maclaren Industries Inc. (“James Maclaren Industries”), a subsidiary of Nexfor Inc. (“Nexfor”), to service the electricity needs of its pulp and paper operations and other industrial customers. In 1999, Nexfor sold Lièvre River Power to the Income Fund, retaining 21% of the units in the Fund, which it sold in May 2000.

Lièvre River Power’s production base consists of three generating stations on the Lièvre River having a combined generating capacity of 238 MW. The 105 MW Masson station is located in the town of Masson-Angers just north of the Ottawa River and 18 miles east of the City of Hull. The Masson Station is the operating centre for the Lièvre River Power system and, since 1998, for the two Pontiac Power stations. The 38 MW Dufferin station is located in the City of Buckingham three miles upstream. One generating unit at the Dufferin Station is scheduled for returbining in 2001. The uppermost station on the river, the 95 MW High Falls plant, is located 24 miles north of the Ottawa River.

Water for these power stations is stored primarily at three reservoirs located upstream on the Lièvre River and two of its tributaries, which are owned and operated by the Government of Quebec. The system also includes five substations and approximately 30 miles of 120 kV transmission lines. These have four interconnections with the Quebec power grid and two with the Ontario power grid. During 2000, the power interconnection at Masson, Quebec was upgraded and expanded from 240 MW to 400 MW.

In 1999, Great Lakes entered into a Power Agency and Guarantee Agreement (“PAGA”) with the Income Fund, expiring in 2019, under which Great Lakes guarantees that the Income Fund will receive the guaranteed price for all electricity produced and delivered by the Lièvre River Power system, except in certain limited circumstances. The guaranteed price was initially set at (i) $37.00 per megawatt hour (“MWh”) for 1,065,000 MWh of electricity in any given year, and (ii) $30.00 per MWh for electricity in excess of 1,065,000 MWh in any given year. Commencing January 1, 2001, the guaranteed price is subject to an annual adjustment equal to the lesser of 3% or 40% of the increase in the Consumer Price Index during the previous year. Great Lakes acts as the Income Fund’s exclusive agent in respect of sales of electricity and provides sales, scheduling, dispatching and transmission services.

Under the PAGA, a hydrology reserve credit facility is provided by Great Lakes to the Income Fund to a maximum amount of $15 million in order to levelize cash distributions to Income Fund unit holders as a consequence of changes in hydrology from year to year. The facility is available for a period ending on the earlier of (i) November 18, 2014, and (ii) the date of the sale of all or substantially all of the power system. The Income Fund is entitled to draw up to $5 million per year for such purposes. The facility is unsecured, bears interest at the prime rate of a Canadian chartered bank plus 2% and is repayable solely from excess revenues of the Income Fund in years when electricity generated and delivered by the power system exceeds 1,418 GWh per annum or upon the sale of all or substantially all of the Lièvre power system.

In 1999, Great Lakes entered into a Management, Operations and Maintenance Agreement with the Income Fund expiring in 2019, to operate and maintain the Lièvre River Power system in accordance with prudent business practice and an approved annual operating plan. In addition, Great Lakes provides the Income Fund with certain administrative and support services. These services are provided through Brascan Power Services Inc., a wholly owned subsidiary of Great Lakes that employs 81 people.

Pontiac Power

Hydro-Pontiac Inc. (“Pontiac Power”) is a Quebec corporation acquired by Great Lakes in December 1996. Pontiac Power owns two hydroelectric generating stations on tributaries of the Ottawa River in western Quebec, with a combined generating capacity of 28 MW. Great Lakes operates these facilities with a staff of 7 managed in conjunction with Lièvre River Power.

The 11 MW Waltham station is located on the Noire River and the 17 MW Coulonge station is located on the Coulonge River.

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Pontiac Power has entered into power contracts with Hydro-Québec for the sale of power produced by the Waltham and Coulonge Stations. Under these contracts, Hydro-Québec has agreed to purchase all of the power produced by these stations at rates, which increase annually according to the increase in the consumer price index for the preceding year. The contracts have a term of 25 years, commencing December 1, 1995 for Waltham and December 1, 1994 for Coulonge. Both contracts include a renewal provision for a further 25 years on completion of the current contracts in 2019 and 2020, respectively.

Maine Power

On February 1, 2002, the Company acquired, through the Income Fund, an integrated hydroelectric generating and distribution system located in northern Maine (“Maine Power”) from Great Northern Paper Inc. (“Great Northern Paper”) for US$156.5 million. This system is owned by the Income Fund through GNE Trust, a Quebec trust, and GNE LLC, a limited liability Delaware corporation. Maine Power is operated by Great Lakes Hydro America, a wholly owned subsidiary of the Income Fund, which employs 19 people.

Maine Power’s generating facilities include six hydroelectric stations containing 31 generating units with an aggregate installed capacity of 126 MW. The system’s watershed has an area of 3,350 square miles. Water storage is provided from 11 reservoirs with an aggregate storage capacity of 300,000 megawatt hours. The system is interconnected with the New England Power Pool through a 20 MW transmission line. In November 2002, work commenced on increasing the capacity of this interconnection to 130 MW through the construction of a 115 kV transmission line. This project is expected to be completed in the first half of 2003.

Concurrently with the acquisition of the Maine Power system, Great Lakes, Brascan Energy Marketing Inc. (“BEMI”) and Great Northern Paper have entered into certain agreements, including a twenty-year master power purchase and sale agreement pursuant to which, except under certain limited circumstances, BEMI shall purchase from Great Northern Energy all the energy produced by the Maine Power system at a fixed price of US$35 per megawatt hour, escalating annually by 20% of the increase in the US Consumer Price Index in the previous year. Under a guarantee dated January 31, 2002, Great Lakes guarantees BEMI’s payment obligation under the power purchase and sale agreement, in the event that an event of default pursuant to such agreement occurs; or BEMI ceases to carry on business.

New Hampshire Power

On May 31, 2002, the Company acquired, through the Income Fund, six hydroelectric generating stations on the Androscoggin River near the towns of Berlin/Gorham in northern New Hampshire (“New Hampshire Power”) with a combined generating capacity of 31 MW for US$31.5 million. This system is owned by the Income Fund through its wholly owned subsidiary, Great Lakes Hydro America. New Hampshire Power is operated in conjunction with Maine Power through Great Lakes Hydro America.

New Hampshire Power’s generating facilities include six stations with 21 generating units which generate approximately 185 GWh of electricity annually. These generating facilities are all licensed by the US Federal Regulatory Agency (“FERC”). All the electricity they produce is being sold by the Company’s power marketing operations.

During the first quarter of 2003, Great Lakes commenced the construction of a 25 MW natural gas-fired cogeneration station in Berlin/Gorham, which will provide electricity and steam for sale to nearby pulp and paper facilities. These facilities were acquired by Nexfor Inc., an affiliate of Brascan, a the time the Company acquired New Hampshire Power.

Powell River Energy

Powell River Energy Inc. (“Powell River Energy”) is a Canadian corporation owned 50% by the Income Fund, through its wholly owned subsidiary, the Powell River Energy Trust, and 50% by Norske Skog Canada Limited (“Norske Skog”), both on a fully diluted basis. In February 2001, Powell River Energy acquired from Norske Skog two hydroelectric generating stations with a combined generating capacity of 82 MW and related transmission facilities located in city of Powell River, British Columbia, for a total consideration of $113 million and assumption of a future income tax liability.

The Powell River Energy facilities were built to provide electricity for the pulp and paper operations of Norske Skog and its predecessors in the City of Powell River, which is located on the west coast of the British Columbia mainland approximately 100 miles north of the city of Vancouver. Its production base consists of two generating stations containing seven generating units with a total installed capacity of 82 MW and an average annual generation of 520 GWh.

The Powell River generating station comprises three powerhouses containing five generating units located in the town of Powell River. The Lois Lake generating station consists of one powerhouse containing two units located 10 miles south of the Powell River facilities. Water for these stations is stored in two large lakes created by the dams of the two facilities: Powell Lake, which is approximately 26 miles in length; and Lois Lake, which together with three interconnected lakes is approximately 10 miles in length. Power from the Lois Lake station is delivered via 12 miles of transmission lines owned

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by Powell River Energy to a distribution system in Powell River. These facilities are also interconnected to the British Columbia power grid.

All of the energy generated by Powell River Energy is sold to Norske Skog pursuant to a 10-year “take or pay” agreement dated January 31, 2001. Norske Skog must purchase all the energy delivered on a first priority basis before purchasing or otherwise receiving any other energy for its mill. Norske Skog is restricted from selling or using the energy from the power facilities other than at its mill. Norske Skog pays $34.95 per MWh, increasing annually by an amount equal to 20% of the increase in the Consumer Price Index for the year. Powell River Energy may make the electricity generated by the power facilities available to others if it is not otherwise needed in the ordinary course of the mill’s business.

Powell River Energy has also entered into an Operations and Maintenance Agreement with Brascan Power Services Inc., a wholly owned subsidiary of Great Lakes, to operate and maintain the Powell River Energy facilities in accordance with prudent business practice and an approved annual operating plan.

Pingston Creek Power

Pingston Creek Power is a joint venture between the Company and Canadian Hydro Developers Inc. In 2001, the joint venture commenced construction of the 30 MW Pingston Creek hydroelectric generating station located near the town of Revelstoke in south central British Columbia. In August 2002, the Company and Canadian Hydro Developers Inc. signed a 20-year agreement to sell all of the power generated by this station to BC Hydro. This station was substantially completed in April 2003 for a cost of $65 million and commenced commercial operations in early May 2003.

Louisiana Hydroelectric Power

Catalyst Old River HydroElectric, Limited Partnership (“Louisiana HydroElectric Power” or “the partnership”) is a limited partnership formed to develop and operate a combined hydroelectric generating station and flood and sediment control facility on a diversion of the Mississippi River near the Town of Vidalia (“Vidalia”), Louisiana, north of Baton Rouge. Great Lakes holds a 75% residual interest in the partnership through wholly owned Catalyst Vidalia Corporation and Vidalia Holding, LLC, which hold, respectively, a 50% general partnership interest and a 25% limited partnership interest in Louisiana HydroElectric Power. Dominion Capital Inc., which is unrelated to Great Lakes, holds the remaining 25% limited partnership interest. Louisiana HydroElectric Power employs 27 people.

After commencing power production in 1990, the facility was sold to institutional investors in a sale and leaseback transaction for US $633 million. Under the transaction, the partnership retained operational responsibilities and long-term ownership rights.

The hydroelectric generating station, known as the Sidney A. Murray, Jr. Generating Station, is located on a man-made channel which diverts water from the Mississippi River to the Red and Atchafalaya Rivers five miles away. The station uses the natural difference in elevation between these two river systems to generate electricity. It contains eight turbines with an installed capacity of 192 MW, making it one of the largest run-of-the-river stations in the world. The facility and inflow channel form an integral part of the US Army Corps of Engineers’ flood and sediment control system for the lower Mississippi River.

Substantially all of the power produced by the facility is sold to Entergy Louisiana, Inc. (“Entergy”) a wholly owned subsidiary of Entergy Inc., a U.S. energy company, under a long-term power sales agreement based on a predetermined price schedule. The remaining power is sold directly to Vidalia pursuant to a power sales agreement. Both of these agreements have substantially similar terms, are on a “pay if delivered” basis and expire on December 31, 2031. Both agreements have been approved by the Louisiana Public Service Commission.

The revenues from these sales are expected to exceed the operating costs, annual capital expenditures and lease principal and interest payments due to the institutional investors and lenders. Surplus cash flows accrue to the partners. Under the terms of the sale and leaseback transaction, however, revenues from the operation of the facility must be deposited in certain trust accounts for the payment of operation and maintenance costs, lease and royalty payments and certain other costs. Distributions from these accounts are made annually to the partners subject to certain requirements to maintain, among other things, a certain lease coverage ratio and minimum lease reserve accounts.

The FERC license to operate the facility is held jointly by the partnership and Vidalia. The transmission lines and the accompanying right-of-way to Entergy’s substation are governed by an agreement with Vidalia dated June 28, 1988. Pursuant to the terms of the agreement, the partnership leases the facility and the site and has the exclusive right to maintain and operate the facility. Vidalia has also covenanted not to transfer any right or interest in the transmission lines to anyone other than the partnership. The royalties to be paid by the partnership to Vidalia under these

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agreements are based on a percentage of gross power revenues. The percentage gradually increases from 3.75% in 1990 to 11.6% in 2021. In 2022 and thereafter, the percentage is 20%.

The partnership has also entered into an agreement with the US Army Corps of Engineers providing for the flow of water required for the facility. This agreement expires on December 31, 2031.

OTHER BUSINESS OPERATIONS

Highvale Power

Highvale Power Corporation (“Highvale Power”) was acquired by Great Lakes in July 1996. It owns 215,000 hectares of freehold lands and 3,900 hectares of Crown lease lands in central Alberta, which together contain 540 million tonnes of recoverable coal reserves. The main holdings are in the Wabamum and Magnolia coalfields near Wabamum Lake, west of the city of Edmonton, and in the Pickardville-Morinville coalfield north of Edmonton.

Approximately 115 million tonnes of recoverable coal at the Highvale mine in the Wabamum coalfield have been leased to TransAlta Utilities Corporation (“TransAlta”) under renewable royalty agreements expiring in 2005 and 2021, respectively. The Highvale mine supplies coal to TransAlta’s Keephills (766 MW) and Sundance (1,980 MW) power stations, which together produce approximately 75% of Alberta’s coal-fired energy. The coal supplied by the Highvale mine is approximately 30% of the total requirement of these two plants. The coal is mined under contract to TransAlta by Luscar Ltd. In addition to the coal reserves committed to TransAlta, Highvale Power has approximately 425 million tonnes of further reserves.

Highvale Power has entered into two agreements with TransAlta for the sale of coal in return for royalty payments. The Highvale 1 Agreement, which runs from 1972 to 2005, provides for the sale of coal to a depth of 2,275 feet above sea level on certain of Highvale Power’s lands. Royalty payments are based on annual coal production plus a predetermined annual purchase payment. The royalty rate is tied to the highest Alberta Crown royalty rate. This agreement is renewable in 2005 by mutual agreement. Coal production from the subject lands is expected to continue to approximately 2012.

The Highvale 2 Agreement, which runs from 1982 to 2021, provides for the sale of 27.3 million tonnes of coal. Royalty payments are based on annual production subject to a take-or-pay annual tonnage of 1.6 million tonnes. The royalty rate is tied to the Alberta Crown coal royalty rate plus an over-royalty rate based on a factor, which escalates over the life of the lease, adjusted to the rate of inflation. This agreement is renewable in 2021 by mutual agreement.

Energy Marketing

The Company conducts its energy marketing business through Brascan Energy Marketing Inc. (“BEMI”), a wholly owned subsidiary which conducts the Company’s wholesale energy marketing business in Canada and the United States. These operations also provide valuable market intelligence regarding pricing dynamics, regulatory systems and market participants, which serves to support the Company’s growth strategy by targeting the most attractive energy markets. BEMI’s operations are staffed in conjunction with Lièvre River Power.

The Company’s energy marketing operations sell the portion of the electricity generated by the Company’s power operations, not sold pursuant to long-term contracts, as well as power purchased wholesale, into the short-term contract and spot electricity markets.

POWER GENERATION OUTLOOK

Strategic Emphasis and Outlook

The Company will continue to emphasize control over operating and maintenance costs, explore ways of increasing its customer base and the market for its hydroelectric power, and examine potential development and redevelopment projects within its service area. Great Lakes will also continue to work on developing and operating other projects in North and South America outside its primary service area where it can apply its considerable experience in the power generating business. In pursuing such opportunities, Great Lakes will focus on small and medium-sized hydroelectric power projects, including projects with water-storage capacity, and gas-fired cogeneration projects.

Based on industry trends, Great Lakes believes it is well positioned for growth opportunities that could strengthen its power generating operations. Management believes that these industry trends favour companies like Great Lakes, which have a good operating history, a low-cost orientation, development expertise and access to capital.

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Development Opportunities

In 2000, Great Lakes announced a major capital investment program, with the objective of doubling the earnings from its power operations by 2005. Under this plan, the Company has already acquired 18 existing hydroelectric stations and completed two new hydroelectric stations. The Company is exploring further opportunities to acquire and develop additional hydroelectric generating capacity in Canada and elsewhere in North and South America.

During 2000, Brascan re-entered the electric energy business in Brazil through wholly owned Brascan Energética S.A. (“BESA”). Over 15 sites have been identified for the potential development of new hydroelectric stations, primarily stations of 30 MW or less located in southern Brazil. Great Lakes is providing advisory services and bridge financing to BESA for the development of these projects. Construction started on two of these projects in the first half of 2001: the 30 MW Passo do Meio station in the State of Rio Grande do Sul and the 16 MW Pedrinho project in the State of Paraná. During 2002, construction started on a third project, the 15 MW Salto Natal station, also in the State of Paraná. These projects are expected to be completed during 2003.

General Operating Risks

The development of projects of the type that Great Lakes undertakes is complex. There can be no assurances that Great Lakes will be able to obtain new power sales agreements, overcome any local opposition to the development of new projects, obtain the necessary site agreements, ensure fuel supply, or obtain construction contracts, steam sales agreements, licenses and certifications, environmental and other permits and financing necessary for the successful development of these projects.

Operating income from hydroelectric power generation fluctuates mainly in relation to the availability of water in the Company’s river systems. While changes in the level of precipitation impact the power generation of Great Lakes’ individual operations, its interests in hydroelectric stations located in several different watersheds help it balance the financial impact of these fluctuations. Risk is also reduced through the existence of long-term power sale contracts with many of Great Lakes’ major customers and by insurance policies that cover fluctuations in precipitation levels below specified minimum levels.

Changes in the Power Industry

In Canada, over 80% of the electricity generated is provided by large provincially-owned corporations, such as Hydro-Québec and Ontario Power Generation Inc., with the remainder being produced by smaller investor-controlled corporations or by industrial companies. In the late 1970s and 1980s, provincial governments, which have legislative authority over the supply of power and utilities, responded to consumer demand for competitive electricity tariffs by initiating programs and policies aimed at permitting the purchase of electricity from independent power producers. In the 1990s, ongoing customer demand for lower prices and the desire to improve global competitiveness in the United States, Canada and worldwide led to many initiatives to restructure the electricity industry from a highly regulated industry controlled by large vertically integrated Crown-owned utilities to one which should eventually favour increased competition and promote opportunities for new market participants. Deregulation of the electricity industry is now under way or being studied in most provinces in Canada, and a number of jurisdictions in the United States.

Ontario

In 1995, the Ontario Government established the MacDonald Committee on Competition in Ontario’s Electricity Industry to review the then existing regulatory regime and the role of the public and private sectors. In November 1997, the Ontario Government released its White Paper entitled “Direction for Change — Chartering a Course for Competitive Electricity and Jobs in Ontario”. This document embodied the Ontario Government’s restructuring plan to create competitive wholesale and retail markets for electricity in the year 2000.

The Energy Competition Act, 1998 received Royal Assent in 1998 to, among other things: (i) end Ontario Hydro’s monopoly in electricity supply and introduce a competitive market; (ii) broaden the mandate of the Ontario Energy Board to include regulation of the electricity sector and improve gas sector regulation; and (iii) reorganize Ontario Hydro into its successor commercial corporations.

The process of restructuring Ontario’s electricity industry continued on a number of fronts during 1999. On April 1, 1999, a significant milestone was reached when Ontario Hydro’s five successor companies were established as follows: Ontario Hydro Services Company Inc. now known as Hydro One Inc. (“HOI”); Ontario Power Generation Inc.; Ontario Electricity Financial Corporation (“OEFC”); Independent Electricity Market Operator (“IMO”); and Electrical Safety Authority.

In this corporate restructuring, HOI received the transmission, distribution and retail assets and OPG received the electricity generating assets. Both companies were established with commercial capital structures. OEFC is responsible for the servicing and retiring of the former Ontario Hydro’s provincially guaranteed debt and certain other legacy liabilities. OEFC is also responsible for the contracts with independent power producers, such as the Company’s

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Valerie Falls Power and Lake Superior Power operations. The IMO has been set up as a non-profit corporation responsible for ensuring the reliability and fairness of the electricity market.

Also on April 1, 1999, the Minister of Energy directed the Ontario Energy Board (“OEB”) to implement the Market Power Mitigation Agreement through licence conditions for OPG, the IMO and HOI. Included in this agreement is OPG’s requirement to de-control 4,000 MW of tier two capacity within 42 months of market opening, which, at OPG’s discretion, may include up to 1,000 MW of hydroelectric capacity. In addition, OPG is required to reduce its effective control of generating capacity in Ontario to not more than 35% within 10 years.

In late May 2000, the OEB issued its decision approving HOI’s transmission cost allocation and rate design to be in effect from the opening of the market. In June 2000, the Minister of Energy announced that the opening of Ontario’s electricity market would be delayed from the November 2000 target. In late April 2001, the Minister of Energy established a new target planning date for the opening of Ontario’s competitive electricity market as May 2002.

