RISKS AND UNCERTAINTIES

utilities may consider excessive or potentially detrimental to their own interests, or those of the shareholder and ratepayers.

The possibility of voluntary consolidation or collaboration with like-minded municipally-owned LDCs for mutual benefit exists if policy direction, regulatory guidance and tax incentives were appropriately aligned.

EWU has formed strategic alliances with other utilities through membership in organizations such as GridSmartCity® and the Utility Standards Forum (USF), that offer an alternative to consolidation, by working together to find efficiencies through partnership. Failure to achieve economies of scale has been viewed as an enterprise risk by WCU with mitigation strategies as described.

chanGinG demand for electricity diStriBution ServiceS

As costs decline for energy generation and storage technologies, the LDC's customers may move progressively towards cost-competitive alternatives, thereby reducing customer need for, and dependence on, the grid. Should these trends materialize at a significant scale, policy and regulatory changes will be necessary in order for ENWIN to recover its investment in infrastructure.

The role of the LDC through this change may differ and require further investment in technology and change in the nature of services provided by the LDC. Failure to adapt to the changing technologies, and failure to invest in innovation or new business services, may impact the business model of the Company.

Conversely, if policies and programs to respond to climate change accelerate the adoption of electric vehicles, the timing and level of demand for electricity may change significantly, resulting in changes to infrastructure needs and continued rate setting evolution.

penSion planS

The Company provides a defined benefit pension plan for the majority of its employees through the Ontario Municipal Employees Retirement System (OMERS).

Any future funding shortfalls and net losses at OMERS are subject to the OMERS Sponsors Corporation Funding Management Strategy, which outlines how benefits and contributions will be modified as the OMERS Primary Plan cycles through periods of funding deficit and surplus.

Pension benefit obligations and related net pension cost can be affected by volatility in the global financial and capital markets.

There is no assurance that pension plan assets will earn the assumed long-term rates of return. Marketdriven changes impacting the performance of the pension plan assets may result in material variations in actual returns on pension plan assets.

technoloGy infraStructure

WCU's business relies on complex information systems, covering operational software, as well as back office processes.

Operational systems include:

• A geographic information system;

• An outage management system; and

• An electricity system supervisory control and data acquisition system (SCADA).

Back office processes, such as customer information and billing systems are heavily integrated with thousands of smart meters producing large volumes of data which is shared with Ontario's Smart Metering Entity.

The failure of one or more of these key systems, or a failure of the company to either plan effectively for future technology needs or to transition effectively to new technology systems, could adversely impact the business operations.

As the sector moves to develop distributed energy resources and smart grid technology, the requirement for efficient deployment of new technology increases.