18-K

FORM 18-K

For Foreign Governments and Political Subdivisions Thereof

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

ANNUAL REPORT

of

PROVINCE OF NEW BRUNSWICK

CANADA

(Name of Registrant)

Date of end of last fiscal year: March 31, 2005

SECURITIES REGISTERED *

(As of close of fiscal year)

Title of issue	Amounts as to which registration is effective	Names of exchanges on which registered
N/A	N/A	N/A

Names and addresses of persons authorized to receive notices and communications from the Securities and Exchange Commission:
	HON. PAMELA WALLIN Canadian Consulate General 1251 Avenue of the Americas New York, NY  10020
or BRIAN SCHUMACHER Canadian Consulate General 1251 Avenue of the Americas New York, NY   10020		or DAVID MURCHISON Canadian Consulate General 1251 Avenue of the Americas New York, NY   10020
	Copies to:
JOHN W. WHITE Cravath, Swaine & Moore Worldwide Plaza 825 Eighth Avenue New York, NY   10019		JOHN DICAIRE Assistant Deputy Minister Treasury Division Province of New Brunswick P.O. Box 6000 Fredricton, NB, Canada  E3B 5H1

*  The Registrant is filing this annual report on a voluntary basis.

The information set forth below is to be furnished:

1.

In respect of each issue of securities of the registrant registered, a brief statement as to:

(a)

The general effect of any material modifications, not previously reported, on the rights of the holders of such securities.

None.

(b)

The title and the material provisions of any law, decree or administrative action, not previously reported, by reason of which the security is not being serviced in accordance with the terms thereof.

None.

(c)

The circumstances of any other failure, not previously reported, to pay principal, interest, or any sinking fund or amortization installment.

None.

2.

A statement as of the close of the last fiscal year of the registrant giving the total outstanding of:

(a)

Internal funded debt of the registrant.  (Total to be stated in the currency of the registrant.  If any internal funded debt is payable in a foreign currency, it should not be included under this paragraph (a), but under paragraph (b) of this item).

Reference is made to page 30 of Exhibit (d) hereto.

(b)

External funded debt of the registrant.  (Totals to be stated in the respective currencies in which payable.  No statement needs to be furnished as to intergovernmental debt.)

Reference is made to page 30 of Exhibit (d) hereto.

3.

A statement giving the title, date of issue, date of maturity, interest rate and amount outstanding, together with the currency or currencies in which payable, of each issue of funded debt of the registrant outstanding as of the close of the last fiscal year of the registrant.

Reference is made to pages 52 and 53 of Exhibit (d) hereto.

4.

(a)

As to each issue of securities of the registrant which is registered, there should be furnished a break-down of the total amount outstanding, as shown in Item 3, into the following:

(1)

Total amount held by or for the account of the registrant.

As at March 31, 2005, the total amount held by or for the account of the registrant was as follows:

Date of Maturity	Interest Rate (%)	Series	Amount Outstanding	Amount held in Sinking Fund	Date Issued
20 June 2005	6 1/2	FH	150,000,000	56,030,000	June 1995
23 Oct. 2007	3 1/2	GA	500,000,000	--	Oct. 2002
15 Feb. 2013	7 5/8	EO	200,000,000	22,797,000	Feb. 1993
15 Aug. 2013	6 3/4	ET	200,000,000	77,765,000	Sept. 1993
15 May 2020	9 3/4	DU	200,000,000	13,310,000	May 1990
1 May 2022	8 3/4	EI	200,000,000	--	May 1992

2

(2)

Total estimated amount held by nationals of the registrant (or if registrant is other than a national government by the nationals of its national government); this estimate need be furnished only if it is practicable to do so.

Not practicable to furnish.

(3)

Total amount otherwise outstanding.

Date of Maturity	Interest Rate (%)	Series	Amount Otherwise  Outstanding	Date Issued
20 June 2005	6 ½	FH	93,970,000	June 1995
23 Oct 2007	3 ½	GA	500,000,000	Oct. 2002
15 Feb 2013	7 5/8	EO	177,203,000	Feb. 1993
15 Aug 2013	6 ¾	ET	122,235,000	Sept. 1993
15 May 2020	9 ¾	DU	186,690,000	May 1990
1 May 2022	8 ¾	EI	200,000,000	May 1992

(b)

If a substantial amount is set forth in answer to paragraph (a)(1) above, describe briefly the method employed by the registrant to reacquire such securities.

The Province of New Brunswick sinking fund is a general investment type fund.  The Provincial Loans Act and in some cases the terms and conditions of the debenture issue specify the minimum rate at which sinking fund installments will be made.  Purchases of bonds into the fund are generally discretionary.  Many of the bonds purchased into the fund are New Brunswick or New Brunswick guaranteed bonds.  The Province is also permitted to buy debt instruments issued or guaranteed by the Government of Canada or any Province of Canada and other debt instruments defined by the Provincial Loans Act.

5.

A statement as of the close of the last fiscal year of the registrant giving the estimated total of:

(a)

Internal floating indebtedness of the registrant.  (Total to be stated in the currency of the registrant.)

Reference is made to pages 30, 52 and 53 of Exhibit (d) hereto.

(b)

External floating indebtedness of the registrant.  (Total to be stated in the respective currencies in which payable.)

Reference is made to page 52 of Exhibit (d) hereto.

6.

Statements of the receipts, classified by source, and of the expenditures, classified by purpose, of the registrant for each fiscal year of the registrant ended since the close of the latest fiscal year for which such information was previously reported.  These statements should be so itemized as to be reasonably informative and should cover both ordinary and extraordinary receipts and expenditures; there should be indicated separately, if practicable, the amount of receipts pledged or otherwise specifically allocated to any issue registered, indicating the issue.

Reference is made to pages 18 to 27 and 48 to 51 of Exhibit (d) hereto.

7.

(a)

If any foreign exchange control, not previously reported, has been established by the registrant (or if the registrant is other than a national government, by its national government), briefly describe such foreign exchange control.

None.

3

(b)

If any foreign exchange control previously reported has been discontinued or materially modified, briefly describe the effect of any such action, not previously reported.

Not applicable.

This annual report comprises:

(a)

Pages numbered 1 to 5 consecutively.

(b)

The following exhibits:

(d)

Current Province of New Brunswick Description.

(e)

Audited Financial Statements of the Province of New Brunswick for the fiscal year ended March 31, 2005, as published in the Public Accounts.

(f)

Consent of the Auditor General of the Province of New Brunswick.

(g)

Audited Financial Statements of NB Power for the fiscal year ended March 31, 2005, as published in its annual report.

(h)

Consent of Deloitte & Touche.

This annual report is filed subject to the Instructions for Form 18-K for Foreign Governments and Political Subdivisions Thereof.

4

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized, at Fredericton, Canada on the 23^rd day of December 2005.

Province of New Brunswick

By:  /s/  John Dicaire   

John Dicaire

Assistant Deputy Minister

Treasury Division

Department of Finance

5

EXHIBIT INDEX

(d)

Current Province of New Brunswick Description.

(e)

Audited Financial Statements of the Province of New Brunswick for the fiscal year ended March 31, 2005, as published in the Public Accounts.

(f)

Consent of the Auditor General of the Province of New Brunswick.

(g)

Audited Financial Statements of NB Power for the fiscal year ended March 31, 2005, as published in its annual report.

(h)

Consent of Deloitte & Touche.

6

Exhibit “d” Current Province of New Brunswick Description

December 2005

1

Exhibit “d” Current Province of New Brunswick Description

TABLE OF CONTENTS

Page

Map of the Province

3

Province of New Brunswick

4

General Information

5

The Economy

6

Revenue and Expenditure of the Province

18

Financing

28

Consolidation of New Brunswick Public Sector Debt

33

Public Sector Pension Liabilities

33

NB Power

36

Tables and Supplementary Information of the Province

48

Funded Debt Outstanding at March 31, 2005

52

Foreign Exchange

53

Sources of Information

53

All dollar amounts herein are in Canadian dollars unless otherwise specified.  On December 6, 2005, the noon buying rate in the City of New York for cable transfers payable in Canadian dollars, as reported by The Federal Reserve Bank of New York, was $1.1563 per U.S. dollar.

Financial data for the Province of New Brunswick ("New Brunswick" or the "Province") have been rounded.  Certain information presented in tabular form may not add to the total presented due to such rounding.

The Province made a major change in its accounting policies during the year ended March 31, 2005 by implementing the new government reporting model recommendations of the Public Sector Accounting Board (PSAB) of the Canadian Institute of Chartered Accountants (CICA).  The Province now distinguishes between financial and non-financial assets and is now accounting for tangible capital assets as prescribed by PSAB.  The new reporting model has resulted in a number of financial statement changes.  In some cases historical data cannot be reproduced in the new format.

Compound annual rates of growth are computed by using the "geometric average method", which is based on first and last year observations of the variables rather than all observations over the period concerned.

2

Exhibit “d” Current Province of New Brunswick Description

MAP OF NEW BRUNSWICK

3

Exhibit “d” Current Province of New Brunswick Description

PROVINCE OF NEW BRUNSWICK

The following summary information is qualified in its entirety by the information contained herein.

	Year ended December 31, (Canadian dollars in millions where applicable)					Compound Annual Growth Rate       %
	2000	2001	2002	2003	2004	2000-2004
Economy1
Gross Domestic Product at market prices	20,085	20,684	21,152	22,179	22,976	3.4
Personal Income	17,434	17,852	18,259	18,819	19,354	2.6
Retail Trade	7,282	7,498	7,787	7,827	7,963	2.3
Manufacturing Shipments	10,944	11,830	12,287	12,595	14,072	6.5
Foreign Commodity Exports	7,403	8,271	8,162	8,513	9,438	8.8
Population at July 1 (in thousands)	751	750	750	751	752	0.1
Unemployment Rate	10.0%	11.1%	10.2%	10.3%	9.8%	---
Change in Consumer Price Index	3.3%	1.7%	3.4%	3.4%	1.5%	---

	Year ended March 31, (Canadian dollars in millions)			Budget Estimat Estimates
		2004	2005		2006
Government Finance*
Ordinary Account (Surplus) Deficit		101.2	(248.5)		(149.5)
Net Capital Expenditure		240.7	344.0		382.5
(Surplus) Deficit on Special Purpose Account		(4.2)	(6.3)		0.7
(Surplus) Deficit on Special Operating Agency		(12.1)	(12.7)		(10.7)
Earnings from Sinking Fund		(222.5)	(221.6)		(227.0)
Increase (Decrease) in Net Debt		88.3	(131.6)		(4.0)
*Comparable historic figures are not available due to move to Tangible Capital Asset Accounting

	Year ended March 31, (Canadian dollars in millions)
	2001	2002	2003	2004	2005
Provincial Purpose Funded Debt and Capital Loans 2
Gross Provincial Purpose Funded Debt and Capital Loans	7,656.2	8,004.7	8,418.7	8,485.8	8,397.0
Less Sinking Funds	3,130.2	3,358.8	3,543.0	3,716.2	3,773.8
Net Provincial Purpose Funded Debt and Capital Loans	4,526.0	4,645.9	4,875.7	4,769.6	4,623.2

	Year ended March 31, (Canadian dollars in millions)
	2001	2002	2003	2004	2005
Advances to NB Power  3
Gross Advances	3,061.1	3,121.7	2,972.8	3,098.0	3,316.6
Less Sinking Funds	297.3	327.4	351.3	363.7	391.6
Net Advances	2,763.8	2,794.3	2,621.5	2,734.3	2,925.0

	Year ended March 31, (Canadian dollars in millions)
	2001	2002	2003	2004	2005
Contingent Liabilities
Gross Contingent Liabilities	135.7	151.4	196.5	263.5	269.4
Less Sinking Funds	---	---	---	---	---
Net Contingent Liabilities	135.7	151.4	196.5	263.5	269.4

¹Source:  Statistics Canada – Numbers are subject to adjustment.

²Foreign currency issues are expressed as the Canadian dollar equivalent at fiscal year end rates of exchange or, where hedges are in place, at the rates of exchange established by such hedges.

³Foreign currency issues are expressed as the Canadian dollar equivalent at fiscal year end rates of exchange.

4

Exhibit “d” Current Province of New Brunswick Description

PROVINCE OF NEW BRUNSWICK
GENERAL INFORMATION

Introduction

The Province of New Brunswick is located on the eastern seaboard of Canada and has a total area of 28,355 square miles of which about 12,877 square miles is Crown land owned by the Province.  The St. John River flows for a distance of over 300 miles through the province to its mouth on the Bay of Fundy.  The province's population is concentrated principally in the valleys of the St. John and other rivers.

A large part of New Brunswick is covered by forests, which constitute a major natural resource.  Other natural resources include fish and shellfish, farmland and base metals, coal, potash, limestone and other minerals.  The location of the province provides the advantage of cost effective water transportation for its products to export markets in the eastern U.S., Great Britain and Western Europe.  Saint John, New Brunswick’s largest city, located at the mouth of the St. John River on the Bay of Fundy, is home to one of North America’s largest oil refineries and is one of the two principal seaports in eastern Canada that remain open throughout the year.  Consequently, some Canadian shipping, which would otherwise pass through the St. Lawrence River, is diverted to the Saint John port during the winter months.

According to Statistics Canada, the population of the province on July 1, 2005 was estimated at 752,006.  The three largest urban areas of New Brunswick and their respective populations based on 2001 census figures are Saint John (122,678), Moncton (117,727) and Fredericton (81,346), the capital of the province.

Government

Canada consists of a federation of provinces and federal territories with a constitutional division of powers between the federal and provincial governments established by the Constitution Act, 1867 and the Constitution Act, 1982.  Under these Acts the Provinces are assigned jurisdiction over health, social services, education, municipal institutions, property and civil rights, natural resources and other matters of purely private or local concern.  The Parliament of Canada has jurisdiction over all areas not assigned exclusively to the provincial legislatures, including such matters as the federal public debt and property, the regulation of trade and commerce, currency and coinage, banks and banking, national defense, the postal services, railways and navigation and employment insurance.

The Constitution Act, 1982 provides for enlarged provincial jurisdiction over and taxation of certain natural resources and electrical energy, a Charter of Rights and Freedoms, including language rights, the principles of the reduction of regional economic disparities and the making of fiscal equalization payments to certain Provinces by the Government of Canada, and for the amendment of the constitution in Canada.  Each Province owns mineral and other resources on its provincial Crown Lands and may own sub-surface resources on its other lands.

The executive power in New Brunswick is vested in the Lieutenant-Governor acting on the advice of the Executive Council.  The Executive Council is responsible to the Legislative Assembly.  The Lieutenant-Governor, who is the representative of the Queen, is appointed by the Governor-General of Canada in Council on the recommendation of the Prime Minister of Canada.  The current Lieutenant-Governor is His Honour Herménégilde Chiasson.  Members of the Executive Council are appointed by the Lieutenant-Governor on the nomination of the Premier from members of the Legislative Assembly.  There are presently 17 members of the Executive Council, including the Premier, the Honourable Bernard Lord.  

Legislative power is exercised by the Legislative Assembly and legislation becomes effective upon the assent of the Lieutenant-Governor unless otherwise specified in the legislation.  The Legislative Assembly is elected for a term of five years and may be dissolved at any time by the Lieutenant-Governor on the advice of the Premier.  Of a total of 55 seats in the Legislative Assembly, 28 are held by the Progressive Conservative Party and 27 are held by the Liberal Party.  The last provincial general election was held on June 9, 2003.

5

Exhibit “d” Current Province of New Brunswick Description

International Trade Agreements

The Government of New Brunswick believes that Canada’s participation in the Canada-U.S. Free Trade Agreement and North American Free Trade Agreement improves the province’s international trade opportunities, particularly with neighbouring U.S. states.  The conclusion of the Uruguay Round of GATT, and the subsequent formation of the World Trade Organization, is beneficial for the export-oriented economies of both Canada and New Brunswick.  The launch of the Doha Development round of WTO negotiations in November 2001 is seen as complimentary to bilateral agreements with the U.S.  Secure access to U.S. markets for the vast majority of the province’s exports continues.  The Province participates actively on Federal/Provincial consultative committees concerned with implementation, dispute settlement and future negotiation issues related to international trade and investment agreements.

On March 22, 2002, the U.S. Department of Commerce (DOC) found that Canadian softwood lumber producers, other than those from Atlantic Canada, had benefited from countervailable subsidies, and also found that Canadian producers of softwood lumber had sold their product below fair market value.  The DOC set the Countervailing Duty (CVD) rate at 18.79% and the "all others" Anti-Dumping (AD) rate at 8.43%.  As a result of the exemption from the subsidies case, New Brunswick and all other Atlantic Canada softwood lumber producers are currently paying only the revised AD rate of 4.03% at the US-Canada border.  The most recent attempt to arrive at a negotiated solution between the US and Canada broke down when Canada countered the US refusal to comply with the NAFTA Extraordinary Challenge Committee’s findings of no injury by canceling negotiations with the U.S. scheduled for August, 2005.  New Bru nswick will continue to support the Canadian federal government on both the litigation track, as cases move forward before both WTO and NAFTA panels, and in pursuing political discussions and negotiations towards a long-term solution so long as any settlement of the current dispute clearly excludes the Atlantic Provinces from restrictions or penalties.

THE ECONOMY

Recent Developments

The Canadian economy rebounded strongly from the slowdown of 2003, shrugging off a soaring Canadian dollar in 2004 while making the best of high oil prices. Real GDP advanced 2.9% in 2004, an improvement from the 2.0% growth in the previous year. Following a gradual start, employment picked up momentum in the second quarter of 2004. Economic growth in New Brunswick also accelerated from the previous year due to increases in personal consumption expenditures, government investment and exports. Real GDP in New Brunswick increased an estimated 2.0% in 2004. The higher exchange rate, combined with high energy and other commodity prices, caused economic momentum to shift from central to western Canada, with Alberta and British Columbia posting the strongest performances. For New Brunswick, growth was recorded in all sectors, except the mining, utilities, accommodation and food services and the public services ¹ industries. Output from the goods producing sector rose 3.2%, while output from the service sector increased 1.5%.

In 2004, retail sales in New Brunswick increased 1.7% over 2003, compared to a 4.7% national increase. New motor vehicle sales contracted for the second consecutive year, down 7.7% over 2003.  New Brunswick's Consumer Price Index increased 1.5%, compared to a 1.9% increase for Canada. Despite the appreciation of the Canadian dollar, New Brunswick manufacturing shipments in 2004 increased 11.7% over 2003, above the national rate of 8.5%.  Labour income in New Brunswick rose 2.3% to $11.9 billion in 2004, below the national rate of 4.0%. New Brunswick's housing starts in 2004 totaled 3,947, a 12.1% decline from 2003. Capital investment in the province increased by 7.4% from 2003, with construction investment outpacing that of machinery and equipment. Capital investment in Canada increased by 8.5% in 2004. In the agriculture sector, farm cash receipts increased 2.8% in 2004 despite a 13.5% decline in potato receipts. Th e value of mineral production in New Brunswick increased 8.2% over 2003, largely due to a 12.2% increase in the value of metallic minerals.

Foreign exports of commodities increased 10.9% in 2004 to $9.4 billion. The value of energy products exports jumped 15.5% over the 2003 level while forestry products rose 8.1%, industrial goods rose 17.9% and machinery and equipment rose 9.8%.

New Brunswick’s employment level in 2004 increased 1.9% from its 2003 level.  With the labour force increasing 1.4%, the unemployment rate dropped to 9.8% from 10.3% in 2003.

¹ Public services include the education services, the health care and social assistance and the public administration industries.

6

Exhibit “d” Current Province of New Brunswick Description

Economic Activity

In 2004, the nominal value of New Brunswick’s GDP was estimated at $22,976 million or $30,553 per capita. Over the 2000 to 2004 period, real GDP grew at a compound annual growth rate of 3.4% compared to a national rate of growth of 4.6%

Between 2000 and 2004, the real GDP from goods producing industries increased at a compound annual growth rate of 2.4% to $6,004.4 million (chained 1997 dollars). The real GDP of service producing industries recorded an identical compound annual growth rate of 2.4% during that same period, reaching a level of $13,077.5 million (chained 1997 dollars).

The gross value of manufacturing shipments increased at a compound annual growth rate of 6.5% (in current prices) over the 2000 to 2004 period, while foreign exports of commodities rose at a compound annual growth rate of 6.3% (in current prices).

Personal income has increased from $17,434 million in 2000 to $19,354 million in 2004 (in current prices), a compound annual growth rate of 2.6%. On a per capita basis, personal income increased from $23,214 to $25,737 (in current prices) over the same period, growing at a compound annual growth rate of 2.6%, identical to the national compound annual growth rate. Retail sales for New Brunswick increased at a compound annual growth rate of 2.3% (in current prices) over the same period.

The following table sets forth selected indices of economic activity for New Brunswick and for Canada as a whole for the years 2000 through 2004.

SELECTED ECONOMIC INDICATORS
	Year Ended December 31, (millions unless otherwise stated)					CAGR1 (%)
	2000	2001	2002	2003	2004	2000-2004
Gross Domestic Product at market prices	$20,085	$20,684	$21,152	$22,179	$22,976	3.4
Gross Domestic Product   (Canada) at market prices	1,076,577	1,108,048	1,154,204	1,216,191	1,290,185	4.6
Per Capita Gross Domestic   Product  (in dollars)	26,744	27,579	28,203	29,533	30,553	3.4
Per Capita Gross Domestic Product (Canada) (in dollars)	35,080	35,719	36,790	38,403	40,351	3.6
Personal Income	17,434	17,852	18,259	18,819	19,354	2.6
Per Capita Personal Income   (in dollars)	23,214	23,803	24,345	25,059	25,737	2.6
Per Capita Personal Income (Canada) (in dollars)	27,384	28,254	28,664	29,369	30,343	2.6
Private and Public Investment (new)	4,087	3,493	3,549	3,980	4,276	1.1
Retail Trade	7,282	7,498	7,787	7,827	7,963	2.3
Manufacturing Shipments	10,944	11,830	12,287	12,595	14,072	6.5
Foreign Commodity Exports	7,403	8,271	8,162	8,513	9,438	8.8
Real Gross Domestic Product   (chained 1997 dollars)	18,942	19,257	20,105	20,449	20,867	2.4
Real Gross Domestic Product   (Canada) at market prices   (chained 1997 dollars)	1,020,488	1,038,702	1,070,789	1,092,388	1,124,428	2.5
Change in Consumer Price Index	3.3%	1.7%	3.4%	3.4%	1.5%	---
Change in Consumer Price Index (Canada)	2.7%	2.6%	2.2%	2.8%	1.9%	---

¹Compound annual growth rate

Source:   Statistics Canada.

7

Exhibit “d” Current Province of New Brunswick Description

New Investment

The following table sets forth statistics regarding new investment in New Brunswick, by sector, and compares total new investment with Canada as a whole.

NEW INVESTMENT
	Year Ended December 31,
	2000	2001	2002	2003	20041
	(millions)
Construction Investment2	2,434.3	1,985.3	2,089.7	2,526.1	2,768.6
Housing	790.3	883.8	1,026.8	1,150.6	1,282.9
Transportation and Warehousing	nd	56.5	48.4	30.5	26.3
Manufacturing	nd	89.2	56.3	78.6	83.1
Public Administration	487.3	380.3	372.0	365.0	452.6
Utilities	135.2	141.3	192.4	449.9	527.8
Finance and Insurance	15.0	10.1	16.2	6.1	23.6
Mining and Oil and Gas Extraction	89.7	nd	65.0	nd	23.8
Agriculture, Forestry, Fishing and Hunting	33.3	32.4	37.0	32.8	28.7
Educational Services	51.5	50.9	49.2	56.5	71.2
Retail Trade	24.6	53.0	42.3	100.2	72.3
Information and Cultural Industries	27.6	nd	62.8	nd	nd
Health Care and Social Assistance	15.0	38.7	25.1	23.6	37.3
Construction	9.5	7.6	7.8	9.8	10.6
Real Estate and Rental and Leasing	26.5	40.7	53.6	74.4	32.5
Professional, Scientific & Technical Services	4.1	2.2	3.8	2.1	1.4
Administrative & Support, Waste Management & Remediation Services	10.5	11.0	1.4	5.8	3.7
Accommodation and Food Services	5.4	5.2	13.1	10.6	10.4
Wholesale Trade	13.2	10.8	6.4	13.5	20.6
Other Services	4.4	6.5	8.1	13.6	4.7
Management of Companies & Enterprises	2.8	0.4	1.0	nd	nd
Arts, Entertainment and Recreation	2.1	1.3	1.2	6.8	6.7
Machinery Equipment Investment2	1,652.3	1,507.6	1,458.8	1,454.0	1,507.4
Manufacturing	nd	327.0	291.2	370.7	405.5
Finance and Insurance	205.4	182.4	194.1	179.8	182.3
Information and Cultural Industries	148.3	nd	203.3	nd	nd
Transportation and Warehousing	nd	82.4	91.2	86.5	95.3
Construction	74.4	58.3	60.9	74.9	80.1
Agriculture, Forestry, Fishing and Hunting	63.6	56.8	67.7	72.3	79.6
Utilities	111.4	55.4	38.8	43.5	20.6
Retail Trade	56.7	83.5	84.1	100.9	99.2
Professional, Scientific & Technical Services	48.6	34.1	33.7	31.7	30.2
Public Administration	132.7	128.4	100.9	93.2	105.2
Real Estate and Rental and Leasing	113.3	92.5	127.8	82.3	92.8
Wholesale Trade	49.0	49.8	38.1	35.2	40.1
Mining and Oil and Gas Extraction	44.5	nd	18.3	nd	25.2
Health Care and Social Assistance	29.3	44.2	37.2	43.8	34.5
Educational Services	22.5	23.6	22.3	25.2	27.3
Administrative & Support, Waste Management & Remediation Services	24.4	23.6	14.0	22.6	22.6
Accommodation and Food Services	14.0	12.3	9.5	12.9	15.4
Other Services	16.2	15.8	13.7	16.0	11.7
Management of Companies & Enterprises	7.8	1.3	7.6	nd	nd
Arts, Entertainment and Recreation	4.1	3.4	4.4	4.2	5.0
Total New Investment	$4,086.7	$3,492.9	$3,548.5	$3,980.2	$4,276.0
Total New Investment (Canada)	$194,926.2	$206,870.6	$213,978.7	$224,849.7	$243,871.4

¹Preliminary actual.

²Total investments include amounts, which are not separately disclosed by Statistics Canada.

  nd:   not disclosed    Source:  Statistics Canada.

8

Exhibit “d” Current Province of New Brunswick Description

Capital investment increased 7.4% in 2004 from the 2003 level, to $4,276.0 million.  Investment in 2004 represents the highest annual investment total in provincial history. Major investments since the mid-1990s included projects in the refined petroleum products, power generation, real estate, retailing, food processing, electronic products, communications, transportation, health, recreation, education and forestry-related industries.

In 2004, Enbridge Gas New Brunswick continued developing the natural gas distribution system in the province, which is available in Fredericton, Moncton, Saint John, St. George, and Oromocto.  With a $3-million investment, Enbridge began accepting customers in St. Stephen.  By the end of 2004, Enbridge had about 3,000 customers in New Brunswick, compared to 2,300 in 2003, and plans to continue expanding its customer base.  

In recent years, Aliant (owner of NBTel) and Rogers Communications Inc. have made significant investments in the province’s telecommunications system, increasing access to high-speed Internet and wireless communications.  Rogers Cable Inc. announced plans to offer telephone service next year in New Brunswick, Newfoundland and Ontario. Landline telephone would be added to the existing services of cable, Internet and cell phones. Rogers also announced the launching of Hi-Speed Extreme, a faster Internet service, to residential customers. Aliant announced further expansion of its high-speed Internet service to more than 6,000 New Brunswick homes and businesses in 2004. This is part of a $12.6-million Maritime expansion and is over and above a $44-million partnership with the federal and provincial governments announced in November 2003. In New Brunswick, 33 new areas now have access to Aliant’s broadband Internet s ervice. Access was extended in certain municipalities (Bathurst, Devon, Edmundston, Fredericton, Miramichi, Moncton, Rothesay and Saint John) and introduced in 25 other areas. Further expansion for next year is planned in the northwest region, mainly in Haut Madawaska (Saint-François area), Plaster Rock and Perth-Andover.  A $44.6-million investment is expected over the 2003-2006 period to give access to broadband Internet to 90% of the Province’s population, with the federal government providing $16.5 million in funding for the project, while the Province will provide $12.5 million. Aliant announced it would invest $26 million in 2004 to increase digital wireless access to 90% of the population in Atlantic Canada before the close of the year. Aliant has invested more than $290 million over the 2000-2005 period to provide a high quality, reliable wireless network in New Brunswick.