Ontario’s energy market was opened to full competition as scheduled on May 1, 2002. This milestone required completion of many items of work by the IMO and OEB, including the finalization of the market rules, confirmation of market readiness by the IMO and approval of the provincial transmission revenue allocation to be approved by the OEB, including the allocation to Great Lakes’ transmission division. In addition, the treatment of Ontario’s independent power companies, such as Great Lakes, was finalized. Further government actions were announced in November 2002, including the implementation of a 4.3 cent / kwh retail cap. However, the price for power that generators, other than OPG, receive in the wholesale market was not capped.

Changes in the present regulatory system could impact the operating income from the Company’s power operations in Ontario in a number of ways. Increased competition could reduce power prices in the short term and would enable customers in the Province to seek alternative suppliers. However, the Company believes that its low-cost structure, which has enabled it to maintain lower prices than are generally charged elsewhere in Ontario and neighbouring US jurisdictions, and its strategically located hydroelectric generating facilities, which can store water for use during periods when higher on-peak rates apply, should enable it to remain very competitive. A more open and competitive environment would also enable the Company to seek additional customers and, over the long run, justify the expansion of its generating base.

Quebec

In Quebec, the National Assembly assented to Bill 50, an Act Respecting the Régie de l’énergie (the “Act”), on December 23, 1996. The Act outlines the roles of the various forms of energy in Quebec’s development and the means that will be used to meet the energy needs of Quebec consumers.

According to the Act, Hydro-Québec possesses exclusive electric power distribution rights throughout Quebec, excluding those areas that, on May 13, 1997, were served by a distributor operating a municipal or private electric distribution system. On that date, the Maclaren Power System was operated by Nexfor as a private electric distribution system and, therefore, Hydro-Québec does not have exclusive distribution rights within the areas served by the Maclaren Power System.

In May 1997, Hydro-Québec officially opened its system to wholesale “wheeling” as a prerequisite for the granting by the Federal Energy Regulatory Commission of the United States to Hydro-Québec of a power marketer’s license to compete in the northeast United States electricity markets, which it received on November 12, 1997. As a result of this action, electricity producers in Québec now have the option to sell electricity outside Quebec and to “wheel” it through Hydro-Québec’s transmission lines at specified rates.

Advantages of Hydroelectric Generation

The Company believes that the unique nature of hydroelectric generation provides many advantages over other forms of electricity generation. The advantages of hydroelectric power include high level of reliability, low operating costs, operational flexibility to meet ongoing base load electricity needs and peak demands, minimal environmental impacts, and its reliance on water, a renewable resource.

Reliability: The equipment involved in producing hydroelectric power has relatively few moving parts. Since the process does not include combusting fossil fuels at high temperatures or creating steam, there is minimal wear and tear on the machinery, which contributes to long life and low maintenance requirements. Unplanned outage rates for hydroelectric units are among the lowest in the electricity industry.

Low Operating Costs: Other than water royalties paid to governmental authorities, hydroelectric facilities do not have any fuel costs, which can be significant and highly volatile for fossil-fuelled plants. As well, most hydroelectric plants can be operated remotely by a single person from a centralized control centre. Combined with the low maintenance and outstanding reliability of equipment, operating expenses are comparatively low.

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High Operational Flexibility: Hydroelectric plants can adjust quickly to changes in demand and, depending on the flow of the river and the storage capacity of the reservoirs, hydroelectric plants can service both the base power requirements of its customers as well as their peak power requirements.

Low Environmental Impact: Hydroelectric generation produces virtually no greenhouse gas emissions or any acid rain, which have major impacts on the environment. Hydroelectric generation minimizes thermal, chemical, radioactive, water and air pollution as compared to fossil-fuelled and nuclear generated power. Instead of producing substantial amounts of residual wastes during the power generation process, hydroelectric generation simply returns the water to the river.

Safety, Health and the Environment

It is the Company’s policy that all of its operating subsidiaries manage their activities having regard to high standards of safety and the well being of their employees, and that they demonstrate care for the environment through the use of recognized sustainable development practices in compliance with all relevant laws and regulations. Compliance with this policy is achieved through developing and implementing managed systems that form an integral part of the daily business activities of all the Company’s operating subsidiaries. These subsidiaries require all employees, contractors, agents and others involved in their operations to comply with established safety, health and environmental practices, and provide suitable training to achieve the desired compliance.

Great Lakes continues to act as a mentor in the Ontario Government’s Safe Workplaces, Sound Business project and volunteers as a safety ambassador for the Workplace Safety Insurance Board. These projects involve senior executives offering advice and information about their organization’s health and safety knowledge, expertise and experience as a resource for other businesses.

Great Lakes has adopted the Environmental Commitment and Responsibility Program of the Canadian Electricity Association. In December 2000, the environmental management systems at its northern Ontario and Maclaren Power operations were registered as compliant with the ISO 14001 Environmental Standard. In March 2001, Great Lakes’ hydroelectric stations received certification as “low impact renewable” electricity sources by Canada’s Environmental Choice Program (“ECP”), enabling the Company to use the ECP’s “EcoLogo” trademark for electricity generated from these stations.

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POWER GENERATING FACILITIES

The following table contains selected information on the Company’s 39 generating stations as at April 30, 2003:

										Number of
		Installed				Average		Operating		Generating
Name of Generating Station	Type	Capacity		Storage		Inflow		Head		Units
		(MW)		(cfs days)		(cfs)		(ft.)
GREAT LAKES POWER
Francis H. Clergue	Hydroelectric		52.2		—		35,926		19		3
Scott Falls	Hydroelectric		22.5		1,130		2,436		75		2
Robert A. Dunford (2)	Hydroelectric		45.0		559		2,402		148		2
McPhail	Hydroelectric		12.8		5,705		2,363		47		2
Hollingsworth (1)	Hydroelectric		23.2		220,083		1,966		114		1
Andrews	Hydroelectric		46.9		500		1,487		185		3
Hogg	Hydroelectric		18.5		3,145		1,477		77		1
Gartshore	Hydroelectric		23.0		12,670		1,472		114		1
MacKay	Hydroelectric		62.0		174,597		1,461		249		3
Mission Falls	Hydroelectric		15.0		35		1,058		117		1
Harris	Hydroelectric		12.5		212		1,055		97		1
Steephill Falls (1)	Hydroelectric		15.5		70,807		906		136		1
MISSISSAGI POWER
Red Rock Falls	Hydroelectric		41.0		4,803		3,624		92		2
Wells	Hydroelectric		239.0		32,030		2,545		214		2
George W. Rayner (3)	Hydroelectric		46.0		—		—		214		2
Aubrey Falls	Hydroelectric		162.0		183,530		1,519		181		2
VALERIE FALLS POWER
Valerie Falls	Hydroelectric		10.0		127,132		1,400		67		2
LAKE SUPERIOR POWER
Lake Superior Power	Natural gas-fired cogeneration		110.0		n/a		n/a		n/a		3
LIÈVRE RIVER POWER
Masson	Hydroelectric		105.0		—		5,779		184		4
Dufferin	Hydroelectric		38.0		—		5,754		59		2
High Falls (1)	Hydroelectric		95.0		544,811		5,445		180		4
PONTIAC POWER
Waltham	Hydroelectric		11.0		92,300		1,305		136		5
Coulonge	Hydroelectric		17.0		97,000		2,590		145		2
MAINE POWER
Weldon	Hydroelectric		18.1		—		6,386		39		4
East Millinocket	Hydroelectric		6.9		—		4,149		25		6
Dolby	Hydroelectric		20.9		—		4,149		49		7
Millinocket	Hydroelectric		36.1		—		3,668		110		8
North Twin	Hydroelectric		7.0		196,000		3,668		28		3
MacKay (1)	Hydroelectric		37.5		451,000		2,793		182		3
NEW HAMPSHIRE POWER (4)	Hydroelectric		30.9		325,231		2,516	varies			21
POWELL RIVER ENERGY
Powell River	Hydroelectric		46.0		292,450		3,321		285		5
Lois Lake	Hydroelectric		36.0		139,903		920		440		2
PINGSTON CREEK
Pingston Creek (5)	Hydroelectric		30.0		—		284		1,827		2
LOUISIANA HYDROELECTRIC POWER
Sidney A. Murray, Jr.	Hydroelectric and		192.0		—		102,000	6 to 20			8
	flood and sediment
	control
TOTAL	39 Stations		1,684.5								120

(1)	Includes storage on upstream lakes and reservoirs.
(2)	Robert A. Dunford G.S. commenced commercial operations in April 2003.
(3)	G.W. Rayner G.S. is currently operated as a backup for Wells G.S.
(4)	Total New Hampshire Power generating units does not include one generating unit not currently in operation at Riverside G.S.
(5)	Pingston Creek G.S. commenced commercial operations in May 2003.

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Glossary of Terms

Average Inflow: the average water flow available for power generation measured in cubic feet per second (cfs).	Installed Capacity: the measure of a power station’s electric generating capacity at full production, measured in megawatts (MW).	Operating Head: the vertical distance that water drops to the tailrace in order to generate hydroelectric power, measured in feet.
Gigawatt Hour: one gigawatt hour equals one million kilowatt hours. A kilowatt hour is equivalent to the energy consumed by a 100 watt light bulb burning for 10 hours.	Megawatt: one megawatt equals one thousand kilowatts. A kilowatt is the electrical energy required to turn on ten 100 watt light bulbs and is equivalent to 1.34 horsepower.	Storage: the temporary holding capacity available to store water for later use in electricity generation, measured in cubic feet per second days (cfs days).

INVESTMENT ACTIVITIES

The Company maintains a portfolio of securities, loans receivable and long-term corporate investments, which are held to generate additional cash flow on a tax-effective basis. These investments, which are principally in associated companies, have consistently contributed to Great Lakes’ earnings and capital base. In determining whether to participate in an investment, the Company’s management assesses each opportunity against its investment guidelines, which require investments to earn an acceptable rate of return from dividends or interest in relation to risk or have the potential for substantial capital appreciation.

Investment transactions involving companies, which are associated with Great Lakes, are completed on normal market terms. Such transactions are reviewed by a committee of independent directors of Great Lakes comprised of individuals with investment experience.

Investment income from the Company’s preferred shareholdings varies only with the amount invested as the rate of return is fixed. Other investment income is sensitive to interest rate changes; however, a similar offsetting sensitivity exists with a portion of the Company’s debt.

Securities Portfolio

The Company’s securities portfolio is comprised primarily of preferred shares of associated companies. The book value of the Company’s securities portfolio by business sector at December 31, 2002 compared to the prior year is summarized below:

millions	2002		2001
Real estate	$	160	$	270
Natural resources		161		152
Financial services and diversified		199		214
Other		70		70
	$	590	$	706

Long-term Investments

The book values of the Company’s principal long-term investments at December 31, 2002 compared to the prior year are shown below:

millions	2002		2001
Brascan Financial Corporation	$	195	$	195
Noranda Inc.		146		146
Brascan Corporation		112		112
Other investments		106		68
	$	559	$	521

Further information on Great Lakes’ long-term investments is contained in the Company’s Annual Report on page 6. Brascan Financial, Noranda and Brascan have prepared their own Annual Information Forms and Annual Reports containing information specific to their operations. Copies of these documents may be obtained from securities administrators in each province of Canada or from the Secretary of the Company.

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FINANCING ARRANGEMENTS

The Company finances its operations through bank facilities, a $100 million commercial paper program, term debt in the form of notes, and loans provided by Brascan.

The Company has issued US$175 million of 9% Notes maturing August 1, 2004 and US$200 million of 8.3% Notes maturing March 1, 2005. The Notes are senior unsecured obligations of the Company. The indenture under which the Notes are issued contains certain limitations on the Company relating to the issuing of debt and preferred shares, distributions by and transfers to subsidiaries of the Company, the incurring of liens on the assets of the Company and its subsidiaries, certain sale and leaseback transactions by the Company, transactions with affiliated and related persons, mergers, consolidations and certain sales of assets by the Company and a change of control of the Company. The indenture also requires the maintenance by the Company of a minimum consolidated net worth.

GLPL has issued $316 million of Series 4 and 5 First Mortgage Bonds bearing interest at 6.57% and 4.58% respectively, which are due on June 16, 2003. The Series 4 and Series 5 bonds rank equally and are secured by a first, fixed charge on the fixed assets of the Great Lakes Power operations in northern Ontario and a floating charge on all other assets of Great Lakes Power, excluding trade accounts receivable. Efforts are well under way to issue new 20 year mortgage bonds to finance these maturities and additional amounts for general corporate purposes.

The Income Fund has issued $100 million of First Mortgage Bonds Series 1, 2 and 3 bearing interest at 7.33%, 7.55% and 7.78%, respectively, due April 24, 2005, April 24, 2010 and April 24, 2015, respectively. These Mortgage Bonds are secured by charges on all present and future real and personal property of Great Lakes Power Trust, which is wholly owned by the Income Fund.

Pontiac Power has issued $62 million mortgage loans bearing interest at a blended rate of 10.52%, amortized monthly to a maturity of December 1, 2020 and secured by charges on the respective Pontiac Power generating assets.

Valerie Falls has issued $33 million of First Mortgage Bonds bearing interest at 6.84%, with interest only payments semi-annually for the first 20 years and blended principal and interest payments for the remaining 20 years to a maturity of December 20, 2042.

The Company’s holds a proportionate share in the $75 million Powell River Energy first mortgage bond, which bears interest at 6.92%, is due June 2009 and is secured by a charge on the respective Powell River Energy operating assets.

Lake Superior Power has issued a $19 million mortgage loan bearing interest at 9.41%, amortizing annually to December 29, 2006 and secured by a charge on the Company’s Lake Superior Power cogeneration assets.

Mississagi Power has issued a $151 million mortgage loan bearing interest at the 30-day Bankers Acceptance rate plus 60 basis points until March 3, 2003 and 80 basis points thereafter. The facility matures on September 4, 2003.

Great Lakes Hydro America has issued a US$113 million mortgage loan bearing interest at US prime plus 150 basis points which matures on January 30, 2005.

ENVIRONMENTAL MANAGEMENT

Great Lakes is committed to the environmentally responsible management of its assets. Developments in the last 15 years have all been subjected to full environmental assessment studies. Public information meetings have been held in order to identify concerns and appropriate actions were taken to address those concerns. Projects constructed prior to this period have been fully audited and mitigation steps have been instituted, where necessary, to bring all plants to accepted standards. Expenditures on environmental compliance are minimal due to the nature of the assets held.

Great Lakes has funded fish stocking activities in the Magpie River and has also worked for many years with local rod and gun clubs to hatch salmon in the Michipicoten River. At the Lake Superior Power cogeneration plant in Sault Ste. Marie, monitoring of air, water and noise is part of an ongoing program of environmental management. At the Sydney A. Murray, Jr. Generating Station in Louisiana, studies are being funded to ensure the continued existence of the Pallid Sturgeon. This fish was previously thought to be close to extinction but has recently been discovered by fishermen in the tailrace area of the plant.

The Company and its operating affiliates continue to monitor environmental standards and to take a proactive position towards protecting the environment in all their operations.

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Environmental Regulations

The development of hydroelectric resources and the construction and operation of power projects are subject to extensive federal, provincial and state laws and regulations adopted for the protection of the environment. The laws and regulations applicable to Great Lakes’ operations primarily involve permits required for the construction of the projects. These permits often contain conditions that require the Company to assess and, where possible, mitigate environmental impacts.

Many of the Company’s hydroelectric generating stations were built before strict environmental laws and regulations came into effect. Since approximately 1980, the Company’s development projects have been subject to an environmental assessment process, which includes public information meetings, full environmental impact studies and requirements to take appropriate actions taken to allay public concerns and environmental impacts where possible.

Non-compliance with environmental laws and regulations, or with conditions contained in environmental permits and approvals, can result in the imposition of substantial fines or other penalties. In some cases, environmental laws may also impose clean-up or other remedial obligations, or an obligation to mitigate environmental impacts from projects. The following federal and provincial laws are among the more significant Canadian environmental laws that apply to the Company. Other federal and provincial laws may also apply, particularly to the development and construction of power projects, and may impose stricter requirements than those discussed below.

Fisheries Act (Canada)

This Act prohibits the alteration or destruction of fish habitat, and prohibits the addition of any substance that may be harmful to any water that may be inhabited by fish. Permits are required for the construction of hydroelectric projects, which may alter fish habitats. Most recent projects require mitigation, compensation and monitoring agreements prior to the issuance of a permit to alter or destroy fish habitat. All the Company’s power projects comply with the Fisheries Act and, where permits were required for the construction or development of those projects, those permits were obtained. The Company also believes it is in material compliance with any conditions imposed by the permits obtained under the Fisheries Act.

Ontario Water Resources Act

The Ontario Water Resources Act is the main provincial statute regulating the use of water in Ontario. It prohibits the addition of any substance to waters in the province that may impair the quality of those waters. Permits are required for the construction of hydroelectric projects, which regulate the amount of water contained, minimum flows required downstream, and other matters. The Company believes it is in material compliance with all its permits under the Ontario Water Resources Act, and with the other requirements of the Act.

Environmental Protection Act (Ontario)

The Environmental Protection Act prohibits discharges to land, air and water that could have an adverse effect on the environment. It also imposes a requirement for a Certificate of Approval for any construction or equipment that may discharge a contaminant into any part of the environment other than water. The Company has obtained all such necessary permits under the Environmental Protection Act, and is in material compliance both with the Environmental Protection Act and the permits issued under it.

The Environmental Protection Act also regulates the management and disposal of waste. The Company’s waste generation is not significant, and all wastes are disposed of in material compliance with the requirements of the Environmental Protection Act. The Company is not currently subject to any liability of which it is aware for the disposal of any of its waste.

The use and storage of PCBs, including PCB contaminated oils or transformers and any PCB wastes, are governed by regulation, both federally and under the Environmental Protection Act. The Company is in compliance with these regulations. None of the company’s major equipment contains PCBs, and lesser pieces of equipment, such as rural transformers, are being tested for PCBs and replaced as part of an ongoing maintenance program. PCB waste, including out of service equipment, is stored in two designated PCB storage sites, pursuant to regulation. These sites are subject to regular reporting requirements and periodic inspection by the Ontario Ministry of the Environment.

Quebec Environmental and Resource Legislation

The Environmental Quality Act governs the Quebec approval process for the construction and operation of power projects. It imposes a requirement for a Certificate of Authorization to be issued by the Ministry of Environment for works related to existing dams, new dams, powerplants and power transmission lines.

The granting of hydraulic and water rights requires a lease from the Government of Quebec to be approved by a decree issued under the Watercourses Act. In addition, approval of the plans and specifications for dams, and the use,

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management and storage of waters for electricity production, also require approval by decree under the Watercourses Act.

Permits and approvals for power project related activities may also be required under Quebec’s Forest Act, the Regulation Respecting Wildlife Habitat, the Act Respecting Land in the Public Domain and the Act Respecting the Protection of Agricultural Land.

The Company believes that its operations in Quebec, conducted through Pontiac Power, are in material compliance with its permits and all applicable regulations.

United States Regulatory Matters

Louisiana HydroElectric Power and Great Lakes Hydro America are subject to United States federal and state regulations. The facilities’ operating licenses, provided by FERC, contain conditions: for example, in the case of Louisiana HydroElectric Power, for quantities of water diversion and water quality during dredging of the channel for the project, that continue during the term of the license. The Company is in full compliance with its FERC license conditions. In addition, the Company’s US operations are subject to regulation under both state and federal law with respect to the quality of discharges to the sanitary sewer and its oil/water waste collection system. These operations are in material compliance with its permits and all applicable regulations.

CAPITAL BASE AND DIVIDEND POLICY

The authorized capital of the Company consists of an unlimited number of Class A Preferred Shares and an unlimited number of common shares. As at April 30, 2003, there were 101,383,135 common shares issued and outstanding and no Class A Preferred Shares issued and outstanding.

During 2001, the Articles of the Company were amended to delete from its authorized capital the Class B Preferred Shares and the Class A Redeemable Preferred Shares.

Dividends on the Company’s common shares are paid quarterly in February, May, August and November of each year. The quarterly dividend was increased to its current level of $0.16 per share in 1996. Special dividends are periodically considered and paid from retained earnings in excess of the Company’s needs.

There exist, in certain circumstances, direct restrictions on the ability of the Company to pay dividends as well as indirect restrictions, insofar as there are restrictions on its subsidiaries in making distributions to the Company.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended or as at December 31, 2002 are included in the Company’s Annual Report at pages 3 to 8 and are incorporated herein by reference.

