r i s k s a n d UNCERTAINTIES

Windsor Canada Utilities Ltd. has adopted a systematic approach to the management of risks and uncertainties, integrating risk management into business processes and the periodic reporting of organizational performance.

The Corporation's Enterprise Risk Management (ERM) framework was established by the Board in 2017 and is to be renewed annually. It consolidates semi-annual risk reporting to the President and Chief Executive Officer and to the Board, highlighting potential risk factors that may have an impact upon ENWIN's near-term business objectives and strategic direction.

The ERM framework supports and compliments WCU's strategic planning and annual business planning cycles, thereby enabling continuous review of assumptions and regularly refreshed environment scans.

WCU monitors sources of risk inherent in the industry and to the regulated environment. These include, but are not restricted to:

• The political and regulatory environment;

• The state of the economy and macro-economic trends;

• The state of financial markets and of investment in utilities;

• The state of financial markets and of investment in utilities; Government policies relating to the production and procurement of renewable and clean energy, as well as carbon emissions and conservation;

• The convergence of information technology and operational technology;

• Labour force demographics, with a particular emphasis on the renewal of human resources in the trades; and

• The weather.

In combination, these sources of risk will shape the evolution of the industry, which could in turn present new and emerging risks that need to be managed effectively.

reGulator rate SettinG environment

In 2019, ENWIN's electricity distribution business sought approval from the Ontario Energy Board (OEB) for a re-basing of its distribution rates, having last done so in 2009.

EWU's ability to recover the actual costs of providing services and earn the allowed ROE depends on the Company achieving its forecasts, established in the rate setting process. If actual loads and energy consumption vary substantially from forecast, or if actual costs of operations, maintenance, administration, capital and financing materially deviate from projections included in the approved revenue requirements, EWU may not achieve its desired level of returns.

Electricity distribution is a capital intensive business. As EWU continues to invest in the renewal of existing aging infrastructure and the development of new infrastructure to address the changing technological needs of distributed electricity, there is no assurance that it will receive the necessary funding in rates from the OEB. To mitigate this risk, the Company strives to stay informed of OEB policy and decisions related to these matters.

ldc conSolidation in ontario

Consolidation amongst municipally owned LDCs continues to be encouraged at the provincial level, as an opportunity to attain economies of scale that would work to the benefit of the customers of all the participating utilities.

However, the pursuit of this opportunity may not be viable if valuations for mergers and acquisitions remain at levels that