In August 2003, the federal and New Brunswick governments announced an agreement to complete the twinning of a 130- kilometer stretch of the Trans-Canada Highway between Fredericton and the Quebec border by 2007. The costs will be split 50-50 between the two levels of government. Once completed, the four-lane Trans-Canada Highway will extend from the Quebec border in the northwest to the Nova Scotia border in the southeast. In December 2004, the Province selected Brun-Way Group to complete the twinning of the TCH and design, construct and finance the 98-kilometre stretch between Grand Falls and Woodstock and to thereafter assume responsibility for the operation, maintenance and rehabilitation of same for a 25 year period.  Construction of the highway will be completed in 2007.

In 2004, two electric power generation projects were completed. The New Brunswick Power Corporation (NB Power) finished a $750-million upgrade of the Coleson Cove power plant. The upgrade, which extends the power plant’s life to 2030, allows the power plant to reduce emission of certain pollutants, including sulphuric anhydrides, particulate matter and nitrogen oxides. Construction of the new 90-megawatt co-generation plant in Saint John by Irving Oil Limited and TransCanada Pipelines Ltd. was also completed. The $80-million project went on line in 2004.

Foreign Exports of Commodities

Foreign exports of commodities have become increasingly important to both the New Brunswick and Canadian economies. In 2004, foreign exports were equivalent to 45.5% of real GDP for the province, compared to 41.1% for Canada. New Brunswick's foreign exports of commodities, estimated at $9,438.0 million in 2004 (in current dollars), increased at a compound annual growth rate of 6.3% over the 2000 to 2004 period.

Due to the significance of commodity exports, the economic performance of the province is highly dependent on international economic conditions, particularly in the U.S. In 2004, the U.S. purchased an aggregate of 89.9% of the province's foreign commodity exports.  Energy products (mostly refined petroleum products and some electricity) accounted for 47.4% of all commodity exports that year, followed by forest products (lumber, pulp and paper) with 23.2%, and agricultural and fishing products (13.6% of the total). Other important commodity exports are fertilizers, plastic products, electronic parts and components, potash and metallic ores (mostly zinc).

9

Exhibit “d” Current Province of New Brunswick Description

The table below shows foreign exports of commodities from New Brunswick for the years 2000 to 2004. The largest component, energy products, increased at a compound annual growth rate of 17.4% during that time, due to an increase in energy prices and a major upgrade at the Irving Oil refinery. Exports of forest products decreased at a compound annual growth rate of 5.6%, as the effects of price declines and weak markets led to a decline in exports of these commodities over the period of 2000-2003. Increasing at a compound annual growth rate of 0.8% over the past five years, exports of agricultural and fishing products reported strong increases from 2000 to 2003, but experienced a significant decrease in 2004.

FOREIGN EXPORTS OF COMMODITIES
	Year Ended December 31,							CAGR1 (%)
	2000	2001	2002		2003	2004		2000-2004
	(millions)
Forest Products	$2,764.7	$2,319.8		$2,088.5	$2,027.2		$2,191.5	-5.6
Energy Products	2,351.1	3,379.8		3,312.2	3,871.1		4,470.9	17.4
Agriculture and Fishing Products	1,243.6	1,352.2		1,399.2	1,337.1		1,282.3	0.8
Industrial Goods	464.6	584.1		595.0	587.1		692.3	10.5
Machinery and Equipment	412.8	465.7		576.0	514.8		565.3	8.2
Other	166.1	169.1		191.4	177.0		235.8	9.2
Total	$7,402.6	$8,271.0		$8,162.2	$8,513.4		$9,438.0	6.3

¹Compound annual growth rate

Source:  Statistics Canada.

10

Exhibit “d” Current Province of New Brunswick Description

Structure of the Economy

The New Brunswick economy receives a large contribution from natural resources, especially forestry and forestry-related industries. The provincial economy shows a larger concentration of service industries than goods producing industries compared to Canada as a whole. During the 2000 to 2004 period, real GDP in the service industries accounted for 69.1% of total real GDP compared to 68.0% for Canada. The following table shows Real GDP by industry in New Brunswick for the years 2000 to 2004, valued in chained 1997 dollars.

GROSS DOMESTIC PRODUCT BY INDUSTRY1
	Year Ended December 31,
	2000	2001	2002	2003	2004	CAGR2 % 2000-2004
	(millions of 1997 dollars)
Goods Producing Industries
Manufacturing3	$2,734.6	$2,686.2	$2,886.3	$2,815.2	$2,934.2	1.8
Construction	1,126.9	1,008.9	1,013.1	1,194.5	1,264.8	2.9
Utilities	605.3	593.0	562.8	607.6	591.9	-0.6
Agriculture, Forestry, Fishing and  Hunting	721.6	854.8	947.7	951.0	1,003.5	8.6
Mining and Oil and Gas Extraction	266.1	259.8	211.8	241.0	205.8	-6.2
Total Goods Producing Industries	5,458.6	5,361.5	5,609.1	5,819.7	6,004.4	2.4
Service Producing Industries
Transportation and Warehousing	973.0	1,001.8	1,026.5	1,048.2	1,094.4	3.0
Information and Cultural Industries	668.5	716.5	767.7	779.9	790.2	4.3
Retail Trade	1,080.3	1,105.0	1,140.6	1,149.0	1,187.3	2.4
Wholesale Trade	774.0	811.1	839.4	863.9	882.9	3.3
Finance and Insurance, Real Estate,      Renting, Leasing, Company Management	2,899.6	3,010.4	3,129.2	3,207.2	3,317.0	3.4
Public Administration	1,670.5	1,707.4	1,745.5	1,743.5	1,735.7	1.0
Educational Services	893.4	881.1	892.0	882.2	869.8	-0.7
Health Care and Social Assistance	1,224.5	1,255.6	1,278.7	1,316.0	1,303.8	1.6
Professional, Scientific and   Technical Services	454.5	458.4	504.9	500.5	503.2	2.6
Administrative and Waste  Management Services	290.0	304.1	369.7	383.9	393.4	7.9
Accommodation and Food Services	410.8	418.3	424.9	435.8	434.9	1.4
Arts, Entertainment and Recreation	98.7	102.5	108.1	111.4	112.9	3.4
Other Services (except Public Administration)	439.8	463.6	493.6	480.9	484.6	2.5
Total Service Producing Industries	11,871.9	12,221.9	12,700.5	12,879.4	13,077.5	2.4
Total Real Domestic Product   (at basic prices)	$17,316.9	$17,607.0	$18,296.0	$18,678.5	$19,056.0	2.4

¹Totals may not add up due to the adoption of the chain Fisher deflation methodology.

²Compound annual growth rate

³Includes natural resources processing: output of forestry-related products accounted for approximately 46.6% of manufacturing GDP at basic prices during the years 1999 through 2003.

Source:  Statistics Canada.

11

Exhibit “d” Current Province of New Brunswick Description

Primary Industries

Mining.  The New Brunswick mining sector has benefited from the development of base metal deposits (zinc, lead, copper and silver ores), potash and peat.  This has resulted in increased direct employment and the development and operation of related smelting, land and water transportation facilities.  The New Brunswick mining industry employs approximately 3,000 people.

A rise in base metals prices in 2004 from 2003 levels was partly offset by a rise in the value of the Canadian dollar.  The net effect was an increase in the total value of mineral production in New Brunswick (increased by 8% to $760 million from a final value of $702 million in 2003).  Metals, which accounted for 66% of the total value of the Province’s mineral production, increased by 12% from 2003 levels, while non-metallics (25% of total production) increased by 6%, chiefly on the strength of higher potash values.  Among the metals, zinc continued to be the dominant commodity (over 43% of total production).  However the province’s only zinc producer, Noranda’s Brunswick mine, is expected to exhaust its mineable reserves by the end of 2009.

The main non-metal commodities are potash, peat, salt and sulphur in smelter gas.  Potash Corporation of Saskatchewan (PCS) operated normally in 2004, with only the regular maintenance shut-down.  The workforce remains at its usual level of approximately 350.

Structural materials such as lime, stone, sand and gravel contributed about 7% to the value of production in 2004.  Several limestone quarries were active, as were areas producing marl and silica.

In 2004, Corridor Resources Inc. and partner PCS continued natural gas production from their first two wells and piped the gas to a plant where it was processed prior to fueling PCS’s potash mill. Columbia Natural Resources Canada, Ltd. (CNRC) undertook a gravity and geochemical survey in June 2004 to satisfy work commitments on Marysville and Cocagne basins licenses.

The Province has established a number of initiatives to improve and expand the viability of the mining industry, as recommended in a major study presented in 2000.  In addition to the Prospector Development Program and the Junior Mining Assistance Program, there are two new initiatives to assist the exploration and mining industries: an 18% tax credit to companies that undertake advanced exploration and a new mine reclamation fund. In 2004, investment in mining exploration in the metallic and industrial minerals sector totaled $13.2 million.  A further $25 million was invested in the exploration for natural gas and other hydrocarbons.  In October 2003 an annual grant program was announced by the Province for the Bathurst Mining Camp.  Fifteen million dollars will be invested in advanced exploration over the first three years.  The terms of the program may be extended for two additional years with a fur ther $10 million contribution.

The following table sets forth the total selling value of mineral production in New Brunswick (including the value of concentrating and smelting) for the years 2000 through 2004.

MINERAL PRODUCTION
	Year Ended December 31,
	2000	2001	2002		2003		2004
	(millions)
Base Metals	$520.5	$580.2		$440.3		$447.7	$502.3
Fuels, including Coal	22.8	19.9		20.0		17.1	n/d
Non-Metallic Minerals	229.2	207.1		193.2		237.8	n/d
Total	$772.5	$807.2		$653.5		$702.5	$760.0

n/d   not disclosed

Source:  Statistics Canada.

12

Exhibit “d” Current Province of New Brunswick Description

Forestry.  Approximately 83.5% of the land area of New Brunswick is forested and roughly one half of the forested land is owned by the Province as Crown land.  Nearly all Crown land is subject to timber licenses or harvest agreements. Harvest activities on Crown land generated $60 million in Crown land royalties for the fiscal year ending March 31, 2005. The Province received $57 million of these royalties from licensee harvest activities and $3 million was forwarded to New Brunswick First Nation Communities in accordance with harvesting agreements and in association with First Nation harvesting activities.

The following table sets forth the most recently published estimates of forest production in New Brunswick for the years 1999 through 2003.

FOREST PRODUCTION
	Year Ended December 31,
	1999	2000	2001	2002	2003
	(thousands of cubic metres)
Pulpwood	3,752	3,573	2,799	3,0691	3,0691
Logs and Bolts	7,486	8,231	7,308	7,3191	7,3191
Fuelwood	20	33	44	36	361
Other	35	36	35	33	30
Total	11,294	11,872	10,186	10,4571	10,4541

¹National Forestry database estimate.

Source:  National Forestry Database

Information regarding New Brunswick's pulp and paper and wood manufacturing industries is set forth below under "Manufacturing".  Pulpwood production from year to year is affected by, among other things, weather conditions for harvesting and bears a fluctuating relationship to shipments by the pulp and paper industry.

Harvesting of the province’s wood resources on Crown lands and industrial freehold lands is in balance with current growth on a sustainable-yield basis.  The province’s yearly harvest level is estimated at 10.5 million cubic metres, comprised of 65% softwood and 35% hardwood fibre.

Agriculture.  The 2001 Census of Agriculture indicated that New Brunswick had 3,034 farms and 388,061 hectares of farmland.  The comparable figures from the 1996 census were 3,405 farms and 386,027 hectares.  Cattle farms accounted for 26% of all farms in New Brunswick in 2001, followed by fruit operations (13%) and dairy farms (11%).  Total farm cash receipts in the province were $419.1 million in 2004, up 2.8% from the previous year.  Receipts for potatoes, the largest crop, decreased 13.5% to $87.0 million.

Fishing.  Crab, lobster, herring, shrimp, scallops and sea urchin have been the species most important to the primary fishing industry, accounting for nearly 94.1% of the value of landings estimated at $191.1 million in 2004, a 7.1% increase from 2003.  The average annual value of fish landings during the 2000-2004 period was $186.1 million.  New methods of processing and marketing frozen and pre-cooked fish and shellfish have expanded market opportunities and increased the competitiveness of the industry.  Shipments of processed fish products for 2004 rose 5.1% from 2003 to $1,146.1 million, a considerable increase over the 2000-2004 average of $993.6 million.  Exports of fish products reached $807.7 million in 2004, a 2.8% increase from 2003.

Due to lower prices for farmed salmon, attributable to increased international competition, along with a strengthened Canadian dollar, sales of New Brunswick aquaculture products decreased 7.6% to $252.0 million in 2004.  New Brunswick sales accounted for 37.7% of the Canadian total in 2004, not far behind first-ranked British Columbia.   

13

Exhibit “d” Current Province of New Brunswick Description

Secondary Industries

Manufacturing.  Manufacturing activity in New Brunswick employed approximately 41,700 people in 2004, providing $1,355.7 million in wages and salaries compared to $1,378.0 million in 2003.

In 2004, the value of manufacturing shipments increased by 11.7% to $14,072.4 million from $12,595.0 million in 2003.  The miscellaneous group of manufacturing industries (which includes diverse groups of small plants as well as large producers such as the Irving Oil refinery and Brunswick Mining and Smelting) accounted for 54.0% of total shipments in 2004 and reported a 12.6% increase in the value of shipments over 2003.  Shipments from the paper products, wood products, machinery products and food industries also increased from the previous year.

The table below sets forth the leading industrial groups in New Brunswick’s manufacturing sector, according to gross selling value of factory shipments, for the years 2000 through 2004.

GROSS SELLING VALUE OF FACTORY SHIPMENTS
	Year Ended December 31,
						CAGR1 %
	1999	2000	2001	2002	2003	1999-2003
Industry	(millions)
Paper Manufacturing	$1,990.3	$2,463.3	$2,191.7	$2,212.8	$2,083.5	1.2
Food Manufacturing	1,729.7	1,799.6	1,913.6	2,022.6	2,034.6	4.1
Wood Product Manufacturing	1,477.5	1,354.7	1,399.4	1,559.9	1,684.8	3.3
Miscellaneous Manufacturing2	3,957.6	5,325.9	6,578.6	6,735.2	7,061.3	15.6
Total	$9,155.2	$10,943.6	$12,083.3	$12,530.5	$12,864.2	8.9

¹Compound annual growth rate

²The principal components of "Miscellaneous" are petroleum products, lead smelting and electrical and electronics commodities.

Source:  Statistics Canada.

Construction.  The construction industry is the second largest of the goods-producing industries in terms of contribution to real GDP. Spending on construction activity in 2004 increased 9.6% from the 2003 level to $2,768.6 million. The two main contributors to the increase were strong residential construction activity in the province, an increase in activity at the Coleson Cove power plant project, and the twinning of the Trans-Canada Highway. Capital investment in Canada reported an increase of 8.5% in 2004. Residential construction, the largest component of investment, accounted for 30.0% of capital investment in 2004. Housing starts in the province reached 3,947 in 2003, a 12.1% decline from the 20-year high of 2003. At the same time, construction investment in the utilities industry jumped 17.3% to $527.8 million in 2004. According to preliminary estimates, construction investment in New Brunswick in 2005 is e xpected to reach $2,870.3 million, up 3.7% from 2004.

Service Industries

Trade.  Retail trade amounted to $7,962.7 million in 2004, an increase of 1.7% from 2003, compared to the national increase of 4.7%. Between 2000 and 2004, New Brunswick’s compound annual growth rate for retail trade was 2.3%. On a per capita basis, the value of retail sales was $10,588 for New Brunswick and $10,844 for Canada as a whole.

Transportation.  New Brunswick has an extensive infrastructure of road, rail, water and air transportation services. In addition, the province has an area air traffic control centre that controls aircraft within the Maritime Provinces, as well as parts of Quebec and Newfoundland & Labrador. New Brunswick’s three main airports enjoyed strong passenger numbers for 2004; annual increases of 8.6% in Moncton, 5.5% in Fredericton and 5.3% in Saint John were reported.

A major ice-free port in Saint John handled a record 26.3 million metric tonnes of cargo in 2004, an increase of 0.8% from 2003; liquid bulk (includes petroleum) rose 2.1%, dry bulk products (includes potash, salt and fish meal) grew 12.7% and container traffic increased 1.8%. Two sectors experienced declines: forest products (-16%) and breakbulk (-12%).  The port had 60 cruise ship calls and 138,800 passengers.  Capital works and maintenance at the port totaled $9.7 million in 2004.

14

Exhibit “d” Current Province of New Brunswick Description

The port of Belledune handled 2.15 million metric tonnes of goods in 2004, a decrease of 7.6% from the previous year.  Capital investment worth $537,000 was carried out at the port.

Communications and Technology.  Employment in communications and technology averaged 48,700 persons in 2004, a decline of 600 from the previous year.

Several customer contact centres announced new jobs in 2004 or expansion plans for 2005 including: AOL Canada, Asurion, Cendant Canada Inc., CenterBeam Inc., ClientLogic, Clinidata, Concentra Solutions, Connect North America, Exxon Mobile, Help Desk Now, Marriott, Nucomm and Virtual Agent Services. These announcements more than offset the closure of RMH Teleservice and Charitable Aid Incorporated. The industry employs over 17,000 contact centre workers.

Aliant and Rogers continued to improve high-speed Internet access and digital wireless service in 2004. A partnership involving the Province, the federal government and Aliant will see the investment of over $40 million before the end of 2006 and result in 90% of New Brunswickers having access to high-speed Internet. The Rogers group also launched Hi-Speed Extreme (a faster Internet service) to residential customers and is planning a landline telephone service for the future.

Positive developments in the information technology sector included new contracts, projects, products and/or expansions for AnyWare Group, Barrett Xplore Inc., Bulletproof Solutions, CGI Group, Ensemble Collaboration, Innovatia, LabMentors, Q1 Labs, Skillsoft, Spielo, T4G and xwave.

The NRC Institute for Information Technology Industry Partnership Facility houses five businesses in Fredericton with room for another five. The facility, called a technology cluster, enables small and medium enterprises to access NRC resources, including Voice Over IP and state-of-the-art labs.

Tourism.  In recent years, tourism has made a significant contribution to the economy of New Brunswick. Revenues in 2004 were similar to the previous year at $1.2 billion although visitation declined 5% to 1.76 million visitors.  Unseasonable cool, wet weather at the start of the summer and high gas prices impacted the tourism season. Results for individual tourism operations were mixed, with some exhibiting declines while others reported growth thanks in part to the 400^th anniversary celebrations of the founding of Acadia.

Labour Force

Following a modest performance the previous year, employment in New Brunswick in 2004 surged forward to reach a record high of 350,400. Employment gains totaled 6,600 or +1.9% for the year. Nationally, employment growth slowed to 1.8%. With employment growth outpacing labour force growth, New Brunswick’s unemployment rate dipped into single-digits, falling to 9.8% in 2004 from 10.3% the previous year. The number of unemployed persons in the province stood at 37,900, a 3.6% drop from 2003. Nationally, a 4.3% decline in the number of Canadians unemployed helped push the unemployment rate down to 7.2%.

15

Exhibit “d” Current Province of New Brunswick Description

The following table sets forth certain information concerning New Brunswick's labour market.

LABOUR FORCE
	Average for Year Ended December 31,
	2000	2001	2002	2003	2004
	(thousands)
Population 15 years and over	598.3	600.0	602.4	605.0	607.4
Labour Force	368.2	371.8	381.8	383.1	388.3
Labour Force Employed	331.4	330.6	342.9	343.8	350.4
Labour Force Unemployed	36.8	41.2	38.9	39.3	37.9
Unemployment Rate
New Brunswick	10.0%	11.1%	10.2%	10.3%	9.8%
Canada	6.8%	7.2%	7.7%	7.6%	7.2%
Participation Rate
New Brunswick	61.5%	62.0%	63.4%	63.3%	63.9%
Canada	65.8%	65.9%	66.9%	67.5%	67.6%

Source:  Statistics Canada.

From 2000 to 2004, the number of persons employed in New Brunswick increased 5.7%. The majority of employment gains in 2004 occurred in the service sector, which rebounded from losses experienced the previous year. Health care and social assistance, and educational services were pillars of job strength, adding 3,000 and 2,700 jobs respectively to the provincial economy.

The following table indicates employment by industry in New Brunswick for the years 2000 through 2004.

EMPLOYMENT BY INDUSTRY
	Average for Year Ended December 31,
	2000	2001	2002	2003	2004
Goods Producing Sector	(thousands)
Agriculture	5.9	5.7	5.3	5.6	6.6
Forestry, Fishing, Mining, Oil and Gas	12.7	11.5	10.7	11.1	11.5
Manufacturing	40.7	38.0	38.1	39.9	41.7
Utilities	4.5	4.6	5.0	4.4	3.6
Construction	19.1	18.8	19.2	18.9	18.9
Service Producing Sector
Trade	56.1	55.8	54.9	53.7	54.0
Transportation and Warehousing	19.8	19.2	19.9	19.1	20.4
Professional, Scientific and Technical Services	11.2	13.1	14.9	15.9	16.1
Business, Building and Other Support Services	12.5	15.4	19.2	21.3	21.4
Educational Services	22.5	22.5	21.8	22.0	24.7
Health Care and Social Assistance	40.5	40.7	42.5	44.7	47.7
Information, Culture and Recreation	12.3	12.1	12.8	12.1	11.2
Accommodation and Food Services	21.7	23.3	25.2	23.1	22.5
Other Services	16.7	15.1	17.2	16.6	17.3
Finance, Insurance, Real Estate and Leasing	12.6	13.4	15.3	15.4	14.2
Public Administration	22.5	21.5	21.0	19.8	18.6
Total	331.4	330.6	342.9	343.8	350.4

Source:  Statistics Canada.

16

Exhibit “d” Current Province of New Brunswick Description

Economic Development

Economic growth is assisted by the federal government’s Atlantic Canada Opportunities Agency (“ACOA”), which was launched in June 1987 with a mandate to stimulate economic development in the Atlantic Provinces.  

The Canada-New Brunswick Infrastructure Program Agreement was established in 2000 to improve urban and rural municipal infrastructure in New Brunswick. Canada and New Brunswick are each contributing $54.4 million to be matched by municipalities for a total fund of $163.2 million. As at March 31, 2005 $92.2 million of federal/provincial funding has been expended under this Agreement. This initiative will continue until March 31, 2009.

In 2004, the Canada-New Brunswick Municipal Rural Infrastructure Fund Agreement was established to improve local infrastructure projects in New Brunswick. Canada and New Brunswick are each contributing $33.0 million to be matched by municipalities for a total of $99.0 million. As at March 31, 2005, no dollars were expended under this initiative.

In 1999 the Government of New Brunswick established the $25 million Acadian Peninsula Economic Development Fund to provide additional economic stimulation to the northeast region of the province. In 2005, the funding for this initiative was increased to $40.0 million. As at March 31, 2005, $26.1 million has been advanced under this initiative.  In 2002, a similar $25 million fund was established to support the Restigouche-Chaleur Economic Development Initiative in the northern part of the province. As at March 31, 2005, $6.7 million has been advanced under this initiative. In 2004, a $25 million Miramichi Regional Economic Development Fund was established to provide economic development to the Miramichi region.  As at March 31, 2005, $2.0 million has been advanced under this initiative.

In 2001 the $30 million Total Development Fund was established by the Government of New Brunswick to provide financial support for the implementation of Total Development Strategies in the forestry, mining, energy, aquaculture, agriculture, new technology and tourism sectors. As at March 31, 2005, $17.0 million has been advanced under this program.

17

Exhibit “d” Current Province of New Brunswick Description

REVENUE AND EXPENDITURE OF THE PROVINCE

General Information

Under the Constitution Act, 1867 and the Constitution Act, 1982 provincial legislatures are given certain exclusive powers, including the power to impose direct taxation within the provinces to raise revenue for provincial purposes, and the power to borrow money on the sole credit of the provinces.

The Financial Administration Act governs the receipt of public money, the disbursement of public funds, the control of expenditures and the keeping and auditing of public accounts of the Province.  All public monies are to be deposited to the credit of the Province and constitute the Consolidated Fund of the Province.  Monies necessary for the carrying out of the operations of the Provincial Government for each fiscal year are voted by the Legislative Assembly, with the exception of those expenditures for which provision has already been made through existing legislative authority.  In addition, under the authority of the Financial Administration Act, should the occasion arise when the Legislative Assembly is not in session, the Lieutenant-Governor in Council may order the issue of a special warrant authorizing payment out of the Consolidated Fund for an expenditure required urgently for the public good which was not provided for by the Legislative Assembly.  Amounts appropriated under special warrant must be approved at the next session of the Legislative Assembly.

In accordance with the Financial Administration Act and certain other Acts, funds received for a special purpose are to be disbursed for that purpose.  Unlike regular appropriations, any unspent balance of these funds may be carried forward to subsequent fiscal years.  At March 31, 2005, the balance of unspent special purpose funds was $78.3 million.

Funds may also be considered as Special Operating Agency Funds.  Revenue may be generated by the Agencies or from transfers from other budgetary accounts.  Any unspent balance of these funds may, with permission from the Board of Management as per the Financial Administration Act, be carried forward to subsequent fiscal years.  At March 31, 2005, the balance of unspent special operating funds, was $16.4 million.  All transactions between the Special Operating Agencies and Provincial departments are eliminated from the Province's combined statement of revenue and expenditure.

During the 2001 fiscal year, the Fiscal Stabilization Fund Act was enacted.  The Act establishes a fund separate from the Consolidated Fund, for the purpose of assisting in stabilizing the fiscal position of the Province from year to year and to improve long term fiscal planning.  Any transfers into the Fiscal Stabilization Fund are authorized by an appropriation in accordance with the Financial Administration Act.  Transfers out of the Fund are made with the approval of the Lieutenant-Governor in Council.  

For the year ending March 31, 2005, the remaining amount of $0.5 million was transferred from the Fiscal Stabilization Fund to the Consolidated Fund.  

Volume 1 of the public accounts are subject to review by the Auditor General, an official responsible under the provisions of the Auditor General Act for the examination of the accounts of the Province and for reporting thereon annually to the Legislative Assembly.

For each fiscal year, the Minister of Finance delivers a budget and the Estimates of Revenue and Expenditure (the "Budget Estimates") to the Legislative Assembly.  As part of the Province's financial reporting system, the Minister of Finance reports on the status of the budget plan during the year.  The Budget Estimates include the revenue and expenses of some Provincially-created Boards, Commissions and Crown corporations, or the net profits of such entities, or the Provincial contribution towards the operations of such entities, as well as funds advanced through such entities to various individuals and enterprises in the form of repayable loans and investments.  

The Provincial Reporting Entity is comprised of certain organizations that are accountable to the Provincial Legislature.  Transactions and balances of these organizations are included in the Province's financial statements through different accounting methods as outlined in Note 1(a) of Volume 1 of the Public Accounts.

In May 1993, An Act Respecting the Balancing of the Ordinary Expenditures and Ordinary Revenues of the Province was enacted.  The Act, which was amended in April 1995 and renamed the Balanced Budget Act, states that "It is the objective of the Government of New Brunswick that (a) in respect of the first fiscal period, the total amount of the ordinary expenditures for that fiscal period not exceed the total amount of the ordinary revenues for that fiscal period, and (b) in respect of each subsequent fiscal period, the total amount of the expenditures for that fiscal period not exceed the total amount of the revenues for that fiscal period".  