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CONSOLIDATED FINANCIAL INFORMATION

The following tables set forth the Company’s consolidated balance sheets and income statements as at and for the three years ended December 31, 2002:

Consolidated Balance Sheets

millions		2002		2001		2000
Assets
	Cash and securities	$	600	$	716	$	667
	Accounts receivable and other		186		336		242
	Long-term investments		559		521		536
	Power generating assets		2,155		1,357		1,197
		$	3,500	$	2,930	$	2,642
Liabilities
	Accounts payable	$	158	$	92	$	83
	Property specific borrowings		905		556		443
	Corporate term debentures		593		596		559
			1,656		1,244		1,085
Future income tax liability			120		116		104
Non-controlling interests			350		271		204
Capital base			1,374		1,299		1,249
		$	3,500	$	2,930	$	2,642

Consolidated Income Statements

millions, except per share amounts		2002		2001		2000
Income
	Power revenue	$	340	$	270	$	246
	Power purchases		14		55		53
	Net power revenue		326		215		193
	Investment and other income		92		105		114
			418		320		307
Expense
	Interest		90		82		83
	Operating and maintenance		60		37		32
	Fuel purchases		18		21		16
	Depreciation		40		27		25
	Non-controlling interests		18		12		15
	Income and other taxes		25		10		20
			251		189		191
	Net income	$	167	$	131	$	116
	Diluted net income per common share	$	1.32	$	1.04	$	0.92

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QUARTERLY OPERATING RESULTS

	2002								2001
millions, except per share amounts (unaudited)	Dec. 31		Sept. 30		June 30		Mar. 31		Dec. 31		Sept. 30		June 30		Mar. 31
Gross revenues	$	99.9	$	107.5	$	120.2	$	113.1	$	82.0	$	101.6	$	92.2	$	117.0
Net income		29.1		42.8		52.9		42.3		24.8		37.9		37.8		30.4
Diluted net income per common share	$	0.23	$	0.34	$	0.41	$	0.34	$	0.20	$	0.30	$	0.30	$	0.24

In the three months ended March 31, 2003, the Company earned net income of $33.2 million, compared to $42.3 million in the first quarter of 2002.

DIRECTORS AND OFFICERS

Each director holds office until the next annual meeting of shareholders of the Company or until a successor is appointed. As a result of the going-private transaction completed on March 2, 2001, none of the directors or officers owns any securities of the Company. Particulars relating to each director are disclosed in the Company’s Annual Filing of Reporting Issuer dated March 31, 2003 on pages 2 and 3 and are included herein by reference.

Officers of the Company

The names and municipalities of residence of the officers of the Company, the offices currently held by them and their other principal occupations are as follows:

Name and Municipal Residence	Office	Other Principal Occupation
Edward C. Kress Toronto, Ontario	Chairman	Chairman, Power Operations Brascan Corporation
Harry A. Goldgut Vaughan, Ontario	Co-Chairman and Chief Executive Officer
Richard Legault, Gatineau, Quebec	President and Chief Operating Officer	President and Chief Executive Officer Great Lakes Hydro Income Fund
Colin L. Clark Sault Ste. Marie, Ontario	Senior Vice-President, Generation	President and Chief Executive Officer, Great Lakes Power Limited
Laurent Cusson Gatineau, Quebec	Senior Vice-President, Marketing	Executive Vice-President, Marketing Brascan Energy Marketing Inc.
Robert Desbois Cornwall, Ontario	Senior Vice-President, Energy Portfolio	Senior Vice-President, Energy Portfolio Brascan Energy Marketing Inc.
Alan V. Dean Toronto, Ontario	Senior Vice-President and Secretary	Senior Vice-President, Corporate Affairs and Secretary, Brascan Corporation
Donald Tremblay Masson, Quebec	Senior Vice-President and Chief Financial Officer	Executive Vice-President and Chief Financial Officer, Brascan Energy Marketing Inc.
Michel Beaudin Hull, Quebec	Vice-President and Controller	Vice-President, Controller Brascan Energy Marketing Inc.
Sachin G. Shah Vaughan, Ontario	Vice-President, Finance	Assistant Treasurer, Brascan Corporation

All of the officers listed above have held their current positions in the Company for the past five years except as follows. Prior to February 2002, Mr. Goldgut was President and Chief Operating Officer of the Company, a position he was appointed to in October 1998. Prior to February 2002, Mr. Legault was Executive Vice-President of the Company,

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a position he was appointed to in April 2001, prior to which he was Vice-President, Power Markets. Mr. Legault is also President of Brascan Energy Marketing Inc. (“BEMI”), a position he was appointed to in November 1999.

Prior to February 2002, Mr. Clark was Vice-President, Power Development of the Company, a position he was appointed to in April 2000. Mr. Clark is also President and Chief Executive Officer of GLPL, a position he was appointed to in April 2002. Prior to February 2002, Mr. Cusson was and continues to be Executive Vice-President, Marketing for BEMI, a position he was appointed to in November 1999.

Prior to February 2003, Mr. Desbois was Vice-President, Energy Portfolio for BEMI, a position he was appointed to in March 2000, prior to which he was employed by Tractabel.

Prior to April 2002, Mr. Tremblay was and continues to be Executive Vice-President and Chief Financial Officer for BEMI, a position he was appointed to in January 2002, prior to which he was Vice-President, Finance and Administration for BEMI.

Prior to February 2003, Mr. Beaudin was Group Controller and Director of Finance for BEMI, a position he was appointed to in May 2001, prior to which he was employed by Versatel. Mr. Shah was appointed to his current positions in April 2003, prior to which he was Manager, Corporate Finance for Great Lakes, a position he was appointed to in June 2002, prior to which he was employed by Ernest & Young, LLP.

SUBSIDIARIES

The following is a list of active subsidiaries of Great Lakes indicating the jurisdiction of incorporation and the percentage of voting securities owned, or over which control or direction is exercised, by the Company:

						Percentage of Voting
					Jurisdiction of	Securities Owned
Name of Subsidiary					Incorporation	or Controlled
Great Lakes Power Limited					Ontario		100
	BrasPower Equities Inc.				Quebec		100
	First Toronto Equities Inc.				Ontario		100
		The Catalyst Group, Inc.			Louisiana		100	(1)
			Catalyst Old River Hydroelectric, Limited Partnership		Louisiana		75	(1)
	Lake Superior Power Inc.				Ontario		100
		Lake Superior, Limited Partnership			Ontario		100
	Valerie Falls Power, Limited Partnership				Ontario		65
Great Lakes Hydro Income Fund					Quebec		50
	Great Lakes Power Trust				Quebec		100
		GNE Trust			Quebec		100
			GNE, Limited Partnership		Ontario		100
				Great Lakes Hydro America	Delaware		100
		Powell River Energy Trust			Quebec		100
			Powell River Energy Inc.		British Columbia		50
				Powell River Energy, Limited Partnership	British Columbia		100
		Mississagi Power Trust			Quebec		100
			Mississagi Property Inc.		Ontario		100
Highvale Power Corporation					Alberta		100
Hydro-Pontiac Inc.					Quebec		100
	Coulonge Power & Company, Limited Partnership				Quebec		100
	Waltham Power & Company, Limited Partnership				Quebec		100
Brascan Energy Marketing Inc.					Ontario		100
Brascan Power Services Inc.					Ontario		100

(1) Non-voting interests.

In addition, the Company beneficially owns, or exercises control or direction over 83% of the non-voting securities of First Toronto Equities Inc.

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ADDITIONAL INFORMATION

Additional information, including details of directors’ and officers’ remuneration and indebtedness to the Company, together with principal holders of the Company’s securities and interests of insiders in material transactions, where applicable, is contained in the Company’s Annual Filing of Reporting Issuer dated March 31, 2003.

Other financial information about the Company is also contained in the Company’s audited comparative consolidated financial statements for the fiscal year 2002, provided at pages 9 to 19 in the Company’s 2002 Annual Financial Report.

The Company will provide to any person or company upon request to the Corporate Secretary of the Company:

(a) when the securities of the Company are in the course of a distribution pursuant to a short form prospectus or a preliminary short form prospectus, which has been filed in respect of a distribution of its securities:

(i)	a copy of the Company’s latest Annual Information Form, together with a copy of any document, or the pertinent pages of any document, incorporated therein by reference;
(ii)	a copy of the comparative consolidated financial statements of the Company for the Company’s most recently completed financial year, together with the report of the auditor thereon, Management’s Discussions and Analysis of Financial Condition and Results of Operations, and a copy of any interim financial statements of the Company issued subsequent to the annual financial statements;
(iii)	a copy of the Company’s Annual Filing of Reporting Issuer; and
(iv)	a copy of any other document or report which is incorporated by reference into a preliminary short form prospectus or a short form prospectus; or

(b) at any other time, a copy of any other document referred to in paragraphs (a)(i), (ii) and (iii) above, provided that the Company may require the payment of a reasonable charge from any person or company who is not a security holder of the Company.

21 EX-99.2 4 t09928exv99w2.txt MANAGEMENT'S DISCUSSION AND ANALYSIS . . . MANAGEMENT'S DISCUSSION AND ANALYSIS OPERATIONS REVIEW SUMMARY Production statistics for the company's power generating operations for 2002 and 2001 are shown below:

2002 2001 ---------- ---------- POWER GENERATED (gigawatt hours)(1) Ontario 2,531 1,793 Quebec 1,585 1,418 Northeast United States 558 -- Other Power Operations 910 748 ------ ------ Total 5,584 3,959 ====== ====== POWER REVENUE ($ millions) Ontario $ 198 $ 182 Power purchases (14) (55) ------ ------ 184 127 Quebec 80 69 Northeast United States 37 -- Other Power Operations 25 19 ------ ------ Net Power Revenue $ 326 $ 215 ====== ======

- ---------------- 1. Power generation is calculated on a proportionate ownership basis. The company's power operations generated 5,584 gigawatt hours ("GWh") of electricity during 2002, up from 3,959 GWh in 2001 primarily due to new acquisitions and a return to more normal precipitation levels after unusually dry conditions in 2001. ONTARIO Power generated by the company's operations in Ontario increased by 41% to 2,531 GWh from 1,793 GWh in 2001. This reflected the acquisition of Mississagi Power in May 2002 which generated 340 GWh during the balance of the year, and a return to more normal hydrology and generation at the Great Lakes Power system. Power generated by the company's operations in Ontario in 2002 compared to 2001 is shown below:

gigawatt hours 2002 2001 - --------------- ---------- ---------- Great Lakes Power - Generation 1,639 1,301 Mississagi Power 340 -- Valerie Falls Power 45 51 Lake Superior Power(1) 507 441 ------ ------ 2,531 1,793 ====== ======

- -------------- 1. Includes electricity equivalents of contracted gas sales. Following the opening of the electricity market in the Province of Ontario to competition on May 1, 2002, the company made a number of changes in response to the new regulatory environment, including the termination of its power purchase agreement with Ontario Power Generation ("OPG"). Great Lakes Power's operations have been restructured into two separate businesses: a generation unit and a regulated power transmission and distribution unit. The company continues to be a distributor of power in its historical service area in the Algoma District and sells electricity to the Public Utility Commission of Sault Ste. Marie and St. Marys Paper under power sales agreements. In May 2002, the company acquired four hydroelectric generating stations located on the Mississagi River northeast of Sault Ste. Marie in northern Ontario from OPG for $346 million. These stations have a combined generating capacity of 488 MW and are being operated in conjunction with the company's other 12 hydroelectric stations in this area. In October 2002, the company acquired Duke Energy's 50% interest in the Lake Superior Power co-generation plant in Sault Ste. Marie, Ontario, increasing its ownership in this facility to 100%. The consideration for this acquisition was $67 million, comprised of $30 million in cash and the assumption of $37 million of debt. Lake Superior Power is operated in conjunction with the company's other hydroelectric power stations in northern Ontario. All of its electricity production is sold to Ontario Electricity Finance Corporation under a long-term contract. During 2002, the company substantially completed the 45 MW Robert A. Dunford hydroelectric generating station on the Michipicoten River near Wawa in northern Ontario, to be commissioned during the first quarter of 2003. This project, named after a former Chairman of the company, has been completed on schedule and under budget at a cost of $72 million. It replaces the older 28 MW High Falls generating station with a larger, more efficient station with increased peak-period generating capability. QUEBEC Power generated by the company's operations in Quebec increased by 12% to 1,585 GWh from 1,418 GWh in 2001. The increase is related to improved water levels at Lievre River Power during the summer of 2002. Power generated by the company's operations in Quebec in 2002 compared to 2001 is shown below:

gigawatt hours 2002 2001 - --------------- ---------- ---------- Lievre River Power 1,399 1,224 Pontiac Power 186 194 ------ ------ 1,585 1,418 ====== ======

NORTHEAST UNITED STATES The company's two power operations in the northeast United States, Maine Power and New Hampshire Power, were acquired during 2002. These two new operations generated 558 GWh during the year since their acquisition. These amounts were below their long term averages due to lower precipitation levels in New England. 2002 ANNUAL REPORT 3 Power generated by the company's operations in northeast United States in 2002 is shown below:

gigawatt hours 2002 - ---------------- ------- Maine Power 477 New Hampshire Power 81 ---- 558 ====

In February 2002, the company acquired Maine Power, an integrated power generating and distributing system in northern Maine from Great Northern Paper Inc. for US$156.5 million. This system includes six hydroelectric generating stations located on the main and west branches of the Penobscot River with a combined generating capacity of 126 MW, as well as an interconnection with the New England Power Pool. Construction commenced in November 2002 on the expansion of this interconnection from 20 MW of capacity to 150 MW for completion during the first half of 2003. This will facilitate the transmission of Maine Power's surplus generation into the New England Power Pool. In May 2002, the company expanded its presence in the northeastern United States with the acquisition of six hydroelectric generating stations in northern New Hampshire from a local forest products company for US$32 million. These stations located on the Androscoggin River are being operated in conjunction with the company's six Maine Power stations. The New Hampshire Power acquisition was made in conjunction with the purchase by Nexfor Inc. ("Nexfor"), an affiliate of Brascan, of certain pulp and paper facilities in that state. During the first quarter of 2003, the company expects to start construction of a 25 MW cogeneration plant in Berlin, New Hampshire. This station will provide electricity and steam for sale to Nexfor's pulp and paper facilities and is expected to be completed in 2004. OTHER POWER OPERATIONS Power generated by the company's other power operations in North America increased by 22% to 910 GWh from 748 GWh in 2001. This reflected improved water flows on the lower Mississippi River which increased power generation at Louisiana HydroElectric Power by 13%. Power generation at Powell River Energy, which was acquired in February 2001, increased by 49% due to a return to normal water levels and a full year of generation available to the company. Power delivered by the company's other North American power operations in 2002 compared to 2001 is shown below:

gigawatt hours 2002 2001 - ----------------- -------- -------- Louisiana HydroElectric Power 639 566 Powell River Energy 271 182 --- --- 910 748 === ===

During 2002, construction progressed on the 30 MW Pingston Creek hydroelectric generating station near Revelstoke, B.C. Developed in a 50/50 joint venture with Canadian Hydro Developers Inc., this project is expected to start production in the first half of 2003. In August 2002, the partners signed a 20-year contract to sell this station's power to BC Hydro. This project is expected to increase the company's generating capacity in British Columbia and further enhance the company's geographic diversification. Development work continues on five new hydroelectric generating stations in southern Brazil. Construction is under way on three of these stations: the 30 MW Passo do Meio project in the State of Rio Grande do Sul, and the 16 MW Pedrinho and 15 MW Salto Natal projects in the State of Parana, all of which are expected to be completed in the first half of 2003. INCOME ANALYSIS Great Lakes' net income for 2002 increased to $167 million from $131 million in 2001. Financial results for the year ended December 31, 2002 compared to 2001 are shown in the following table:

millions, except per share amounts 2002 2001 - ----------------------------------- -------- -------- Revenues Power revenue $340 $270 Power purchases (14) (55) ---- ---- Net power revenue 326 215 Investment & other income 92 105 ---- ---- 418 320 ==== ==== Expenses Interest 90 82 Operating & maintenance 60 37 Fuel purchases 18 21 Depreciation 40 27 Non-controlling interests 18 12 Income & other taxes 25 10 ---- ---- 251 189 ---- ---- Net income $167 $131 ==== ====

POWER REVENUE Total power revenue for 2002 was $340 million compared with $270 million in 2001, an increase of 26% primarily due to the acquisitions of Mississagi Power, Maine Power and New Hampshire Power and better hydrology and electricity prices. Great Lakes strives to maximize the stability and predictability of power generating revenues through the use of fixed price contracts to minimize the impact of price fluctuations, and through diversification of watersheds and water storage reservoirs to minimize fluctuation in generation levels. Approximately 85% of the company's projected 2003 revenues is subject to fixed price contracts or regulated revenue requirements. The remaining revenue is generated through the sale of power on a wholesale basis. Due to the low cost of hydroelectric power and the ability to increase generation during peak pricing 4 GREAT LAKES POWER INC. periods, the company is able to generate attractive margins on its uncommitted capacity. Great Lakes' long-term sales contracts have an average duration of 17 years, and its counterparties are almost exclusively customers with long-standing credit history or investment grade ratings. Ontario Power operations in Ontario contributed $184 million of revenue in 2002 compared to $127 in 2001. The main reasons for the increased revenues were the return to long-term average generation at Great Lakes Power and the addition of Mississagi Power. Correspondingly, generation in this region increased to 2,531 GWh from 1,793 GWh in 2001. Quebec Power operations in Quebec contributed $80 million of revenue in 2002 compared to $69 million in 2001. The increase is attributed to improved generation at Lievre River Power along with improved average prices, secured by long-term contracts. Northeast United States The company acquired two power operations in the Northeast United States during February and May of 2002. These operations contributed 558 GWh of generation and $37 million in revenues during the balance of the year. Other Power Operations Other power operations include the results of Louisiana HydroElectric Power and Powell River Energy. Revenue from other power operations totalled $25 million in 2002, compared with $19 million in 2001. The increase is a result of improved water conditions on the lower Mississippi River, which increased generation at Louisiana HydroElectric Power, combined with a full year of generation from Powell River Energy. POWER PURCHASES The company had an obligation to serve all customers in its Great Lakes Power service area in northern Ontario until May 1, 2002, the date when the electricity market in Ontario opened to competition. As a result, the company purchased power from OPG as required to supplement its own generation. After May 1, 2002, this obligation ceased and, as a result, supplemental power purchases are no longer required. INVESTMENT AND OTHER INCOME Investment and other income for 2002 was $92 million compared with $105 million in 2001. Investment and other income consists of dividend income from long-term investments and the company's securities portfolio, and interest on loans receivable. The decrease in investment and other income is attributed to lower average interest rates in Canada and the United States, and decreased loans receivable balances during the year. EXPENSES Total expenses for 2002 were $251 million compared with $189 in 2001. Total expenses increased by 33% from 2001 as a result of the acquisitions of Mississagi Power, Maine Power and New Hampshire Power and a full year of expenses for Powell River Energy, which was acquired in February 2001. Interest expense in 2002 was $90 million compared to $82 million in 2001. Interest expense consists of the costs related to servicing property specific borrowings and corporate term debt. The increase in interest expense is attributable to additional debt incurred as a result of acquisitions. These costs were partially offset by decreasing interest rates during the year. Operating and maintenance costs increased to $60 million in 2002 compared with $37 million in 2001. Operating and maintenance costs consist of labour, materials and administrative support. The increase in operating and maintenance costs is primarily attributable to the acquisitions in 2002. Fuel purchases consist of the costs for natural gas required for the Lake Superior Power cogeneration plant. Fuel purchases were $18 million in 2002 compared to $21 million in 2001. The decrease in fuel purchases is a result of less gas purchased for resale in 2002. Depreciation expense in 2002 was $40 million compared to $27 million in 2001. The increase is attributable to the acquisitions in 2002 and 2001. Non-controlling interests expense increased to $18 million in 2002 compared with $12 million in 2001. Non-controlling interest consists of the allocation of income associated with the non-controlling interests in the company's consolidated entities. The increase is related to the higher earnings recorded by the Great Lakes Hydro Income Fund (the "Income Fund"), which is 50% owned by other investors. Income and other taxes increased to $25 million in 2002 compared with $10 million in 2001. Income and other taxes consist of municipal and other generation taxes on hydroelectric facilities and federal, provincial and state income taxes. The increase in income and other taxes is primarily related to municipal taxes on the assets acquired during the past two years, and increased non-cash provisions for federal and provincial income taxes, which are accounted for under the future liability method of accounting. 2002 ANNUAL REPORT 5 BALANCE SHEET ANALYSIS The company's total assets increased during 2002 from $2,930 million to $3,500 million, due mainly to investments in additional generating capacity. Assets and liabilities at December 31, 2002 and 2001 are summarized in the following table:

millions 2002 2001 - --------- ------- ------- Assets Cash & cash equivalents $ 10 $ 10 Accounts receivable & other 186 336 Securities 590 706 Long-term investments 559 521 Power generating assets 2,155 1,357 ------- ------- $ 3,500 $ 2,930 ======= ======= Liabilities Accounts payable & other $ 158 $ 92 Property specific borrowings 905 556 Corporate term debentures 593 596 Future income taxes 120 116 Non-controlling interests 350 271 Shareholders' equity 1,374 1,299 ------- ------- $ 3,500 $ 2,930 ======= =======