18

Exhibit “d” Current Province of New Brunswick Description

The first fiscal period under the Act was the three fiscal years ended on March 31, 1996 and the second fiscal period the four consecutive fiscal years.  In the second fiscal period, the Province did not meet the requirements of the Balanced Budget Act.  The cumulative difference between total expenditures and total revenues during the period was a deficit of $1,236.5 million.  Major factors explaining the result are the booking of a $450 million write down of New Brunswick Power Corporation asset values in 1998-99 and recognition of the total net present value of the Fredericton-Moncton Highway, $903.8 million, as a result of eliminating the tolls in March 2000 and the consequent change in the lease arrangement from an operating to a capital lease.  As at March 31, 2004 revenues of the Province exceed expenditures by $247.2 million for the balanced budget period of 2000-01 to 2003-04.  As of Ma rch 31, 2005, revenues of the Province exceed expenditures by $131.5 million for the balanced budget period of 2004-05 to 2007-08.  

The Province of New Brunswick implemented Tangible Capital Asset Accounting and introduced major changes in accounting policies, during the year ended March 31, 2005.  It implemented the new government reporting model recommendations of the Public Sector Accounting Board of the Canadian Institute of Chartered Accountants.  In addition to restating net debt, the new accounting model introduces an additional financial measure for governments that is referred to as the accumulated deficit.  It is the net debt minus non-financial assets.  With this model, net debt is divided into two components: the portion that relates to investment in capital infrastructure and other non-financial assets, and the portion that relates to past operating deficits, or the accumulated deficit.   The new reporting model has resulted in a number of financial statement changes.  In some cases, historical data cannot be reproduced in the new format.

Changes in Cash Flow

The following table sets forth the changes in cash flow of the Province for the two fiscal years ended March 31, 2005 and the Budget Estimates for the fiscal year ending March 31, 2006.

19

Exhibit “d” Current Province of New Brunswick Description

Comparative Statement of Cash Flow (millions)
Historical data is unavailable due to adoption of Tangible Capital Asset Accounting						Budget Estimates
		2004		2005		2006
Operating Transactions
Surplus (Deficit)	$	(173.4)	$	242.3	$	98.9
Non-Cash Items
Amortization of Premiums, Discounts and Issue Expenses		7.4		7.1		7.4
Foreign Exchange Expense		(40.3)		(21.7)		---
Increase in Allowance for Doubtful Accounts		71.2		77.4		32.3
Sinking Fund Earnings		(222.5)		(221.6)		(227.0)
Amortization of Tangible Capital Assets		269.1		193.4		211.6
Loss on Disposals of Tangible Capital Assets		---		2.3
Actual Losses Due to Foreign Exchange		(25.8)		10.5
Decrease in Pension Liability		(90.6)		(114.8)		---
Increase (Decrease) in Deferred Revenue		6.7		29.4
Proceeds from Disposal of Tangible Capital Assets		(2.0)		(27.2)		---
Decrease (Increase) in Working Capital		124.1		140.9		---
Net Cash from (Used In) Operating Activities		(76.1)		318.0		123.2
Investing Transactions
(Increase) Decrease in Investments, Loans and Advances		57.7		(1.4)		(297.2)
Net Cash From (Used in) Investing Activities		57.7		(1.4)		(297.2)
Capital Transactions
Purchase of Capital Assets		(248.6)		(326.7)		(344.4)
Cash Received to Acquire Tangible Capital Assets		49.8		34.3		38.0
Proceeds from Disposal of Capital Assets		2.0		27.2
Cash used in Capital Transactions		(196.8)		(265.2)		(306.4)
Financing Transactions
Proceeds from Issuance of Funded Debt		914.4		867.1		---
Purchase of NB Power Debentures		(296.7)		(300.0)
Received from Sinking Fund for Redemption of Debentures and Payment of Exchange		171.2		292.2		---
Increase (Decrease) in Obligations under Capital Leases		(7.8)		(16.4)
Sinking Fund Installments		(121.8)		(128.3)		---
Funded Debt Matured		(407.5)		(627.5)		---
Net Cash from Financing Activities		251.8		87.1		---
Increase (Decrease) in Cash Position during Year		36.6		138.5		---
Cash Position - Beginning of Year		(26.8)		9.8		---
Cash Position - End of Year		9.8		148.3		---
Cash Represented by
Cash net of Bank Advances and Short Term Borrowing.	$	9.8	$	148.3		---

¹The Budget Estimates do not include estimates of total borrowing requirements of the Province and NB Power .  For information with respect to financial requirements of the Province and NB Power  and with respect to maturing debt of the Province, see "Financing-Financial Requirements", "NB Power -Financial Requirements" and "Financing-Funded Debt Maturity Schedule", respectively.

²For further information see Table IV in "Tables and Supplementary Information of the Province."

^(---)Denotes no estimate provided.

20

Exhibit “d” Current Province of New Brunswick Description

2005 Budget Estimates

The 2005 Budget projected a decrease in net debt of $2.4 million.  For the fiscal year ended March 31, 2005 the decrease in net debt was $131.5 million.  The change of $129.1 million from the Budget Estimates was in part the result of revenues being $279.7 million higher than budget at $5,959.8 million and expenditures being $91.8 million higher than budget at $5,717.6 million.  The change in net debt also reflects the Province’s move to Tangible Capital Asset Accounting, which has resulted in a restatement of net debt.

Major Sources of Ordinary Account Revenue

The major sources of ordinary account revenue for the Province are payments from the federal government, income taxes, consumption taxes, and property taxes.  For the fiscal year ending March 31, 2006, the Province’s revenue is estimated at $5,715.7 million, reflecting projected growth of 2.0% from the fiscal year ending March 31, 2005.  Overall this represents a projected increase of $114.1 million in revenue.  The principal factors that have increased are Consumption tax and Personal Income tax.

The following table shows the percentage sources of ordinary account revenue for the four fiscal years ended March 31, 2005 and the Budget Estimates for the fiscal year ending March 31, 2006.

ORDINARY ACCOUNT REVENUE SOURCES

	Year ended March 31 %				Budget Estimates	Compound Annual  Growth Rate
	2002	2003	2004	2005	2006	2002-06
Taxes
Personal Income	18.7	19.3	18.7	17.9	17.9		2.9
Corporate Income	4.7	4.0	3.3	4.0	3.6		-2.5
Consumption	18.8	22.2	22.4	18.9	20.3		6.2
Property	6.0	6.3	6.0	6.1	6.0		4.1
Miscellaneous	0.6	0.7	0.8	0.7	0.7		6.1
Total Taxes	48.8	52.5	51.3	47.6	48.5		3.9
Other Revenue
Licenses, Permits and Fees	3.7	3.8	5.8	5.3	5.4		14.8
Federal Government Payments	41.1	38.7	36.5	40.7	39.9		3.4
Other Agencies	4.3	2.9	4.2	4.5	4.4		4.3
Miscellaneous	2.0	2.1	2.2	1.9	1.8		0.5
Total Revenue	100.0	100.0	100.0	100.0	100.0
Total Ordinary Account Revenue (millions)	$4,865.3	$4,728.3	$5,094.3	$5,601.6	$5,715.7		4.1

Note:

·

Total Ordinary Account Revenue reported as per the Public Accounts of the Province, except for 2003 and 2004 where the revenue from the Fiscal Stabilization Fund has been excluded.

Personal and Corporate Income Taxes.  New Brunswick’s provincial personal and corporate income taxes are collected and administered by the federal government under a federal-provincial tax collection agreement.  For the taxation years up to and including 1999, personal income tax was calculated as a percentage of federal income tax.  Effective January 1, 2000, the Province adopted a ‘tax on taxable income’ method of calculating provincial personal income tax.  This method gave New Brunswick personal income tax policy flexibility to help ensure the tax system addresses the government’s social, economic and fiscal objectives.

The 2005-2006 Budget announced that provincial income tax credit amounts and tax brackets would be indexed to protect against inflation effective January 1, 2005.

21

Exhibit “d” Current Province of New Brunswick Description

Provincial Personal Income Tax Rates and Brackets

2004 Taxation Year	2005 Taxation Year
9.68% on first $32,183 14.82% on $32,183 to $64,368 16.52% on $64,368 to $104,648 17.84% over $104,648	9.68% on first $32,730 14.82% on $32,730 to $65,462 16.52% on $65,462 to $106,427 17.84% over $106,427

In the 2001-02 Budget, the Province introduced a low-income tax reduction.  Effective for the 2003 taxation year, New Brunswick’s low-income tax reduction was enhanced so that all single tax filers with income up to $12,500 will no longer pay provincial personal income tax.  As a result, New Brunswickers who earn income from a full-time job at the current minimum wage and families earning up to $20,000 no longer pay any provincial income tax. As in previous years, eligible low-income families with dependent children may also receive the New Brunswick Child Tax Benefit and the New Brunswick Working Income Supplement, depending upon their income level.  The 2005-2006 Budget announced that effective for the 2005 taxation year, indexation was extended to include the Low-Income Tax Reduction.  As a result, individuals with incomes up to $12,713 and families with incomes up to $20,324 will pay no New Brunswi ck income tax for 2005.

The corporate income tax is calculated as a percentage of corporate taxable income as defined for federal tax purposes.  The 2002-2003 Budget reduced the general corporate income tax rate from 16% to 14.5%, effective July 1^st, 2002. The 2003-2004 Budget further reduced the general corporate income tax rate from 14.5% to 13%, effective January 1^st, 2003. Between 1999 and 2003, the small business corporate income tax rate, which applies to small Canadian controlled private corporations, was reduced from 6% to 3%.  In addition, the small business threshold to which this rate applies was increased from the first $200,000 to the first $400,000 of active business income.    The 2004-2005 Budget further reduced the small business corporate income tax rate from 3% to 2.5% effective July 1^st, 2004.  In addition, the 2004-2005 Budget further increased the small business thre shold to which the rate applies from $400,000 to $425,000, effective July 1^st, 2004.  The 2005-2006 Budget announced a three-year plan to bring the small business rate to one percent and to increase the income threshold eligible for the small business corporate income tax rate up to $500,000.  The following table provides the details of the three-year plan.

Effective Date	Rate	Threshold
July 1, 2005	2%	$450,000
July 1, 2006	1.5%	$475,000
July 1, 2007	1%	$500,000

Effective January 1, 2003, New Brunswick’s Research and Development (R&D) tax credit was significantly increased and enhanced from a 10% non-refundable tax credit to a 15% refundable tax credit for expenditures that are eligible for the federal Scientific Research and Experimental Development Tax Credit. Also, New Brunswick offers a 40% refundable Film Tax Credit. The credit is applied to eligible wages and salaries paid to New Brunswick residents.

To encourage entrepreneurship and assist small businesses with obtaining equity capital, the government implemented the Small Business Investor Tax Credit effective August 1, 2003.  This tax credit provides a 30% non-refundable personal income tax credit of up to $15,000 per year on eligible investments by New Brunswickers made after August 1, 2003.  The credit is applied against provincial personal income tax otherwise payable.

Capital Taxes.  Effective April 1, 1997, the Province introduced a large corporations capital tax, applied to taxable capital in excess of  $5 million at a rate of 0.3%.  The Large Corporations Capital Tax applies to the same definition of taxable capital as the federal Large Corporations Tax but does not apply to federally defined financial institutions.  For banks, loan companies and trust companies, New Brunswick applies a capital tax on capital assets in excess of $10 million at a rate of 3%.  The Province administers the capital tax on financial institutions.  Both the Large Corporations Capital Tax and the Financial Corporations Capital Tax are deductible for federal and provincial corporate income tax purposes.  

Harmonized Sales Tax.  Effective April 1, 1997, New Brunswick eliminated its provincial retail sales tax and adopted a harmonized sales tax (HST) of 15%.  The HST is a value-added tax and is composed of the federal 7% goods and services tax (GST) and a provincial component of 8%.  The federal government administers the HST.  The tax adopts the federal GST base and therefore applies to all goods and services subject to tax under the federal Excise Tax Act.

22

Exhibit “d” Current Province of New Brunswick Description

Under the HST, businesses receive full input tax credits for tax paid on business purchases.  As with the federal GST, the HST provides the same tax-free status for certain goods offered under the GST (e.g. basic groceries).  In addition, a number of rebates and credits are available.  Books receive a point of sale rebate on the 8% provincial portion of the HST.  Matching federal rebate programs, the Province provides partial rebates on the provincial portion of the HST for municipalities, charities and non-profit organizations in respect of tax payable that is not otherwise recoverable.  New Brunswick also participates in the Foreign Visitor Rebate Program.  As well, the Province offers HST rebates to universities for qualifying research and development projects.

Gasoline and Motive Fuel Tax and Tobacco Tax. The provincial gasoline and motive fuel tax rates are 14.5 cents per litre for gasoline and 16.9 cents per litre for diesel fuel.  To discourage smoking and to help offset the costs that smoking imposes on the health care system, New Brunswick tobacco taxes have increased twice since the last reporting period.  On June 18^th, 2002, tobacco taxes increased from 7.25 to 9.75 cents per cigarette, from 4.95 to 7.45 cents per tobacco stick and from 3.99 to 6.49 cents per gram of fine cut tobacco.  On December 10, 2002, tobacco taxes were further increased from 9.75 to 11.75 cents per cigarette, from 7.45 to 9.45 cents per tobacco stick and from 6.49 to 8.49 cents per gram of fine cut tobacco.  

Property Taxes.  New Brunswick levies a provincial real property tax of $1.50 per $100 of assessment on residential property that is not occupied by the owner.  A provincial property tax rate of 65 cents per $100 of assessment is applied to owner-occupied residential property in unincorporated areas.  The Province also levies a property tax on non-residential property, at a rate of $2.25 per $100 of assessment.  In addition to the residential and non-residential property tax rates, the Province applies a cost of assessment levy of 2 cents per $100 of assessment.  Municipal/local taxes are imposed to defray the cost of providing local services that are not provided by the Province.  In the case of incorporated municipalities, municipal taxes are collected by the Province and are remitted back to the municipality.  In unincorporated areas, the local tax is collected and retained by the Province, as the Pr ovince provides and pays for the provision of local services.  The Province offers a low-income property tax allowance of up to $200 for families with taxable incomes of $20,000 or under.  There is also a fee of 5 cents per $100 of assessment imposed on residential property that is not owner-occupied and is not exempt under the Assessment Act.  This levy finances the Office of the Rentalsman.

The 2004-2005 Budget announced that, effective January 1, 2005, qualifying not-for-profit housing corporations and not-for-profit co-operative housing associations are eligible to receive relief from the provincial property tax applied to their low-income rental housing property.  

In the 2005-2006 Budget, government introduced legislation to amend the Assessment Act to encourage private sector businesses to develop and utilize heritage properties.  This program will provide a property tax incentive for owners of designated heritage properties who undertake an approved restoration.  The owner of the designated heritage property will be forgiven a portion of the net increase in provincial and municipal taxes resulting from the increase in assessed value of this property for a four-year period.

Federal-Provincial Fiscal Arrangements

The Federal-Provincial Fiscal Arrangements Act was amended in March 2005 to implement the 2004 First Ministers’ 10-Year Plan to Strengthen Health Care, which provides for increased federal funding in support of health care through the introduction of a Wait Times Reduction Transfer Trust, the one-time 2004 Medical Equipment Trust (MET) and the Canada Health Transfer (CHT).  The Act was also amended to implement the October 2004 new federal equalization framework, which fixed total equalization funding for the provinces and set up a federal panel to review the Equalization Program.

Fiscal Equalization Payments.  New Brunswick is one of eight provinces to receive fiscal equalization payments from the federal government.  The Equalization Program assists provinces in providing reasonably comparable levels of public services at reasonably comparable levels of taxation.  New Brunswick's equalization payment for the fiscal year ended March 31, 2004 was $1,089.3 million and for the fiscal year ending March 31, 2005 was $1,395.5 million.  Fiscal equalization payments accounted for 22.1% of total ordinary revenue for the fiscal year ended March 31, 2004 and 25.6% of the total ordinary revenue for the fiscal year ending March 31, 2005.

Canada Health Transfer and Canada Social Transfer.  In 2004-05 the federal government provided annual funding through the CHT, Canada Social Transfer (CST), Health Reform Transfer (HRT), and various one-time funds in support of health care, post-secondary education, social assistance and services, early childhood development, and early learning and child care to provinces and territories.  For the fiscal year ending March 31, 2004, major health and social transfers totaled $557.4 million, which accounted for 11.3% of total ordinary revenue.  For the fiscal year ending March 31, 2005 major health and social transfers totaled $676.4 million, which accounted for 12.4% of total ordinary revenue.

23

Exhibit “d” Current Province of New Brunswick Description

Fiscal Stabilization Program.  Under the Fiscal Stabilization Program, the federal government may make unconditional payments to a province when total revenues of that province, as per the federal definition, fall short of the previous years total due to a downturn in economic activity.

Revenue Guarantee Program.  The Revenue Guarantee Program guarantees cash payments to a province if federal income tax changes result in a 1% or greater decline in that province's personal income tax base.  This program is under review, given the move by provinces from “tax on tax” to “tax on income” method of calculating provincial personal income tax.

Major Ordinary Account Expenditure

For the fiscal year ending March 31, 2005 the Province's actual ordinary expenditure was $5,353.1 million, 3.0% higher than the actual ordinary expenditures for the fiscal year ended March 31, 2004.  The net increase of  $157.6 million is a result of various increases including funding for health care and investments in infrastructure and innovation trust funds.  Increases were offset somewhat by a decrease in the cost of service of the public debt and in pension fund expense for teachers.

The following table shows the percentage distribution of ordinary account expenditure for the four fiscal years ended March 31, 2005 and the Budget Estimates for the fiscal year ending March 31, 2006.

ORDINARY ACCOUNT EXPENDITURE DISTRIBUTION
			Fiscal Year Ended March 31,
														Budget
														Estimate
		2002			2003			2004			2005			2006
Economic Development.		3.0	%		2.3	%		2.6	%		2.6	%		2.1	%
Education		18.3			19.7			19.3			18.6			18.3
Employment Development & Labour		4.1			3.9			3.8			3.7			3.5
Family and Community Services		14.1			14.2			13.7			13.5			13.3
Health		28.8			30.0			30.1			31.5			31.9
Protection Services		2.6			2.7			2.6			2.6			2.5
Resource Sector		2.7			2.7			2.7			2.8			2.6
Transportation.		3.1			3.3			2.9			2.8			2.8
Central Government		9.8			7.8			11.1			11.0			12.2
Service of the Public Debt		13.5			13.4			11.2			10.9			10.8
		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Total Ordinary Account Expenditures (in millions)	$	4,832.9		$	4,896.4		$	5,195.5		$	5,353.1		$	5,566.1

Economic Development.  The Economic Development expenditure of $118.7 million represents 2.1% of the total budgeted expenditure for the fiscal year ending March 31, 2006 and are made up of the Departments of:  Business New Brunswick ($34.4 million), the Regional Development Corporation ($39.9 million), Tourism and Parks ($24.4 million) and a portion of General Government ($20.0 million).

Education.  Operating expenses of elementary and secondary schools are paid by the Province.  For the fiscal year ending March 31, 2006, expenditure on education for public schooling is estimated at $820.0 million, 14.7% of total budgeted expenditure.  The Province also pays operating grants to universities estimated at $197.7 million, 3.6% of total budgeted expenditure, for the fiscal year ending March 31, 2006.

24

Exhibit “d” Current Province of New Brunswick Description

Employment Development & Labour.  The Employment Development and Labour expenditure of $194.7 million represents 3.5% of the total budgeted expenditure for the fiscal year ending March 31, 2006 and is made up of the Departments of Training and Employment Development ($194.1 million) and a portion of General Government ($0.6 million).

Family and Community Services.  The Province provides an income security program, which includes payments to social assistance clients, the disabled, and residents of special care homes.  Funds are also budgeted for exit-related programs.  In addition, the Province assists individuals and families in the acquisition and/or retention of suitable accommodations for reasonable and affordable cost.  For the fiscal year ending March 31, 2006, the Province budgeted $740.1 million for Income Assistance, 13.3% of total budgeted expenditure.

Health.  The Province pays the operating expenses of approved public hospitals to cover the cost of hospital services supplied by such hospitals.  The Province also operates a comprehensive medical services payment plan (Medicare), which covers the costs of eligible medical services incurred by registered residents.  For the fiscal year ending March 31, 2006, expenditure on health services is estimated at $1,778.3 million, 31.9% of total budgeted expenditure.

Protection Services.  The Protection Services expenditure of $137.8 million represents 2.5% of total expenditure budgeted for the fiscal year ending March 31, 2006 and is made up of the Department of Justice ($45.0 million), the Department of Public Safety ($91.5 million) and a portion of General Government ($1.3 million).

Resource Sector.  The Resource Sector expenditure of $145.8 million represents 2.6% of the total budgeted expenditure for the fiscal year ending March 31, 2006 and is made up of the Department of Agriculture, Fisheries and Aquaculture ($35.1 million), a portion of Environment and Local Government ($16.8 million), Natural Resources ($91.7 million), Department of Energy ($1.9 million) and a portion of General Government ($.3 million).

Transportation.  For the fiscal year ending March 31, 2006, the Province budgeted $153.9 million for the planning, design and maintenance of highways and the operation of ferry services.  This represents 2.8% of the total budgeted expenditure.

Central Government.  The Central Government expenditure of $678.1 million estimated for the fiscal year ending March 31, 2006 represents 12.2% of total budgeted expenditure and is made up of expenditures of the Department of Finance ($77.5 million), the Department of Supply and Services ($94.2 million), a portion of Environment and Local Government ($38.8 million), General Government ($283.4 million), other central agencies ($34.0 million) and Consolidated Entities ($150.2 million)

Service of the Public Debt.  For the fiscal year ending March 31, 2006 the estimate of $601.0 million for servicing the debt of the Province, including interest, foreign exchange, amortization and other debt management expenses, represents 10.8% of the total budgeted expenditure.

Net Capital Expenditures

Expenditures for physical assets are financed primarily by borrowing, and are charged to operations as incurred.  The following table shows the percentage distribution of gross capital expenditure for the four fiscal years ended March 31, 2005 and the Budget Estimates for the fiscal year ending March 31, 2006.  The table also shows the total amounts of recoveries through cost-sharing agreements.

25

Exhibit “d” Current Province of New Brunswick Description

CAPITAL EXPENDITURE DISTRIBUTION
					Fiscal Year Ended March 31,
														Budget
														Estimate
		2002			2003			2004			2005			2006
													< font face="Times New Roman">
Highways		47.2	%		58.7	%		61.7	%		53.0	%		47.9	%
Bridges		7.3			6.7			7.3			7.9			7.6
Schools		15.2			13.5			12.0			12.1			11.3
Hospitals		5.3			5.1			8.6			14.8			22.6
Other Public Buildings		5.9			7.4			2.8			2.4			5.1
Vehicles		10.8			1.5			2.6			5.0			1.7
Other		8.3			7.1			5.0			4.8			3.8
Total		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
													< font face="Times New Roman">
Total Expenditure (in millions)	$	227.4		$	253.9		$	293.3		$	385.6		$	423.8
													< font face="Times New Roman">
													< font face="Times New Roman">
Total Recoveries (in millions)	$	19.9		$	42.7		$	52.6		$	41.6		$	41.3
													< font face="Times New Roman">
Net Capital Exp. (in millions)	$	207.5		$	211.2		$	240.7		$	344.0		$	382.5

Capital recoveries for the fiscal year ending March 31, 2006 are estimated at $41.3 million, of which $40.0 million are recoveries from the Federal Government.  As of March 31, 2005, the Province and the federal government had entered into 28 cost-sharing agreements for Economic Development. All of these agreements have expired as of March 31, 2005, involving expenditures in excess of $1,105.3 million of which the federal government will contribute a total of approximately 65.2%. Included in this expenditure is the Regional Economic Development Agreement totaling $104.0 million with a federal recovery of $72.8 million.

During the fiscal year ended March 31, 1999 an amendment was made to the Highway Improvement Program providing for expenditures of $300.0 million of which the federal government contributed 50%.  As of March 31, 2005 the Province had $300.0 million in shareable expenditures and recovered $150.0 million from the federal government.

During the fiscal year ended March 31, 2003 an agreement was signed under the Strategic Highway Infrastructure Program for $29.2 million of which the federal government will contribute 50%.  As of March 31, 2005, the Province had  $21.8 million in shareable expenditures and recovered $10.9 million from the federal government.

During the fiscal year ended March 31, 2004, an agreement was signed under the Strategic Infrastructure Fund for $400.0 million of which the federal government will contribute 50%.  As of March 31, 2005, the Province had $66.4 million in shareable expenditures and recovered $33.2 million from the federal government.

During the fiscal year ended March 31, 2005 an agreement amendment was signed under the Strategic Infrastructure Fund and the Border Infrastructure Fund for $80.0 million of which the federal government will contribute 50%.  As of March 31, 2005, the Province had $5.0 million in shareable expenditures and recovered $2.5 million from the federal government

Special Purpose Account

Special purpose account revenue is all revenue designated for special purpose by donor trust funds or by legislation.  For the fiscal year ending March 31, 2006, such revenue is estimated to be $45.4 million and expenditures from the various accounts are estimated to be $46.1 million for a deficit of $0.7 million.

26

Exhibit “d” Current Province of New Brunswick Description

Special Operating Agencies

Revenue may be generated by the Special Operating Agencies or from transfers from other budgetary accounts.  Expenditures are incurred by the agencies in delivering the programs they offer and may be of a capital or operating nature.  For the fiscal year ending March 31, 2006, revenue is estimated at $203.1 million from the various agencies and expenditures at $192.4 million for a surplus of $10.7 million.

Loans and Advances

The Province has followed a policy of promoting economic development through the provision of financial assistance to industry.  Such assistance has been channeled principally through the Department of Business New Brunswick, the Department of Family and Community Services and Provincial Holdings Ltd. and may take the form of repayable loans, guarantees of bank loans and bond issues and equity investments.  Funds required for repayable loans and advances are appropriated annually by the Legislative Assembly and are included in the Province's annual borrowing requirements.  Allowances for doubtful or uncollectable amounts are reviewed annually and the net balances of loans and advances less allowances are reflected in the Province's accounts.  See "Tables and Supplementary Information of the Province--Table V" for information concerning loans and advances for the four fiscal years ended March 31, 2 005 and the Budget Estimates for the fiscal year ending March 31, 2006.

Business New Brunswick.  The Minister of Business New Brunswick is responsible for assistance provided under the Economic Development Act, the Agricultural Development Board and the Fisheries Development Act:

The Economic Development Act authorizes the Minister to provide financial assistance to aid and encourage the establishment or development of industry on such terms and conditions as are specified by the Lieutenant-Governor in Council.  At March 31, 2005 loans and guarantees under the Economic Development Act amounted to approximately $239.6 million.  The allowance for doubtful accounts on these loans and guarantees amounted to $100.7 million.  

The Agriculture Development Board provides aid to farmers and farm-related businesses by way of loans, grants and loan guarantees to increase income and employment in rural areas of the Province.  At March 31, 2005 loans and guarantees outstanding were $22.6 million.  The allowance for doubtful accounts totaled $16.4 million.  

The Fisheries Development Act provides financial assistance mainly by way of direct loans to fishermen to purchase and operate fishing vessels and equipment.  At March 31, 2005, loans and guarantees outstanding amounted to $47.6 million.  The allowance for doubtful accounts totaled $40.5 million.

Family and Community Services.  The Department of Family and Community Services carries out the Government's housing policies.  Loans are issued pursuant to the New Brunswick Housing Act.  At March 31, 2005 loans under the New Brunswick Housing Act totaled $33.6 million.  The allowance for doubtful accounts on these loans totaled $2.1 million.  In accordance with the recommendations of the Canadian Institute of Chartered Accountants, loans that will be repaid through future Provincial appropriations are expensed at the time of issue.

Provincial Holdings Ltd.  Provincial Holdings Ltd. (“PHL”) is a New Brunswick company, which the Province uses to invest in the equity of industrial enterprises that are based in the Province.  PHL is wholly owned by the Province. As at March 31, 2005, $6.5 million had been advanced to PHL by the Province.  The allowance for doubtful accounts on loans to PHL totaled approximately $2.9 million.

27

Exhibit “d” Current Province of New Brunswick Description

FINANCING

Borrowing Requirements

The following table provides information on the Province's ordinary account deficit or surplus, deficit or surplus from operations and increase or decrease in net debt for the fiscal years ended March 31,2004 and 2005 and the Budget Estimates for the fiscal year ending March 31, 2006.

INCREASE (DECREASE) IN NET DEBT

	Year Ended March 31, (millions)
Historical data not available due to move to Tangible Capital Asset Accounting						Budget Estimates
		2004		2005		2006
Ordinary Account Revenue	$	5,094.3	$	5,601.6	$	5,715.7
Ordinary Account Expenditure		5,195.5		5,353.1		5,566.1
(Surplus) Deficit on Ordinary Account		101.2		(248.5)		(149.5)
Capital Account Expenditure		293.3		385.6		423.8
Capital Account Recoveries		52.6		41.6		41.3
Net Capital Expenditure		240.7		344.0		382.5
Special Purpose Account Revenues		40.7		48.9		45.4
Special Purpose Account Expenditures		36.5		42.6		46.0
(Surplus) Deficit on Special Purpose Account		(4.2)		(6.3)		0.7
Special Operating Agency Revenues		207.4		216.9		203.1
Special Operating Agency Expenditures		195.3		204.2		192.4
(Surplus) Deficit on Special Operating Agency		(12.1)		(12.7)		(10.7)
Sinking Fund Earnings		(222.5)		(221.6)		(227.0)
Eliminations of Inter-Account Transactions		(0.1)		(0.4)		--
Change in Other Non-Financial Assets		(14.8)		14.0		--
Increase (Decrease) in Net Debt	$	88.3	$	(131.6)	$	(4.0)

Net loans and advances, sinking fund installments and the difference between the cash contributions made to the pension funds and the amounts expensed according to CICA recommendations as well as several other relatively small items are not included since they are non-budgetary items.  Borrowing requirements associated with the budget and the aforementioned items for the fiscal year ended March 31, 2005 were $93.3 million and for the fiscal year ending March 31, 2006 are estimated at approximately $434.2 million.

Non-Public Borrowing

The Province has borrowed from one non-public source, the Canada Pension Plan (“CPP”).

The CPP is a compulsory national pension plan in which all provinces other than Quebec participate.  When the Plan generates surpluses, the excess funds are invested in capital markets.  In the past, funds were invested in non-marketable securities issued by participating provinces, provincially guaranteed Crown Corporations and the federal government at a rate based on the federal government's long-term public market borrowing costs.  Changes to CPP legislation in 1998 allowed for new funds flowing

28

Exhibit “d” Current Province of New Brunswick Description

into the CPP to be invested in domestic and foreign equities and for provincial bonds previously issued to the CPP Investment Fund to be rolled over upon maturity on a one-time basis at a cost equal to the respective province’s market rate.  At March 31, 2005, New Brunswick had outstanding borrowings from the CPP Investment Fund of $834.3 million.

Public Borrowing

At March 31, 2005, the Province had outstanding borrowings for Provincial purposes from non-federal sources totaling $7,562.7 million through the issue and sale of debentures and notes, such securities being denominated in Canadian dollars, U.S. dollars, Japanese yen and Swiss francs.  Not included in this amount is $3,316.6 million borrowed on behalf of NB Power .

Trend and Distribution of Borrowing

The trend and distribution of the amounts and sources of the Province's annual debt financing over the past five fiscal years is shown below:

SOURCES OF FUNDS ¹

Year ended March 31,	Public Borrowing		Non-Public Borrowing Canada Pension Plan		Total Borrowing
	(millions)
2001	$	600.0	$	53.0	$	653.02
2002		600.0		74.8		674.83
2003		1,050.2		73.2		1,123.44
2004		551.9		71.2		623.15
2005		500.0		67.1		567.16
	$	3,302.1	$	339.3	$	3,641.4

¹Debt securities payable in foreign currencies are expressed as the Canadian dollar equivalent at the time of issue.

² In addition, $300.0 million was borrowed on behalf of NB Power.

³ In addition, $300.0 million was borrowed on behalf of NB Power.

⁴ In addition, $741.8 million was borrowed on behalf of NB Power.

⁵ In addition, $296.7 million was borrowed on behalf of NB Power.

⁶ In addition, $300.0 million was borrowed on behalf of NB Power.

Between April 1, 2005 and December 15, 2005, the Province borrowed $996.1 million.  

Growth of Funded Debt

The following tables illustrate the rate of change of the Province's outstanding Provincial purpose funded debt and present certain ratios relating that growth to economic indicators.  The following tables do not include $50 million borrowed during the fiscal year 2000, $300.0 million borrowed during the fiscal year 2001, $300.0 million borrowed during the fiscal year 2002, $741.8 million borrowed during the fiscal year 2003, $296.7 million borrowed during the fiscal year 2004 and $300.0 borrowed during fiscal year 2005 on behalf of NB Power.

The Province is required by legislation to pay annually into a sinking fund the Canadian currency equivalent of not less than 1% of all Provincial purpose funded debt.  The Province’s current policy is to pay 1.5% of Provincial purpose funded debt annually into the sinking fund.  Sinking fund installments are invested in approved securities including direct and guaranteed obligations of the Province.  Interest earned on such investments is added to the sinking fund and is reinvested in approved securities.  At March 31, 2005 the value of the sinking fund applicable to debt issued for Provincial purposes amounted to $3,773.8 million.  For the fiscal year ended March 31, 2005, earnings on investments amounted to $221.6 million.

29

Exhibit “d” Current Province of New Brunswick Description

OUTSTANDING NET PROVINCIAL PURPOSE FUNDED DEBT AND CAPITAL LOANS

	Gross Provincial Purpose Funded Debt1 Denominated in millions
At March 31,		Cdn Dollars	US Dollars	Japanese Yen	Swiss Francs	Total2	Value of Sinking Funds	Net Provincial Purpose Funded Debt	Change over previous year %
2001		5,956.2	933.5	10,872.0	100.0	7,656.2	3,130.2	4,526.0	1.0
2002		6,305.4	933.5	9,744.0	100.0	8,004.7	3,358.8	4,645.9	2.6
2003		6,270.4	747.5	8,616.0	100.0	8,418.7	3,543.0	4,875.7	4.9
2004		7,396.9	747.5	0.0	100.0	8,485.8	3,716.2	4,769.6	(2.2)
2005		7,679.5	500.0	0.0	100.0	8,397.0	3,773.8	4,623.2	(3.1)

¹Debt securities issued in foreign currencies, which have been hedged are reported in the currency into which they have been hedged at the rates of exchange established by such hedges.

²

Debt securities payable in foreign currencies are expressed as the Canadian dollar equivalent at fiscal year-end rates of exchange or, where hedges are in place, at the rates of exchange established by such hedges.

COMPARATIVE DEBT STATISTICS1
	(millions)
	2001	2002	2003	2004	2005
Gross Domestic Product at market prices	$20,085	$20,684	$21,152	$22,179	$22,976
Personal Income	17,434	17,852	18,259	18,819	19,354
Ordinary Revenue	4,509	4,865	4,839	5,094	5,602
Net Funded Debt	4,526	4,646	4,876	4,770	4,623
As % of Gross Domestic Product	22.5	22.5	23.1	21.5	20.1
As % of Personal Income	26.0	26.0	26.7	25.3	23.9
As % of Ordinary Revenue	100.4	95.5	100.8	93.6	82.5

¹The figures for Ordinary Revenue and Net Funded Debt are for the fiscal year ended March 31.  The figures for GDP and Personal Income are for the calendar year ended December 31 of the previous year.

30

Exhibit “d” Current Province of New Brunswick Description

PROVINCIAL PURPOSE FUNDED DEBT MATURITY SCHEDULE

For Securities Outstanding at March 31, 2005 (denominated in millions1)
				Total
	Canadian	United States	Swiss	Canadian
Year ending March 31,	Dollars	Dollars	Francs	Dollars2
2006	$ 246.1	US$ 150.0	Sfr      ---	$435.8
2007	660.5	---	100.0	764.9
2008	537.3	---	---	537.3
2009	861.3	---	---	861.3
2010	722.7	---	---	722.7
2006-10	3,027.8	150.0	100.0	3,321.9
2011-15	2,615.5	200.0	---	2,857.4
2016-20	646.9	---	---	646.9
2021-25	339.3	150.0	---	520.7
2026-30	500.0	---	---	500.0
2031-35	550.0	---	---	550.0
	$ 7,679.5	US$ 500.0	Sfr 100.0	$ 8,397.0

¹

Debt securities issued in foreign currencies, which have been hedged, are reported in the currency into which, they have been hedged at the rates of exchange established by such hedges.

²

Debt securities payable in foreign currencies are expressed as the Canadian dollar equivalent at the fiscal year-end rates of exchange or, where hedges are in place, at the rates of exchange established by such hedges.

Between April 1, 2005 and December 15, 2005, the Province borrowed $996.1 million.   

Unfunded Debt

Because the Province follows an accrual accounting system, expenditures are allocated to the year in which they were incurred regardless of the date of paymentresulting in the establishment of accounts payable and accrued liabilities.  Such unfunded debt is not secured by debt instruments.

At March 31, 2004, the Province's unfunded debt was as follows:

UNFUNDED DEBT

	At March 31, 2005
	(millions)
Bank Advances and Short Term Borrowing	$	694.3
Trust Deposits		52.5
Accounts Payable		687.8
Accrued Expenditures		882.5
Deferred Revenue		323.9
Total Unfunded Debt	$	2,641.0

This unfunded debt is partially offset by assets of the Province in the amount of $1,757.1 million, represented by $842.6 million of cash and short term investments, $352.3 million of accounts and interest receivable, $392.0 million of taxes receivable, $42.9 million of inventories and $127.3 million of prepaid and deferred charges.

31

Exhibit “d” Current Province of New Brunswick Description

Contingent Liabilities  

The following table summarizes outstanding contingent liabilities at March 31, 2005 with comparable numbers as at March 31, 2004

CONTINGENT LIABILITIES
			At March 31,
			2004	2005
			(millions)
Bank Loans
	Under Various Acts	$	339.3		$	337.0
	Less: Provision for Possible Losses		75.8			67.6
Total Contingent Liabilities		$	263.5		$	269.4

Due to the adoption of the definition of the Reporting Entity recommended by the Public Sector Accounting and Auditing Board of the CICA, guarantees associated with the debt of NB Power  and the New Brunswick Municipal Finance Corporation are not included in the previous table.  These guarantees are as follows:

			At March 31,
			2004		2005
			(millions)
Bonds, Debentures and Notes
		NB Power ¹	$	125.0		$	125.0
		New Brunswick Municipal Finance Corporation		421.4			466.6
	Loans from Northern Canada Power Commission to NB Power			5.5			4.4
				551.9			596.0
		Less: Sinking Funds		39.5			43.3
				512.4			552.7
		Accrued Interest¹		12.3			12.6
	Total		$	524.7		$	565.3

¹Foreign denominated debt plus accrued interest are expressed as the Canadian dollar equivalent at fiscal year-end rates of exchange.

Debt Record

The Province has always paid promptly when due the full amount of the principal, redemption premium, if any, and interest on every direct obligation issued by it and every indirect obligation on which it has been required to implement its guarantee, all in the lawful currency of the country where payable at the time of payment thereof, subject during wartime to any applicable restrictions of laws and regulations forbidding trading with the enemy.

32

Exhibit “d” Current Province of New Brunswick Description

CONSOLIDATION OF NEW BRUNSWICK PUBLIC SECTOR DEBT

Other than the Province, NB Power, New Brunswick Municipal Finance Corporation and municipalities are the only public sector entities with outstanding debt.  Municipalities, with the exception of the City of Saint John, are required to obtain approval from the Provincial Government before borrowing money for capital expenditures.

CONSOLIDATED FUNDED DEBT OF THE NEW BRUNSWICK PUBLIC SECTOR

(millions)

Province of New Brunswick
	Funded Debt	$	8,397.0
	Less: Sinking Funds		3,773.8
			4,623.2
Municipalities
	Funded Debt		466.6
Total Public Sector Debt		$	5,089.8

Information in the foregoing table relative to the Province is at March 31, 2005 and information relative to municipalities is the amount outstanding at December 31, 2004.  The figures for the Province do not include contingent liabilities of the Province in respect of its guarantees of obligations of NB Power  ($86.1 million net of sinking funds of $43.3 million).  Also excluded is $2,925.0 million (net of sinking funds of $391.6 million) borrowed by the Province on behalf of NB Power .  This debt is paid out of the operating revenues of NB Power  rather than out of Provincial revenues.  Between April 1, 2005 and December 15, 2005, the Province borrowed $996.1 million.  

PUBLIC SECTOR PENSION LIABILITIES

The Public Service Superannuation Act establishes a plan under which pensions are paid to most government employees and to certain employees of boards or institutions affiliated with the Province or their surviving spouses and minor dependents.  Employees contribute approximately 6.0% on average of their salaries into the Public Service Superannuation Fund (PSSF).  Approximately 9,756 active Provincial employees are making contributions. The Province and other designated employers are required to contribute into the PSSF an amount that is necessary, in addition to employee contributions, to cover current service cost.  If at any time the PSSF is unable to satisfy all pension liabilities, the deficiency will be met out of the ordinary revenue of the Province.  The Province contributed $44.2 million as the employer portion of current service cost for the year ending March 31, 2005.  The Province w ill contribute approximately $ 37.6 million for current service cost for the fiscal year ending March 31, 2006.  The market value of the PSSF was $2,924.3 million as of March 31, 2005.  

As the result of the PSSF’s April 1, 2002 actuarial valuation for funding purposes, the Province of New Brunswick and three other designated employers began making special payments to reduce the $281.6 million unfunded liability.  The Province’s share of the special payments will be $40.8 million while the three designated employers will collectively contribute $11.1 million in the fiscal year ending March 31, 2006.

The Teachers’ Pension Act establishes a plan for the payment of pensions to retired teachers or their surviving spouses and minor dependents.  Teachers covered contribute approximately 7.77% on average of their salaries into the Teachers’ Pension Fund (TPF).  Approximately 7,618 active employees are making contributions.  The Province is required to match employee contributions.  If at any time the TPF is unable to satisfy all pension liabilities, the deficiency will be met out of the ordinary revenue of the Province.  The Province contributed $31.5 million as the employer portion of current service cost for the year ended March 31, 2005.  The Province will contribute approximately $ 34.9 million for the fiscal year ending March 31, 2006.  The market value of the TPF was $3,279.9 million as of March 31, 2005.  

As the result of the Teachers’ April 1, 2003 actuarial valuation for funding purposes, the Province of New Brunswick began making special payments to reduce the $748.0 million unfunded liability.  The special payments will be $75.3 million in the fiscal year ending March 31, 2006 ($72.6 million in the fiscal year ending March 31, 2005).

33

Exhibit “d” Current Province of New Brunswick Description

As of April 1, 2005, the Public Service Superannuation Plan had an actuarial pension surplus of $3.9 million using accounting assumptions while the Teachers’ Pension Plan had an actuarial pension liability of  $73.1 million.

Significant actuarial assumptions used for the purposes of financial statements were:

	Short Term	Long Term
Salary escalation rate	2.0% to 3.0%	4.0%
Real rate of return	4.25%	4.25%
Inflation	2.0% to 3.0%	3.5%

The financial statements for the Province of New Brunswick report a pension surplus of $29.6 million for the Public Service Superannuation Plan and a pension liability of $38.6 million for the Teachers’ Pension Plan as of March 31, 2005.  The primary difference between the actuarial pension liabilities and the liabilities per the financial statements is that accounting standards require that experience gains be amortized over the estimated average remaining service life of the employees.

The Province sponsors three separate School District pension plans totaling $263.3 million in assets.  The Plans have December 31 year-ends.  The total surplus is approximately $31.2million on an actuarial basis and $21.4 million on an accounting basis.  If at any time these plans are found to be deficient, the Province is required to contribute an amount sufficient to fully fund the obligations.

The Province sponsors pension plans for Provincial court judges, Members of the Legislative Assembly and the Ombudsman.  Collectively they have a total actuarial unfunded liability of $42.8 million and an accounting unfunded liability of  $52.0 million as of March 31, 2005.

The Province also contributes to the Pension Plan of Certain Bargaining Employees of New Brunswick Hospitals, C.U.P.E. Employees of New Brunswick Hospitals and the Pension Plan for Part-time and Seasonal Employees.  The Province contributes a fixed percentage of an employees’ wages, and has no further financial obligation.

New Brunswick Investment Management Corporation

In 1996, legislation was proclaimed establishing the New Brunswick Investment Management Corporation.  The corporation acts as trustee for the Public Service Superannuation Fund, the Teachers’ Pension Fund and the Provincial Court Judges’ Pension Fund.

 New Brunswick Electric Finance Corporation

New Brunswick Electric Finance Corporation (“NBEFC”) was established under the Electricity Act (“Act”), which came into force on October 1, 2004.

NBEFC has as its mandate to manage the assets, liabilities, rights and obligations that NBEFC received as part of the restructuring of New Brunswick Power Holding Corporation, and to dispose or otherwise deal with them as it sees fit.

Upon the proclamation of the Electricity Act, New Brunswick Power Corporation was restructured into the New Brunswick Power Holding Corporation with four subsidiary companies:

New Brunswick Power Generation Corporation;

New Brunswick Power Nuclear Corporation;

New Brunswick Power Transmission Corporation, and

New Brunswick Power Distribution and Customer Service Corporation.

34

Exhibit “d” Current Province of New Brunswick Description

As a result of the restructuring, the former New Brunswick Power Corporation’s debt, accrued interest and Sinking Funds were transferred to NBEFC.  A net total of $3.5 billion was transferred to NBEFC that consisted of the following:

Long-term debt	$	3,537
Short-term debt		378
Accrued interest		83
Sinking funds		(418)
	$	3,580

In exchange, NBEFC received promissory notes from each New Brunswick Power Holding Corporation’s subsidiaries, including accrued interest, and a $140-million equity share in New Brunswick Transmission Corporation. In addition, NBEFC assumed the deferred debt charges of $50 million and relieved the newly formed NB Power Holding Corporation and its subsidiaries (“NB Power Group”) of New Brunswick Power Corporation’s $187 million deficit.  

NBEFC holds Class “B” non-voting share of nominal value in the Holding Corporation as well as in its subsidiaries.  NBEFC holds an additional thousand Class “B” non-voting common shares in New Brunswick Transmission Corporation assigned a value of $140 million.

NBEFC will receive debt service payments, dividends and payments in lieu of taxes from the newly formed companies.

35

Exhibit “d” Current Province of New Brunswick Description

NEW BRUNSWICK POWER HOLDING CORPORATION

New Brunswick Power Corporation (“NB Power”) was established as a Crown Corporation of the Province of New Brunswick in 1920 by enactment of the New Brunswick Electric Power Act.

On October 1, 2004 the Province of New Brunswick proclaimed the Electricity Act, which resulted in the reorganization of NB Power and the restructuring of the electricity industry in New Brunswick. NB Power was continued as New Brunswick Power Holding Corporation (Holdco) with four new subsidiary operating companies that commenced operations on this date. The subsidiaries include:

·

New Brunswick Power Generation Corporation, (Genco)¹

·

New Brunswick Power Nuclear Corporation, (Nuclearco)²

·

New Brunswick Power Transmission Corporation, (Transco)

·

New Brunswick Power Distribution and Customer Service Corporation, (Disco)

The new subsidiary companies pay the equivalent of income and capital taxes, operate on a commercial basis, and over time will be required to earn a positive rate of return on equity, pay a cash dividend to the Province of New Brunswick, and borrow funds without a provincial government guaranty¹.

At March 31, 2005, Holdco and its subsidiaries, collectively called the NB Power Group (“the Group”) operated six hydro-electric plants with a combined net generating capacity of 884 megawatts, one CANDU nuclear plant at Point Lepreau with a net generating capacity of 635 megawatts, five thermal plants with a combined net generating capacity of 1,923 megawatts and three combustion turbine plants with a combined net generating capacity of 327 megawatts.  The Group has a total net generating capacity of 3,769 megawatts and its gross generation constitutes 88% of the gross generating capacity in the province.²  Gross investment in all plants at March 31, 2005, was $4,433 million.

At March 31, 2005, the Group maintained 6,665 kilometers of transmission lines and 19,803 kilometers of distribution lines, representing a gross investment of $291 million and $727 million, respectively.  The Group also had an investment of $452 million in terminals and substations.

Transco has extensive interconnection facilities to take advantage of its favorable geographic position between the two very large electric power systems in Québec and New England and the other two Maritime Provinces.  At March 31, 2005 interconnection capacity was as follows:

INTERCONNECTION CAPACITY

Utility System	Megawatts
Québec	1,100
New England	810
Nova Scotia	500
Prince Edward Island	200
Total	2,610

Genco exports energy to Northern Maine and New England pursuant to export permits from the National Energy Board expiring in the 2006-2019 period.

___________________________

¹ Includes New Brunswick Power Coleson Cove Corporation, formed as a subsidiary of Genco upon restructuring, and NB Coal Ltd..

² NB Power Nuclear Corporation will remain an agent of the Crown and its debt will continue to be guaranteed by the Province of New Brunswick

³ Gross generating capacity for the Province is based on 2003 Statistics Canada figures.

36

Exhibit “d” Current Province of New Brunswick Description

Financial Restructuring

A corporation under the name New Brunswick Electric Finance Corporation (“NBEFC”) was formed to facilitate, over time, the conversion of NB Power’s debt to appropriate levels of debt and equity in the subsidiaries. On October 1, 2004, NBEFC re-capitalized NB Power, converting $187 million of debt to equity, to bring NB Power’s equity to zero and further converted $140 million of debt to equity to re-capitalize Transco to 60% debt and 40% equity.  All other subsidiaries were capitalized at 100% debt.

Market Restructuring and Deregulation

As part of the restructuring on October 1, 2004, the New Brunswick System Operator (“System Operator”) was established as an independent not-for-profit corporation to:

·

ensure reliable operation of the electricity system

·

implement and operate an electricity market

·

design and administer a non-discriminatory transmission tariff

A Market Advisory Committee, comprised of many stakeholders, advises the System Operator on market issues and recommends rule and tariff changes.

Wholesale and large industrial customers have the option to obtain electricity from competitive suppliers. Customers leaving the system may be assessed an exit fee or equivalent charge. For wholesale and large industrial customers that do not select an alternative supplier, Disco will have an obligation to provide a standard offer of service under terms and prices consistent with previous service. Market conditions will be reviewed periodically regarding the introduction of retail competition.

To facilitate provision of standard offer supply, the existing generation supply resources will be provided under contracts to Disco.  If and when these contracted resources are insufficient to meet standard offer needs Disco would acquire new resources through a competitive request for proposal (“RFP”) process.

The regulatory powers of the Board of Commissioners of Public Utilities of New Brunswick (“PUB”) were increased to include:

·

the open-access transmission tariff in New Brunswick

·

stranded costs and exit fees

·

RFP process for new resource requirements

·

market monitoring

·

appeal of market rules

·

standard service rate increases that exceed the greater of 3.0% or the percentage change in the average consumer price index

Business Development

Consistent with the Group’s business development plan objectives to ensure the reliability of supply, environmental acceptability, economic efficiency, and financial viability,four major development projects have been undertaken:

Coleson Cove Generating Station Refurbishment

In December 2004, Genco completed the Coleson Cove Generating Station Refurbishment Project at a cost of approximately $659 million.  The Coleson Cove Generating Station (“the Station”) is a three-unit, 978 MW net generation facility capable of burning a wide range of liquid fuels.  The Station is the largest in the Group’s system and provides one-third of New Brunswick’s energy requirements during the winter months.  Generation from the Station is required to meet future demand.

Investment in flue gas de-sulfurizing and associated emission control equipment was necessary to meet more stringent environmental standards which resulted from the intent to burn Orimulsion® at the Station. The forecasted significantly lower fuel costs for the station, the savings from which were intended to finance the environmental control equipment, have not materialized as a result of the unavailability of Orimulsion®.

37

Exhibit “d” Current Province of New Brunswick Description

In September 2005, Holdco reinitiated legal action in New Brunswick against the fuel supplier, Bitor America Corporation and Petroleos de Venezuela (“PDVSA”), for their failure to provide Orimulsion® under the terms and conditions negotiated by NB Power and Bitor.  The case is outstanding.

The station is projected to use heavy fuel oil in the near term with the potential of switching to Orimulsion® or another lower cost fuel in the medium term. Fuel switching may require development of a new fuel handling system and alternative delivery options are being considered.

Point Lepreau Nuclear Generating Station Refurbishment

On July 29, 2005 the Government of New Brunswick, on the recommendation of the Board of Directors of Nuclearco, announced its decision to refurbish the Point Lepreau Generating Station during an 18-month outage scheduled to begin in April 2008.  The $1.0 billion capital project will replace all 380 fuel channel and calandria tube assemblies and feeders as well as complete other equipment replacements, inspections and upgrades to allow the station to operate an additional 25 years.  Production from the station provides up to 30% of New Brunswick’s electricity, and maintains significant environmental benefits.

International Power Line Project

The construction of a second 345 kV transmission line and interconnection to the New England electricity market will have the benefits of increased opportunities for imports and exports of electricity, reduced transmission losses and increased system reliability for the State of Maine and the Maritime Provinces.  The estimated cost of the project is $50 million for the Canadian portion. The National Energy Board (NEB) has issued a conditional Certificate of Public Convenience and Necessity to construct, operate, and maintain the power line. The US portion is estimated to cost $90 million (USD) and is expected to be owned and operated by Bangor Hydro-Electric Company; a subsidiary of Emera Inc. Bangor Hydro-Electric Company is in the process of seeking the required approvals for the US portion of the project. The final regulatory approval for the US portion is expected by the end of December 2005.  ISO New England wil l operate the line and has agreed to roll the full cost of the US line, to $90 million (USD), into its regional tariff. The project is planned for completion in late 2007.

Renewable Energy Development

Following a public request for proposals, Disco signed a twenty-year power purchase agreement with Eastern Wind Inc. for a 20 MW wind farm on Grand Manan. The proposed wind farm will have 11 turbines and expects to be generating electricity in the summer of 2006. Disco intends to purchase the output and environmental attributes from the project as part of a long-term goal to acquire 400 MW from renewable energy projects by 2016.

Rates

Under the Electric Power Act, in effect prior to October 1, 2004, rates were charged by NB Power to cover all operating charges and expenses, overhead, interest and amortization charges, and to maintain "such reserve, depreciation and surplus accounts as are maintained by a properly managed corporation".  Effective January 1, 1990, NB Power became subject to rate regulation by the PUB.  The Lieutenant Governor in Council may reverse or vary any rate order of the PUB.  If this occurs there is noappeal.  The mandate of the PUB does not extend to areas such as approval of borrowings or contracts for the sale or purchase of electricity outside the province.

The Public Utilities Act was amended on December 10, 1993 to provide “legislated permission” regulation.  Since that date, NB Power and its successor company, Disco, may implement rate increases in any fiscal year without applying to the PUB, provided the rate increase does not exceed the greater of 3.0% or the percentage change in the average consumer price index.  

Under the new Electricity Act, effective October 1, 2004, Disco’s ability to increase rates is governed by a similar provision as set out in the 1993 Amendment to the Public Utilities Act.    In addition, the newly incorporated Transco is governed under the Electricity Act and as such, Transco’s rates are set out in an approved tariff.  Genco and Nuclearco are not regulated as of October 1, 2004.

38

Exhibit “d” Current Province of New Brunswick Description

Rate increases in the past five fiscal years are shown in the following tables:

AVERAGE RATE INCREASES

	Year Ended March 31,
Customer Classification		2001	2002	2003	2004	20051
Residential		3.0%	0.0%	3.0%	2.9%	6.0%
General service		0.0	0.0	1.5	2.9	6.0
Industrial		0.0	0.0	1.5	1.5	4.5
Wholesale		0.0	0.0	1.5	2.5	5.6
Street lights		0.0	0.0	0.0	2.9	6.0

Operations and Financial Review

The financial information which follows is on a combined basis for the fiscal year ended March 31, 2005 for the Group.