FINANCIAL ASSETS The company's accounts receivable and other assets decreased to $186 million in 2002 from $336 million in 2001 due principally to the draw down of interest bearing deposits with affiliates in order to finance investments in the company's power generating operations. The company's securities portfolio, which is comprised primarily of preferred shares of affiliated Canadian companies, decreased from $706 million to $590 million in 2002. The composition of the company's securities portfolio by business sector at December 31, 2002 and 2001 is summarized below:

millions 2002 2001 - --------- ------- ------- Property $ 160 $ 270 Natural resources 161 152 Financial services & diversified 199 214 Other 70 70 ------- ------- $ 590 $ 706 ======= =======

The book values of the company's long-term investments and the underlying securities at December 31, 2002 and 2001 are shown below:

millions 2002 2001 - --------- ------- ------- Brascan Financial Corporation $ 195 $ 195 Noranda Inc. 146 146 Brascan Corporation 112 112 Other investments 106 68 ------- ------- $ 559 $ 521 ======= =======

Great Lakes holds a senior preferred share investment in Brascan Financial Holdings Inc. which, together with Brascan, owns all of the common shares of Brascan Financial Corporation ("Brascan Financial"), a Canadian-based financial services company. Brascan's combined interest in Brascan Financial was increased from 71% during 2002 as a result of Brascan's offer to purchase all of the outstanding common shares of this company. Brascan Financial's results for the two years ended December 31, 2002 are shown below:

millions 2002 2001 - --------- ------- ------- Total assets $ 4,334 $ 3,585 Shareholders' equity 2,844 2,660 Revenues 501 444 Net income 272 251

Great Lakes holds a senior preferred share investment in Noranda Equities Inc. which, together with Brascan, owns 40% of the common shares of Noranda Inc. ("Noranda"). Noranda, a publicly listed company, is a major producer of mined and refined base metals. Noranda's financial results for the two years ended December 31, 2002 are shown below:

millions 2002 2001 - --------- ------- ------- Total assets $ 11,377 $ 12,141 Shareholders' equity 2,928 3,797 Revenues 6,090 6,152 Net income (loss) (700) (92)

Noranda's loss in 2002 reflects a charge of $630 million relating to the writedown of its magnesium operations in Quebec. Great Lakes owns a $112 million senior preferred share investment issued by a wholly owned subsidiary of Brascan. Brascan's financial results for the two years ended December 31, 2002 are shown below:

millions 2002 2001 - --------- ------- ------- Total assets $ 22,788 $21,929 Common equity 4,162 4,261 Revenues 4,810 1,269 Net income 130 311

The decrease in Brascan's net income in 2002 reflects its share of Noranda's higher loss related to the writedown of its magnesium operations. Other investments include primarily the company's shares of First Toronto Investments Limited, a Brascan subsidiary which holds investments in equity securities of Canadian corporations, primarily companies affiliated with Brascan. POWER GENERATING ASSETS The depreciated cost of the company's power generating assets increased during 2002 from $1,357 million to $2,155 million. Power generating assets in Canada increased by 50% from $911 million in 2001 to $1,366 million in 2002. This increase is a result of the acquisition of Mississagi Power and the remaining half interest in Lake Superior Power. The acquisition in 2002 of Maine Power and New Hampshire Power resulted in the ownership of power 6 GREAT LAKES POWER INC. generating assets with a book value of $301 million at year end in the Northeast United States region. Other power operations increased 9% from $446 million in 2001 to $485 million in 2002. The increase is attributed to additional costs related to assets under development and the increase in the company's investment in Louisiana HydroElectric Power. LIQUIDITY AND CAPITAL RESOURCES The company's liquidity and capital requirements are affected primarily by the results of operations, capital expenditures, debt service requirements and working capital needs. The net cash provided by or used in operating, financing and investing activities for 2002 and 2001 was as follows:

millions 2002 2001 - --------- ------- ------- Cash provided by (used in): Operating activities $ 237 $ 183 Financing activities 347 122 Investing activities (584) (314)

Cash provided by operating activities increased during 2002 to $237 million compared with $183 million in 2001 for the reasons discussed under "Income Analysis". Cash provided by financing activities increased during 2002 to $347 million compared with $122 million in 2001. Financing activities in 2002 included acquisition debt related to the acquisition of Mississagi Power, Maine Power and New Hampshire Power, Income Fund financing and $33 million in a first property specific bond financing for Valerie Falls. In May 2002, the Income Fund issued 14.7 million units at $14.00 per unit. Fifty percent of the units issued were subscribed for by Great Lakes. Gross proceeds from the issue totaled $206 million. Cash utilized in investing activities increased in 2002 to $584 million from $314 million in 2001 primarily due to the acquisitions of Mississagi, Maine, New Hampshire and the remaining half interest in Lake Superior for a total investment of $713 million. This was offset by a decrease in deposit balances, which were collected during the year in order to finance acquisitions. LIABILITIES Accounts payable and other increased to $158 million in 2002, compared to $92 million in 2001. The increase is related to increased working capital balances relating to operations acquired during the year. Great Lakes' borrowings includes property specific borrowings, corporate debentures, bank credit facilities and bridge loan facilities provided by Brascan. At December 31, 2002, the company's total debt was $1,498 million, as detailed in the following table:

AVERAGE Average INTEREST Interest millions 2002 RATE 2001 Rate - -------- -------------- ------------- First Mortgage Bonds Great Lakes Power Ltd. $ 316 5.8% $ 317 5.6% Great Lakes Hydro Income Fund 100 7.5% 100 7.5% Other property specific borrowings 489 6.3% 139 8.2% ------ ------ 905 556 Corporate term debentures 593 7.4% 596 7.4% ------ ------ $1,498 $1,152 ====== ======

The maturity schedule of the company's property specific borrowings is as follows:

millions Annual Repayments - -------- ----------------- 2003 $ 483 2004 8 2005 235 2006 4 2007 2 Thereafter 173 ------ $ 905 ======

In addition to the above debt, the company has a commercial paper program with an authorized amount of $100 million. The company's commercial paper is currently rated R-1(low) by Dominion Bond Rating Service and A-2 by Standard & Poor's. CAPITAL BASE AND FINANCIAL POSITION The company's capital base at December 31, 2002 of $1,374 million was comprised of common equity with a book value of $1,126 million or $11.11 per share and a further $248 million of subordinated convertible debentures. The convertible debentures mature September 2013 and interest and principal may be paid by the company in the form of its common shares. The debentures are therefore included as part of the company's capital base. The composition of the company's capital base at December 31, 2002 and 2001 is summarized in the following table:

millions, except number of shares 2002 2001 - --------------------------------- ------- ------- Subordinated convertible debentures $ 248 $ 248 Common shares 1,126 1,051 ------- ------- $ 1,374 $ 1,299 ======= =======

Regular dividends paid on the company's common shares in both 2002 and 2001 amounted to $64.9 million, representing an earnings payout ratio of 39% in 2002. 2002 ANNUAL REPORT 7 The company's policy is to distribute surplus operating cash flows not required for investment in power generating facilities to its common shareholders in the form of regular quarterly and special dividend payments. BUSINESS ENVIRONMENT AND RISKS Operating income from hydroelectric power generation fluctuates in relation to the availability of water and the ability to generate and deliver power to markets with the highest power rates. While changes in the level of precipitation impact the amount of power generated by individual operations, the diversified locations of the company's hydroelectric power stations across several different watershed areas in Canada and the United States help to balance the financial impact of these fluctuations. Deregulated electricity markets in northeast Canada and the United States have resulted in fluctuations in the price of power based on supply and demand dynamics. This volatility in prices is managed through long-term fixed price contracts on approximately 85% of the company's power production. Counterparty credit risk is inherent in the company's long-term fixed price contracts. The company manages this risk by entering into contracts with counterparties that are either (i) investment grade or (ii) have an established credit history. The Ontario Government opened the Ontario electricity supply market to full competition on May 1, 2002. Further government actions were announced in November 2002, including the implementation of a 4.3 cent / kwh retail cap. However, the price for power that generators, other than OPG, receive in the wholesale market was not capped. Regulatory changes may result in uncertain power markets in the short term, which could impact the operating income from the company's power businesses. Investment income from a substantial portion of the company's preferred shareholdings varies generally with the amount invested, as the rate of return is generally fixed. Income from other investments is sensitive to interest rate changes; however, a similar offsetting sensitivity exists with a portion of the company's debt. OPERATING STRATEGY The company's primary goal is to generate increased return on capital for its shareholders. The company is committed to expanding its power generating business by enhancing and expanding its power production base. To achieve this objective, the company has four strategic priorities: (i) increase and strengthen cash flow from the generation business; (ii) expand its production base through the acquisition of existing generating assets and development of greenfield sites; (iii) expand access to new interconnected electricity markets in the United States through the company's existing transmission interconnections between Ontario and Quebec, and other planned and proposed interconnections with adjacent markets in the United States, and (iv) position the company to market power in open access, competitive markets, thereby optimizing the value of its generation portfolio through the timing of power sales with peak pricing periods and securing long-term contracts. FORWARD-LOOKING STATEMENTS The company's financial analysis and review contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "believe", "expect", "anticipate", "intend", "estimate" and other expressions which are predictions of or indicate future events and trends and which do not relate to historical matters identify forward-looking statements. Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the company to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those set forth in the forward-looking statements include general economic conditions, weather conditions, interest rates, availability of equity and debt financing and other risks. The company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. 8 GREAT LAKES POWER INC. EX-99.3 5 t09928exv99w3.txt CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS MANAGEMENT RESPONSIBILITY TO THE SHAREHOLDERS The attached financial statements and other financial information have been prepared by the company's management which is responsible for their integrity and objectivity. To fulfill this responsibility, the company maintains systems of internal control and policies and procedures to ensure that its reporting practices and accounting and administrative procedures are of high quality. These policies and procedures are designed to provide relevant, reliable and timely financial information. These statements have been prepared in conformity with Canadian generally accepted accounting principles and, where appropriate, reflect estimates based on judgments of management. Financial information presented elsewhere in this Annual Report is consistent with that shown in the accompanying consolidated financial statements. Deloitte & Touche LLP, the independent auditors appointed by the shareholders, have examined the financial statements of the company in accordance with Canadian generally accepted auditing standards to enable them to express to the shareholders their opinion on the financial statements. Their report as auditors is set out below. These statements have also been reviewed by the Board of Directors and by its Audit Committee, which meets with the auditors and management to review the activities of each and reports to the Board of Directors. The auditors have full access to the Audit Committee and meet with the committee both with and without the presence of management. The Board of Directors, through its Audit Committee, oversees management's financial reporting responsibilities and is responsible for reviewing and approving the financial statements. /s/ Craig J. Laurie - ------------------------------------------ Vice-President and Chief Financial Officer February 7, 2003 AUDITORS' REPORT TO THE SHAREHOLDERS OF GREAT LAKES POWER INC. We have audited the consolidated balance sheets of Great Lakes Power Inc. as at December 31, 2002 and 2001 and the consolidated statements of income, retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance as to whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the company as at December 31, 2002 and 2001 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles. /s/ Deloitte & Touche LLP - ---------------------------------- Toronto, Canada February 7, 2003 2002 ANNUAL REPORT 9 CONSOLIDATED BALANCE SHEET

December 31 millions note 2002 2001 ---- ------ ------ ASSETS Cash and cash equivalents $ 10 $ 10 Accounts receivable and other 3 186 336 Securities 4 590 706 Long-term investments 5 559 521 Power generating assets 6 2,155 1,357 -- ------ ------ $3,500 $2,930 ====== ====== LIABILITIES Accounts payable and other $ 158 $ 92 Property specific borrowings 8 905 556 Corporate term debentures 9 593 596 FUTURE INCOME TAX LIABILITY 10 120 116 NON-CONTROLLING INTERESTS 11 350 271 SHAREHOLDERS' EQUITY 12 1,374 1,299 -- ------ ------ $3,500 $2,930 ====== ======

Approved by the Board: /s/ Sidney A. Lindsay /s/ Edward C. Kress - --------------------- ------------------- 10 GREAT LAKES POWER INC. CONSOLIDATED STATEMENT OF INCOME

Years ended December 31 millions, except per share amounts note 2002 2001 ---- ---- ---- REVENUE Power revenue $ 340 $ 270 Power purchases 14 55 Net power revenue 326 215 Investment and other income 92 105 ----- ----- 418 320 ----- ----- EXPENSES Interest 90 82 Operating and maintenance 60 37 Fuel purchases 18 21 Depreciation 40 27 Non-controlling interests 18 12 Income and other taxes 10 25 10 ----- ----- 251 189 ----- ----- NET INCOME $ 167 $ 131 ----- ----- DILUTED NET INCOME PER COMMON SHARE 13 $1.32 $1.04 ----- -----

CONSOLIDATED STATEMENT OF RETAINED EARNINGS

Years ended December 31 millions note 2002 2001 ---- ---- ---- RETAINED EARNINGS Balance, beginning of year $ 448 $ 398 Net income 167 131 Distributions to holders of common shares and equivalents 12 (80) (81) Adjustment for change in accounting policy 1 (8) -- Fund unit issue costs (4) -- ----- ----- Balance, end of year $ 523 $ 448 ===== =====

2002 ANNUAL REPORT 11 CONSOLIDATED STATEMENT OF CASH FLOWS

Years ended December 31 millions 2002 2001 ------ ------ CASH FLOW FROM OPERATIONS Net income $ 167 $ 131 Add non-cash items Depreciation 40 27 Hydrological provisions (3) (17) Other 6 (5) ------ ------ CASH FLOW FROM OPERATIONS $ 210 $ 136 Net change in non-cash working capital 27 47 ------ ------ Cash provided by operating activities 237 183 ------ ------ FINANCING AND SHAREHOLDER DISTRIBUTIONS Borrowings 405 249 Debt repayments (54) (110) Issuance of fund units 103 78 Distributions: -- Great Lakes Hydro Income Fund unitholders (27) (14) -- Common shares and equivalents (80) (81) ------ ------ 347 122 ------ ------ INVESTING Securities purchases (10) (107) Securities sales 125 51 Long-term investments (36) 14 Loans and other receivables 171 (94) Power generating assets (834) (178) ------ ------ (584) (314) ------ ------ CASH AND CASH EQUIVALENTS Increase (decrease) -- (9) Balance, beginning of year 10 19 ------ ------ Balance, end of year $ 10 $ 10 ====== ====== SUPPLEMENTARY INFORMATION Interest paid $ 85 $ 84 Taxes paid $ 16 $ 15 ====== ======

12 GREAT LAKES POWER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF ACCOUNTING POLICIES BUSINESS OPERATIONS The company is incorporated under the laws of Ontario and develops, owns and operates hydroelectric and other power generating facilities principally in Canada and the United States. The company also conducts investment activities, which include the receipt of interest and dividends on the company's financial assets as well as gains realized on investment transactions. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include: (i) the accounts of all subsidiaries and other controlled entities of Great Lakes Power Inc. (the "company") including Great Lakes Power Limited, Great Lakes Hydro Income Fund (the "Income Fund"), Lake Superior Power, Valerie Falls Power, Hydro Pontiac Inc. ("Pontiac Power") and Highvale Power Corporation; and (ii) the accounts of incorporated and unincorporated joint ventures and partnerships to the extent of the company's proportionate interest in their respective assets, liabilities, revenue and expenses, including the company's investment in Powell River Energy. The company owns a 75% non-controlling residual interest in Louisiana HydroElectric Power, which is equity accounted. INVESTMENTS Partly owned businesses, where the company is able to exercise significant influence, are carried on the equity method. Interests in jointly controlled entities are proportionately consolidated. Other long-term investments are carried at the lower of cost and net realizable value. The excess of acquisition costs over the underlying net book values of the company's investment is evaluated for impairment in conjunction with the evaluation of the carrying value of the investment. Management assesses the recoverability of its investment as a whole based on a review of the expected future operating income and cash flows of these investments on a discounted basis. REVENUE AND EXPENSE RECOGNITION Revenue from the sale of electricity and steam is recorded based upon output delivered at rates as specified under contract terms or prevailing market rates. Electricity sales revenue is recognized when power is provided. Investment income is recorded on the accrual basis, less a provision for uncollectible interest, fees, commissions or other amounts. The company maintains hydrological insurance which partially compensates for the effect of variations in streamflow when measured against long-term averages. Until May 1, 2002, the company was rate regulated and maintained provisions to adjust for the effect of similar hydrology variations. SECURITIES Securities are carried at the lower of cost and their estimated net realizable value with any valuation adjustments charged to income. This policy considers the company's intent to hold an investment through periods where quoted market values may not fully reflect the underlying value of that investment. Accordingly, there are periods where the "fair value" or the "quoted market value" may be less than cost. In these circumstances, the company reviews the relevant securities to determine if it will recover its carrying value within a reasonable period of time and adjust it, if necessary. The company also considers the degree to which estimation is incorporated into valuations and any potential impairment relative to the magnitude of the related portfolio. LOANS RECEIVABLE Loans and notes receivable are carried at the lower of cost and estimated realizable value calculated based on expected future cash flows, discounted at market rates for assets with similar terms. FINANCING COSTS Expenses related to the issuance of debt are amortized over the term of the debt. Expenses related to the issuance of the company's shares are charged to retained earnings. Interest on funds used in construction and on development projects is capitalized. INCOME TAXES The company uses the asset and liability method in accounting for income taxes. Under this method, future income tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities, and measured using the enacted, or substantively enacted, tax rates and laws that will be in effect when the differences are expected to reverse, taking into account the organization of the company's financial affairs and its impact on taxable income and tax losses. FOREIGN EXCHANGE Assets and liabilities denominated in foreign currencies are translated into Canadian dollars at the rate of exchange in effect at the balance sheet date. Revenues and expenses are translated at the weighted average rate for the year. PENSION BENEFITS AND EMPLOYEE FUTURE BENEFITS The cost of retirement benefits for the defined benefit plan and post-employment benefits is recognized as 2002 ANNUAL REPORT 13 the benefits are earned by employees. The company uses the accrued benefit method pro-rated on the length of service and management's best estimate assumptions to value its pension and other retirement benefits. Assets are valued at fair value for purposes of calculating the expected return on plan assets. For the defined contribution plan, the company expenses payments based on employee earnings. DERIVATIVE FINANCIAL INSTRUMENTS The company, principally through wholly owned Brascan Energy Marketing Inc., uses derivative financial instruments to manage commodity price risk associated with the company's production, operating and risk management activities. Gains and losses resulting from these instruments are included in income on the same basis as the asset, liability or contract being hedged. Non-hedging activity is subject to policy limits and any gains or losses recorded in investment and other income on a fair value basis. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses. Actual results could differ from those estimates. CHANGES IN ACCOUNTING POLICIES Effective January 1, 2002, the company adopted, without restatement of the prior period comparative financial statements, the new accounting standards issued by the Canadian Institute of Chartered Accountants ("CICA") on Business Combinations and Goodwill and Other Intangible Assets. This standard requires that all business combinations be accounted for using the purchase method and establishes specific criteria for the recognition of intangible assets separately from goodwill. Under the standards, goodwill will no longer be amortized but will be subject to impairment tests on at least an annual basis. During 2002, the company and its subsidiaries were required to perform impairment tests on goodwill recorded as of January 1, 2002. As a result, $8 million was recorded against opening retained earnings in relation to the goodwill recorded on the acquisition of Powell River Energy. Effective January 1, 2002, the company adopted the new CICA accounting recommendations on the impairment of long-lived assets. When the carrying value of a long-lived asset is less than its net recoverable amount as determined on an undiscounted basis, an impairment loss is recognized to the extent that its fair value, measured as the discounted cash flows over the life of the asset when quoted market prices are not readily available, is below the asset's carrying value. FUTURE ACCOUNTING POLICY CHANGES In November 2001, the CICA issued Accounting Guideline 13, Hedging Relationships ("AcG-13"), which will apply to fiscal years beginning on or after July 1, 2003. The guideline sets out the criteria that must be met in order to apply hedge accounting for derivatives and is based on many of the principles outlined in the U.S. standard relating to derivative instruments and hedging activities. Specifically, the guideline provides detailed guidance on (a) the identification, designation, documentation and effectiveness of hedging relationships, for purposes of applying hedge accounting; and (b) the discontinuance of hedge accounting. The CICA issued a draft Accounting Guideline, Consolidation of Special-Purpose Entities on August 1, 2002. The proposed guideline provides guidance on determining who is a primary beneficiary of the special purpose entities and will therefore be required to consolidate the special purpose entities. The CICA issued a draft Accounting Guideline, Disclosure of Guarantees which will require a guarantor to disclose significant information about guarantees it has provided to third parties, without regard to its evaluation of whether it will have to make any payments under the guarantees. This guideline is expected to have effect for interim and annual periods ending on or after March 31, 2003. The CICA issued a new standard, Asset Retirement Obligations, which requires the recognition of a liability for obligations for asset retirements in the period the liability is incurred. This standard will result in increasing the carrying value of a company's liabilities and assets. The asset retirement obligation will be amortized as an expense over the life of the asset. This guidance applies to, for example, site restoration of a mine, oil or gas well or landfill, nuclear plant decommissioning and removal of plant and equipment from leased property on termination of the lease. The standard is effective for fiscal years beginning on or after January 1, 2004. The effects of these guidelines and standards are under review and have not been determined at this time. COMPARATIVE FIGURES Certain of the prior year's figures have been reclassified to conform with the 2002 presentation. 14 GREAT LAKES POWER INC. 2. ACQUISITIONS The company acquired interests in four power generating assets in 2002 and one in 2001. All acquisitions have been accounted for using the purchase method of accounting and the results of their operations have been included in these consolidated financial statements from the date of acquisition. MAINE POWER In February 2002, the Income Fund completed the acquisition of the hydroelectric generating system and related transmission facilities in northern Maine, USA from Great Northern Paper Inc. ("GNP") for cash consideration of $242 million and a promissory note of $7 million payable to GNP. The system consists of six hydroelectric generating stations located on the Penobscot River with a combined generating capacity of approximately 126 MW and eleven water storage dams. The fair value assigned to the assets acquired was as follows:

millions 2002 - -------- ---- Power generating assets $ 251 Working capital (2) ----- Net assets acquired $ 249 ----- Consideration paid $ 249 =====