The Group recorded a net income of $9 million in 2004/05 compared with a net loss of $18 million in 2003/04.

The most significant factor contributing to the change in year-over-year net income was a non-recurring charge in 2003/04 against net income of $44 million for write-off of costs associated with a fuel handling system intended for delivery of Orimulsion® fuel to the Coleson Cove Generating Station. The income from operations in the previous year before the write-off was $26 million compared to the current year income from operations of $9 million.

Other factors contributing to the year-over-year increase in income were:

• higher in-province revenue due to the 2.5 per cent average rate increase implemented April 1, 2004

and an increase in revenue due to interruptible energy prices, which are variable and linked to

generation costs

• higher out-of-province revenue due to higher average prices for export energy

• decreased finance charges arising from mid-year restructuring of the Corporation’s debt

There were other factors that offset the impact of these positive developments:

• higher fuel and purchased power costs due to decreased nuclear generation and lower hydro

performance, both of which resulted in higher replacement energy costs

• higher operations, maintenance and administration costs as a result of a significant staff adjustment

program that reduced the Group’s workforce by 10 per cent for 2005/06

• special payments in lieu of income taxes made to the Shareholder post mid-year restructuring

Cash flow from operations in 2004/05 decreased by $11 million to $245 million. This resulted primarily from a decrease in net income (excluding the one-time 2003/04 write-off of $44 million for fuel handling facility costs).

The Group’s debt decreased by $204 million in 2004/05 due to the net reduction of debt from financial reorganization of NB Power and principal repayments made during the year, offset by a new debt issue to fund capital spending at Coleson Cove Generating Station.

___________________________

⁴ Rates were raised twice in fiscal 04/05, on April 1, 2004 and March 31, 2005. The cumulative impact resulted in average increases of 6% for residential, general service and streetlight customers, 4.5% for industrial customers and 5.6% for wholesale customers.

39

Exhibit “d” Current Province of New Brunswick Description

On Oct. 1, 2004, NBEFC assumed the obligations of NB Power with respect to notes and debt instruments previously issued to the Province or to other third-party debt holders. These obligations included all notes and debentures existing at Sept. 30, 2004, including US dollar debentures and cross-currency interest rate swaps, as well as related accrued interest and deferred debt costs.

In exchange for the transfer of these items, NBEFC issued a new debt portfolio to the Group, along with related accrued interest, common share equity of $140 million and contributed surplus of $187 million.

Operating Results

Total revenue was $1,403 million in 2004/05, which is an increase of $92 million or 7 per cent from 2003/04.

In-province revenue was $1,049 million in 2004/05, representing an increase of $40 million or 4.0 per cent from 2003/04. The main contributors to the year-over-year variance were:

• a 2.5 per cent average rate increase implemented April 1, 2004, which increased revenue by $24 million

• higher interruptible energy prices for large industrial customers increased revenue by $12 million; these prices are variable and linked to generation costs

• changes in overall sales mix and weather-adjusted sales volumes increased revenue by $4 million

Out-of-province revenue increased $5 million or 2.0 per cent from 2003/04. The main contributors

to the year-over-year variance were:

• an increase in revenue of $11 million due to a higher average price for export energy, partially offset  by lower hydro and nuclear generation, which decreased the availability of surplus energy for export  and resulted in a 3 per cent decrease in export sales volumes and a $6 million decrease in revenue

For the fiscal year ended March 31, 2005, energy was supplied as follows:

COMPOSITION OF ENERGY SUPPLY	Total		In Province
Hydro	14.5	%	17.5	%
Heavy fuel & combustion turbine	21.1		13.2
Orimulsion®	12.1		10.6
Coal and petroleum coke	20.9		22.0
Nuclear	21.9		26.1
Purchases	9.5		10.6
Total	100.0	%	100.0	%

The cost of fuel and purchased power was $497 million in 2004/05, an increase of $30 million or 6.4 per cent from 2003/04. Heavy fuel oil represented 39 per cent of this spending while purchased power from utilities in Nova Scotia, Maine, Quebec and New Brunswick accounted for 25 per cent. The year-over-year increase in fuel and purchased power costs was attributable to the following factors:

• hydro flows were 106 per cent of the long-term average in 2004/05 compared to 120 per cent in 2003/04. Decreased availability of this low-cost energy increased generation costs by $20 million.

• Point Lepreau’s net capacity factor was 77 per cent during 2004/05 compared to 86 per cent in 2003/04. Decreased availability of this low-cost energy increased generation costs by $28 million.

These increases were offset by an overall lower load decrease ($11 million) and other variances in generation and purchased power mix, and an overall decrease in fuel prices, net of the hedging impact ($7 million).

Operations, maintenance and administration costs were $384 million in 2004/05, an increase of $29 million or 8.2 per cent from 2003/04. This was mainly due to the following factors:

40

Exhibit “d” Current Province of New Brunswick Description

• early retirement costs were $23 million higher due to a significant staff adjustment program that decreased the Corporation’s workforce by 10 per cent for 2005/06 onward

• labour, hired services, and material costs were $13 million higher mainly due to the timing and extent of maintenance outages in Nuclearco and Genco

These increases were offset by a $10 million reduction in costs, including reduced pension costs and decreased hired services and other related costs from restructuring.

Amortization and decommissioning costs were $219 million in 2004/05, an increase of $6 million or 2.8 per cent from 2003/04. This was primarily due to the completion and capitalization of the Coleson Cove Generating Station refurbishment project in December 2004.

Capital Expenditures

Capital expenditures, net of proceeds on disposal and customer contributions, were $335 million in 2004/05, a decrease of $162 million or 33 per cent from 2003/04.

The primary reason for the decrease was reduced spending on the Coleson Cove Generating Station Refurbishment Project ($200 million versus $400 million the previous year) as the project was completed in December 2004. This decrease was offset by an increase in regular capital expenditures by Genco, and an increase in capital spending on pre-engineering work required for refurbishment of the Point Lepreau Generating Station. Transmission and distribution infrastructure upgrade projects were also completed during the year.

Free Cash Outflow and Debt Increase

Free cash outflow was $161 million in 2004/05, an increase of $215 million from 2003/04. The primary reasons for the increase were:

• reduced capital spending

• reduced funding of the used nuclear fuel management and nuclear decommissioning liabilities due to a one-time funding     in 2003/04 to meet CNSC licensing requirements

Net debt decreased by $204 million in 2004/05 compared to an increase in 2003/04 of $321 million. This was mainly due to the following factors:

• reduced capital spending

• reduced funding of the used nuclear fuel management and decommissioning liabilities

• a net reduction in debt due to the restructuring of the Corporation’s debt portfolio on Oct. 1, 2004

The Group’s debt levels will increase in future years with refurbishment of the Point Lepreau Generating Station and construction of the International Power Line. The level of short term borrowings fluctuates depending on the timing of debt maturities and capital investment requirements. Since restructuring on Oct. 1, 2004 the Group issues long and short-term notes to NBEFC.  Under the authority of the Electricity Act, the Province of New Brunswick issues debt on behalf of NBEFC.

41

Exhibit “d” Current Province of New Brunswick Description

Statistical Information

The following table sets forth certain information with respect to the peak demand and capacity for each of the fiscal years 2001 through 2005.

PEAK DEMAND AND CAPACITY

Year Ended March 31,	In Province Peak demand	Out-of-Province Firm Sales	Total Peak Demand	Total Net Generating Capacity and Firm Capacity Purchases51
	(megawatts)
2001	2,893	464	3,357	4,121
2002	2,768	863	3,631	4,268
2003	3,089	590	3,679	4,275
2004	3,340	366	3,706	4,276
2005	3,146	399	3,545	4,350

¹⁵ At the time of the in-province peak demand.

42

Exhibit “d” Current Province of New Brunswick Description

The following table sets forth certain statistical information for the five fiscal years ended March 31, 2005.

SELECTED OUTPUT AND SALES DATA

				Year Ended March 31,
				2001	2002	2003	2004	2005
System Power Generated and Purchased (in millions of kilowatt-hours)
			Generated	18,818	19,067	17,908	19,199	18,514
			Purchased	2,092	1,945	1,752	1,371	1,848
				20,910	21,012	19,660	20,570	20,362
Station service and losses (transformer and transmission)				2,021	1,953	2,051	2,000	1,943
Total Energy Available				18,889	19,059	17,609	18,570	18,419
Electric Sales (in millions of kilowatt-hours)
		In-province		14,011	13,795	14,540	14,648	14,606
		Out-of-province		4,878	5,264	3,069	3,922	3,813
Total Electric Sales				18,889	19,059	17,609	18,570	18,419
Revenue from Sale of Power (in millions of dollars
	In-province			$931	$919	$993	$1,009	$1,049
	Out-of-province			332	359	227	246	251
Total revenue from sale of power				1,263	1,278	1,220	1,255	1,300
Miscellaneous revenue and transmission				46	41	53	56	103
Total Revenue				$1,309	$1,319	$1,273	$1,311	$1,403
Number of Customers (at end of period)61				353,724	356,440	360,237	363,439	366,930
Average Revenue per kilowatt-hour
	In-province			6.64¢	6.66¢	6.83¢	6.89¢	7.18¢
	Out-of-province			6.81¢	6.82¢	7.40¢	6.27¢	6.58¢

___________________________

⁶ Includes customers served indirectly through local distribution companies in the Cities of Saint John and Edmundston

43

Exhibit “d” Current Province of New Brunswick Description

The following summary financial information was extracted from the audited combined financial statements of NB Power Holding Corporation.

NEW BRUNSWICK POWER HOLDING CORPORATION

Summary Combined Balance Sheet

	As At March 31, (millions of dollars)
	2004	20057
Assets
Current assets	$287	$330
Fixed assets	3,146	3,273
Long-term assets	176	195
Deferred charges	120	76
Total Assets	$3,729	$3,874
Liabilities and Deficit
Current liabilities	$817	$956
Long-term debt	2,814	2,459
Deferred liabilities	293	323
Shareholder’s equity	(195)	136
Total Liabilities and Shareholder’s Equity	$3,729	$3,874

___________________________

⁷ 2005 data represents summary combined figures based on the results of the Group for fiscal 04/05. Prior years’ data is consolidated from the former integrated structure.

44

Exhibit “d” Current Province of New Brunswick Description

Summary Combined Statement of Income

	Year ended March 31,
		millions of dollars
	2001	2002	2003	2004	20058
Revenues	$1,309	$1,319	$1,273	$1,311	$1,403
Expenses
Fuel and purchased power	504	492	528	467	497
Transmission9	--	--	--	---	---
Operations	530	552	580	601	644
Interest and exchange	355	256	242	217	202
Write-off fuel handling system costs10 1	--	--	--	44	--
	1,389	1,300	1,350	1,329	1,389
Income (loss) before special payments in lieu of income taxes	(80)	19	(77)	(18)	14
Special payments in lieu of income taxes11	--	--	--	--	5
Net Income (Loss) for the Year	$(80)	$19	$(77)	$(18)	$9

.

___________________________

⁸ 2005 data represents summary combined figures based on the results of the Group for fiscal 04/05. Prior years’ data is consolidated from the former integrated structure

⁹ The PUB also regulates the Open Access Transmission Tariff (OATT) that establishes non-discriminatory access to the transmission system for generators and customers inside and outside the province and generates revenues for Transco to operate and maintain the transmission system. In its March 2003 decision, the PUB approved an initial revenue requirement that is the basis for existing OATT rates. The OATT rates were effective September 20, 2003. On October 1, 2004, the System Operator assumed responsibility for the design and administration of the OATT. As such, Transco bills the System Operator for the majority of its revenue requirement, which the System Operator collects through the OATT from the various load and load-serving customers including Genco, Nuclearco, and Disco.

¹⁰ NB Power received environmental approvals and commenced a project in December 2002 to refurbish the 998 MW Coleson Cove Generating Station to extend its life and convert it to burn Orimulsion® fuel. The project included the development and construction of facilities and pipeline capable of handling Orimulsion® fuel. NB Power had signed a memorandum of understanding for the development of these facilities. The site chose required investment in a fixed jetty, storage tanks, pumping and piping to the existing pipelines used to transport heavy fuel oil to the generating station. Of the expenses incurred on the fuel delivery system, $44 million was not expected to provide future service value and was expensed in the year ended March 31, 2004.

¹¹ Special payments in lieu of income taxes are calculated at an individual company level. During the period that special payments in lieu of income taxes was applicable, Disco incurred a net loss and recorded a future special payments in lieu of income taxes amount, reducing the overall provision.

45

Exhibit “d” Current Province of New Brunswick Description

Summary Combined Statement of Cash Flow

	Year Ended March 31,
	(millions of dollars)
	2001	2002	2003	2004	200512
Net Inflow (Outflow) of Cash Related to the Following Activities:
Net income (loss)	$ (80)	$19	$(77)	$ (18)	$9
Non-cash items	294	215	216	274	236
Net change in non-cash working capital balances	16	(35)	14	29	(51)
Nuclear decommissioning and used fuel management funds installments and earnings131	--	--	(20)	(156)	(13)
Other	--	--	(7)	(8)	(1)
Cash from operating activities	230	199	126	121	180
Cash from financing activities	(91)	(104)	131	321	158
Cash from investing activities	(116)	(135)	(212)	(497)	(341)
Net Cash Inflow (Outflow)	23	(40)	45	(55)	(3)
Cash and short-term investments
Beginning of Year	34	57	17	62	7
End of year	$ 57	$17	$62	$7	$4

Segmented Information

___________________________

¹² 2005 data represents summary combined figures based on the results of the Group for fiscal 04/05. Prior years’ data is consolidated from the former integrated structure

¹³ NB Power has established a used nuclear fuel segregated fund held in a custodial account to meet the license conditions of the Point Lepreau Generating Station set by the CNSC.  NB Power has also established a trust fund pursuant to the Federal Nuclear Fuel Waste Act (“NFWA”). In accordance with the NFWA, the Nuclear Waste Management Organization was formed to prepare and review alternatives, and provide recommendations for long-term management of nuclear waste. This submission is to occur within three years of the NFWA coming into force. The federal government will determine the strategy for dealing with the long-term management of used nuclear fuel based on submitted plans. The NFWA requires major owners of used nuclear fuel in Canada to establish trust funds to finance the long-term management of used nuclear fuel. The NFWA requires the Corporation to contribute $4 million annually fo r the next two years to its trust fund. Further funding requirements beyond this time will be based on the plan chosen. The funds contained in the established fund to meet the license conditions of the generating station described above will also be used to meet these requirements. NB Power has established a decommissioning segregated fund held in a custodial account to meet the license conditions for the Point Lepreau Generating Station set by the CNSC.

46

Exhibit “d” Current Province of New Brunswick Description

The Group is organized and operates under five reportable business segments. On Oct. 1, 2004, the restructuring of NB Power resulted in each of the business segments becoming incorporated companies. As these segments existed for the full year, the results presented are representative of the full year activities of the segments. These results will differ from the individual company statements, which only report the results of the segment for the period October 1, 2004, when the company commenced operations.

Year Ended March 31, 2005

(millions of dollars)

	Genco	Nuclearco	Tansco	Disco	Holdco	Eliminations	Total
Total Revenue	869	226	102	1,093	139	(1,026)	1,403
Total Expenses	841	236	93	1,086	156	(1,018)	1,394
Net Income (Loss) for Year	28	(10)	9	7	(17)	(8)	9
Total Assets	2,196	637	369	759	363	(450)	3,874
Total Debt	1,983	383	198	589	3	0	3,156
Capital Expenditures	238	30	28	39	0	0	335

47

Exhibit “d” Current Province of New Brunswick Description

TABLES AND SUPPLEMENTARY INFORMATION OF THE PROVINCE

In the following tables, the revenue and expenditure for the four fiscal years ended March 31, 2005 have been extracted from the Public Accounts for such years (subject to certain adjustments for purposes of comparability).  For the fiscal year ending March 31, 2006, the numbers have been extracted from the Budget and the forecast of revenue and expenditure published in the Budget Estimates.  Revenue and expenditure are expressed on a net basis.

TABLE I - COMPARATIVE STATEMENT OF ORDINARY REVENUE
				Fiscal Year Ended March 31, (in millions)
										Budget
										Estimate
		2002		2003		2004		2005		2006
Own Source
Taxes	$	2,376.3	$	2,481.6	$	2,612.4	$	2,664.2	$	2,771.9
Investment Income1		211.3		138.0		213.3		249.8		249.9
Licences and Permits		95.3		95.8		95.3		93.2		100.8
Sale of Goods and Services		83.8		83.2		201.3		203.9		210.2
Royalties		58.2		57.5		67.2		67.8		65.3
Return on Investment		23.4		24.7		30.0		22.2		20.1
Fines and Penalties		1.3		1.5		1.2		1.6		1.7
Other		15.4		17.9		16.2		16.9		13.2
Transfer from Fiscal Stabilization Fund		---		110.4		---		---		---
Total - Own Source		2,865.0		3,010.6		3,236.9		3,319.6		3,433.1
Grants from Canada
Unconditional Grants - Canada		1,818.0		1,647.6		1,636.4		2,039.8		2,037.6
Conditional Grants - Canada		182.3		180.5		221.0		242.2		245.0
Total - Grants from Canada		2,000.3		1,828.1		1,857.4		2,282.0		2,282.6
Total - Ordinary Revenue	$	4,865.3	$	4,838.7	$	5,094.3	$	5,601.6	$	5,715.7

___________________________

¹ Includes Lottery revenues, New Brunswick Municipal Finance Corporation, New Brunswick Liquor Corporation, New Brunswick Electric Finance Corporation, New Brunswick Securities Commission and Algonquin Golf Limited.

48

Exhibit “d” Current Province of New Brunswick Description

TABLE II - COMPARATIVE STATEMENT OF ORDINARY EXPENDITURE
			Fiscal Year Ended March 31, (in millions)
											Budget
											Estimate
		2002			2003		2004		2005		2006
Economic Development	$	144.6		$	114.1	$	132.8	$	137.3	$	118.7
Education		886.5			962.3		1,000.7		999.3		1,017.7
Employment Development & Labour		198.4			188.9		198.4		196.0		194.7
Family and Community Services		679.7			695.2		711.9		723.5		740.1
Health		1,393.4			1,468.4		1,565.6		1,689.5		1,778.3
Protection Services		126.2			131.4		134.3		139.5		137.8
Resource Sector		130.2			134.0		142.6		148.8		145.8
Transportation		150.7			159.5		151.4		150.3		153.9
Central Government		471.4			381.7		574.9		588.0		678.1
Service of the Public Debt		651.8			660.9		582.9		580.9		601.0
Total Ordinary Expenditure	$	4,832.9		$	4,896.4	$	5,195.5	$	5,353.1	$	5,566.1

49

Exhibit “d” Current Province of New Brunswick Description

Table III - Comparative Statement of Net Capital Expenditure
(in millions)		Fiscal Year Ended March 31,
										Budget
										Estimate
		2002		2003		2004		2005		2006
Expenditure:
Highways	$	107.4	$	148.9	$	181.3	$	204.3	$	203.1
Bridges		16.7		17.1		21.3		30.4		32.0
Schools		34.5		34.3		35.2		46.7		48.0
Hospitals		12.1		12.9		25.3		56.9		95.7
Other Public Buildings		13.4		18.7		8.1		9.3		21.8
Economic and Regional Development		0.5		0.5		0.5		0.5		1.1
Vehicles		24.5		3.9		7.5		19.3		7.0
Water Pollution Control Grants.		0.5		0.5		0.5		0.4		0.5
Other		17.8		17.1		13.6		17.8		14.6
Total Expenditure		227.4		253.9		293.3		385.6		423.8
Recoveries:
Recoveries from Canada
Highways		16.6		38.3		49.6		31.9		36.2
Economic and Regional Development Projects		0.8		3.1		0.2		1.7		0.0
Health		0.7		0.4		1.6		3.7		3.8
		18.1		41.8		51.4		37.3		40.0
Other Recoveries		1.8		0.9		1.2		4.3		1.3
Total Recoveries		19.9		42.7		52.6		41.6		41.3
Net Capital Expenditure.	$	207.5	$	211.2	$	240.7	$	344.0	$	382.5

TABLE IV - COMPARATIVE STATEMENT OF NET DEBT
(in millions)
Historical data unavailable due to adoption of TCAA		Fiscal Year Ended March 31,
						Budget
						Estimate
		2004		2005		2006
Net Debt - Beginning of year	$	6,879.3	$	6,967.6	$	6,836.0
Ordinary Account (Surplus) Deficit.		101.2		(248.5)		(149.5)
Net Capital Expenditure		240.7		344.0		382.5
Special Purpose (Surplus) Deficit		(4.2)		(6.3)		0.7
Special Operating Agency  (Surplus) Deficit		(12.1)		(12.7)		(10.7)
Earnings from Sinking Funds		(222.5)		(221.6)		(227.0)
Change in Other Non-Financial Assets		(14.8)		14.0		---
Eliminations of Inter-account Transactions		---		(0.5)		---
Increase (Decrease) in Net Debt for the year.		88.3		(131.6)		(4.0)
Net Debt - End of year	$	6,967.6	$	6,836.0	$	6,832.0

50

Exhibit “d” Current Province of New Brunswick Description

TABLE V - COMPARATIVE STATEMENT OF NET LOANS AND ADVANCES
				Fiscal Year Ended March 31,
(in millions)										Budget
								&n bsp;		Estimate
		2002		2003		2004		2005		2006
								&n bsp;
								&n bsp;
Disbursements:
								&n bsp;
Agricultural Development Act	$	1.9	$	0.5	$	0.2	$	0.1	$	3.0
Economic Development Act		10.8		19.5		13.4		18.2		42.0
Fisheries Development Act		5.1		1.7		0.5		1.2		5.0
Housing		6.3		5.1		4.8		4.9		5.9
Nursing Home		1.7		---		---		---		---
Student Loan Advances		---		---		---		---		273.7	*
Veterans' Affairs		9.7		1.3		0.8		---		---
Other		---		0.5		---		0.9		1.6
		35.5		28.6		19.7		25.3		331.2
								&n bsp;
Recoveries:
								&n bsp;
Agricultural Development Act		1.6		0.6		0.5		1.5		2.0
Economic Development Act		7.6		12.6		25.8		11.1		9.5
Fisheries Development Act		3.6		3.8		2.9		3.7		2.8
Greater Moncton Area Transitional Policing		0.3		0.3		0.3		0.3		0.3
Housing		3.9		4.2		4.2		5.0		4.5
Loans to Students		---		---		---		---		12.5
Nursing Homes		4.5		---		---		---		---
Provincial Holdings Ltd		1.1		0.4		0.3		0.3		0.3
Veterans' Affairs		---		0.3		1.3		1.4		1.5
Other		0.3		0.3		0.3		0.3		0.6
		22.9		22.5		35.6		23.6		34.0
Net Loans and Advances.	$	12.6	$	6.1	$	(15.9)	$	1.7	$	297.2
								&n bsp;
								&n bsp;
* In 05/06, the Dept of Education took over the financing of the NB Student Loan Program

51

Exhibit “d” Current Province of New Brunswick Description

FUNDED DEBT OUTSTANDING AT MARCH 31, 2005
Date of Maturity		Interest Rate	Sinking Fund Installment Rate	Series	Currency Amount	Outstanding Amount (CAN $)	Date Issued	Reference
		%	%		Thousands
Repayable in United States Dollars:
20 June	2005	6.5	1.5	FH	150,000.0	189,687.0	June 1995	2
15 Feb.	2013	7.625	1 & 1.5	EO	200,000.0	241,920.0	Feb. 1993	2
15 Aug.	2013	6.75	1 & 1.5	ET	200,000.0	241,920.0	Sept. 1993	2
15 May	2020	9.75	1 & 1.5	DU	200,000.0	241,920.0	May 1990	2
1 May	2022	8.75	1 & 1.5	EI	200,000.0	241,920.0	May  1992	2
					US$ 950,000.0	C$ 1,157,367.0
Repayable in Swiss Francs:
3 Nov.	2006	5.625	1.5	FQ	100,000.0	C$104,443.0	March 1998	2,4
					Sfr 100,000.0	C$104,443.0
Repayable in Canadian Dollars:
10 Apr.	2005-10 Dec. 2005	10.8 - 12.57	1	CP		46,125.0	1985	1
19 Apr.	2005	8.75	1 & 1.5	FE		200,000.0	April 1995	2
29 July	2005	2.96	1.5	GF		36,000.0	July 2003	2
15 Dec.	2005	7.50	1 & 1.5	FK		200,000.0	Dec. 1995	2
3 Feb.	2006	3.75	1 & 1.5	GB		200,000.0	Feb. 2003	2
9 May	2006-10 Mar. 2007	9.04 - 9.97	1	CP		75,518.0	1986 – 1987	1
19 June	2006	7.75	1.5	FL		200,000.0	June 1996	2
31 July	2006	3.4	1.5	GG		36,000.0	July 2003	2
16 Oct.	2006	7.10	1.5	FM		200,000.0	Oct. 1996	2
3 Nov.	2006	5.625	1.5	FQ		54,932.2	March 1998	2,4
26 Feb.	2007	6.75	1 & 1.5	FN		200,000.0	Feb. 1997	2
10 Apr.	2007-10 Mar.  2008	9.12 - 11.07	1	CP		62,396.0	1987 – 1988	1
30 July	2007	3.816	1.5	GH		38,704.0	July 2003	2
23 Oct.	2007	4.78 & 4.7925	1 & 1.5	GA		791,500.0	Oct. 2002	2,13
11 Apr.	2008-1 Dec. 2008	9.62 - 10.39	1	CP		59,314.0	1988	1
2 June	2008	5.70	1.5	FR		550,000.0	Mar., Oct. 1998	2,5
7 July	2008	4.35	1.5	GD		101,958.4	July 2003	2
2 Dec.	2008	4.25	1.5	GI		300,000.0	Sept. 2003	2
3 Apr.	2009-1 Mar. 2010	9.15 - 10.31	1	CP		64,307.0	1989 – 1990	1
2 June	2009	5.25	1.5	FU		550,000.0	May, Sept. 1999	2,7
22 June	2009	10.25	1.5	DR		88,019.0	June 1989	2,3
23 Nov.	2009	10	1 & 1.5	DT		120,359.0	Nov. 1989	2,3
2 Dec	2009	4.5	1 & 1.5	GK		300,000.0	June 2004	2
2 Apr.	2010-1 Mar. 2011	10.36 - 11.04	1.5	CP		40,360.0	1990 – 1991	1
15 June	2010	6.375	1 & 1.5	FW		600,000.0	June, Dec. 2000	2,9
10 Apr.	2011-10 July 2011	9.81 - 10.04	1.5	CP		58,458.0	1991	1
12 July	2011	5.8	1 & 1.5	FX		600,000.0	Feb., June 2001	2,10
31 Oct.	2011	10.125	1 & 1.5	ED		200,000.0	Oct. 1991	2
1 Dec.	2011	5.85	1 & 1.5	FY		600,000.0	Dec. 01, Feb.  02	2,11
11 May	2012-10 July 2012	9.17 - 9.45	1.5	CP		41,673.0	1992	1
6 Dec	2012	5.875	1& 1.5	FZ		600,000.0	June, Aug. 2002	2,12
18 Jan.	2013	9.25	1 & 1.5	EN		200,000.0	Jan. 1993	2
25 Feb	2013	5.5	1 & 1.5	GC		200,000.0	Feb. 2003	2
28 June	2013	8.5	1 & 1.5	ER		200,000.0	June 1993	2

52

Exhibit “d” Current Province of New Brunswick Description

	13 Jan.	2014	7.75	1.5	EW	200,000.0	Jan. 1994	2
	4 Feb.	2015	4.5	1 & 1.5	GL	250,000.0	Feb. 2005	2
	12 May	2015	8.75	1 & 1.5	FF	200,000.0	May 1995	2
	27 June	2017	6.75	1.5	FO	250,000.0	June 1997	2
	27 Dec.	2017	6	1.5	FP	250,000.0	Nov. 1997	2
	2 Apr.	2019 - 3 Mar.  2020	5.64-6.82	1.5	CP	46,892.0	1999-2000	1
	1 Apr.	2020 - 2 Mar.  2021	6.25-6.76	1.5	CP	53,014.0	2000-2001	1
	1 Apr.	2021 - 1 Mar.  2022	6.26-6.70	1.5	CP	74,784.4	2001-2002	1
	1 Apr.	2022 – 1 Mar. 2023	5.79 – 6.51	1.5	CP	73,185.0	2002-2003	1
	5 Apr.	2023 – 1 Mar. 2024	5.37 – 6.06	1.5	CP	71,205.0	2003-2004	1
	2 Apr.	2024 – 10 Jan. 2025	5.16 – 5.83	1.5	CP	67,087.0	2004-2005	1
	27 Dec.	2028	5.65	1.5	FT	500,000.0	July 98, Feb. 99	2,6
	15 Dec.	2029	5.75 / 6.29	1	FV	50,000.0	Dec. 1999	8
	27 Jan.	2034	5.5	1.5	GJ	550,000.0	Jan., Nov. 2004	2,14
						$ 10,451,791.0
						C$ 11,713,601.0
Note:
Up to 31 March 1980, the sinking fund installment rate on the Series CP debentures was 3%.  Commencing 1 April 1980, the minimum rate was reduced to 1%.

References:

(1)

Issued to Canada Pension Plan Investment Fund, not negotiable, transferable or assignable.  Twenty year bonds redeemable in whole, or in part, at 100% on not less than six months notice.

(2)

Non-callable.

(3)

Pursuant to Section 24 of the Provincial Loans Act, the Minister of Finance authorized the cancellation of a portion of this issue held as an investment in the Sinking Fund effective 1 April 1991.  The Sinking Fund instalment is the same as that made prior to the cancellation.

(4)

Swiss Franc 100,000.0 represents the amount payable under a swap transaction for the repayment at maturity of a portion of series FQ $150,000.0 due 3 November 2006.  The remaining $54,932.2 of series FQ is repayable in Canadian dollars.  Interest is payable semi-annually in Canadian dollars.

(5)

In October 1998, the Province issued an additional $250,000.0 of its Series FR debentures.

(6)

In February 1999, the Province issued an additional $250,000.0 of its Series FT debentures.

(7)

In September 1999, the Province issued an additional $250,000.0 of its Series FU debentures.

(8)

Puttable at par on 15 December 2007 at the option of the note holder with 10 calendar days notice.  The interest rate is 5.75% to 15 December 2007.  After this date, until maturity, the interest rate is 6.29%.

(9)

In December 2000, the Province issued an additional $300,000.0 of its Series FW debentures.

(10)

In June 2001, the Province issued an additional $300,000.0 of its Series FX debentures.

(11)

In February 2002, the Province issued an additional $300,000.0 of its Series FY debentures.

(12)

In August 2002, the Province issued an additional $300,000.0 of its Series FZ debentures.

(13)

Canadian $791,500.0 represents the amount payable under an interest rate and currency swap agreement with a counter-party for the repayment at maturity of the Province’s debt of Series GA 3.50% $500,000.0 US due 23 October 2007. Interest is payable semi-annually in Canadian dollars at a fixed rate.

(14)

In November 2004, the Province issued an additional $250,000.0 of its Series GJ debentures.

53

Exhibit “d” Current Province of New Brunswick Description

FOREIGN EXCHANGE

Canada maintains a floating exchange rate for the Canadian dollar to permit the rate to be determined by fundamental market forces without intervention except as required to maintain orderly conditions.

Spot exchange rates for the U.S. dollar, Japanese yen and Swiss franc in Canada, expressed in Canadian dollars, are shown in the table below for 2000 through 2004.

Average of Noon Spot Rates		2000		2001		2002		2003		2004
U.S. Dollar	$	1.4852	$	1.5489	$	1.5704	$	1.4014	$	1.3015
Japanese Yen (100 yen)		1.3780		1.2755		1.2554		1.2088		1.2035
Swiss Franc		0.8796		0.9189		1.0112		1.0418		1.0473

Source:  Bank of Canada

SOURCES OF INFORMATION

Information included herein which is designated as being taken from a publication of the Province or Canada, or any agency or instrumentality of either, is included herein upon the authority of such publication as a public official document.

The financial statements of the Province included herein under the heading "Tables and Supplementary Information of the Province" have been taken from the Public Accounts of the Province (subject to certain adjustments for purposes of comparability) and the forecast of revenue and expenditure published in the Budget Estimates.  All financial information of the Province contained herein was obtained from the annual Budget and Main Estimates, the financial reviews pertaining thereto and the Public Accounts, or was prepared by representatives of the Department of Finance in their official capacities.  The information set forth under "Province of New Brunswick", and other than as described in the preceding paragraph, was prepared by representatives of the Department of Finance in their official capacities.

54

EX-99.1

ii PROVINCE OF NEW BRUNSWICK 2005

To His Honour,

The Honourable Herménégilde Chiasson

Lieutenant-Governor of the Province of New Brunswick

     The undersigned has the honour to submit the Public Accounts of the Province of New Brunswick for the fiscal year ended 31 March 2005.

I am, Your Honour,

JEANNOT VOLPÉ 
Minister of Finance

Fredericton, New Brunswick 
15 November 2005

The Honourable Jeannot Volpé 
Minister of Finance

Sir:

     The undersigned has the honour to present to you the Public Accounts of the Province of New Brunswick for the fiscal year ended 31 March 2005.

Respectfully submitted,

Stephen Thompson, C.M.A. 
Acting Comptroller

Fredericton, New Brunswick 
15 November 2005

2005 PROVINCE OF NEW BRUNSWICK iii

TABLE OF CONTENTS
Audited Financial Statements
Introduction to Volume I	1
Statement of Responsibility	2
Results for the Year	3
Major Variance Analysis	6
Auditor's Report	10
Statement of Financial Position	11
Statement of Operations	12
Statement of Cash Flow	13
Statement of Change in Net Debt	14
Notes to the Financial Statements	15
Schedules to the Financial Statements	42

2005 PROVINCE OF NEW BRUNSWICK 1

INTRODUCTION

VOLUME I

The Public Accounts of the Province of New Brunswick are presented in five volumes.

This volume contains the audited financial statements of the Provincial Reporting Entity as described in note 1 to the financial statements. They include a Statement of Financial Position, a Statement of Operations, a Statement of Cash Flow and a Statement of Change in Net Debt. This volume also contains the Auditor’s Report, Statement of Responsibility, management’s comments on the results of the year and a variance analysis.

Volume II contains unaudited supplementary information to the Financial Statements presented in Volume I. It presents summary statements for revenue and expenditure as well as five-year comparative statements. This volume also contains detailed information on Supplementary Appropriations, Funded Debt, statements of the General Sinking Fund, Securities Held, and revenue and expenditure by government department (this includes salary, travel, supplier, grant and contribution, and loan disbursement listings).

Volume III contains the financial statements of those corporations, boards and commissions which are accountable for the administration of their financial affairs and resources to the Government or the Legislature of the Province. The Government or Legislature also has the power to control these organizations either through ownership or through legislative provisions.

Volume IV contains the financial statements of various trust funds which the Province administers as Trustee.

Volume V contains salary listings of certain government organizations, including Regional Health Authorities, New Brunswick Power Corporation, and New Brunswick Liquor Corporation. The salary listings are for employees who received earnings during the year ended 31 December 2004 in excess of $40,000.

2 PROVINCE OF NEW BRUNSWICK 2005

STATEMENT OF RESPONSIBILITY

The financial statements of the Province of New Brunswick are prepared each year by the Comptroller as required under section 12 of the Financial Administration Act. The financial statements include a Statement of Financial Position, a Statement of Operations, a Statement of Cash Flow and a Statement of Change in Net Debt.

Financial statement integrity and objectivity are the responsibility of the Government. To help fulfil this responsibility, systems of internal control have been established to provide reasonable assurance that transactions are properly authorized, executed and reported. The statements are prepared in accordance with the accounting policies described in Note 1 to the Financial Statements.

On behalf of the Government:

Honourable Jeannot Volpé 
Minister of Finance

15 November 2005

2005 PROVINCE OF NEW BRUNSWICK 3

RESULTS FOR THE YEAR

New Reporting Model

The Province of New Brunswick made a major change in its accounting policies during the year ended 31 March 2005. It implemented the new government reporting model recommendations of the Public Sector Accounting Board (PSAB) of the Canadian Institute of Chartered Accountants (CICA).

This change affects the method of determining the annual surplus or deficit for the year, it affects the calculation of net debt, and it introduces a new indicator of the Province’s financial performance called accumulated deficit.

Under the new policy, the Province now distinguishes between financial and non-financial assets. It is also now accounting for its tangible capital assets as prescribed by PSAB. These tangible capital assets are disclosed with the Province’s other non-financial assets. Tangible Capital Assets include government-owned buildings, roads, bridges, vehicles, and large pieces of machinery or equipment. To be considered a tangible capital asset, an asset must be used in the delivery of a government service, and it must also have an expected life or usage beyond one year.

The long-standing practice of the Province of New Brunswick has been to expense the full cost of a tangible capital asset in the year in which it is acquired. Under the new model, the Province will spread out the cost of the asset over the useful life of the asset. The expense will be charged systematically over the years that the asset is being used to deliver services. This usage charge is called amortization and is now included in the Province’s expenses when determining the surplus or deficit for the year.

When a government’s liabilities are bigger than its financial assets, the government is in a net debt position. Financial assets are either cash or assets that will produce a flow of cash in the future. The new accounting treatment for tangible capital assets will not alter the way in which net debt is calculated. That is, the change in net debt each year will continue to reflect the full cost of the tangible capital assets acquired in the year. However certain other assets that were previously classified as financial assets have been reclassified as non-financial assets resulting in the restatement of net debt. These assets include inventories of supplies and prepaid expenses.

In addition to restating net debt, the new accounting model introduces an additional financial measure for governments that is referred to as the accumulated deficit. It is the net debt minus non-financial assets. With this model, net debt is divided into two components: the portion that relates to investment in capital infrastructure and other non-financial assets, and the portion that relates to past operating deficits, or the accumulated deficit.

The new reporting model has resulted in a number of financial statement changes. The following is a comparison of the new model and the old model, illustrating a statement of financial position, a statement of operations, and a statement of change in net debt.

4 PROVINCE OF NEW BRUNSWICK 2005

Statement of Financial Position
	New Model	Old Model
Financial Assets	$         847.5	$     847.5
Liabilities	(7,683.5)	(7,683.5)
Net Debt	(6,836.0)	(6,836.0)
Tangible Capital Assets	4,746.7	---
Other Non Financial Assets	165.4	165.4
Total Non Financial Assets	4,912.1	165.4
Accumulated Deficit	$ (1,923.9)	$  (6,670.6)
Statement of Operations
	New Model	Old Model
Revenue	$      5,959.8	$   5,959.8
Expenditures (excluding  capital & amortization)	(5,535.9)	(5,535.9)
Sub-total	423.9	423.9
Net Capital Expenditures	---	(292.4)
Amortization and Change  in non financial assets	(181.7)	---
Surplus / (Deficit)	$       242.2	$     131.5
Statement of Change in Net Debt
	New Model	Old Model
Opening Net Debt	$ (6,967.5)	$  (6,967.5)
Surplus (Deficit)	242.2	131.5
Sub-total	(6,725.3)	(6,836.0)
Net Capital Expenditures	(292.4)	N/A
Amortization	181.7	N/A
Ending Net Debt	$ (6,836.0)	$ (6,836.0)

Showing tangible capital assets in the financial statements provides a better measure of financial condition and of the resources available to the government to use in delivering services. This shows that a government has assets that still have value and service potential. This will provide better information to understand the nature and extent of the government’s assets and its plans for maintenance and replacement. Furthermore, including an annual usage or amortization expense in the government’s financial statements will present more information about the cost of government programs.

Fiscal Management Measures

The Government uses multiple measures to guide its fiscal management, a number of which are described below.

2005 PROVINCE OF NEW BRUNSWICK 5

Surplus

The year ended 31 March 2005 was the first year that the Province used the new reporting model as described previously. As part of this change, the results for the year ended 31 March 2004 were restated. The surplus for the year ended 31 March 2005 was $242.2 million, a significant improvement on the $173.4 million deficit for the year ended 31 March 2004.

Net Debt

In Volume I of the 31 March 2004 Public Accounts, the following table disclosed the net debt at the end of each year since 2000.

		(millions)
Year	2000	2001	2002	2003	2004
Net Debt	$6,925.3	$6,782.0	$6,603.6	$6,712.9	$6,816.1

This table reported a reduction in net debt over the four year period of $109.2 million. However, with the adoption of the new reporting model, certain assets have been reclassified from financial assets to non-financial assets, requiring a restatement of the net debt numbers. The restated numbers are as follows:

		(millions)
Year	2000	2001	2002	2003	2004
Net Debt	$7,048.9	$6,908.7	$6,778.6	$6,879.2	$6,967.5

Therefore the reduction in net debt over the four year period from 1 April 2000 until 31 March 2004 has been restated to $81.4 million.

Net debt was reduced by a further $131.5 million during the year ended 31 March 2005 to reach a balance of $6,836.0. The following table reports the net debt position at the end of each of the past five years.

		(millions)
Year	2000	2001	2002	2003	2004	2005
Net Debt	$7,048.9	$6,908.7	$6,778.6	$6,879.2	$6,967.5	$6,836.0

The reduction in net debt over the five year period therefore has been $212.9 million.

Net Debt as a Percentage of Gross Domestic Product

At 31 December 1999, the Province’s Gross Domestic Product was $19,041 million. Therefore, the restated net debt as at 31 March 2000 was 37.0% of GDP at the time. The Province’s GDP at 31 December 2004 was $23,369 million, so the net debt to GDP ratio stands at 29.3% for the year ended 31 March 2005.

		(millions)
Year	2000	2001	2002	2003	2004	2005
GDP	$19,041.0	$20,085.0	$20,689.0	$21,168.0	$22,452.0	$23,369.0
Net Debt	$  7,048.9	$  6,908.7	$  6778.6	$   6879.2	$  6,967.5	$  6,836.0
Ratio	37.0%	34.4%	32.8%	32.5%	31.0%	29.3%

6 PROVINCE OF NEW BRUNSWICK 2005

This table reports that there has been a five year improvement in the net debt to GDP ratio (a reduction of 7.7 percentage points from the starting point of 37.0%).

Debt Charges

The Province’s debt charges for the year ended 31 March 2005, calculated as the amount spent on servicing the public debt less sinking fund earnings, totaled $359.3 million, $47.7 million less than what the Province spent in 2000.

Balanced Budget Results

31 March 2005 was the first year of a new four year Balanced Budget Period. During the year, the Government generated a $131.5 million surplus for Balanced Budget purposes.

MAJOR VARIANCE ANALYSIS

Explanations of major variances are described below, first for revenue, followed by expenses. In this analysis, comparisons are made between the actual results for 2004-2005 and either the 2004-2005 budget or actual results for 2003-2004.

REVENUE

Provincial Sources

Taxes on Consumption

Taxes on consumption are down $73.8 million from budget mainly due to a $70.7 million decrease in harmonized sales tax revenues. This reflects a negative prior-year adjustment of $78.1 million for the 2003 taxation year, resulting from a decrease in the national revenue pool.

Taxes on consumption are down $80.2 million from the previous year due to prior-year adjustments related to harmonized sales tax revenues.

Taxes on Property

Taxes on property are up $30.2 million from the previous year primarily due to growth in the assessment base and higher than anticipated revenue collection.

Taxes on Income

Taxes on income are up $40.3 million from budget due to a $23.2 million increase in corporate income tax revenue resulting from higher forecasts of corporate taxable income, and a $16.5 million increase in personal income tax revenue due largely to an underpayment in respect of the 2003 taxation year, resulting in a positive prior-year adjustment.

Taxes on income are up $110.5 million from the previous year as a result of an increase of $62.1 million in corporate income tax revenue due to higher forecasts of corporate taxable income and prior-year adjustments, and a $47.9 million increase in personal income tax revenue that is due to growth in the tax base and prior-year adjustments.

2005 PROVINCE OF NEW BRUNSWICK 7

Investment Income

Investment income is up $31.0 million from the previous year primarily due to a $26.0 million improvement for NB Power. The previous fiscal year’s results for NB Power were influenced by negative one-time adjustments.

Federal Sources

Health and Social Transfers

Health and Social Transfers are up $24.8 million from budget, mainly due to increased funding resulting from the September 2004 10-year Plan to Strengthen Health Care.

Health and Social Transfers are up $97.2 million from the previous year, largely due to increased funding resulting from the 2003 health accord and the September 2004 10-year Plan to Strengthen Health Care.

Fiscal Equalization Payments

Fiscal equalization payments are up $240.9 million from budget due to positive in-year and prior-year adjustments resulting from new tax base and revenue data, and increased funding from the new federal Equalization framework announced in October 2004.

Fiscal equalization payments are up $306.2 million year-over-year due to increased in-year entitlements, including funding from the new federal framework, and prior-year adjustments.

Conditional Grants

Conditional Grants are up $40.2 million from budget mainly due to increased federal funding for health care.

Conditional Grants are up $32.9 million from the previous year mainly due to increased federal funding for health care and for the development of the broadband network.

EXPENSES

Education

Education expenses were $7.3 million higher than budget mainly due to Teachers' Pension Plan expense being higher than anticipated.

Education expenses were $3.4 million lower than 2003-2004 mainly due to a reduction in Teachers' Pension Plan expense. This was partially offset through increased investments in Schools District Operations and Assistance to Universities.

Health

Health expenses were $32.2 million higher than budget mainly due to increased expenses in Hospital Services, Out-of-Province Hospital Payments and Medicare.

8 PROVINCE OF NEW BRUNSWICK 2005

Health expenses were $48.5 million higher than 2003-2004 mainly due to increased expenses in Hospital Services, Medicare, the Prescription Drug Program and Out-of-Province Hospital Payments.

Family and Community Services

Family and Community Services expenses were $7.4 million higher than budget because of higher than projected costs for Child Protection and Long Term Care.

Family and Community Services expenses were $13.3 million higher than 2003-2004 primarily due to increased costs for Child Protection and Prevention and Nursing Homes.

Protection Services

Protection Services expenses were $4.8 million higher than budget mainly due to the Disaster Financial Assistance Program in Public Safety and increased expenses for Court Services in Justice.

Protection Services expenses were $6.0 million higher than 2003-2004 mainly due to increased expenses for Disaster Financial Assistance, Police, Fire and Emergency Services and Inspection Services in Public Safety and for Court Services in Justice.

Economic Development

Economic Development expenses were $17.6 million higher than budget mainly due to increased expenses in Business New Brunswick's Strategic Assistance program, Tourism and Parks’ Tourism Atlantic Marketing Initiative and Regional Development Corporation’s Canada/NB Infrastructure Program and Other Programs.

Economic Development expenses were $11.6 million higher than in 2003-2004 mainly due to increased expenses in Business New Brunswick’s Strategic Assistance program, Tourism and Parks’ Tourism Atlantic Marketing Initiative and Regional Development Corporation’s Canada/NB Infrastructure Program and Other Programs. These increases were partially offset by a reduction in Business New Brunswick’s Provision for Loss expense.

Employment Development and Labour

Employment Development and Labour expenses were $3.4 million higher than budget mainly due to higher than expected demand for contract training in the New Brunswick Community College network.

Resource Sector

Resource Sector expenses were $12.4 million higher than budget mainly due to increased expenses in Agriculture, Fisheries & Aquaculture’s Canadian Agricultural Income Stabilization program and the inclusion of NB Tire Stewardship Board expenses within this sector.

Resource Sector expenses were $7.8 million higher than in 2003-2004 mainly due to increased expenses in Agriculture, Fisheries & Aquaculture’s Canadian Agricultural Income Stabilization program.

Transportation

Transportation expenses were $2.3 million higher than 2003-2004 mainly due to increased spending in the Permanent Highways and Permanent Bridges programs.

2005 PROVINCE OF NEW BRUNSWICK 9

Central Government

Central Government expenses were $30.7 million higher than budget mainly due to investments in the University Infrastructure Trust Fund, the New Brunswick Innovation Trust Fund and increased costs in General Government’s Supplementary Funding Provision.

Central Government expenses were $29.8 million higher than 2003-2004 mainly due to investments in the University Infrastructure Trust Fund, the New Brunswick Innovation Trust Fund and increased costs in the Department of Supply and Services.

Service of the Public Debt

Service of the Public Debt expenses were $23.1 million lower than budget as a result of a larger foreign exchange gain in year than was anticipated at budget time. This gain was the result of the strengthening Canadian dollar.

Service of the Public Debt expenses were $2.0 million lower than in 2003-2004 mainly due to interest savings from refinancing and sinking fund redemptions that were partially offset by a smaller foreign exchange gain in 2004-2005.

10 PROVINCE OF NEW BRUNSWICK 2005

AUDITOR'S REPORT

To the Legislative Assembly 
Province of New Brunswick

I have audited the statement of financial position of the Province of New Brunswick as at 31 March 2005 and the statements of operations, cash flow and change in net debt for the year then ended. These financial statements are the responsibility of government. My responsibility is to express an opinion on these financial statements based on my audit.

I conducted my audit in accordance with Canadian generally accepted auditing standards. Those standards require that I plan and perform an audit to obtain reasonable assurance 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 government, as well as evaluating the overall financial statement presentation.

In my opinion, these financial statements present fairly, in all material respects, the financial position of the Province as at 31 March 2005 and the results of its operations and its cash flows for the year then ended in accordance with the accounting policies set out in Note 1 to the financial statements. As required by the Auditor General Act, I report that, in my opinion, these policies have been applied, after giving retroactive effect to the change in accounting for tangible capital assets and other non-financial assets, as explained in Note 3 to the financial statements, on a basis consistent with that of the preceding year.

K. D. Robinson, CA
Acting Auditor General

30 September 2005

Office of the Auditor General 
P.O. Box 758
Fredericton, New Brunswick E3B 5B4

2005 PROVINCE OF NEW BRUNSWICK 11

STATEMENT OF FINANCIAL POSITION
as at 31 March 2005

		(millions)
Schedule			2005		2004
	FINANCIAL ASSETS
1	Cash Net of Short Term Borrowing	$	148.3	$	9.8
2	Accounts and Interest Receivable		352.3		357.8
3	Taxes Receivable		392.0		466.6
4	Inventories for Resale		4.8		3.1
5	Loans and Advances		120.6		126.3
6	Investments		(170.5)		(146.4)
	Total Financial Assets		847.5		817.2
	LIABILITIES
7	Accounts Payable		687.8		602.7
8	Accrued Expenditures		882.5		836.2
	Unrealized Foreign Exchange Gains		39.9		22.8
9	Allowance for Losses		67.6		75.8
10	Deferred Revenue		323.9		294.4
11	Deposits Held in Trust		52.5		45.8
12	Obligations under Capital Leases (Note 7)		849.4		865.8
	Pension Liability (Note 13)		156.7		271.5
			3,060.30		3,015.1
	Funded Debt (Note 11)		11,713.6		11,583.8
	Borrowing for New Brunswick Electric Finance Corporation		(3,316.6)		(3,098.0)
	Funded Debt for Provincial Purposes		8,397.0		8,485.8
	Sinking Fund Investments		(3,773.8)		(3,716.2)
			4,623.2		4,769.6
	Total Liabilities		7,683.5		7,784.7
	NET DEBT		(6,836.0)		(6,967.5)
	NON-FINANCIAL ASSETS
	Tangible Capital Assets (Note 9)		4,746.7		4,650.0
4	Inventories of Supplies		38.1		40.2
13	Prepaid and Deferred Charges		127.3		111.2
	Total Non-Financial Assets		4,912.1		4,801.4
	ACCUMULATED DEFICIT	$	(1,923.9)	$	(2,166.1)
	Contingent Liabilities - See Note 14
	Commitments - See Note 15

The accompanying notes are an integral part of these Financial Statements.

Mike Ferguson, C.A. 
Comptroller

12 PROVINCE OF NEW BRUNSWICK 2005

STATEMENT OF OPERATIONS
for the fiscal year ended 31 March 2005

		(millions)
Schedule			2005  Budget		2005 Actual		2004 Actual
	REVENUE
	Provincial Sources
14	Taxes on Consumption	$	1,133.1	$	1,059.3	$	1,139.5
	Taxes on Property		326.6		334.1		303.9
15	Taxes on Income		1,135.8		1,176.1		1,056.6
16	Other Taxes		97.0		94.7		103.4
17	Licenses and Permits		103.5		103.0		104.1
18	Royalties		68.2		70.7		70.4
19	Investment Income		270.0		283.7		252.7
20	Other Provincial Revenue		291.2		284.0		271.6
	Sinking Fund Earnings		228.0		221.6		222.5
			3,653.4		3,627.2		3,533.7
	Federal Sources
	Health and Social Transfers		617.6		642.4		545.2
	Fiscal Equalization Payments		1,154.6		1,395.5		1,089.3
	Other Unconditional Grants - Canada		1.9		1.9		1.9
21	Conditional Grants - Canada		252.6		292.8		259.9
			2,026.7		2,332.6		1,896.3
			5,680.1		5,959.8		5,430.0
	EXPENSE
22	Education		1,049.9		1,057.2		1,060.6
23	Health		1,804.8		1,837.0		1,788.5
24	Family and Community Services		722.5		729.9		716.6
25	Protection Services		146.4		151.2		145.2
26	Economic Development		161.0		178.6		167.0
27	Employment Development and Labour		225.9		229.3		229.0
28	Resource Sector		154.4		166.8		159.0
29	Transportation		289.4		288.5		286.2
30	Central Government		467.5		498.2		468.4
	Service of the Public Debt (Note 12)		604.0		580.9		582.9
			5,625.8		5,717.6		5,603.4
	ANNUAL SURPLUS (DEFICIT)		54.3		242.2		(173.4)
	ACCUMULATED DEFICIT - BEGINNING OF YEAR		(2,166.1)		(2,166.1)		(1,992.7)
	ACCUMULATED DEFICIT - END OF YEAR	$	(2,111.8)		(1,923.9)	$	(2,166.1)

The accompanying notes are an integral part of these Financial Statements.  

2005 PROVINCE OF NEW BRUNSWICK 13

STATEMENT OF OPERATIONS
for the fiscal year ended 31 March 2005

	(millions)
		2005		2004
OPERATING ACTIVITIES
Surplus / (Deficit)	$	242.2	$	(173.4)
Non Cash Items
Amortization of Premiums, Discounts and Issue Expenses		7.1		7.4
Foreign Exchange Expense		(21.8)		(40.3)
Increase in Allowance for Doubtful Accounts		77.5		71.2
Amortization of Tangible Capital Assets		193.4		269.1
Loss on Disposal of Tangible Capital Assets		2.3		---
Sinking Fund Earnings		(221.6)		(222.5)
Losses on Foreign Exchange Settlements		10.5		(25.8)
Decrease in Pension Liability (Note 13)		(114.8)		(90.6)
Increase in Deferred Revenue		29.4		6.6
(Increase) Decrease in Working Capital		140.9		124.3
Net Cash From Operating Activities		345.1		(74.0)
INVESTING ACTIVITIES
Increase in Investments, Loans and Advances		(1.3)		57.7
Net Cash Used in Investing Activities		(1.3)		57.7
CAPITAL TRANSACTIONS
Acquisition of Capital Assets		(326.7)		(248.8)
Revenue Received to Acquire Tangible Capital Assets		34.3		49.9
Net Cash Used in Capital Transactions		(292.4)		(198.9)
FINANCING ACTIVITIES
Proceeds from Issuance of Funded Debt		567.1		617.7
Received from Sinking Fund for Redemption of Debentures and       Payment of Exchange		292.2		171.2
Increase (Decrease) in Obligations under Capital Leases		(16.4)		(7.8)
Sinking Fund Installments		(128.3)		(121.8)
Funded Debt Matured		(627.5)		(407.5)
Net Cash From Financing Activities		87.1		251.8
INCREASE IN CASH DURING YEAR		138.5		36.6
CASH POSITION - BEGINNING OF YEAR		9.8		(26.8)
CASH POSITION - END OF YEAR	$	148.3	$	9.8
CASH REPRESENTED BY
Cash Net of Short Term Borrowing	$	148.3	$	9.8

                                       The accompanying notes are an integral part of these Financial Statements. 