NEW HAMPSHIRE POWER In May 2002, the Income Fund completed the acquisition of a hydroelectric generating system located in New Hampshire from American Tissue Inc. for cash consideration of $50 million. The system consists of six hydroelectric stations located on the Androscoggin River in New Hampshire,with a combined generating capacity of approximately 31 MW. The fair value assigned to the power generating assets acquired was equal to the cash consideration paid. MISSISSAGI POWER In May 2002, the Income Fund completed the acquisition of a hydroelectric generating system located in northern Ontario from Ontario Power Generation Inc. and OPG-Mississagi River Inc. for cash consideration of $346 million. The system consists of four hydroelectric stations located on the Mississagi River with a combined generating capacity of approximately 488 MW and four water storage dams. The fair value assigned to the assets acquired was as follows:

millions 2002 - -------- ---- Power generating assets $ 345 Working capital 1 ----- Net assets acquired $ 346 ----- Consideration paid $ 346 =====

LAKE SUPERIOR POWER In November 2002, the company acquired the 50% interest which it did not own in the Lake Superior Power cogeneration station in northern Ontario for cash consideration of $30 million. The net assets acquired as a result of the acquisition and the consideration given are as follows:

millions 2002 - -------- ---- Assets acquired Current assets $ 6 Power generating assets 61 Liabilities assumed Long term debt (37) ----- Net assets acquired $ 30 ----- Consideration paid $ 30 =====

POWELL RIVER ENERGY In February 2001, the Income Fund acquired a 50% indirect interest in the Powell River Energy hydroelectric power generation and transmission facilities in southwestern British Columbia for cash consideration of $58 million. The net assets acquired as a result of the acquisition and the consideration given are as follows:

millions 2001 - -------- ---- Assets acquired Power generating assets $ 58 Goodwill 17 Liabilities assumed Future income tax liability (17) ----- Net assets acquired $ 58 ----- Consideration paid $ 58 =====

3. ACCOUNTS RECEIVABLE AND OTHER The composition of accounts receivable and other is as follows:

millions 2002 2001 - -------- ---- ---- Demand deposits $ (14) $ 190 Coal royalty receivables 70 70 Trade receivables 85 29 Prepaid interest and other 45 47 ----- ----- $ 186 $ 336 ===== =====

The fair value of the company's accounts receivable and other approximates their carrying values at December 31, 2002 and 2001 based on expected future cash flows from these assets, discounted at market rates for assets with similar terms and investment risks. 4. SECURITIES The fair value of the company's securities at December 31, 2002 was $583 million (2001 - $705 million). In determining fair values, quoted market prices are used where available and, where not available, management estimates the amounts which could be recovered over time or through a transaction with knowledgeable and willing third parties under no compulsion to act. 2002 ANNUAL REPORT 15 The securities consist of 68% floating rate securities and 32% fixed rate securities with an average yield at December 31, 2002 of 6.40%. All financial and investment transactions with affiliated companies are at normal market terms. Affiliated companies include Brascan and its subsidiaries and equity accounted investees. At December 31, 2002, the carrying value of securities and deposits with affiliated companies amounted to $536 million and $(14) million, respectively (2001 - $660 million and $190 million). In 2002, income from securities and loans with affiliated companies amounted to $39 million (2001 - $48 million). 5. LONG-TERM INVESTMENTS Long-term investments include the company's direct and indirect interests in Brascan Financial Corporation, Noranda Inc., Brascan Corporation and First Toronto Investments Limited. The book values of the company's long-term investments and the underlying securities at December 31, 2002 and 2001 are shown below:

millions 2002 2001 - -------- ------ ------ Brascan Financial Corporation $ 195 $ 195 Noranda Inc. 146 146 Brascan Corporation 112 112 Other investments 106 68 ------ ------ $ 559 $ 521 ====== ======

6. POWER GENERATING ASSETS The composition of the company's power generating assets at December 31, 2002 and 2001, by geographic area and asset type, is shown below:

millions 2002 2001 - -------- ------ ------ By geographic area: Ontario $ 937 $ 471 Quebec 429 440 Northeast United States 304 -- Other 485 446 ------ ------ $2,155 $1,357 ====== ====== By asset type: Generation $1,846 $ 1,017 Transmission 157 156 Distribution 69 65 Other 82 53 ------ ------ 2,154 1,291 Accumulated depreciation and amortization (331) (264) ------ ------ 1,823 1,027 Investment in Louisiana HydroElectric 332 330 ------ ------ $2,155 $1,357 ====== ======

Power generating assets includes the cost of the company's 18 power generating stations in Ontario, 5 hydroelectric generating stations in Quebec, 12 hydroelectric stations in the Northeast United States and 50%share of two Powell River Energy hydroelectric generating stations, and the company's Highvale Power coal assets. The company's 75% residual interest in Louisiana HydroElectric Power's hydroelectric generating station and sediment control works is shown on an equity accounted basis. The financial accounts of Louisiana HydroElectric Power for 2002 and 2001 are as follows:

millions 2002 2001 - -------- ------ ------ Assets $1,604 $1,568 Property specific borrowings 1,273 1,261 Other liabilities 155 156 Operating revenues 209 187 Operating expenses 55 53 Net income 24 7 ====== ======

Depreciation is based on the service lives of the assets which are 60 years for hydroelectric generation, 20 years for cogeneration and 40 years for transmission, distribution and other. The company's hydroelectric power facilities operate under various renewable agreements for water rights which extend through the year 2008 for Great Lakes Power, 2044 for Valerie Falls Power, 2019 and 2020 for Pontiac Power, 2019 for Lievre River Power and 2031 for Louisiana HydroElectric Power. Substantially all of the water rights for Powell River Energy are perpetual. 7. JOINT VENTURES The following amounts represent the company's proportionate interest in incorporated and unincorporated joint ventures reflected in the company's accounts. (These amounts include Powell River Energy in 2001 and 2002 and Lake Superior Power in 2001 only.)

millions 2002 2001 - -------- ------ ------ Assets $ 59 $ 125 Liabilities 56 84 Operating revenues 9 46 Operating expenses 8 31 Net income 1 10 Cash flows from operating activities 2 16 Cash flows from investing activities (1) (60) Cash flows from financing activities (1) 37 ====== ======

16 GREAT LAKES POWER INC. 8. PROPERTY SPECIFIC BORROWINGS

millions 2002 2001 - -------- ------ ------ Great Lakes Power Limited First Mortgage Bonds Series 4 (US $105) $ 166 $ 167 Series 5 150 150 ------ ------ 316 317 ====== ====== Great Lakes Power Trust Credit Agreements 7 15 First Mortgage Bonds Series 1 50 50 Series 2 25 25 Series 3 25 25 ------ ------ 107 115 ====== ====== Other Power Operations Property specific borrowings Pontiac Power 62 63 Valerie Falls Power 33 -- Powell River Energy 38 47 Lake Superior Power 19 14 Mississagi Power 151 -- Great Lakes Hydro America (US $113) 179 -- ------ ------ $ 905 $ 556 ====== ======

The US$105 million First Mortgage Bonds Series 4 bear interest at the rate of 6.57%, are due on June 16, 2003 and are secured by a charge on the company's wholly owned power generating assets in northern Ontario. The $150 million First Mortgage Bonds Series 5 bear interest at the rate of 4.58%, are due on June 16, 2003 and are secured by a charge on the company's wholly owned power generating assets in northern Ontario. Through the use of an interest rate swap, the company pays interest at a rate which varies with the Banker's Acceptance ("B.A.") rate. These bonds replaced the $95 million First Mortgage Bonds Series 3 bearing interest at a rate of 6.69%, which matured December 31, 2001. The Income Fund First Mortgage Bonds Series 1, 2 and 3 bear interest at 7.33%, 7.55% and 7.78%, respectively; and are due April 24, 2005, April 24, 2010 and April 24, 2015, respectively. These Mortgage Bonds are secured by charges on all present and future real and personal property of Great Lakes Power Trust, which is wholly owned by the Income Fund. The $62 million Pontiac Power mortgage loans bear interest at a blended rate of 10.52%, amortized monthly to a maturity of December 1, 2020 and are secured by charges on the respective Pontiac Power generating assets. The $33 million Valerie Falls First Mortgage Bond bears interest at 6.84%, with interest only payments semi-annually for the first 20 years and blended principal and interest payments for the remaining 20 years to a maturity of December 20, 2042. The company's proportionate share of the $75 million Powell River Energy first mortgage bond bears interest at 6.92%, is due June 2009 and is secured by a charge on the respective Powell River Energy operating assets. The $19 million Lake Superior Power mortgage loan bears interest at 9.41%, amortizes annually to December 29, 2006 and is secured by a charge on the company's Lake Superior Power cogeneration assets. The $151 million Mississagi Power mortgage loan bears interest at the 30-day Bankers Acceptance rate plus 60 basis points until March 3, 2003 and 80 basis points thereafter. The facility matures on September 4, 2003. The US$113 million Great Lakes Hydro America mortgage loan bears interest at US prime plus 150 basis points and matures on January 30, 2005. The company has established a US$100 million loan facility with Brascan, its principal shareholder, which can be drawn down at any time, bearing interest at the prime rate and secured by the company's residual interest in Louisiana HydroElectric Power. At either party's option, the facility may be drawn down and converted into a fixed-rate financing at 9.75% repayable in 2015. Principal repayments on the company's outstanding property specific borrowings due over the next five years and thereafter are as follows:

millions Annual Repayments - -------- ----------------- 2003 $ 483 2004 8 2005 235 2006 4 2007 2 Thereafter 173 ----- $ 905 =====

9. TERM DEBENTURES

millions 2002 2001 - -------- ------ ------- Corporate debentures Series 1 (US$175) $ 277 $ 278 Series 3 (US$200) 316 318 ----- ----- $ 593 $ 596 ===== =====

The Series 1 debentures bear interest at the rate of 9.0% and are due in August 2004. The Series 3 debentures bear interest at 8.3% and are due March 2005. Through the use of an interest rate swap, the company pays interest at a rate which varies with the LIBOR rate. The fair value of the company's property specific borrowings and term debentures is $1,520 million (2001 -- $1,167 million) based on current market prices for debt with similar terms and risks. 2002 ANNUAL REPORT 17 10. FUTURE INCOME TAX LIABILITY The difference between the statutory rate and the effective rate of tax is attributable to the company's dividend income and equity earnings being taxed prior to receipt by the company. The company's future income tax liability of $120 million (2001 - $116 million) is comprised principally of temporary differences relating to property, plant and equipment. This amount is net of a future tax asset of $12 million (2001 - $21 million) relating to unused non-capital losses.

millions 2002 2001 - -------- ------ ------ Net income $ 167 $ 131 Combined income tax rates 38% 41% Statutory income tax rates applied to accounting income 63 54 Non-deductible expenses 2 1 Non-taxable dividends (45) (54) Recognition of the benefit of tax losses (16) (7) ------ ------ Provision for income taxes $ 4 $ (6) ====== ======

11. NON-CONTROLLING INTERESTS Non-controlling interests include preferred shares, limited partnership interests and trust units owned by minority shareholders in the company's consolidated subsidiaries, as follows:

millions 2002 2001 - -------- ------ ------ Preferred shares issued by consolidated subsidiaries $ 90 $ 90 Limited partnership interests of consolidated subsidiaries 4 4 Trust units issued by consolidated subsidiaries 256 177 ------ ------ $ 350 $ 271 ====== ======

12. SHAREHOLDERS' EQUITY The company is authorized to issue an unlimited amount of common shares, of which the following were issued and outstanding:

millions 2002 2001 - -------- ------ ------ 101,383,135 (2001 - 101,383,135) Common shares $ 603 $ 603 Retained earnings 523 448 ------ ------ 1,126 1,051 Subordinated convertible debentures 248 248 ------ ------ $1,374 $1,299 ====== ======

The subordinated convertible debentures mature September 30, 2013, bear interest at the prime rate subject to a minimum of 6% and a maximum of 8%, and are convertible at $10.00 per common share into 24.8 million common shares. Principal and interest are payable at the company's option with common shares. The company is authorized to issue an unlimited amount of preferred shares, none of which are currently outstanding. The following table summarizes the company's distributions to common shareholders and equivalents:

millions 2002 2001 - -------- ------ ------ Common share dividends $ 65 $ 65 Convertible debt interest 15 16 ------ ------ $ 80 $ 81 ====== ======

13. OTHER INFORMATION

millions, except per share amounts 2002 2001 - -------- ------ ------ Average diluted common shares outstanding 126.2 126.2 Basic earnings per share $ 1.50 $ 1.13 ====== ======

The company's two largest customers accounted for 8% and 7%, respectively, of total revenues in 2002 (2001 - 12% and 10%, respectively). During 2002, no hydrological provisions (2001 - $7 million) were applied against power purchase costs and a $3 million (2001 - $10 million) recovery of hydrological provisions was included in revenue from power operations. At December 31, 2002, hydrological provisions totalled nil (2001 - $3 million). 14. COMMITMENTS AND CONTINGENCIES The company has entered into a power agency and guarantee agreement with the Great Lakes Power Trust (the "Trust"), in which the company has a 50% indirect interest, for a term of 20 years. This agreement requires the company to fund any deficiency amount between a guaranteed price for energy and the actual energy revenues earned by the Trust. The company is entitled to receive any revenues in excess of the guaranteed amount. The cumulative net surplus amount in 2002 was nil (2001 - $0.2 million). In addition, the company agreed to provide to the Income Fund hydrology credit facilities in the amount of $25 million for a period of 15 years, of which not more than $8 million is permitted to be advanced during any given year. Of this amount, Lievre River Power has $15 million available until 2014 and Mississagi Power has $10 million available until 2019. These facilities bear interest at market rates. 15. DERIVATIVE FINANCIAL INSTRUMENTS Derivative financial instruments are utilized by the company in the management of interest rate and commodity exposures primarily related to the generation of electricity. It is the company's policy to restrict the use of derivative financial instruments for trading or speculative purposes to within predetermined limits. The company formally documents relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking forward electricity sale derivatives to specific periods in which the company anticipates generating electricity for sale. The company also 18 GREAT LAKES POWER INC. formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the fair values or cash flows of the hedged items. The company defers unrealized gains and losses on electricity commodity contracts designated as hedges and records them as an adjustment to power revenues when the underlying hedged transaction is recorded. Commodity contracts not designated as hedges are recorded in accounts receivable or accounts payable at fair value with changes in fair value recorded in power revenue.

Notional Notional Range of Amount Average Amount Average Maturity Bought Rate Sold Rate -------- -------- ------- -------- ------- Electricity 1 month 2,284 $56.58 6,270 $54.89 to GWh per GWh per 3 years MWh MWh

As at December 31, 2002, contracts designated as hedges had a net fair value determined based on quoted market rates of negative $33 million, consisting of contracts with a positive mark-to-market of$38 million and contracts with a negative mark-to-market of $71 million. The company manages credit risks by entering into contracts with highly rated counterparties. The company enters into interest rate swaps on its long term debt. The swap agreements require the periodic exchange of payments without the exchange of the notional principal amount on which the payments are based. The company designates its interest hedge agreements as hedges of the underlying debt. Interest expense is adjusted to include the payments made or received under the interest rate swaps. The total notional amount of principal underlying interest rate swap contracts in 2002 was $466 million (2001 - $468 million). These contracts have maturities varying from one to three years, and have a favourable replacement value of $8 million (2001 - $26 million). In the event a designated hedged item is sold, extinguished or matures prior to the termination of the related derivative instruments, any realized or unrealized gain or loss on such derivative instruments is recognized in income. In the event a derivative instrument in a designated hedge relationship is sold, extinguished or matures prior to the termination of the related hedged item, any realized or unrealized gain or loss is recognized in income on the same basis as the underlying hedged item. 16. EMPLOYEE BENEFIT PLAN The company offers a number of pension plans to its employees. The company's obligations under its defined benefit pension plans are determined periodically through the preparation of actuarial valuations. As of December 31, 2002, the assets of the plans totalled $40 million (2001 - $37 million) and accrued benefit obligation amounted to $43 million (2001 - $35 million) for a net accrued benefit liability of $3 million (2001 - $2 million). The benefit plan expense for 2002 was $0.3 million (2001 - $0.2 million). The investment rate of return was 7% (2001 - 7%). The discount rate used was 6.75% with a rate of compensation increase of 3.8%. 17. GEOGRAPHIC SEGMENTED INFORMATION The company operates in Canada and the United States. Revenues by country are as follows:

millions 2002 2001 - -------- ------ ------- Canada $ 288 $ 258 United States 52 12 ------ ------- $ 340 $ 270 ====== =======

Income by country is as follows:

millions 2002 2001 - -------- ------ ------- Canada $ 181 $ 120 United States 35 12 Other unallocated income (expenses) (49) (1) ------ ------- $ 167 $ 131 ====== ======

Power generating assets by country are as follows:

millions 2002 2001 - -------- ------ ------ Canada $1,519 $1,027 United States 636 330 ------ ------- $2,155 $1,357 ====== ======

Depreciation expense from power generating assets by country is as follows:

millions 2002 2001 - -------- ------ ------ Canada $ 34 $ 27 United States 6 -- ------ ------- $ 40 $ 27 ====== ======

2002 ANNUAL REPORT 19 FOURTH QUARTER 2002 FINANCIAL RESULTS The company's unaudited financial statements for the fourth quarter of 2002 and 2001 are set out in the following tables: CONSOLIDATED STATEMENT OF INCOME

(unaudited) Three months ended December 31 millions, except per share amounts 2002 2001 - ---------------------------------- ------- ------- REVENUE Power revenue $ 78 $ 57 Power purchases -- 11 ------ ------ Net power revenue 78 46 Investment and other income 22 25 ------ ------ 100 71 ------ ------ EXPENSES Interest 26 20 Operating and maintenance 17 10 Fuel purchases 6 3 Depreciation 10 7 Non-controlling interests -- 3 Income and other taxes 12 3 ------ ------ 71 46 ------ ------ NET INCOME $ 29 $ 25 ====== ====== DILUTED NET INCOME PER COMMON SHARE $ 0.23 $ 0.20 ====== ======

CONSOLIDATED STATEMENT OF RETAINED EARNINGS

(unaudited) Three months ended December 31 millions 2002 2001 - -------- ------- ------- RETAINED EARNINGS Balance, beginning of period $ 526 $ 443 Net income 29 25 Distributions to unitholders of common shares & equivalents (20) (20) Adjustment for change in accounting policy (8) -- Fund unit issue costs (4) -- ------ ------ $ 523 $ 448 ====== ======

CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited) Three months ended December 31 millions 2002 2001 - -------- ------- ------- CASH FLOW FROM OPERATIONS Net income $ 29 $ 25 Add non-cash items Depreciation 10 7 Hydrological provisions (3) (7) Other 8 7 ------ ------ CASH FLOW FROM OPERATIONS $ 44 $ 32 Net change in non-cash working capital 41 42 ------ ------ Cash provided by operating activities 85 74 ------ ------ FINANCING AND SHAREHOLDER DISTRIBUTIONS Borrowings 32 177 Debt repayments 2 (104) Issuance of funds units -- 78 Distributions: -- Great Lakes Hydro Income Fund unitholders (7) (5) -- Common shares and equivalents (20) (20) ------ ------ 7 126 ------ ------ INVESTING Securities purchases (10) (57) Securities sales 67 40 Long-term investments (36) 14 Loans and other receivables (91) (152) Power generating assets (51) (54) ------ ------ (121) (209) ------ ------ CASH AND CASH EQUIVALENTS Increase (decrease) (29) (9) Balance, beginning of period 39 19 ------ ------ Balance, end of period $ 10 $ 10 ====== ====== SUPPLEMENTARY INFORMATION Interest paid $ 21 $ 22 Taxes paid $ 3 $ 4 ====== ======

20 GREAT LAKES POWER INC. EX-99.4 6 t09928exv99w4.htm CONSENT OF DELOITTE & TOUCHE, LLP

Exhibit 99.4

FORM OF INDEPENDENT AUDITOR CONSENT

CONSENT OF DELOITTE & TOUCHE, LLP

Great Lakes Power Inc.
Suite 300, BCE Place
181 Bay Street, Box 762
Toronto, Ontario M5J 2T3

Independent Auditors’ Consent

We consent to the use of our report dated February 7, 2003, appearing in this Annual Report on Form 40-F of Great Lakes Power Inc. for the year ended December 31, 2002.