14 PROVINCE OF NEW BRUNSWICK 2005

STATEMENT OF CHANGE IN NET DEBT
for the fiscal year ended 31 March 2005

	(millions)
		2005 Actual		2004 Actual
NET DEBT - BEGINNING OF YEAR
As Previously Published	$	(6,816.1)	$	(6,712.9)
Prior Year's Adjustments
Inventories of Supplies to Non-Financial Assets		(40.0)		(40.7)
Prepaids to Non-Financial Assets		(111.2)		(125.6)
RESTATED NET DEBT - BEGINNING OF YEAR		(6,967.5)		(6,879.2)
CHANGES IN YEAR
Annual Surplus (Deficit)		242.2	$	(173.4)
Acquisition of Tangible Capital Assets		(326.7)		(248.8)
Amortization of Tangible Capital Assets		193.4		269.1
Losses on Sales of Tangible Capital Assets		2.3		---
Revenue Received to Acquire Tangible Capital Assets		34.3		49.9
Acquisition of Supplies Inventories		(38.1)		(40.2)
Increase in Prepaid Expenses		(127.3)		(111.2)
Consumption of Supplies Inventories		40.2		40.7
Use of Prepaid Expenses		111.2		125.6
(INCREASE) DECREASE IN NET DEBT		131.5		(88.3)
NET DEBT - END OF YEAR	$	(6,836.0)	$	(6,697.5)

                                        The accompanying notes are an integral part of these Financial Statements.

2005 PROVINCE OF NEW BRUNSWICK 15

NOTES TO THE FINANCIAL STATEMENTS 
31 March 2005

NOTE 1        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Provincial Reporting Entity

In these financial statements, the Province is defined as the Provincial Reporting Entity. The Provincial Reporting Entity is comprised of certain organizations that are controlled by the government. These organizations are the Consolidated Fund, the General Sinking Fund, the Fiscal Stabilization Fund and certain agencies, commissions and corporations. The agencies, commissions and corporations included in this definition are identified below.

Transactions and balances of organizations are included in these financial statements through one of the following accounting methods:

Consolidation method - This method combines the accounts of distinct organizations. It requires uniform accounting policies for the organizations. Inter-organizational balances and transactions are eliminated under this method. This method reports the organizations as if they were one organization.

Modified equity method - This method is used for government enterprises. Government enterprises are defined in Note 8 to these financial statements. The modified equity method reports a government enterprise’s net assets as an investment in the Province’s Statement of Financial Position. The net income of the government enterprise is reported as investment income in the Province’s Statement of Operations. Inter-organizational transactions and balances are not eliminated. All gains or losses arising from inter-organizational transactions between government enterprises and other government organizations are eliminated. The accounting policies of government enterprises are not adjusted to conform with those of other government organizations.

Transaction method - This method records only transactions between the Province and the other organizations.

Organizations that have been included in the Provincial Reporting Entity through consolidation are:

Algonquin Golf Limited;
 Algonquin Properties Limited; 
Arts Development Trust Fund; 
Environmental Trust Fund; 
Fiscal Stabilization Fund; 
Forest Protection Limited;
New Brunswick Credit Union Deposit Insurance Corporation; 
New Brunswick Distance Education Network Inc.; 
New Brunswick Highway Corporation; 
New Brunswick Housing Corporation; 
New Brunswick Investment Management Corporation; 
New Brunswick Tire Stewardship Board; 
Regional Development Corporation; 
Regional Health Authorities; 
Service New Brunswick; 
Sport Development Trust Fund.

16 PROVINCE OF NEW BRUNSWICK 2005

NOTES TO THE FINANCIAL STATEMENTS
31 March 2005

Government enterprises that have been included in these financial statements through modified equity accounting are:

Lotteries Commission of New Brunswick; 
New Brunswick Electric Finance Corporation; 
New Brunswick Liquor Corporation; 
New Brunswick Municipal Finance Corporation; 
New Brunswick Power Holding Corporation; 
New Brunswick Securities Commission.

Certain organizations that are accountable to the Legislature have been included through the transaction method. The transaction method was used because the appropriate methods would not produce a materially different result. The determination of which entities to exclude because of materiality was made by Board of Management. The organizations included through the transaction method are:

Advisory Council on the Status of Women;
Board of Commissioners of Public Utilities of New Brunswick; 
Fundy Linen Services Inc.; 
Kings Landing Corporation; 
New Brunswick Advisory Council on Youth; 
New Brunswick Arts Board; 
New Brunswick Crop Insurance Commission; 
New Brunswick Insurance Board; 
New Brunswick Museum; 
New Brunswick Public Libraries Foundation; 
New Brunswick Research and Productivity Council; 
Premier's Council on the Status of Disabled Persons; 
Provincial Holdings Ltd.; 
Strait Crossing Finance Inc.

b) Significant Accounting Policies

Accrual Accounting

Expenses are recorded for all goods and services received during the fiscal year.

Revenue from Canada under the Federal-Provincial Fiscal Arrangements and Federal Post-Secondary Education and Health Contributions Act, 1977, and the Canada-New Brunswick Tax Collection Agreement is accrued based on information provided by Canada and is subject to adjustment in future years.

All other revenues and recoveries are recorded on an accrual basis.

2005 PROVINCE OF NEW BRUNSWICK 17

NOTES TO THE FINANCIAL STATEMENTS
31 March 2005

Debt Charges

Interest and other debt service charges are reported in the Statement of Operations as Service of the Public Debt except as described below:

Because government enterprises are included in the Provincial Reporting Entity through modified equity accounting, the cost of servicing their debt is not included in the Service of the Public Debt expense. The cost of servicing the debt of government enterprises is an expenditure included in the calculation of their net profit or loss for the year.

Interest costs imputed on the Province’s Accrued Pension Liability are recorded as part of pension expense, which is included in various expenditure functions.

Interest earned on the assets of the General Sinking Fund and on other provincial assets is reported as revenue.

Note 12 to these financial statements reports the components of the Service of the Public Debt Expense function and total debt charges.

Government Transfers

Government transfers are transfers of money, such as grants, from a government to an individual, an organization or another government for which the government making the transfer does not receive any goods or services directly in return.

Government transfers are recognized in the Province's financial statements as expenses or revenues in the period that the events underlying the transfer occurred. Liabilities have been established for any transfers due at 31 March 2005 for which the intended recipients have met the eligibility criteria. Receivables have been established for transfers to which the Province is entitled under governing legislation, regulation or agreement.

During the year ended 31 March 2005, funding of $24.0 million for Diagnostic and Medical Equipment was received from Canada. $7.9 million of this amount has been deferred to 2006.

Tangible Capital Assets

Tangible capital assets are assets owned by the Province which have useful lives greater than one year. Commencing in 2005, capital assets are being reported on the Statement of Financial Position. Certain dollar thresholds have been established for practical purposes. Computer hardware and software have not been capitalized in the Province’s financial statements.

Tangible capital assets are reduced by the amount of revenue received to assist in the purchase or construction of those assets. Both the assets and restated reduction are being amortized over the useful lives of the assets at the rates indicated in Note 9.

Short Term Investments

Short term investments are recorded at cost.

Allowances

Allowances have been established for accounts receivable, loan guarantees and other possible losses. These allowances are disclosed in the schedules to the financial statements.

18 PROVINCE OF NEW BRUNSWICK 2005

NOTES TO THE FINANCIAL STATEMENTS
31 March 2005

Concessionary Loans

There are two situations where the Province charges loan disbursements entirely as expenses. These are:

Loan agreements which commit the Province to provide future grants to the debtor to be used to repay the loan.

Loan agreements which include forgiveness provisions if the forgiveness is considered likely.

In both these situations, the loan is charged to expense when it is disbursed.

Loans that are significantly concessionary because they earn a low rate of return are originally recorded as assets at the net present value of the expected future cash flows. The net present value is calculated using the Province’s borrowing rate at the time the loan was issued. The difference between the nominal value of the loan and its net present value is recorded as an expense.

Inventories

Inventories are recorded at the lower of cost or net realizable value. Inventories include supplies for use, and goods and properties held for resale. Properties held for resale are reported as a financial asset and include land and fixtures acquired or constructed for the purpose of sale. Properties held for resale also include properties acquired through foreclosure. Properties acquired through foreclosure which have not been disposed of within two fiscal year ends of repossession are removed from inventory and are recorded as expenditure.

Inventories of supplies for use are reported as a non financial asset.

Deferred Revenue

Amounts received or recorded as receivable but not earned by the end of the fiscal year are recorded as deferred revenue.

Deposits Held in Trust

Any funds remitted to the Province and held in trust for specified persons are included in both the financial assets and liabilities of the Province. Legally established trust funds which the Province administers but does not control are not included as Provincial assets or liabilities. Note 17 to these financial statements discloses the equity balances of the trust funds administered by the Province.

Borrowing on Behalf of New Brunswick Electric Finance Corporation

The Province, as represented by the Consolidated Fund, has issued long term debt securities on behalf of New Brunswick Electric Finance Corporation in exchange for debentures with like terms and conditions.

The New Brunswick Electric Finance Corporation debentures received by the Province are reported in the Statement of Financial Position as a reduction of Funded Debt. This financing arrangement was used to obtain more favourable debt servicing costs. The transactions involving these securities, including the debt servicing costs, are not part of the budget plan of the Province’s Consolidated Fund.

2005 PROVINCE OF NEW BRUNSWICK 19

NOTES TO THE FINANCIAL STATEMENTS
31 March 2005

Foreign Currency Translation

The Province's assets, liabilities and contingent liabilities denominated in foreign currencies are translated to Canadian dollars at the year end rates of exchange, except where such items have been hedged or are subject to interest rate and currency swap agreements. In such cases, the rates established by the hedge or the agreements are used in the translation. Revenue and expense items are translated at the rates of exchange in effect at the respective transaction dates.

Exchange gains and losses are included in the Statement of Operations except for the unrealized exchange gains and losses arising on the translation of long term items, which are deferred and amortized on a straight line basis over the remaining life of the related assets or liabilities.

Leases

Long term leases, under which the Province, as lessee, assumes substantially all the benefits and risks of ownership of leased property, are classified as capital leases although certain minimum dollar thresholds are in place for practical reasons. The present value of a capital lease is accounted for as a tangible capital asset and an obligation at the inception of the lease.

All leases under which the Province does not assume substantially all the benefits and risks of ownership related to the leased property are classified as operating leases. Each rental payment required by an operating lease is recorded as an expense when it is due.

Measurement Uncertainty

Measurement uncertainty is uncertainty in the determination of the amount at which an item is recognized in financial statements. This uncertainty exists when there is a variance between the recognized amount and another reasonably possible amount. Many items in these financial statements have been measured using estimates. Those estimates have been based on assumptions that reflect economic conditions.

Some examples of where measurement uncertainty exists are the establishment of allowances for doubtful accounts, the determination of pension expense and the calculation of transition balances for Tangible Capital Assets.

NOTE 2     BUDGET

The budget amounts included in these financial statements are the amounts published in the Main Estimates, adjusted for transfers from the Supplementary Funding Provision Program and elimination of inter-account transactions.

The Supplementary Funding Provision Program is an appropriation which provides funding to other programs for costs associated with contract settlements and other requirements not budgeted in a specific program.

Budget figures for the year ending 31 March 2005 have also been adjusted for the acquisition of tangible capital assets and amortization expense. These amounts are disclosed in the Main Estimates as a separate schedule.

20 PROVINCE OF NEW BRUNSWICK 2005

NOTES TO THE FINANCIAL STATEMENTS 
31 March 2005

NOTE 3     CHANGE IN ACCOUNTING POLICY

The Province adopted Tangible Capital Asset reporting in 2005 in accordance with the Public Sector Accounting Board (PSAB) guidelines. No change to Net Debt resulted from this change; however, the Province now reports another figure, Accumulated Deficit. This amount represents Net Debt less non financial assets.

As a result of this adoption, the prior year revenue was reduced by $49.8 million relating to grants for capital assets that were netted against the asset cost. Expenditures have been restated to the expense basis resulting in an increase of $20.5 million. This amount consists of $269.1 million of amortization expense less $248.6 million of costs that were capitalized.

The Province has reclassified supplies inventory and prepaid and deferred charges as non financial assets in accordance with PSAB. This resulted in an increase in Net Debt at 31 March 2003 of $166.3 million and at 31 March 2004 of $151.4 million. There was no impact on the annual surplus.

NOTE 4     BALANCING OF EXPENDITURE AND REVENUE

The Province’s Balanced Budget Act requires that total expenditures not exceed total revenues for the period commencing 1 April 2004 and ending 31 March 2008.

That Act stipulates that any change made within the last fifteen months of the period from 1 April 2004 to 31 March 2008, or after completion of that period, in relation to the official estimates by the Government of Canada for provincial entitlements under the Federal-Provincial Fiscal Arrangements and Federal Post-Secondary Education and Health Contributions Act or the Canada-New Brunswick Tax Collection Agreement, shall not be taken into account.

The difference for the period ending 31 March 2005 between revenue and expenditure is as follows:

	(millions)
	2005 Actual
Revenue per Statement of Operations Adjustment	$  5,959.8
Revenue to acquire tangible capital assets	34.3
Total Revenue	5,994.1
Expense per Statement of Operations	5,717.6
Adjustments
Expenditures capitalized	326.7
Amortization of tangible capital assets	(193.4)
Losses on sales of tangible capital assets	(2.3)
Change in other non-financial assets	14.0
Total Expenditure	5,862.6
Surplus for the year Balanced Budget Act	$    131.5

2005 PROVINCE OF NEW BRUNSWICK 21

NOTES TO THE FINANCIAL STATEMENTS 
31 March 2005

NOTE 5     LOANS AND ADVANCES

In addition to establishing budgets for various revenue and expenditure classifications, the Province budgets disbursements and recoveries for loans and advances. The budgeted amounts and actual results for the year ended 31 March 2005, and the actual results for the year ended 31 March 2004 are as follows:

	(millions)
	2005	2005	2004
	Budget	Actual	Actual
Disbursements
Agricultural Development Act	$   3.0	$   ---	$   0.2
Economic Development Act	42.0	18.2	13.3
Fisheries Development Act	5.0	1.3	0.5
Housing	5.4	4.9	4.8
Municipal Assistance Act	1.0	0.9	---
Veteran's Affairs	---	---	0.9
Other	1.6	---	---
Total Disbursements	58.0	25.3	19.7
Recoveries
Agricultural Development Act	1.1	1.5	0.5
Economic Development Act	9.5	11.2	25.8
Municipalities	0.3	0.3	0.3
Fisheries Development Act	2.8	3.7	2.9
Housing	4.4	4.9	4.2
Provincial Holdings Ltd.	0.3	0.3	0.3
Veterans' Affairs	1.4	1.4	1.3
Other	0.4	0.3	0.3
Total Recoveries	20.2	23.6	35.6
Net Loans and Advances	$   37.8	$   1.7	$   (15.9)

22 PROVINCE OF NEW BRUNSWICK 2005

NOTES TO THE FINANCIAL STATEMENTS 
31 March 2005

NOTE 6     SPECIAL PURPOSE ACCOUNTS

Special Purpose Account revenue earned but not spent accumulates as a surplus in that account and may be spent in future years for the purposes specified. At 31 March 2005, the accumulated surplus in all Special Purpose Accounts totaled $78.3 million ($72.2 million 2004). This total is a component of net debt and accumulated deficit. The following table summarizes the change in the accumulated Special Purpose Account surplus.

		(millions)
	2004	2005
	Accumulated  Surplus	Revenue	Expense	Accumulated Surplus
Education
Canada Student Loans	$   0.4	$   10.5	$   10.7	$   0.2
Fred Magee Account	0.3	---	---	0.3
Library Account	0.3	0.4	0.4	0.3
Scholarship and Trusts	---	0.1	0.1	---
Self Sustaining Accounts	5.4	10.0	8.4	7.0
Environment and Local Government
Environmental Trust Fund	3.5	5.7	5.2	4.0
Family and Community Services
CHMC Funding	45.4	7.4	4.1	48.7
Finance
Strait Crossing Finance Inc.	---	0.1	0.1	---
General Government
Active Community School Sport Project	0.2	0.2	0.3	0.1
Arts Development Trust Fund	---	0.7	0.7	---
Historic Places	---	0.4	0.5	(0.1)
Sport Development Trust Fund	0.1	0.5	0.5	0.1
Health and Wellness
Hospital Liability Protection Amount	0.5	4.2	4.6	0.1
Medical Research Assistance Account	3.1	0.1	---	3.2
Justice
Child Centered Family Justice Fund	0.3	0.2	0.5	---
Natural Resources
Grand Lake Meadows	0.3	---	---	0.3
Trail Management Trust Fund	0.7	1.0	0.6	1.1
Wildlife Trust Fund	1.3	1.0	1.2	1.1
Recoverable Projects	---	0.1	0.1	---
Public Safety
Municipal Police Assistance	0.4	2.3	1.0	1.7
National Safety Code Agreement	0.1	0.1	0.2	---
Suspended Driver - Alcohol Re-education	---	0.3	0.3	---
Victim Services Account	0.1	1.5	1.2	0.4
Supply and Services
Land Management Account	6.2	1.2	1.1	6.3
Public/Private Partnership Projects	0.2	---	---	0.2
Renovation of Old Government House	0.3	---	---	0.3
Tourism and Parks
Parlee Beach Maintenance	---	0.1	0.1	---
Training and Employment Development
Connect NB	0.2	---	0.2	---
Johann Wordel Account	0.1	---	---	0.1
NB Community College Scholarship Account	0.5	0.1	---	0.6
Recoverable Projects	2.3	0.2	0.2	2.3
	$   72.2	$   48.4	42.3	$   78.3

2005 PROVINCE OF NEW BRUNSWICK 23

NOTES TO THE FINANCIAL STATEMENTS
31 March 2005

NOTE 7     OBLIGATIONS UNDER CAPITAL LEASES

The total future principal and interest payments for capital leases amount to $1,768.8 million ($1,847.5 million 2004). That amount includes $849.4 million ($865.8 million 2004) in principal and $919.3 million ($981.7 million 2004) in interest.

Minimum annual principal and interest payments in each of the next five years are as follows:

Fiscal Year	(millions)
2005-2006	$   76.1
2006-2007	76.6
2007-2008	76.3
2008-2009	76.3
2009-2010	76.7

NOTE 8     GOVERNMENT ENTERPRISES

A Government Enterprise is an organization accountable to the Legislative Assembly that has the power to contract in its own name, has the financial and operating authority to carry on a business, sells goods and services to customers outside the Provincial Reporting Entity as its principal activity, and that can, in the normal course of its operations, maintain its operations and meet its liabilities from revenues received from sources outside the Provincial Reporting Entity.

The following is a list of Government Enterprises, and their fiscal year ends, which are included in the Provincial Reporting Entity as described in note 1 a) to these financial statements.

Lotteries Commission of New Brunswick (Lotteries)	31-03-05
New Brunswick Liquor Corporation (Liquor)	31-03-05
New Brunswick Municipal Finance Corporation (Municipal Finance)	31-12-04
New Brunswick Electric Finance Corporation (NB Electric Finance)	31-03-05
New Brunswick Power Holding Corporation (NB Power)	31-03-05
New Brunswick Securities Commission (Securities)	31-03-05

The following table presents condensed financial information of these Government Enterprises.

24 PROVINCE OF NEW BRUNSWICK 2005

NOTES TO THE FINANCIAL STATEMENTS
31 March 2005

	Lotteries	Liquor	Municipal Finance	NB Electric Finance	NB Power	Securities
Assets
Cash and Equivalents	$     ---	$     0.2	$     1.1	$         0.1	$         4.0	$   1.0
Receivables	0.2	1.7	5.1	57.7	217.0	0.1
Prepaids	---	0.5	---	---	3.0	---
Inventories	---	17.3	---	---	106.0	---
Investments	---	---	---	140.5	---	---
Deferred Charges	---	1.9	---	46.2	71.0	---
Fixed Assets	---	10.5	---	---	3,237.0	---
Long Term Notes  Receivables	---	---	---	2,815.5	---	---
Other Assets	---	---	466.6	339.8	200.0	0.6
Total Assets	$   0.2	$   32.1	$   472.8	$   3,399.8	$   3,399.8	$   1.7
Liabilities
Short Term  Indebtedness	$    ---	$    ---	$    ---	$   422.0	$   340.0	$   ---
Payables	---	17.5	5.2	76.7	259.0	0.1
Reserves	---	---	---	---	---	0.4
Long Term Debt	---	2.9	466.6	3,522.8	2,816.0	---
Sinking Funds	---	---	---	(434.9)	---	---
Deferred Liabilities	---	---	---	---	323.0	---
Total Liabilities	$   ---	$   20.4	$   471.8	$   3,586.6	$   3,738.0	$   0.5
Equity
Capital Stock	$   ---	$   ---	$   ---	$   ---	$   140.0	$   ---
Contributed Surplus	---	---	---	---	187.0	---
Retained Earnings	0.2	11.7	1.0	(186.8)	(191.0)	1.2
Total Equity	0.2	11.7	1.0	(186.8)	136.0	2.2
Total Liabilities and  Equity	$   0.2	$   32.1	$   472.8	$   3,399.8	$   3,3874.0	$   1.7
Net Income
Revenue	$   122.8	$   331.0	$   23.5	$   137.2	$   1,403.0	$   6.1
Expenses	(4.6)	(209.2)	(0.1)	(15.3)	(1,187.0)	(1.7)
Interest Expense	---	---	(23.3)	(122.1)	(202.0)	---
Special Payments	---	---	---	---	(5.0)	---
Net Income	$   118.2	$   121.8	$   0.1	$   (0.2)	$   9.0	$   4.4

The financial information of Government Enterprises is prepared according to generally accepted accounting principles, using accounting policies that are appropriate for the industry segment in which they operate. These accounting policies may not be consistent with accounting policies used by other member organizations of the Provincial Reporting Entity.

Because minor adjustments are required for timing differences, the net income amounts reported in the financial statements of government enterprises may vary slightly from the investment income reported in the Province’s Statement of Operations.

2005 PROVINCE OF NEW BRUNSWICK 25

NOTES TO THE FINANCIAL STATEMENTS
 31 March 2005

Lotteries Commission of New Brunswick

The Lotteries Commission of New Brunswick is a shareholder in Atlantic Lottery Corporation Inc. and in the Interprovincial Lottery Corporation. Atlantic Lottery Corporation Inc. is jointly owned by the four Atlantic Provinces and is responsible to develop, organize, undertake, conduct and manage lotteries in Atlantic Canada. Atlantic Lottery Corporation Inc. also markets and handles the products of the Interprovincial Lottery Corporation. The Interprovincial Lottery Corporation is a corporation jointly owned by the ten Canadian provinces.

New Brunswick Liquor Corporation

The New Brunswick Liquor Corporation was established under the New Brunswick Liquor Corporation Act. Its business activity is the purchase, distribution and sale of alcoholic beverages throughout the Province of New Brunswick.

New Brunswick Municipal Finance Corporation

The Municipal Finance Corporation was established under the New Brunswick Municipal Finance Corporation Act. Its purpose is to provide financing for municipalities and municipal enterprises through a central borrowing authority.

New Brunswick Electric Finance Corporation

New Brunswick Electric Finance Corporation is a Crown Corporation formed to assume New Brunswick Power's existing debt, to capitalize the new companies with debt and equity to enable them to become financially independent of Government, and to receive interest, dividend and special payments (in lieu of taxes) to enable it to service and repay the debt it has assumed.

The New Brunswick Electric Finance Corporation (NBEFC) includes the NBPHC using the modified equity method. At 31 March 2005 it had included $0.5 million of net income from NBPHC. In the preceding table, the amounts disclosed as Short Term Indebtedness and Long Term Debt for NBPHC are also shown as Long Term Notes Receivables and Other Assets by NBEFC. The $140.5 million shown by NBEFC as an investment is equal to the amount of Capital Stock of NBPHC plus all earnings of the corporation subsequent to 30 September 2004. In addition, $3,316.6 million of the amount shown as Long Term Debt of NBEFC has been borrowed by the Province and is shown on the Statement of Financial Position as a reduction of Funded Debt.

New Brunswick Power Holding Corporation

The New Brunswick Power Corporation was established as a Crown Corporation of the Province of New Brunswick in 1920 by enactment of the New Brunswick Electric Power Act. On October 1, 2004 the Province of New Brunswick proclaimed the Electricity Act which resulted in the reorganization of NB Power and the restructuring of the electricity industry in New Brunswick. NB Power was continued as New Brunswick Power Holding Corporation (NBPHC) with four new subsidiary operating companies which commenced operations on that date.

NB Power Holding Corporation provides for the continuous supply of energy adequate for the needs and future development of the Province, and promotes economy and efficiency in the distribution, supply, sale and use of power.

26 PROVINCE OF NEW BRUNSWICK 2005

NOTES TO THE FINANCIAL STATEMENTS
31 March 2005

New Brunswick Securities Commission

The New Brunswick Securities Commission is a Provincial Corporation under the Securities Act (New Brunswick) established on July 1, 2004. The business of the Commission is the regulation of the New Brunswick capital market, including administration of the Act, the Securities Regulation and the New Brunswick Securities Commission rules.

NOTE 9     TANGIBLE CAPITAL ASSETS

Tangible capital assets include acquired, built, developed and improved tangible assets, whose useful life extends beyond the fiscal year and which are intended to be used on an ongoing basis for producing goods or delivering services. Computer hardware and software are not included for the year ended March 31, 2005.

Certain assets which have historical or cultural value, including works of art, historical documents and historical and cultural artifacts are not recognized as tangible capital assets. Assets under construction are not amortized until the asset is available to be put into service.

Calculation of opening balances included, where available, acquisition totals reported in Public Accounts from 1973 to 2004. These numbers were reduced for related revenue recoveries, grants, maintenance costs and other non capital expenditures. Surfacing costs have been segregated starting in 2005. Prior to 2005, these costs are included in roads and highways and bridges.

Tangible capital assets are amortized on a straight-line basis over their estimated useful lives using the rates noted below. One-half of the annual amortization is charged in the year of acquisition and in the year of disposal.

The following table summarizes the net book value of tangible capital assets.

Summary of Net Book Value

	(millions)
	2005				2004
	Estimated  Useful Life (Yrs.)	Cost	Accumulated  Amortization	Net Book  Value	Net Book Value
Land	Indefinite	$   297.2	$   ---	$   297.2	$   286.9
Roads and Highways	40-50	3,439.3	975.2	2,464.1	2,527.5
Bridges	40-50	588.4	219.4	369.1	374.0
Surfacing	20	58.7	1.5	57.2	---
Ferries	40	12.0	3.8	8.1	7.0
Land Improvements	20-25	54.7	41.7	13.1	12.4
Buildings	20-40	2,177.9	952.1	1,225.7	1,236.8
First Time Equipping	5	7.4	5.2	2.2	2.3
Motor Vehicles	5	261.1	171.2	89.9	83.3
Machinery and Equipment	5-15	421.2	293.2	128.0	115.6
Water Management Systems	20-50	6.5	0.3	6.2	4.1
Assets Under Construction	n/a	85.4	---	85.4	---
Other	Various	0.5	---	0.5	0.1
Total		$7,410.3	$2,663.6	$4,746.7	$4,650.0

2005 PROVINCE OF NEW BRUNSWICK 27

NOTES TO THE FINANCIAL STATEMENTS 31 
March 2005

NOTE 10     BORROWING AUTHORITY

a) Balance of Borrowing Authority under the Provincial Loans Act

The balance of borrowing authority granted under the Provincial Loans Act is as follows:

	(millions)
	Balance 2004	Authority Granted During the  Year	Borrowing  During the Year	Balance  2005
Loan Act 2001	$    94.0	$        ---	$     94.0	$         ---
Loan Act 2003	400.0	---	150.0	250.0
Loan Act 2004	---	300	---	300.0
	$ 494.0	$ 300.00	$  244.0	$  550.0

Under the authority of section 2 of the Provincial Loans Act, the maximum temporary indebtedness of the Province is $ 1,400.0 million. At 31 March 2005, the cash position of the Province net of bank advances and short term borrowing was $148.3 million.