/s/ Deloitte & Touche, LLP

Deloitte & Touche, LLP
Chartered Accountants

Toronto, Ontario
February 7, 2003

Page 2 EX-99.5 7 t09928exv99w5.htm CERTIFICATION OF CEO PURSUANT TO SECTION 906

Exhibit 99.5

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report of Great Lakes Power Inc. (the “Company”) on Form 40-F for the year ended December 31, 2002, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Harry A. Goldgut, Co-Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1.	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Harry A. Goldgut
	Harry A. Goldgut Co-Chairman and Chief Executive Officer
	May 20, 2003

Page 3 EX-99.6 8 t09928exv99w6.htm CERTIFICATION OF CFO PURSUANT TO SECTION 906

Exhibit 99.6

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report of Great Lakes Power Inc. (the “Company”) on Form 40-F for the year ended December 31, 2002, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Donald Tremblay, Senior Vice-President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1.	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Donald Tremblay
	Donald Tremblay Senior Vice-President and Chief Financial Officer
	May 20, 2003

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EX-99.1

exv99w1

EX-99.2

                                                                               .
                                                                               .
                                                                               .
MANAGEMENT'S DISCUSSION AND ANALYSIS


OPERATIONS REVIEW

SUMMARY

Production statistics for the company's power generating operations for 2002 and
2001 are shown below:





                                             2002            2001
                                          ----------      ----------
                                                      
POWER GENERATED (gigawatt hours)(1)
Ontario                                     2,531             1,793
Quebec                                      1,585             1,418
Northeast United States                       558                --
Other Power Operations                        910               748
                                           ------            ------
Total                                       5,584             3,959
                                           ======            ======
POWER REVENUE ($ millions)
Ontario                                    $  198            $  182
Power purchases                               (14)              (55)
                                           ------            ------
                                              184               127
Quebec                                         80                69
Northeast United States                        37                --
Other Power Operations                         25                19
                                           ------            ------
Net Power Revenue                          $  326            $  215
                                           ======            ======


- ----------------
1. Power generation is calculated on a proportionate ownership basis.

The company's power operations generated 5,584 gigawatt hours ("GWh") of
electricity during 2002, up from 3,959 GWh in 2001 primarily due to new
acquisitions and a return to more normal precipitation levels after unusually
dry conditions in 2001.

ONTARIO

Power generated by the company's operations in Ontario increased by 41% to 2,531
GWh from 1,793 GWh in 2001. This reflected the acquisition of Mississagi Power
in May 2002 which generated 340 GWh during the balance of the year, and a return
to more normal hydrology and generation at the Great Lakes Power system.

Power generated by the company's operations in Ontario in 2002 compared to 2001
is shown below:




gigawatt hours                               2002            2001
- ---------------                           ----------      ----------
                                                      

Great Lakes Power - Generation              1,639             1,301
Mississagi Power                              340                --
Valerie Falls Power                            45                51
Lake Superior Power(1)                        507               441
                                           ------            ------
                                            2,531             1,793
                                           ======            ======


- --------------
1. Includes electricity equivalents of contracted gas sales.

Following the opening of the electricity market in the Province of Ontario to
competition on May 1, 2002, the company made a number of changes in response to
the new regulatory environment, including the termination of its power purchase
agreement with Ontario Power Generation ("OPG"). Great Lakes Power's operations
have been restructured into two separate businesses: a generation unit and a
regulated power transmission and distribution unit. The company continues to be
a distributor of power in its historical service area in the Algoma District and
sells electricity to the Public Utility Commission of Sault Ste. Marie and St.
Marys Paper under power sales agreements.

In May 2002, the company acquired four hydroelectric generating stations located
on the Mississagi River northeast of Sault Ste. Marie in northern Ontario from
OPG for $346 million. These stations have a combined generating capacity of 488
MW and are being operated in conjunction with the company's other 12
hydroelectric stations in this area.

In October 2002, the company acquired Duke Energy's 50% interest in the Lake
Superior Power co-generation plant in Sault Ste. Marie, Ontario, increasing its
ownership in this facility to 100%. The consideration for this acquisition was
$67 million, comprised of $30 million in cash and the assumption of $37 million
of debt. Lake Superior Power is operated in conjunction with the company's other
hydroelectric power stations in northern Ontario. All of its electricity
production is sold to Ontario Electricity Finance Corporation under a long-term
contract.

During 2002, the company substantially completed the 45 MW Robert A. Dunford
hydroelectric generating station on the Michipicoten River near Wawa in northern
Ontario, to be commissioned during the first quarter of 2003. This project,
named after a former Chairman of the company, has been completed on schedule and
under budget at a cost of $72 million. It replaces the older 28 MW High Falls
generating station with a larger, more efficient station with increased
peak-period generating capability.

QUEBEC

Power generated by the company's operations in Quebec increased by 12% to 1,585
GWh from 1,418 GWh in 2001. The increase is related to improved water levels at
Lievre River Power during the summer of 2002. Power generated by the company's
operations in Quebec in 2002 compared to 2001 is shown below:




gigawatt hours                               2002            2001
- ---------------                           ----------      ----------
                                                      

Lievre River Power                          1,399             1,224
Pontiac Power                                 186               194
                                           ------            ------
                                            1,585             1,418
                                           ======            ======



NORTHEAST UNITED STATES

The company's two power operations in the northeast United States, Maine Power
and New Hampshire Power, were acquired during 2002. These two new operations
generated 558 GWh during the year since their acquisition. These amounts were
below their long term averages due to lower precipitation levels in New England.




                                                            2002 ANNUAL REPORT 3






Power generated by the company's operations in northeast United States in 2002
is shown below:




gigawatt hours                          2002
- ----------------                      -------
                                    
Maine Power                             477
New Hampshire Power                      81
                                       ----
                                        558
                                       ====


In February 2002, the company acquired Maine Power, an integrated power
generating and distributing system in northern Maine from Great Northern Paper
Inc. for US$156.5 million. This system includes six hydroelectric generating
stations located on the main and west branches of the Penobscot River with a
combined generating capacity of 126 MW, as well as an interconnection with the
New England Power Pool. Construction commenced in November 2002 on the expansion
of this interconnection from 20 MW of capacity to 150 MW for completion during
the first half of 2003. This will facilitate the transmission of Maine Power's
surplus generation into the New England Power Pool.

In May 2002, the company expanded its presence in the northeastern United States
with the acquisition of six hydroelectric generating stations in northern New
Hampshire from a local forest products company for US$32 million. These stations
located on the Androscoggin River are being operated in conjunction with the
company's six Maine Power stations.

The New Hampshire Power acquisition was made in conjunction with the purchase by
Nexfor Inc. ("Nexfor"), an affiliate of Brascan, of certain pulp and paper
facilities in that state. During the first quarter of 2003, the company expects
to start construction of a 25 MW cogeneration plant in Berlin, New Hampshire.
This station will provide electricity and steam for sale to Nexfor's pulp and
paper facilities and is expected to be completed in 2004.

OTHER POWER OPERATIONS

Power generated by the company's other power operations in North America
increased by 22% to 910 GWh from 748 GWh in 2001. This reflected improved water
flows on the lower Mississippi River which increased power generation at
Louisiana HydroElectric Power by 13%. Power generation at Powell River Energy,
which was acquired in February 2001, increased by 49% due to a return to normal
water levels and a full year of generation available to the company.

Power delivered by the company's other North American power operations in 2002
compared to 2001 is shown below:




gigawatt hours                          2002         2001
- -----------------                     --------     --------
                                               

Louisiana HydroElectric Power            639         566
Powell River Energy                      271         182
                                         ---         ---
                                         910         748
                                         ===         ===


During 2002, construction progressed on the 30 MW Pingston Creek hydroelectric
generating station near Revelstoke, B.C. Developed in a 50/50 joint venture with
Canadian Hydro Developers Inc., this project is expected to start production in
the first half of 2003. In August 2002, the partners signed a 20-year contract
to sell this station's power to BC Hydro. This project is expected to increase
the company's generating capacity in British Columbia and further enhance the
company's geographic diversification.

Development work continues on five new hydroelectric generating stations in
southern Brazil. Construction is under way on three of these stations: the 30 MW
Passo do Meio project in the State of Rio Grande do Sul, and the 16 MW Pedrinho
and 15 MW Salto Natal projects in the State of Parana, all of which are expected
to be completed in the first half of 2003.

INCOME ANALYSIS

Great Lakes' net income for 2002 increased to $167 million from $131 million in
2001.

Financial results for the year ended December 31, 2002 compared to 2001 are
shown in the following table:




millions, except per share amounts                  2002       2001
- -----------------------------------               --------   --------
                                                         
Revenues
  Power revenue                                     $340       $270
  Power purchases                                    (14)       (55)
                                                    ----       ----
  Net power revenue                                  326        215
  Investment & other income                           92        105
                                                    ----       ----
                                                     418        320
                                                    ====       ====
Expenses
  Interest                                            90         82
  Operating & maintenance                             60         37
  Fuel purchases                                      18         21
  Depreciation                                        40         27
  Non-controlling interests                           18         12
  Income & other taxes                                25         10
                                                    ----       ----
                                                     251        189
                                                    ----       ----
Net income                                          $167       $131
                                                    ====       ====



POWER REVENUE

Total power revenue for 2002 was $340 million compared with $270 million in
2001, an increase of 26% primarily due to the acquisitions of Mississagi Power,
Maine Power and New Hampshire Power and better hydrology and electricity prices.

Great Lakes strives to maximize the stability and predictability of power
generating revenues through the use of fixed price contracts to minimize the
impact of price fluctuations, and through diversification of watersheds and
water storage reservoirs to minimize fluctuation in generation levels.

Approximately 85% of the company's projected 2003 revenues is subject to fixed
price contracts or regulated revenue requirements. The remaining revenue is
generated through the sale of power on a wholesale basis. Due to the low cost of
hydroelectric power and the ability to increase generation during peak pricing



 4 GREAT LAKES POWER INC.







periods, the company is able to generate attractive margins on its uncommitted
capacity. Great Lakes' long-term sales contracts have an average duration of 17
years, and its counterparties are almost exclusively customers with
long-standing credit history or investment grade ratings.

Ontario

Power operations in Ontario contributed $184 million of revenue in 2002 compared
to $127 in 2001. The main reasons for the increased revenues were the return to
long-term average generation at Great Lakes Power and the addition of Mississagi
Power. Correspondingly, generation in this region increased to 2,531 GWh from
1,793 GWh in 2001.

Quebec

Power operations in Quebec contributed $80 million of revenue in 2002 compared
to $69 million in 2001. The increase is attributed to improved generation at
Lievre River Power along with improved average prices, secured by long-term
contracts.

Northeast United States

The company acquired two power operations in the Northeast United States during
February and May of 2002. These operations contributed 558 GWh of generation and
$37 million in revenues during the balance of the year.

Other Power Operations

Other power operations include the results of Louisiana HydroElectric Power and
Powell River Energy. Revenue from other power operations totalled $25 million in
2002, compared with $19 million in 2001. The increase is a result of improved
water conditions on the lower Mississippi River, which increased generation at
Louisiana HydroElectric Power, combined with a full year of generation from
Powell River Energy.

POWER PURCHASES

The company had an obligation to serve all customers in its Great Lakes Power
service area in northern Ontario until May 1, 2002, the date when the
electricity market in Ontario opened to competition. As a result, the company
purchased power from OPG as required to supplement its own generation. After May
1, 2002, this obligation ceased and, as a result, supplemental power purchases
are no longer required.

INVESTMENT AND OTHER INCOME

Investment and other income for 2002 was $92 million compared with $105 million
in 2001. Investment and other income consists of dividend income from long-term
investments and the company's securities portfolio, and interest on loans
receivable. The decrease in investment and other income is attributed to lower
average interest rates in Canada and the United States, and decreased loans
receivable balances during the year.

EXPENSES

Total expenses for 2002 were $251 million compared with $189 in 2001. Total
expenses increased by 33% from 2001 as a result of the acquisitions of
Mississagi Power, Maine Power and New Hampshire Power and a full year of
expenses for Powell River Energy, which was acquired in February 2001.

Interest expense in 2002 was $90 million compared to $82 million in 2001.
Interest expense consists of the costs related to servicing property specific
borrowings and corporate term debt. The increase in interest expense is
attributable to additional debt incurred as a result of acquisitions. These
costs were partially offset by decreasing interest rates during the year.

Operating and maintenance costs increased to $60 million in 2002 compared with
$37 million in 2001. Operating and maintenance costs consist of labour,
materials and administrative support. The increase in operating and maintenance
costs is primarily attributable to the acquisitions in 2002.

Fuel purchases consist of the costs for natural gas required for the Lake
Superior Power cogeneration plant. Fuel purchases were $18 million in 2002
compared to $21 million in 2001. The decrease in fuel purchases is a result of
less gas purchased for resale in 2002.

Depreciation expense in 2002 was $40 million compared to $27 million in 2001.
The increase is attributable to the acquisitions in 2002 and 2001.

Non-controlling interests expense increased to $18 million in 2002 compared with
$12 million in 2001. Non-controlling interest consists of the allocation of
income associated with the non-controlling interests in the company's
consolidated entities. The increase is related to the higher earnings recorded
by the Great Lakes Hydro Income Fund (the "Income Fund"), which is 50% owned by
other investors.

Income and other taxes increased to $25 million in 2002 compared with $10
million in 2001. Income and other taxes consist of municipal and other
generation taxes on hydroelectric facilities and federal, provincial and state
income taxes. The increase in income and other taxes is primarily related to
municipal taxes on the assets acquired during the past two years, and increased
non-cash provisions for federal and provincial income taxes, which are accounted
for under the future liability method of accounting.

                                                            2002 ANNUAL REPORT 5










BALANCE SHEET ANALYSIS

The company's total assets increased during 2002 from $2,930 million to $3,500
million, due mainly to investments in additional generating capacity. Assets and
liabilities at December 31, 2002 and 2001 are summarized in the following table:




millions                                2002             2001
- ---------                             -------          -------
                                                 
Assets
  Cash & cash equivalents             $    10          $    10
  Accounts receivable & other             186              336
  Securities                              590              706
  Long-term investments                   559              521
  Power generating assets               2,155            1,357
                                      -------          -------
                                      $ 3,500          $ 2,930
                                      =======          =======
Liabilities
  Accounts payable & other            $   158          $    92
  Property specific borrowings            905              556
  Corporate term debentures               593              596
Future income taxes                       120              116
Non-controlling interests                 350              271
Shareholders' equity                    1,374            1,299
                                      -------          -------
                                      $ 3,500          $ 2,930
                                      =======          =======


FINANCIAL ASSETS

The company's accounts receivable and other assets decreased to $186 million in
2002 from $336 million in 2001 due principally to the draw down of interest
bearing deposits with affiliates in order to finance investments in the
company's power generating operations.

The company's securities portfolio, which is comprised primarily of preferred
shares of affiliated Canadian companies, decreased from $706 million to $590
million in 2002. The composition of the company's securities portfolio by
business sector at December 31, 2002 and 2001 is summarized below:



millions                                2002            2001
- ---------                             -------          -------
                                                 
Property                              $   160          $   270
Natural resources                         161              152
Financial services & diversified          199              214
Other                                      70               70
                                      -------          -------
                                      $   590          $   706
                                      =======          =======



The book values of the company's long-term investments and the underlying
securities at December 31, 2002 and 2001 are shown below:




millions                               2002             2001
- ---------                             -------          -------
                                                 
Brascan Financial Corporation         $   195          $   195
Noranda Inc.                              146              146
Brascan Corporation                       112              112
Other investments                         106               68
                                      -------          -------
                                      $   559          $   521
                                      =======          =======



Great Lakes holds a senior preferred share investment in Brascan Financial
Holdings Inc. which, together with Brascan, owns all of the common shares of
Brascan Financial Corporation ("Brascan Financial"), a Canadian-based financial
services company. Brascan's combined interest in Brascan Financial was increased
from 71% during 2002 as a result of Brascan's offer to purchase all of the
outstanding common shares of this company. Brascan Financial's results for the
two years ended December 31, 2002 are shown below:




millions                               2002             2001
- ---------                             -------          -------
                                                 
Total assets                          $ 4,334          $ 3,585
Shareholders' equity                    2,844            2,660
Revenues                                  501              444
Net income                                272              251



Great Lakes holds a senior preferred share investment in Noranda Equities Inc.
which, together with Brascan, owns 40% of the common shares of Noranda Inc.
("Noranda"). Noranda, a publicly listed company, is a major producer of mined
and refined base metals. Noranda's financial results for the two years ended
December 31, 2002 are shown below:




millions                                2002             2001
- ---------                             -------          -------
                                                
Total assets                         $ 11,377         $ 12,141
Shareholders' equity                    2,928            3,797
Revenues                                6,090            6,152
Net income (loss)                        (700)             (92)



Noranda's loss in 2002 reflects a charge of $630 million relating to the
writedown of its magnesium operations in Quebec.

Great Lakes owns a $112 million senior preferred share investment issued by a
wholly owned subsidiary of Brascan. Brascan's financial results for the two
years ended December 31, 2002 are shown below:




millions                                2002             2001
- ---------                             -------          -------
                                                 
Total assets                         $ 22,788          $21,929
Common equity                           4,162            4,261
Revenues                                4,810            1,269
Net income                                130              311



The decrease in Brascan's net income in 2002 reflects its share of Noranda's
higher loss related to the writedown of its magnesium operations.

Other investments include primarily the company's shares of First Toronto
Investments Limited, a Brascan subsidiary which holds investments in equity
securities of Canadian corporations, primarily companies affiliated with
Brascan.

POWER GENERATING ASSETS

The depreciated cost of the company's power generating assets increased during
2002 from $1,357 million to $2,155 million.

Power generating assets in Canada increased by 50% from $911 million in 2001 to
$1,366 million in 2002. This increase is a result of the acquisition of
Mississagi Power and the remaining half interest in Lake Superior Power.

The acquisition in 2002 of Maine Power and New Hampshire Power resulted in the
ownership of power


6  GREAT LAKES POWER INC.








generating assets with a book value of $301 million at year end in the Northeast
United States region.

Other power operations increased 9% from $446 million in 2001 to $485 million in
2002. The increase is attributed to additional costs related to assets under
development and the increase in the company's investment in Louisiana
HydroElectric Power.

LIQUIDITY AND CAPITAL RESOURCES

The company's liquidity and capital requirements are affected primarily by the
results of operations, capital expenditures, debt service requirements and
working capital needs. The net cash provided by or used in operating, financing
and investing activities for 2002 and 2001 was as follows:



millions                                2002             2001
- ---------                             -------          -------
                                                 
Cash provided by (used in):
  Operating activities                $   237           $  183
  Financing activities                    347              122
  Investing activities                   (584)            (314)



Cash provided by operating activities increased during 2002 to $237 million
compared with $183 million in 2001 for the reasons discussed under "Income
Analysis".

Cash provided by financing activities increased during 2002 to $347 million
compared with $122 million in 2001. Financing activities in 2002 included
acquisition debt related to the acquisition of Mississagi Power, Maine Power and
New Hampshire Power, Income Fund financing and $33 million in a first property
specific bond financing for Valerie Falls.

In May 2002, the Income Fund issued 14.7 million units at $14.00 per unit. Fifty
percent of the units issued were subscribed for by Great Lakes. Gross proceeds
from the issue totaled $206 million.

Cash utilized in investing activities increased in 2002 to $584 million from
$314 million in 2001 primarily due to the acquisitions of Mississagi, Maine, New
Hampshire and the remaining half interest in Lake Superior for a total
investment of $713 million. This was offset by a decrease in deposit balances,
which were collected during the year in order to finance acquisitions.

LIABILITIES

Accounts payable and other increased to $158 million in 2002, compared to $92
million in 2001. The increase is related to increased working capital balances
relating to operations acquired during the year.

Great Lakes' borrowings includes property specific borrowings, corporate
debentures, bank credit facilities and bridge loan facilities provided by
Brascan.

At December 31, 2002, the company's total debt was $1,498 million, as detailed
in the following table:



                                       AVERAGE          Average
                                      INTEREST         Interest
millions                          2002    RATE     2001    Rate
- --------                        --------------    -------------
                                              
First Mortgage Bonds
  Great Lakes Power Ltd.         $ 316    5.8%    $ 317    5.6%
  Great Lakes Hydro
    Income Fund                    100    7.5%      100    7.5%
Other property
    specific borrowings            489    6.3%      139    8.2%
                                ------           ------
                                   905              556

Corporate term debentures          593    7.4%      596    7.4%
                                ------           ------
                                $1,498           $1,152
                                ======           ======



The maturity schedule of the company's property specific borrowings is as
follows:




millions                    Annual Repayments
- --------                    -----------------
                                   
2003                                   $  483
2004                                        8
2005                                      235
2006                                        4
2007                                        2
Thereafter                                173
                                       ------
                                       $  905
                                       ======



In addition to the above debt, the company has a commercial paper program with
an authorized amount of $100 million. The company's commercial paper is
currently rated R-1(low) by Dominion Bond Rating Service and A-2 by Standard &
Poor's.

CAPITAL BASE AND FINANCIAL POSITION

The company's capital base at December 31, 2002 of $1,374 million was comprised
of common equity with a book value of $1,126 million or $11.11 per share and a
further $248 million of subordinated convertible debentures. The convertible
debentures mature September 2013 and interest and principal may be paid by the
company in the form of its common shares. The debentures are therefore included
as part of the company's capital base.

The composition of the company's capital base at December 31, 2002 and 2001 is
summarized in the following table:




millions, except number of shares       2002            2001
- ---------------------------------     -------          -------
                                                 
Subordinated convertible
debentures                            $   248          $   248
Common shares                           1,126            1,051
                                      -------          -------
                                      $ 1,374          $ 1,299
                                      =======          =======



Regular dividends paid on the company's common shares in both 2002 and 2001
amounted to $64.9 million, representing an earnings payout ratio of 39% in 2002.


                                                           2002 ANNUAL REPORT  7








The company's policy is to distribute surplus operating cash flows not required
for investment in power generating facilities to its common shareholders in the
form of regular quarterly and special dividend payments.

BUSINESS ENVIRONMENT AND RISKS

Operating income from hydroelectric power generation fluctuates in relation to
the availability of water and the ability to generate and deliver power to
markets with the highest power rates. While changes in the level of
precipitation impact the amount of power generated by individual operations, the
diversified locations of the company's hydroelectric power stations across
several different watershed areas in Canada and the United States help to
balance the financial impact of these fluctuations.

Deregulated electricity markets in northeast Canada and the United States have
resulted in fluctuations in the price of power based on supply and demand
dynamics. This volatility in prices is managed through long-term fixed price
contracts on approximately 85% of the company's power production.

Counterparty credit risk is inherent in the company's long-term fixed price
contracts. The company manages this risk by entering into contracts with
counterparties that are either (i) investment grade or (ii) have an established
credit history.

The Ontario Government opened the Ontario electricity supply market to full
competition on May 1, 2002. Further government actions were announced in
November 2002, including the implementation of a 4.3 cent / kwh retail cap.
However, the price for power that generators, other than OPG, receive in the
wholesale market was not capped.

Regulatory changes may result in uncertain power markets in the short term,
which could impact the operating income from the company's power businesses.

Investment income from a substantial portion of the company's preferred
shareholdings varies generally with the amount invested, as the rate of return
is generally fixed. Income from other investments is sensitive to interest rate
changes; however, a similar offsetting sensitivity exists with a portion of the
company's debt.

OPERATING STRATEGY

The company's primary goal is to generate increased return on capital for its
shareholders.

The company is committed to expanding its power generating business by enhancing
and expanding its power production base. To achieve this objective, the company
has four strategic priorities: (i) increase and strengthen cash flow from the
generation business; (ii) expand its production base through the acquisition of
existing generating assets and development of greenfield sites; (iii) expand
access to new interconnected electricity markets in the United States through
the company's existing transmission interconnections between Ontario and Quebec,
and other planned and proposed interconnections with adjacent markets in the
United States, and (iv) position the company to market power in open access,
competitive markets, thereby optimizing the value of its generation portfolio
through the timing of power sales with peak pricing periods and securing
long-term contracts.

FORWARD-LOOKING STATEMENTS

The company's financial analysis and review contains "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The
words "believe", "expect", "anticipate", "intend", "estimate" and other
expressions which are predictions of or indicate future events and trends and
which do not relate to historical matters identify forward-looking statements.
Reliance should not be placed on forward-looking statements because they involve
known and unknown risks, uncertainties and other factors, which may cause the
actual results, performance or achievements of the company to differ materially
from anticipated future results, performance or achievements expressed or
implied by such forward-looking statements. Factors that could cause actual
results to differ materially from those set forth in the forward-looking
statements include general economic conditions, weather conditions, interest
rates, availability of equity and debt financing and other risks. The company
undertakes no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise.




 8 GREAT LAKES POWER INC.

EX-99.3

                       CONSOLIDATED FINANCIAL STATEMENTS

MANAGEMENT RESPONSIBILITY

TO THE SHAREHOLDERS

The attached financial statements and other financial information have been
prepared by the company's management which is responsible for their integrity
and objectivity. To fulfill this responsibility, the company maintains systems
of internal control and policies and procedures to ensure that its reporting
practices and accounting and administrative procedures are of high quality.
These policies and procedures are designed to provide relevant, reliable and
timely financial information. These statements have been prepared in conformity
with Canadian generally accepted accounting principles and, where appropriate,
reflect estimates based on judgments of management. Financial information
presented elsewhere in this Annual Report is consistent with that shown in the
accompanying consolidated financial statements.

Deloitte & Touche LLP, the independent auditors appointed by the shareholders,
have examined the financial statements of the company in accordance with
Canadian generally accepted auditing standards to enable them to express to the
shareholders their opinion on the financial statements. Their report as auditors
is set out below.

These statements have also been reviewed by the Board of Directors and by its
Audit Committee, which meets with the auditors and management to review the
activities of each and reports to the Board of Directors. The auditors have full
access to the Audit Committee and meet with the committee both with and without
the presence of management. The Board of Directors, through its Audit Committee,
oversees management's financial reporting responsibilities and is responsible
for reviewing and approving the financial statements.

/s/  Craig J. Laurie
- ------------------------------------------
Vice-President and Chief Financial Officer
February 7, 2003


AUDITORS' REPORT

TO THE SHAREHOLDERS OF GREAT LAKES POWER INC.

We have audited the consolidated balance sheets of Great Lakes Power Inc. as at
December 31, 2002 and 2001 and the consolidated statements of income, retained
earnings and cash flows for the years then ended. These financial statements are
the responsibility of the company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance as to whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at December 31, 2002
and 2001 and the results of its operations and its cash flows for the years then
ended in accordance with Canadian generally accepted accounting principles.



/s/ Deloitte & Touche LLP
- ----------------------------------
Toronto, Canada
February 7, 2003



                                                            2002 ANNUAL REPORT 9



CONSOLIDATED BALANCE SHEET



December 31
millions
                                                 note    2002      2001
                                                 ----  ------    ------
                                                        
ASSETS

   Cash and cash equivalents                           $   10    $   10
   Accounts receivable and other                  3       186       336
   Securities                                     4       590       706
   Long-term investments                          5       559       521
   Power generating assets                        6     2,155     1,357
                                                 --    ------    ------
                                                       $3,500    $2,930
                                                       ======    ======

LIABILITIES

   Accounts payable and other                          $  158    $   92
   Property specific borrowings                   8       905       556
   Corporate term debentures                      9       593       596

FUTURE INCOME TAX LIABILITY                      10       120       116

NON-CONTROLLING INTERESTS                        11       350       271

SHAREHOLDERS' EQUITY                             12     1,374     1,299
                                                 --    ------    ------
                                                       $3,500    $2,930
                                                       ======    ======


Approved by the Board:



/s/ Sidney A. Lindsay                            /s/ Edward C. Kress
- ---------------------                            -------------------

10 GREAT LAKES POWER INC.





CONSOLIDATED STATEMENT OF INCOME




Years ended December 31
millions, except per share amounts                   note        2002      2001
                                                     ----        ----      ----
                                                                 
REVENUE

Power revenue                                                   $ 340     $ 270
Power purchases                                                    14        55
Net power revenue                                                 326       215
Investment and other income                                        92       105
                                                                -----     -----
                                                                  418       320
                                                                -----     -----
EXPENSES

Interest                                                           90        82
Operating and maintenance                                          60        37
Fuel purchases                                                     18        21
Depreciation                                                       40        27
Non-controlling interests                                          18        12
Income and other taxes                                 10          25        10
                                                                -----     -----
                                                                  251       189
                                                                -----     -----
NET INCOME                                                      $ 167     $ 131
                                                                -----     -----
DILUTED NET INCOME PER COMMON SHARE                    13       $1.32     $1.04
                                                                -----     -----



CONSOLIDATED STATEMENT OF RETAINED EARNINGS




Years ended December 31
millions                                             note        2002      2001
                                                     ----        ----      ----
                                                                 

RETAINED EARNINGS

Balance, beginning of year                                      $ 448     $ 398
Net income                                                        167       131
Distributions to holders of common shares
and equivalents                                        12         (80)      (81)
Adjustment for change in accounting policy              1          (8)       --
Fund unit issue costs                                              (4)       --
                                                                -----     -----
Balance, end of year                                            $ 523     $ 448
                                                                =====     =====

                                                           2002 ANNUAL REPORT 11





CONSOLIDATED STATEMENT OF CASH FLOWS


Years ended December 31
millions                                               2002             2001
                                                      ------           ------
                                                                 
CASH FLOW FROM OPERATIONS

  Net income                                          $  167           $  131
  Add non-cash items
    Depreciation                                          40               27
    Hydrological provisions                               (3)             (17)
    Other                                                  6               (5)
                                                      ------           ------
CASH FLOW FROM OPERATIONS                             $  210           $  136
  Net change in non-cash working capital                  27               47
                                                      ------           ------
  Cash provided by operating activities                  237              183
                                                      ------           ------
FINANCING AND SHAREHOLDER DISTRIBUTIONS

  Borrowings                                             405              249
  Debt repayments                                        (54)            (110)
  Issuance of fund units                                 103               78
  Distributions:
    -- Great Lakes Hydro Income Fund unitholders         (27)             (14)
    -- Common shares and equivalents                     (80)             (81)
                                                      ------           ------
                                                         347              122
                                                      ------           ------
INVESTING

  Securities purchases                                   (10)            (107)
  Securities sales                                       125               51
  Long-term investments                                  (36)              14
  Loans and other receivables                            171              (94)
  Power generating assets                               (834)            (178)
                                                      ------           ------
                                                        (584)            (314)
                                                      ------           ------
CASH AND CASH EQUIVALENTS

  Increase (decrease)                                     --               (9)
  Balance, beginning of year                              10               19
                                                      ------           ------
Balance, end of year                                  $   10           $   10
                                                      ======           ======
SUPPLEMENTARY INFORMATION

  Interest paid                                       $   85           $   84
  Taxes paid                                          $   16           $   15
                                                      ======           ======


12 GREAT LAKES POWER INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF ACCOUNTING POLICIES

BUSINESS OPERATIONS

The company is incorporated under the laws of Ontario and develops, owns and
operates hydroelectric and other power generating facilities principally in
Canada and the United States. The company also conducts investment activities,
which include the receipt of interest and dividends on the company's financial
assets as well as gains realized on investment transactions.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include:

(i)  the accounts of all subsidiaries and other controlled entities of Great
     Lakes Power Inc. (the "company") including Great Lakes Power Limited, Great
     Lakes Hydro Income Fund (the "Income Fund"), Lake Superior Power, Valerie
     Falls Power, Hydro Pontiac Inc. ("Pontiac Power") and Highvale Power
     Corporation; and

(ii) the accounts of incorporated and unincorporated joint ventures and
     partnerships to the extent of the company's proportionate interest in their
     respective assets, liabilities, revenue and expenses, including the
     company's investment in Powell River Energy.

The company owns a 75% non-controlling residual interest in Louisiana
HydroElectric Power, which is equity accounted.

INVESTMENTS

Partly owned businesses, where the company is able to exercise significant
influence, are carried on the equity method. Interests in jointly controlled
entities are proportionately consolidated. Other long-term investments are
carried at the lower of cost and net realizable value.

The excess of acquisition costs over the underlying net book values of the
company's investment is evaluated for impairment in conjunction with the
evaluation of the carrying value of the investment. Management assesses the
recoverability of its investment as a whole based on a review of the expected
future operating income and cash flows of these investments on a discounted
basis.

REVENUE AND EXPENSE RECOGNITION

Revenue from the sale of electricity and steam is recorded based upon output
delivered at rates as specified under contract terms or prevailing market rates.
Electricity sales revenue is recognized when power is provided.

Investment income is recorded on the accrual basis, less a provision for
uncollectible interest, fees, commissions or other amounts.

The company maintains hydrological insurance which partially compensates for the
effect of variations in streamflow when measured against long-term averages.
Until May 1, 2002, the company was rate regulated and maintained provisions to
adjust for the effect of similar hydrology variations.

SECURITIES

Securities are carried at the lower of cost and their estimated net realizable
value with any valuation adjustments charged to income. This policy considers
the company's intent to hold an investment through periods where quoted market
values may not fully reflect the underlying value of that investment.
Accordingly, there are periods where the "fair value" or the "quoted market
value" may be less than cost. In these circumstances, the company reviews the
relevant securities to determine if it will recover its carrying value within a
reasonable period of time and adjust it, if necessary. The company also
considers the degree to which estimation is incorporated into valuations and any
potential impairment relative to the magnitude of the related portfolio.

LOANS RECEIVABLE

Loans and notes receivable are carried at the lower of cost and estimated
realizable value calculated based on expected future cash flows, discounted at
market rates for assets with similar terms.

FINANCING COSTS

Expenses related to the issuance of debt are amortized over the term of the
debt. Expenses related to the issuance of the company's shares are charged to
retained earnings. Interest on funds used in construction and on development
projects is capitalized.

INCOME TAXES

The company uses the asset and liability method in accounting for income taxes.
Under this method, future income tax assets and liabilities are determined based
on differences between the financial reporting and tax bases of assets and
liabilities, and measured using the enacted, or substantively enacted, tax rates
and laws that will be in effect when the differences are expected to reverse,
taking into account the organization of the company's financial affairs and its
impact on taxable income and tax losses.

FOREIGN EXCHANGE

Assets and liabilities denominated in foreign currencies are translated into
Canadian dollars at the rate of exchange in effect at the balance sheet date.
Revenues and expenses are translated at the weighted average rate for the year.

PENSION BENEFITS AND EMPLOYEE FUTURE BENEFITS

The cost of retirement benefits for the defined benefit plan and post-employment
benefits is recognized as



                                                           2002 ANNUAL REPORT 13




the benefits are earned by employees. The company uses the accrued benefit
method pro-rated on the length of service and management's best estimate
assumptions to value its pension and other retirement benefits. Assets are
valued at fair value for purposes of calculating the expected return on plan
assets. For the defined contribution plan, the company expenses payments based
on employee earnings.

DERIVATIVE FINANCIAL INSTRUMENTS

The company, principally through wholly owned Brascan Energy Marketing Inc.,
uses derivative financial instruments to manage commodity price risk associated
with the company's production, operating and risk management activities. Gains
and losses resulting from these instruments are included in income on the same
basis as the asset, liability or contract being hedged. Non-hedging activity is
subject to policy limits and any gains or losses recorded in investment and
other income on a fair value basis.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses. Actual results could differ from
those estimates.

CHANGES IN ACCOUNTING POLICIES

Effective January 1, 2002, the company adopted, without restatement of the prior
period comparative financial statements, the new accounting standards issued by
the Canadian Institute of Chartered Accountants ("CICA") on Business
Combinations and Goodwill and Other Intangible Assets.

This standard requires that all business combinations be accounted for using the
purchase method and establishes specific criteria for the recognition of
intangible assets separately from goodwill. Under the standards, goodwill will
no longer be amortized but will be subject to impairment tests on at least an
annual basis. During 2002, the company and its subsidiaries were required to
perform impairment tests on goodwill recorded as of January 1, 2002. As a
result, $8 million was recorded against opening retained earnings in relation to
the goodwill recorded on the acquisition of Powell River Energy.

Effective January 1, 2002, the company adopted the new CICA accounting
recommendations on the impairment of long-lived assets. When the carrying value
of a long-lived asset is less than its net recoverable amount as determined on
an undiscounted basis, an impairment loss is recognized to the extent that its
fair value, measured as the discounted cash flows over the life of the asset
when quoted market prices are not readily available, is below the asset's
carrying value.

FUTURE ACCOUNTING POLICY CHANGES

In November 2001, the CICA issued Accounting Guideline 13, Hedging Relationships
("AcG-13"), which will apply to fiscal years beginning on or after July 1, 2003.

The guideline sets out the criteria that must be met in order to apply hedge
accounting for derivatives and is based on many of the principles outlined in
the U.S. standard relating to derivative instruments and hedging activities.
Specifically, the guideline provides detailed guidance on (a) the
identification, designation, documentation and effectiveness of hedging
relationships, for purposes of applying hedge accounting; and (b) the
discontinuance of hedge accounting.

The CICA issued a draft Accounting Guideline,
Consolidation of Special-Purpose Entities on August 1, 2002. The proposed
guideline provides guidance on determining who is a primary beneficiary of the
special purpose entities and will therefore be required to consolidate the
special purpose entities.

The CICA issued a draft Accounting Guideline, Disclosure of Guarantees which
will require a guarantor to disclose significant information about guarantees it
has provided to third parties, without regard to its evaluation of whether it
will have to make any payments under the guarantees. This guideline is expected
to have effect for interim and annual periods ending on or after March 31, 2003.

The CICA issued a new standard, Asset Retirement Obligations, which requires the
recognition of a liability for obligations for asset retirements in the period
the liability is incurred. This standard will result in increasing the carrying
value of a company's liabilities and assets. The asset retirement obligation
will be amortized as an expense over the life of the asset. This guidance
applies to, for example, site restoration of a mine, oil or gas well or
landfill, nuclear plant decommissioning and removal of plant and equipment from
leased property on termination of the lease. The standard is effective for
fiscal years beginning on or after January 1, 2004.

The effects of these guidelines and standards are under review and have not been
determined at this time.

COMPARATIVE FIGURES

Certain of the prior year's figures have been reclassified to conform with the
2002 presentation.

14  GREAT LAKES POWER INC.





2.   ACQUISITIONS

The company acquired interests in four power generating assets in 2002 and one
in 2001. All acquisitions have been accounted for using the purchase method of
accounting and the results of their operations have been included in these
consolidated financial statements from the date of acquisition.

MAINE POWER

In February 2002, the Income Fund completed the acquisition of the hydroelectric
generating system and related transmission facilities in northern Maine, USA
from Great Northern Paper Inc. ("GNP") for cash consideration of $242 million
and a promissory note of $7 million payable to GNP. The system consists of six
hydroelectric generating stations located on the Penobscot River with a combined
generating capacity of approximately 126 MW and eleven water storage dams.

The fair value assigned to the assets acquired was as follows:


millions                                    2002
- --------                                    ----
                                        
Power generating assets                    $ 251
Working capital                               (2)
                                           -----
Net assets acquired                        $ 249
                                           -----
Consideration paid                         $ 249
                                           =====



NEW HAMPSHIRE POWER

In May 2002, the Income Fund completed the acquisition of a hydroelectric
generating system located in New Hampshire from American Tissue Inc. for cash
consideration of $50 million. The system consists of six hydroelectric stations
located on the Androscoggin River in New Hampshire,with a combined generating
capacity of approximately 31 MW.

The fair value assigned to the power generating assets acquired was equal to the
cash consideration paid.

MISSISSAGI POWER

In May 2002, the Income Fund completed the acquisition of a hydroelectric
generating system located in northern Ontario from Ontario Power Generation Inc.
and OPG-Mississagi River Inc. for cash consideration of $346 million. The system
consists of four hydroelectric stations located on the Mississagi River with a
combined generating capacity of approximately 488 MW and four water storage
dams.

The fair value assigned to the assets acquired was as follows:


millions                                    2002
- --------                                    ----
                                        
Power generating assets                    $ 345
Working capital                                1
                                           -----
Net assets acquired                        $ 346
                                           -----
Consideration paid                         $ 346
                                           =====



LAKE SUPERIOR POWER

In November 2002, the company acquired the 50% interest which it did not own in
the Lake Superior Power cogeneration station in northern Ontario for cash
consideration of $30 million.

The net assets acquired as a result of the acquisition and the consideration
given are as follows:


millions                                    2002
- --------                                    ----
                                        
Assets acquired
  Current assets                           $   6
  Power generating assets                     61
Liabilities assumed
  Long term debt                             (37)
                                           -----
Net assets acquired                        $  30
                                           -----
Consideration paid                         $  30
                                           =====



POWELL RIVER ENERGY

In February 2001, the Income Fund acquired a 50% indirect interest in the Powell
River Energy hydroelectric power generation and transmission facilities in
southwestern British Columbia for cash consideration of $58 million. The net
assets acquired as a result of the acquisition and the consideration given are
as follows:


millions                                    2001
- --------                                    ----
                                        
Assets acquired
  Power generating assets                  $  58
  Goodwill                                    17
Liabilities assumed
  Future income tax liability                (17)
                                           -----
Net assets acquired                        $  58
                                           -----
Consideration paid                         $  58
                                           =====



3.   ACCOUNTS RECEIVABLE AND OTHER

The composition of accounts receivable and other is as follows:


millions                         2002        2001
- --------                         ----        ----
                                      
Demand deposits                 $ (14)      $ 190
Coal royalty receivables           70          70
Trade receivables                  85          29
Prepaid interest and other         45          47
                                -----       -----
                                $ 186       $ 336
                                =====       =====



The fair value of the company's accounts receivable and other approximates their
carrying values at December 31, 2002 and 2001 based on expected future cash
flows from these assets, discounted at market rates for assets with similar
terms and investment risks.

4.   SECURITIES

The fair value of the company's securities at December 31, 2002 was $583 million
(2001 - $705 million). In determining fair values, quoted market prices are used
where available and, where not available, management estimates the amounts which
could be recovered over time or through a transaction with knowledgeable and
willing third parties under no compulsion to act.

                                                           2002 ANNUAL REPORT 15



The securities consist of 68% floating rate securities and 32% fixed rate
securities with an average yield at December 31, 2002 of 6.40%.

All financial and investment transactions with affiliated companies are at
normal market terms. Affiliated companies include Brascan and its subsidiaries
and equity accounted investees. At December 31, 2002, the carrying value of
securities and deposits with affiliated companies amounted to $536 million and
$(14) million, respectively (2001 - $660 million and $190 million). In 2002,
income from securities and loans with affiliated companies amounted to $39
million (2001 - $48 million).

5.   LONG-TERM INVESTMENTS

Long-term investments include the company's direct and indirect interests in
Brascan Financial Corporation, Noranda Inc., Brascan Corporation and First
Toronto Investments Limited.

The book values of the company's long-term investments and the underlying
securities at December 31, 2002 and 2001 are shown below:




millions                                       2002                2001
- --------                                      ------              ------
                                                          
Brascan Financial Corporation                 $  195              $  195
Noranda Inc.                                     146                 146
Brascan Corporation                              112                 112
Other investments                                106                  68
                                              ------              ------
                                              $  559              $  521
                                              ======              ======


6.   POWER GENERATING ASSETS

The composition of the company's power generating assets at December 31, 2002
and 2001, by geographic area and asset type, is shown below:




millions                                       2002                2001
- --------                                      ------              ------
                                                          
By geographic area:
Ontario                                       $  937              $  471
Quebec                                           429                 440
Northeast United States                          304                  --
Other                                            485                 446
                                              ------              ------
                                              $2,155              $1,357
                                              ======              ======
By asset type:
Generation                                    $1,846             $ 1,017
Transmission                                     157                 156
Distribution                                      69                  65
Other                                             82                  53
                                              ------              ------
                                               2,154               1,291
Accumulated depreciation
  and amortization                              (331)               (264)
                                              ------              ------
                                               1,823               1,027
Investment in Louisiana HydroElectric            332                 330
                                              ------              ------
                                              $2,155              $1,357
                                              ======              ======


Power generating assets includes the cost of the company's 18 power generating
stations in Ontario, 5 hydroelectric generating stations in Quebec, 12
hydroelectric stations in the Northeast United States and 50%share of two Powell
River Energy hydroelectric generating stations, and the company's Highvale Power
coal assets.

The company's 75% residual interest in Louisiana HydroElectric Power's
hydroelectric generating station and sediment control works is shown on an
equity accounted basis. The financial accounts of Louisiana HydroElectric Power
for 2002 and 2001 are as follows:




millions                                       2002                2001
- --------                                      ------              ------
                                                          
Assets                                        $1,604              $1,568
Property specific borrowings                   1,273               1,261
Other liabilities                                155                 156
Operating revenues                               209                 187
Operating expenses                                55                  53
Net income                                        24                   7
                                              ======              ======


Depreciation is based on the service lives of the assets which are 60 years for
hydroelectric generation, 20 years for cogeneration and 40 years for
transmission, distribution and other.

The company's hydroelectric power facilities operate under various renewable
agreements for water rights which extend through the year 2008 for Great Lakes
Power, 2044 for Valerie Falls Power, 2019 and 2020 for Pontiac Power, 2019 for
Lievre River Power and 2031 for Louisiana HydroElectric Power. Substantially all
of the water rights for Powell River Energy are perpetual.

7.   JOINT VENTURES

The following amounts represent the company's proportionate interest in
incorporated and unincorporated joint ventures reflected in the company's
accounts. (These amounts include Powell River Energy in 2001 and 2002 and Lake
Superior Power in 2001 only.)




millions                                       2002                2001
- --------                                      ------              ------
                                                          
Assets                                        $   59              $  125
Liabilities                                       56                  84
Operating revenues                                 9                  46
Operating expenses                                 8                  31
Net income                                         1                  10
Cash flows from operating activities               2                  16
Cash flows from investing activities              (1)                (60)
Cash flows from financing activities              (1)                 37
                                              ======              ======



16  GREAT LAKES POWER INC.


8.   PROPERTY SPECIFIC BORROWINGS



millions                                               2002               2001
- --------                                              ------             ------
                                                                  
Great Lakes Power Limited
  First Mortgage Bonds
    Series 4 (US $105)                                $ 166              $ 167
    Series 5                                            150                150
                                                     ------             ------
                                                        316                317
                                                     ======             ======
Great Lakes Power Trust
  Credit Agreements                                       7                 15
  First Mortgage Bonds
    Series 1                                             50                 50
    Series 2                                             25                 25
    Series 3                                             25                 25
                                                     ------             ------
                                                        107                115
                                                     ======             ======
Other Power Operations
  Property specific borrowings
    Pontiac Power                                        62                 63
    Valerie Falls Power                                  33                 --
    Powell River Energy                                  38                 47
    Lake Superior Power                                  19                 14
    Mississagi Power                                    151                 --
    Great Lakes Hydro America (US $113)                 179                 --
                                                     ------             ------
                                                      $ 905              $ 556
                                                     ======             ======


The US$105 million First Mortgage Bonds Series 4 bear interest at the rate of
6.57%, are due on June 16, 2003 and are secured by a charge on the company's
wholly owned power generating assets in northern Ontario.

The $150 million First Mortgage Bonds Series 5 bear interest at the rate of
4.58%, are due on June 16, 2003 and are secured by a charge on the company's
wholly owned power generating assets in northern Ontario. Through the use of an
interest rate swap, the company pays interest at a rate which varies with the
Banker's Acceptance ("B.A.") rate. These bonds replaced the $95 million First
Mortgage Bonds Series 3 bearing interest at a rate of 6.69%, which matured
December 31, 2001.

The Income Fund First Mortgage Bonds Series 1, 2 and 3 bear interest at 7.33%,
7.55% and 7.78%, respectively; and are due April 24, 2005, April 24, 2010 and
April 24, 2015, respectively. These Mortgage Bonds are secured by charges on all
present and future real and personal property of Great Lakes Power Trust, which
is wholly owned by the Income Fund.

The $62 million Pontiac Power mortgage loans bear interest at a blended rate of
10.52%, amortized monthly to a maturity of December 1, 2020 and are secured by
charges on the respective Pontiac Power generating assets.

The $33 million Valerie Falls First Mortgage Bond bears interest at 6.84%, with
interest only payments semi-annually for the first 20 years and blended
principal and interest payments for the remaining 20 years to a maturity of
December 20, 2042.

The company's proportionate share of the $75 million Powell River Energy first
mortgage bond bears interest at 6.92%, is due June 2009 and is secured by a
charge on the respective Powell River Energy operating assets.

The $19 million Lake Superior Power mortgage loan bears interest at 9.41%,
amortizes annually to December 29, 2006 and is secured by a charge on the
company's Lake Superior Power cogeneration assets. The $151 million Mississagi
Power mortgage loan bears interest at the 30-day Bankers Acceptance rate plus 60
basis points until March 3, 2003 and 80 basis points thereafter. The facility
matures on September 4, 2003.

The US$113 million Great Lakes Hydro America mortgage loan bears interest at US
prime plus 150 basis points and matures on January 30, 2005. The company has
established a US$100 million loan facility with Brascan, its principal
shareholder, which can be drawn down at any time, bearing interest at the prime
rate and secured by the company's residual interest in Louisiana HydroElectric
Power. At either party's option, the facility may be drawn down and converted
into a fixed-rate financing at 9.75% repayable in 2015.

Principal repayments on the company's outstanding property specific borrowings
due over the next five years and thereafter are as follows:



millions                                                     Annual Repayments
- --------                                                     -----------------
                                                          
2003                                                                     $ 483
2004                                                                         8
2005                                                                       235
2006                                                                         4
2007                                                                         2
Thereafter                                                                 173
                                                                         -----
                                                                         $ 905
                                                                         =====


9.   TERM DEBENTURES




millions                                                2002              2001
- --------                                               ------           -------
                                                                  

Corporate debentures
  Series 1 (US$175)                                    $ 277             $ 278
  Series 3 (US$200)                                      316               318
                                                       -----             -----
                                                       $ 593             $ 596
                                                       =====             =====


The Series 1 debentures bear interest at the rate of 9.0% and are due in August
2004.

The Series 3 debentures bear interest at 8.3% and are due March 2005. Through
the use of an interest rate swap, the company pays interest at a rate which
varies with the LIBOR rate.

The fair value of the company's property specific borrowings and term debentures
is $1,520 million (2001 -- $1,167 million) based on current market prices for
debt with similar terms and risks.

                                                           2002 ANNUAL REPORT 17




10.  FUTURE INCOME TAX LIABILITY

The difference between the statutory rate and the effective rate of tax is
attributable to the company's dividend income and equity earnings being taxed
prior to receipt by the company. The company's future income tax liability of
$120 million (2001 - $116 million) is comprised principally of temporary
differences relating to property, plant and equipment. This amount is net of a
future tax asset of $12 million (2001 - $21 million) relating to unused
non-capital losses.


millions                                                  2002      2001
- --------                                                ------    ------
                                                            
Net income                                              $  167     $  131
Combined income tax rates                                  38%        41%
Statutory income tax rates applied
  to accounting income                                      63         54
Non-deductible expenses                                      2          1
Non-taxable dividends                                      (45)       (54)
Recognition of the benefit of tax losses                   (16)        (7)
                                                        ------     ------
Provision for income taxes                              $    4     $   (6)
                                                        ======     ======


11.  NON-CONTROLLING INTERESTS

Non-controlling interests include preferred shares, limited partnership
interests and trust units owned by minority shareholders in the company's
consolidated subsidiaries, as follows:


millions                                                  2002       2001
- --------                                                ------     ------
                                                            
Preferred shares issued by
  consolidated subsidiaries                             $   90     $   90
Limited partnership interests of
  consolidated subsidiaries                                  4          4
Trust units issued by
  consolidated subsidiaries                                256        177
                                                        ------     ------
                                                        $  350     $  271
                                                        ======     ======

12.  SHAREHOLDERS' EQUITY

The company is authorized to issue an unlimited amount of common shares, of
which the following were issued and outstanding:


millions                                                  2002       2001
- --------                                                ------     ------
                                                            
101,383,135 (2001 - 101,383,135)
  Common shares                                         $  603     $  603
Retained earnings                                          523        448
                                                        ------     ------
                                                         1,126      1,051
Subordinated convertible debentures                        248        248
                                                        ------     ------
                                                        $1,374     $1,299
                                                        ======     ======


The subordinated convertible debentures mature September 30, 2013, bear interest
at the prime rate subject to a minimum of 6% and a maximum of 8%, and are
convertible at $10.00 per common share into 24.8 million common shares.
Principal and interest are payable at the company's option with common shares.

The company is authorized to issue an unlimited amount of preferred shares, none
of which are currently outstanding.

The following table summarizes the company's distributions to common
shareholders and equivalents:


millions                                                  2002       2001
- --------                                                ------     ------
                                                            
Common share dividends                                  $   65     $   65
Convertible debt interest                                   15         16
                                                        ------     ------
                                                        $   80     $   81
                                                        ======     ======

13.  OTHER INFORMATION


millions, except per share amounts                        2002       2001
- --------                                                ------     ------
                                                            
Average diluted common
  shares outstanding                                     126.2      126.2
Basic earnings per share                                $ 1.50     $ 1.13
                                                        ======     ======


The company's two largest customers accounted for 8% and 7%, respectively, of
total revenues in 2002 (2001 - 12% and 10%, respectively).

During 2002, no hydrological provisions (2001 - $7 million) were applied against
power purchase costs and a $3 million (2001 - $10 million) recovery of
hydrological provisions was included in revenue from power operations. At
December 31, 2002, hydrological provisions totalled nil (2001 - $3 million).

14.  COMMITMENTS AND CONTINGENCIES

The company has entered into a power agency and guarantee agreement with the
Great Lakes Power Trust (the "Trust"), in which the company has a 50% indirect
interest, for a term of 20 years. This agreement requires the company to fund
any deficiency amount between a guaranteed price for energy and the actual
energy revenues earned by the Trust. The company is entitled to receive any
revenues in excess of the guaranteed amount. The cumulative net surplus amount
in 2002 was nil (2001 - $0.2 million).

In addition, the company agreed to provide to the Income Fund hydrology credit
facilities in the amount of $25 million for a period of 15 years, of which not
more than $8 million is permitted to be advanced during any given year. Of this
amount, Lievre River Power has $15 million available until 2014 and Mississagi
Power has $10 million available until 2019. These facilities bear interest at
market rates.

15.  DERIVATIVE FINANCIAL INSTRUMENTS

Derivative financial instruments are utilized by the company in the management
of interest rate and commodity exposures primarily related to the generation of
electricity. It is the company's policy to restrict the use of derivative
financial instruments for trading or speculative purposes to within
predetermined limits.

The company formally documents relationships between hedging instruments and
hedged items, as well as its risk management objective and strategy for
undertaking various hedge transactions. This process includes linking forward
electricity sale derivatives to specific periods in which the company
anticipates generating electricity for sale. The company also


18  GREAT LAKES POWER INC.



formally assesses, both at the hedge's inception and on an ongoing basis,
whether the derivatives that are used in hedging transactions are highly
effective in offsetting changes in the fair values or cash flows of the hedged
items.

The company defers unrealized gains and losses on electricity commodity
contracts designated as hedges and records them as an adjustment to power
revenues when the underlying hedged transaction is recorded. Commodity contracts
not designated as hedges are recorded in accounts receivable or accounts payable
at fair value with changes in fair value recorded in power revenue.



                                       Notional              Notional
                          Range of       Amount    Average     Amount    Average
                          Maturity       Bought       Rate       Sold       Rate
                          --------     --------    -------   --------    -------
                                                         
Electricity                1 month        2,284     $56.58      6,270     $54.89
                                to          GWh        per        GWh        per
                           3 years                     MWh                   MWh


As at December 31, 2002, contracts designated as hedges had a net fair value
determined based on quoted market rates of negative $33 million, consisting of
contracts with a positive mark-to-market of$38 million and contracts with a
negative mark-to-market of $71 million. The company manages credit risks by
entering into contracts with highly rated counterparties.

The company enters into interest rate swaps on its long term debt. The swap
agreements require the periodic exchange of payments without the exchange of the
notional principal amount on which the payments are based.

The company designates its interest hedge agreements as hedges of the underlying
debt. Interest expense is adjusted to include the payments made or received
under the interest rate swaps. The total notional amount of principal underlying
interest rate swap contracts in 2002 was $466 million (2001 - $468 million).
These contracts have maturities varying from one to three years, and have a
favourable replacement value of $8 million (2001 - $26 million).

In the event a designated hedged item is sold, extinguished or matures prior to
the termination of the related derivative instruments, any realized or
unrealized gain or loss on such derivative instruments is recognized in income.
In the event a derivative instrument in a designated hedge relationship is sold,
extinguished or matures prior to the termination of the related hedged item, any
realized or unrealized gain or loss is recognized in income on the same basis as
the underlying hedged item.

16.  EMPLOYEE BENEFIT PLAN

The company offers a number of pension plans to its employees. The company's
obligations under its defined benefit pension plans are determined periodically
through the preparation of actuarial valuations. As of December 31, 2002, the
assets of the plans totalled $40 million (2001 - $37 million) and accrued
benefit obligation amounted to $43 million (2001 - $35 million) for a net
accrued benefit liability of $3 million (2001 - $2 million). The benefit plan
expense for 2002 was $0.3 million (2001 - $0.2 million). The investment rate of
return was 7% (2001 - 7%). The discount rate used was 6.75% with a rate of
compensation increase of 3.8%.

17.  GEOGRAPHIC SEGMENTED INFORMATION

The company operates in Canada and the United States. Revenues by country are as
follows:




millions                                                    2002           2001
- --------                                                   ------        -------
                                                                  
Canada                                                     $  288        $   258
United States                                                  52             12
                                                           ------        -------
                                                           $  340        $   270
                                                           ======        =======


Income by country is as follows:




millions                                                    2002           2001
- --------                                                   ------        -------
                                                                  
Canada                                                     $  181         $  120
United States                                                  35             12
Other unallocated income (expenses)                           (49)            (1)
                                                           ------        -------
                                                           $  167         $  131
                                                           ======         ======


Power generating assets by country are as follows:




millions                                                    2002           2001
- --------                                                   ------         ------
                                                                  
Canada                                                     $1,519         $1,027
United States                                                 636            330
                                                           ------        -------
                                                           $2,155         $1,357
                                                           ======         ======


Depreciation expense from power generating assets by country is as follows:




millions                                                    2002           2001
- --------                                                   ------         ------
                                                                  
Canada                                                     $   34         $   27
United States                                                   6             --
                                                           ------        -------
                                                           $   40         $   27
                                                           ======         ======



                                                           2002 ANNUAL REPORT 19


FOURTH QUARTER 2002 FINANCIAL RESULTS

The company's unaudited financial statements for the fourth quarter of 2002 and
2001 are set out in the following tables:

CONSOLIDATED STATEMENT OF INCOME



(unaudited)
Three months ended December 31

millions, except per share amounts                      2002               2001
- ----------------------------------                    -------            -------
                                                                   

REVENUE
  Power revenue                                       $   78            $   57
  Power purchases                                         --                11
                                                      ------            ------
  Net power revenue                                       78                46
  Investment and other income                             22                25
                                                      ------            ------
                                                         100                71
                                                      ------            ------
EXPENSES

  Interest                                                26                20
  Operating and maintenance                               17                10
  Fuel purchases                                           6                 3
  Depreciation                                            10                 7
  Non-controlling interests                               --                 3
  Income and other taxes                                  12                 3
                                                      ------            ------
                                                          71                46
                                                      ------            ------
NET INCOME                                            $   29            $   25
                                                      ======            ======
DILUTED NET INCOME
  PER COMMON SHARE                                    $ 0.23            $ 0.20
                                                      ======            ======


CONSOLIDATED STATEMENT OF RETAINED EARNINGS




(unaudited)
Three months ended December 31
millions                                                2002               2001
- --------                                              -------            -------
                                                                   

RETAINED EARNINGS
  Balance, beginning of period                        $ 526              $ 443
  Net income                                             29                 25
  Distributions to unitholders
    of common shares & equivalents                      (20)               (20)
  Adjustment for change
    in accounting policy                                 (8)                --
  Fund unit issue costs                                  (4)                --
                                                      ------            ------
                                                      $ 523             $  448
                                                      ======            ======


CONSOLIDATED STATEMENT OF CASH FLOWS




(unaudited)
Three months ended December 31
millions                                               2002               2001
- --------                                             -------            -------
                                                                   

CASH FLOW FROM OPERATIONS
  Net income                                          $  29             $   25
  Add non-cash items
    Depreciation                                         10                  7
    Hydrological provisions                              (3)                (7)
    Other                                                 8                  7
                                                      ------            ------
CASH FLOW FROM OPERATIONS                             $  44             $   32
Net change in non-cash working capital                   41                 42
                                                      ------            ------
Cash provided by operating activities                    85                 74
                                                      ------            ------

FINANCING AND SHAREHOLDER DISTRIBUTIONS

  Borrowings                                             32                177
  Debt repayments                                         2               (104)
  Issuance of funds units                                --                 78
  Distributions:
    -- Great Lakes Hydro Income
         Fund unitholders                                (7)                (5)
    -- Common shares and equivalents                    (20)               (20)
                                                      ------            ------
                                                          7                126
                                                      ------            ------
INVESTING

Securities purchases                                    (10)               (57)
Securities sales                                         67                 40
Long-term investments                                   (36)                14
Loans and other receivables                             (91)              (152)
Power generating assets                                 (51)               (54)
                                                      ------            ------
                                                       (121)              (209)
                                                      ------            ------
CASH AND CASH EQUIVALENTS

Increase (decrease)                                     (29)                (9)
Balance, beginning of period                             39                 19
                                                      ------            ------
Balance, end of period                                $   10            $   10
                                                      ======            ======
SUPPLEMENTARY INFORMATION
Interest paid                                         $   21            $   22
Taxes paid                                            $    3            $    4
                                                      ======            ======


20  GREAT LAKES POWER INC.

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