Under the authority of subsection 3(1) of the Provincial Loans Act, the Province may borrow sums required for the repayment, refinancing or renewal of securities issued or for the payment of any loan or liability, repayment of which is guaranteed by the Province. This authority is in addition to the authorities listed above.

b) Borrowing by the Municipal Finance Corporation

The New Brunswick Municipal Finance Corporation has authority under the New Brunswick Municipal Finance Corporation Act to provide financing for municipalities and municipal enterprises. As at 31 December 2004, long term debt owed by the corporation was $466.6 million.

28 PROVINCE OF NEW BRUNSWICK 2005

NOTES TO THE FINANCIAL STATEMENTS 
31 March 2005

NOTE 11     FUNDED DEBT OUTSTANDING

The following is a maturity schedule for the total amount of the Province’s Funded Debt.

		(millions)
Fiscal Year of  Maturity	Interest Rate (%) Range	Currency  Amount	Total Funded Debt	NB Electric Finance Corporation	Funded Debt For Provincial Purposes
2005-2006	6.5 3.0-12.6	US $150.0 CAN $682.1	$  189.7 682.1	$   --- (436.0)
			871.8	(436.0)	$  435.8
2006-2007	5.6 3.4-10.0	Sfr   100.0 CAN $766.5	104.4 766.5	--- (106.0)
			870.9	(106.0)	764.9
2007-2008	3.8-11.1	CAN $892.6	892.6	(355.3)	537.3
2008-2009	4.3-10.4	CAN $1,011.3	1,011.3	(150.0)	861.3
209-2010	4.5-10.3	CAN $1,122.7	1,122.7	(400.0)	722.7
210-2011 & After	6.8-9.8 4.5-11.0	US  $800.0 CAN $5,976.6	967.7 5,976.6	(544.3) (1,325.0)
			6,944.3	(1,869.3)	5,075.0
Funded Debt before Sinking Fund Investments			11,713.6	(3,316.6)	8,397.0
Less: Sinking Fund Investments			4,165.4	(391.6)	3,773.8
Funded Debt Outstanding			$  7,548.2	$  (2,925.0)	$  4,623.2

2005 PROVINCE OF NEW BRUNSWICK 29

NOTES TO THE FINANCIAL STATEMENTS
31 March 2005

Pursuant to section 12 of the Provincial Loans Act, the Minister of Finance maintains a General Sinking Fund for the repayment of funded debt either at maturity or upon redemption in advance of maturity. At 31 March 2005, the equity of the General Sinking Fund accumulated for the repayment of Provincial Debt was $3,773.8 million ($3,716.2 million 2004). Some of the assets of this Fund are bonds and debentures issued or guaranteed by the Province of New Brunswick. The provincial net book value of these investments at 31 March 2005 was $1,647.7 million ($1,565.6 million 2004).

Because government enterprises are included in the reporting entity through modified equity accounting, long term debt issued directly by those enterprises is not included in the amount of Funded Debt Outstanding. Note 8 to these financial statements discloses the long term debt obligations of government enterprises.

The following amounts, which are payable swap agreements, have been included in the preceding funded debt maturity schedule. They have been reflected in that schedule in the currency payable per each financial swap agreement.

	(millions) 2005
Fiscal Year of Maturity	Amount Payable in Original Currency	Amount Payable Per Financial Swap Agreement	Canadian Dollar Equivalent
2006-2007	CAN $  95.1	Sfr   100.0	$   104.4
2007-2008	US  $  500.0	CAN  $ 791.5	791.5
			$   895.9

The swap agreements are interest rate and currency swap agreements except the Sfr 100.0 issue due 2006-2007 which is a currency swap agreement only.

The following estimated payments are required in each of the next five years to meet the sinking fund provisions of existing debt.

Fiscal Year	(millions)
2005-2006	$  123.4
2006-2007	115.3
2007-2008	106.6
2008-2009	92.1
2009-2010	87.8

30 PROVINCE OF NEW BRUNSWICK 2005

NOTES TO THE FINANCIAL STATEMENTS 
31 March 2005

NOTE 12    DEBT CHARGES 

Employees of the Province and certain other entities, as well as members of the Legislative Assembly, are entitled to receive pension benefits. The Pension plans under which these benefits are received are as follows:

	(millions)
	2005	2004
Interest	$  756.9	$  766.2
Interest on Fredericton - Moncton Highway Capital Lease	57.5	58.1
Interest on Other Capital Leases	2.3	2.3
Foreign Exchange Expense	(21.7)	(40.3)
Other Expenses	1.9	2.1
	796.9	788.4
Interest Recovery for Debt Incurred for the New Brunswick Power Corporation	(216.0)	(205.5)
Service of the Public Debt	580.9	582.9
Sinking Fund Earnings	(221.6)	(222.5)
Debt Charges before Pension Interest	359.3	360.4
Pension Interest Charged	17.6	85.4
	$  376.9	$  445.8

NOTE 13    PENSION PLANS

a)  Description

Employees of the Province and certain other entities, as well as members of the Legislative Assembly, are entitled to receive pension benefits.  The Pension plans under which these benefits are received are as follows: 

Plan Name	Date of Latest Actuarial Valuation for Accounting Purposes
Public Service Superannuation Plan (PSSA)	01 April 2004
Teachers' Pension Plan (TPA)	01 April 2004
Provincial Court Act and Provincial Court           Judges' Pension Act (Judges')	01 April 2004
Members' Superannuation Plan and Members'           Pension Plan (Members')	01 April 1996
Pension Plan for Canadian Union of Public Employees of           New Brunswick Hospitals (H-CUPE)	---
Pension Plan for Management Employees of New Brunswick           School Districts (Sch-Mgt)	01 January 2002
Pension Plan for General Labour, Trades and Services Employees           of New Brunswick School Districts (GLTS)	01 January 2003
Pension Plan for Full-Time CUPE 2745 Employees of New           Brunswick School Districts (CUPE 2745)	01 January 2003
Ombudsman Plan (Ombud)	---
Pension Plan for Certain Bargaining Employees of            New Brunswick Hospitals (H-CBE)	---
Pension Plan for Part-time and Seasonal Employees (Part-time)	---
Early Retirement / Workforce Adjustment Program (Early Ret)	01 April 1999

2005 PROVINCE OF NEW BRUNSWICK 31

NOTES TO THE FINANCIAL STATEMENTS 
31 March 2005

Pension funds distinct from the Consolidated Fund exist for each of these pension plans, except the Members’ Superannuation Plan, Members’ Pension Plan and the Ombudsman Plan.

The pension expense and liability relating to NB Power employees belonging to the Public Service Superannuation Plan are fully accounted for in the financial statements of NB Power. The schedules in this note have been adjusted to reflect this.

The following is a summary of the contribution levels and basic member benefits for each pension plan. Complete plan descriptions are contained in the specific plan documentation.

	Contributions
	Employee			Benefits
Plan	Earnings  up to  YMPE	Earnings Above YMPE	Employer	Unreduced Benefits	Reduced Benefits	Basic Benefit	Annual Benefit Indexing
PSSA	5.80%	7.50%	Determined by an actuary required to  fund current services costs	Age 60 with 5 years service.	Age 55 with 5 years service.	2.0% of salary times years  services.  Integrated with CPP.	Up to 5.00%
TPA	7.30%	9.00%	Equal to Employee.	Sum of age and years of servcice 87; 35 years service; or age 65 with 5 years service; or age 60 years with 20 years service.	Sum of age and service total 80 or  age 60 with 5 years service.	2.0% of salary times years  services.   Integrated with CPP.	up to 4.75%
Sch-Mgt	This plan is being curtailed.  There are no current contributors to the plan		N/A	Age 60 with 5 continuous years service.	At age 55 with 5 continuous years service.	2.0% of salary times years service.  Integrated with CPP.	Up to  3.00%
CUPE 2745	4.50%	6.00%	No more than 95% of employee contributions	Age 60 with 5 years continuous employment	Age 55 with 5 years continuous employment	1.3% to 2.0% of salary times years service.  Integrated with  CPP.	Up to 2.00%
GLTS	4.50%	6.00%	Not less than 95% of employee contributions.	Age 60 with 5 years continuous service.	Age 55 with 5 years continuous employment.	1.4% to 2.0% of salary times years service.   Integrated with CPP.	Up to 2.00%
Judges' a)Provincial Court Act	7.00%	N/A	Determined by an actuary.	Age 60 with 25 years service or at age 65 with 10 years service.	N/A	60% of salary Integrated with CPP.	Up to  60%
b)Provincial Court Judges' Pension Act	7.00%	N/A	Determined by an actuary.	Age 60 with 2 years service.	2 years service.	2.75% per year of service up to 65% of salary.  Not integrated with CPP.	Up to 5.00%

32 PROVINCE OF NEW BRUNSWICK 2005

NOTES TO THE FINANCIAL STATEMENTS 
31 March 2005

	Contributions
	Employee			Benefits
Plan	Earnings Up to YMPE	Earnings Above YMPE	Employer	Unreduced Benefits	Reduced Benefits	Basic Benefit	Annual Benefit Indexing
H-CUPE	5.15%	6.00%	Currently on  a contibution holiday.	Age 60 with 5 years continuous service.	Age 55 with 5 years continuous employment.	1.4% to 1.75% of salary times years service.  Integrated with CPP.	Up to 2.00%
H-CBE	5.185%	6.61%	Equal to employee contributions.	Age 60 with 5  years continuous service.  Normal retirement at age 65.	Age 55 with 5 years continuous employment.	2.0% of salary times years service.  Integrated with CPP.	Up to 4.00%
Part-Time	2.00% 3.21% or 4.50%	N/A	Equal to employee contributions.	Normal retirement age 65.	N/A	Defined contribution plan.	N/A
Ombud	This plan has no active members and exists solely to pay benefits to past Ombudsmen or their beneficiaries.  The current and future Ombudsmen are members of either the Judges' or PSSA Plan.
Early Ret	The Province has obligations under various early retirement initiatives.
Members'	a) Members' Superannuation Plan
	Applies to Members of Legislative Assembly who were MLA's prior to enactment of this Members' Pension Act.
	Members contribute 9% of MLA's indemnity plus 6% of Minister's salary.
	Province contributes amount equal to excess of pension payments over member contributions plus interest.
	Eligible for benefits upon ceasing to be an MLA with at least 10 sessions service.
	Basic MLA benefits equal 4.5% of average indemnity times number sessions up to final year's indemnity.
	Basic Minister's benefits equal 3% of Minister's average salary times years service as a Minister.
	b) Members' Pension Plan
	Members contribute lesser of amount under MSP and maximum deductible RPP contributions per Income Tax Act.
	Province contributes amount equal to excess of pension payments over member contributions plus interest.
	Eligible for benefits at age 60 upon ceasing to be an MLA with minimum 8 sessions service.
	Supplementary allowance at age 55 minimum 8 sessions service.
	Basic MLA benefits equal 2% of average indemnity times sessions served.  Additional supplementary allowance of 125% of basic MLA's pension.
	Basic Ministers' benefits equal 2% of average salary times years service as Minister.
	Additional supplementary allowance of 50% of basic Ministers' pension amount.

2005 PROVINCE OF NEW BRUNSWICK 33

NOTES TO THE FINANCIAL STATEMENTS
31 March 2005

b) Pension Liability

With the exception of the H - CBE plan and the H - CUPE plan which are defined benefit plans with fixed employer contributions, and the Part-Time plan, which is a defined contribution plan, the Province is liable for any excess of accrued pension benefits over pension fund assets. The Provincial share of the estimated pension liability for all pension plans is $156.7 million ($271.5 million 2004). This estimate is based on actuarial valuations for accounting purposes using the projected unit credit method, calculated as at the dates listed above. This method estimates the present value of retirement benefits associated with the period of employee service to the valuation date. These actuarial valuations were based on a number of assumptions about future events, such as rates of return on assets, wage and salary increases and employee turnover and mortality. Section g) of this note lists some of the actuarial assumptions used. Section h) lists sele cted information about plan members.

Details of the pension liability are outlined in the following table. The estimated accrued benefits and the value of plan assets reported have been updated to the most recent year end of the applicable pension plan. This was based on a projection of the actuarial assumptions and on actual contribution levels. The plans for hospital and school district employees have 31 December year ends. All other plans have 31 March year ends.

Details of the unamortized adjustments and valuation allowances are disclosed in sections d), e) and f) of this note.

	(millions)
	2005					2004
Plan	Estimated Accrued  Benefits	Value of Assets	Actuarial Pension Liability (Surplus)	Unamortized Pension Adjustments and Valuation Allowance	Pension Liability  (Surplus)	Pension Liablility (Surplus)
PSSA	$  2,920.4	$   2,924.3	$   (3.9)	$   (25.7)	$   (29.6)	$   20.8
TPA	3,353.0	3,279.9	73.1	(34.5)	38.6	124.6
Judges'	29.2	24.0	5.2	9.2	14.4	15.1
Members'	37.6	---	37.6	---	37.6	36.6
H - CUPE	---	30.2	(30.2)	---	(30.2)	(33.5)
Sch - Mgt	14.3	13.1	1.2	---	1.2	1.3
GLTS	182.2	209.1	(26.9)	12.5	(14.4)	(12.9)
CUPE 2745	35.6	41.1	(5.5)	(2.7)	(8.2)	(8.1)
Early Ret	147.3	---	147.3	---	147.3	127.9
	$   6,719.6	$   6,521.7	$   197.9	$   (41.2)	$   156.7	$   271.5

The value of accrued benefits in all plans exceeds the value of assets by $197.9 million at 31 March 2005. However, because the calculation of this excess includes estimates of future events and market values of assets, the Statement of Financial Position reports a liability of $156.7 million for accounting purposes. The difference of $41.2 million is being amortized over future years.

34 PROVINCE OF NEW BRUNSWICK 2005

NOTES TO THE FINANCIAL STATEMENTS
31 March 2005

c) Change in Pension Liability

The components of the change in pension liability are disclosed in the following table:

	(millions)
Plan	Employers' Share of Pension Benefits Earned	Pension  Interest	Amortization of Adjustments	Valuation Adjustment	Total Pension Expense	Employer Pension Contribution	Increase (Decrease) in Pension Liability
PSSA	$   40.2	$   1.3	$   (8.4)	$   ---	$   33.1	$   8.35	$   (50.4)
TPA	33.0	7.0	(21.9)	---	18.1	104.1	(86.0)
Judges'	1.0	0.4	(1.8)	---	(0.4)	0.3	(0.7)
Members'	0.7	3.0	---	---	3.7	2.4	1.3
H - CUPE	6.4	(3.1)	---	---	3.3	---	3.3
Sch - Mgt	---	0.3	(0.4)	---	(0.1)	---	(0.1)
GLTS	3.6	(1.7)	0.2	(1.2)	0.9	2.4	(1.5)
CUPE 2745	0.7	(0.4)	0.5	(0.3)	0.5	0.6	(0.1)
Ombud	0.2	---	---	---	0.2	0.2	---
H - CBE	13.5	---	---	---	13.5	13.5	---
Part-time	5.1	---	---	---	5.1	5.1	---
Early Ret	19.7	10.8	---	---	30.5	11.1	19.4
	$   124.1	$   17.6	$   (31.8)	$   (1.5)	$   108.4	$   223.2	$   (114.8)

Total pension benefits of $209.7 million were earned by employees during the fiscal year. Employees contributed $ 76.8 million toward these benefits. The value of pension benefits charged to agencies was $8.8 million. The employers’ share of pension benefits earned was $124.1 million.

d) Experience Adjustments

Experience gains or losses are generally amortized to pension expense over the estimated average remaining service life of active contributors. The following table summarizes the experience gains or losses for each plan:

			(millions)
Plan	Estimated  Average Remaining Service Life of Active Contributors (years)	31 March 2004 Unamortized Experience Adjustments	New  Experience (Gains) Losses	Amortization of Experience Adjustments	31 March 2005 Unamortized Experience Adjustments
PSSA	15.0	$   36.9	$   51.3	$   (3.3)	$   84.9
TPA	15.0	138.8	47.2	(3.0)	183.0
Judges'	8.0	(9.5)	(1.0)	1.8	(8.7)
Sch - Mgt	---	---	(0.4)	0.4	---
GLTS	12.0	1.8	3.0	(0.2)	4.6
CUPE 2745	14.0	1.4	1.4	(0.1)	2.7
		$   169.4	$   101.5	$   (4.4)	$   266.5

2005 PROVINCE OF NEW BRUNSWICK 35

NOTES TO THE FINANCIAL STATEMENTS
31 March 2005

e) Changes to Actuarial Assumptions

Changes to actuarial assumptions are amortized to pension expense over the estimated average remaining service life of active contributors. The following table summarizes the value of estimation adjustments arising from changes to actuarial assumptions for each plan:

		(millions)
Plan	Estimated Average  Remaining Service Life of Active Contributors (years)	31 March 2004 Unamortized Value of Changes to  Assumptions	New Changes to Assumptions	Amortization  of Changes to Assumptions	31 March 2005 Unamortized Value of Changes  to Assumptions
PSSA	15.0	$   (18.5)	$   (52.4)	$11.7	$   (59.2)
TPA	15.0	(109.4)	(64.0)	24.9	(148.5)
Judges'	8.0	---	(0.5)	---	(0.5)
		$   (127.9)	$   (116.9)	$36.6	$   (208.2)

f) Valuation Allowance

Pension surpluses for individual plans that exceed certain limits have been reduced by valuation allowances. Details of the allowances are provided in the following table:

	(millions)
Plan	31 March 2005 Valuation Allowance
GLTS	$   (17.1)

36 PROVINCE OF NEW BRUNSWICK 2005

NOTES TO THE FINANCIAL STATEMENTS
31 March 2005

g) Actuarial Assumptions

Calculation of the Province’s employee pension obligations and related pension expenditure is based on long and short term actuarial assumptions except the Judges’ Plan where only long term assumptions are used.

The tables below disclose the long term assumptions and the range of short term assumptions used in the actuarial valuations.

Long Term Assumptions
Plan	Rate of Return on Assets (0%)	Annual Wage and Salary Increase (%)	Inflation (%)	Rate of Pension Escalation after Retirement (%)
PSSA	7.90	4.00 plus promotional increase between  0.25 and 1.50	3.50	3.30 to 3.40
TPA	7.90	4.00 plus promotional increase between  0.25 and 1.50	3.50	3.20 to 3.40
Judges'	7.90	4.50	3.50	3.30 to 3.40
Sch - Mgt	8.16	4.75	4.00	2.00
GLTS	7.90	4.00	3.50	2.00
CUPE 2745	7.90	4.00	3.50	2.00
Member's	8.16	4.75	4.00	4.00
Short Term Assumptions
Plan	Rate of Return on Assets (%)	Annual Wage and Salary Increase (%)	Inflation (%)	Rate of Pension Escalation after Retirement (%)
PSSA	7.90	2.00 to 3.00	2.00 to 3.00	1.70 to 2.70
TPA	7.90	2.00 to 3.00	2.00 to 3.00	1.70 top 2.75
Sch - Mgt	7.90	1.50 to 4.00	2.00 to 3.50	2.00
GLTS	7.90	2.00 to 3.00	2.00 to 3.00	2.00
CUPE 2745	7.90	2.00 to 3.00	2.00 to 3.00	2.00
Members'	N/A	0.00 to 4.00	2.00 to 3.50	2.00 to 3.50

These assumptions have been used to determine the amount of the Province’s obligation for pension benefits outstanding and the value of benefits earned by employees during the fiscal year and are based on management’s best estimates. Different assumptions have been used to determine the appropriate level of employee and employer contributions needed to fund the estimated cost of the pension plans.

2005 PROVINCE OF NEW BRUNSWICK 37

NOTES TO THE FINANCIAL STATEMENTS
31 March 2005

h) Member Data

The following table lists data about the members of each plan.

Plan	Number of Active Contributors	Number of  Pensioners	Average Annual  Salary of  Contributors	Average Annual Pension
PSSA	18,893	10,316	$   50,190	$   16,293
TPA	9,731	7,157	53,690	27,234
Judges'	23	27	151,561	47,728
Sch - Mgt	---	81	---	11,249
GLTS	2,056	1,151	26,838	7,938
CUPE 2745	559	171	24,294	4,686
Members'	53	114	42,703	26,786

Ministers earn an additional average salary of $38,130.

NOTE 14     CONTINGENT LIABILITIES

a) Guaranteed Loans

The Province has guaranteed certain debt of entities external to the Provincial Reporting Entity under the authority of various statutes. At 31 March 2005, the total contingent liability in respect of these guarantees was $337.0 million ($339.3 million 2004), of which the Province has recognized $67.6 million as a liability in the Statement of Financial Position ($75.8 million 2004).

	(millions)
	Authorized  Limit	Contingent Liability
Adult Education and Training Act	$   0.3	$   0.3
Agricultural Development Act	0.4	0.4
Economic Development Act	106.5	103.8
Employment Development Act	5.2	3.9
Fisheries Development Act	15.0	5.0
Livestock Incentives Act	1.5	0.9
Nursing Homes Act	10.3	10.3
Regional Development Corporation Act	4.0	3.3
Youth Assistance Act	209.1	209.1
		337.0
Less: Allowance for Losses (Schedule 9)		67.6
		$   269.4

38 PROVINCE OF NEW BRUNSWICK 2005

NOTES TO THE FINANCIAL STATEMENTS
31 March 2005

b) Environmental Responsibility

The Province of New Brunswick has an agreement with a mining company to limit the liability of the company to $3.0 million for environmental damages that occurred prior to the company commencing mining at a specified site. The cost to clean up the major problem area of this site has been estimated at $3.0 million. The Province currently holds a performance bond for $1.3 million from this company relating to this clean up.

c) Insurance

The Province does not carry general liability insurance or property insurance on its assets except in a few limited instances. Any successful liability claims against the Province and any replacement of lost or damaged property are charged to expense in the year of settlement or replacement.

NOTE 15 COMMITMENTS

a) Operating Leases

The total future minimum payments under various operating lease agreements, including those of government enterprises, for the rental of space and equipment amounts to $407.8 million ($392.0 million 2004). Minimum annual lease payments in each of the next five years are as follows:

Fiscal Year	(millions)
2005-2006	$   51.1
2006-2007	43.9
2007-2008	40.2
2008-2009	36.1
2009-2010	62.5

b) Nursing Homes

The Department of Family and Community Services includes in its annual operating budget funding for the repayment of approved long term debt of certain nursing homes. The Department funds the nursing homes through grants which pay the difference between operating expenses and revenue from other sources. On average, revenue from other sources covers approximately 35% of operating costs.

Total long term debt of these nursing homes at 31 March 2005 amounted to approximately $94.4 million ($95.4 million 2004). Of the $94.4 million nursing home debt, the Province has issued guarantees totalling approximately $10.3 million ($10.6 million 2004) which is included as a contingent liability.

c) Authorized Capital Projects

The 31 March 2005 estimated amount required to complete authorized major construction projects of schools, hospitals, other buildings, roads and bridges, and to meet capital grant obligations is $97.6 million ($206.4 million 2004). This includes projects that will be cost shared with the Government of Canada.

2005 PROVINCE OF NEW BRUNSWICK 39

NOTES TO THE FINANCIAL STATEMENTS
31 March 2005

NOTE 16     EXPENSE BY PRIMARY CLASSIFICATION

The expenditures by primary classification are as follows:

	(millions)
	2005	2004
Personal Services	$1,958.1	$1,908.4
Other Services	1,044.3	980.3
Materials and Supplies	124.7	113.5
Property and Equipment	73.3	69.4
Contributions, Grants and Subsidies to or on behalf of:
Municipalities and Local Service Districts	143.7	145.1
Individuals	943.2	894.0
Nursing Homes	131.8	125.1
Other	471.7	435.2
Debt and Other charges	633.4	663.3
Amortization	193.4	269.1
	$5,717.6	$5,603.4

Personal Services includes salaries and benefits of employees, and allowances paid to the members of the Legislative Assembly. Personal Services does not include salaries and benefits of employees of hospitals and other agencies, which are paid by those organizations. Funding provided to those organizations is recorded as Contributions, Grants and Subsidies.

Other Services includes the purchase of various services including rental of space, postage, advertising, professional services, Royal Canadian Mounted Police services and travel expenses.

Materials and Supplies includes the purchase of textbooks, office supplies, heating fuel, vehicle and equipment supplies and parts, and structural materials and supplies.

Property and Equipment includes the purchase and construction of buildings, roads, bridges, equipment, and office furniture.

Contributions, Grants and Subsidies includes payments to government corporations, agencies and boards, and to business entities and non-profit organizations. Contributions, Grants and Subsidies to or on behalf of individuals includes income assistance payments and medical service payments on behalf of individuals.

Debt and Other Charges includes the cost of servicing the public debt and bad debt expenses.

Amortization is the systematic charge to income of the cost of tangible capital assets.

40 PROVINCE OF NEW BRUNSWICK 2005

NOTES TO THE FINANCIAL STATEMENTS
31 March 2005

NOTE 17     TRUST FUNDS

The Province is trustee for various trust funds outside the Provincial Reporting Entity.

The following is a summary of the trust fund equities calculated using the method indicated below to value investment assets:

	(millions)
	2005	2004
Cost Method
Margaret R. Lynds Bequest	$   0.1	$   0.1
Mental Health Trust Fund	0.9	0.8
New Brunswick Power Corporation Sinking Fund	---	39.5
Viscount Bennett Besquest	0.2	0.2
	$   1.2	40.6
Market Value Method
Judges' Superannuation Fund	$   24.1	$   22.7
Pension Plan for the Management Employees    of New Brunswick School Districts	13.1	12.8
Pension Plan for General Labour, Trades and Services     Employees of New Brunswick School Districts	209.1	194.3
Pension Plan for Full-Time CUPE 2745 Employees of      New Brunswick School Districts	41.1	38.4
Public Service Superannuation Fund	3,755.2	3,466.0
Teachers' Pension Trust Fund	3,281.9	3,081.3
	$ 7,324.5	$ 6,815.5

The Margaret R. Lynds Bequest is used to award three annual scholarships of equal value to students pursuing the study of communications at specified universities. The Mental Health Trust Fund is used to pay for psychoanalysis treatment of deserving New Brunswick residents. The income from the Viscount Bennett Bequest is used to develop the Province's historic resources.

The New Brunswick Power Corporation Sinking Fund is held in trust under the authority of the Electric Power Act. New Brunswick Power Corporation makes payments to this sinking fund as required by the terms of any bond or debenture issues. These are retained and invested. The purpose of the fund is to repay the bonds or debentures when they mature. As of 1 October 2004, the New Brunswick Electric Finance Corporation assumed responsibility for this Fund.

2005 PROVINCE OF NEW BRUNSWICK 41

NOTES TO THE FINANCIAL STATEMENTS
31 March 2005

NOTE 18     COMPARATIVE FIGURES

Certain 2004 figures have been restated to conform to 2005 presentation. The most significant of which relates to the capitalization of government’s capital assets and is quantified in Note 1, Summary of Significant Accounting Policies.

NOTE 19     SUBSEQUENT EVENTS

In May 2005 the Province of New Brunswick purchased the student loan portfolio for $209.2 million. This purchase eliminated the March 31, 2005 contingent liability related to the Youth Assistance Act.

On August 4, 2005, Electric Finance provided consent to the New Brunswick Power Holding Corporation to refurbish the Point Lepreau Generating Station. The planned refurbishment has a forecasted construction cost of approximately $1 billion and will extend the useful life of the station to 2034. The maintenance outage for the refurbishment will begin in the spring of 2008 and is scheduled to be completed by fall 2009.

42 PROVINCE OF NEW BRUNSWICK 2005

SCHEDULES TO THE FINANCIAL STATEMENTS 
31 MARCH 2005

	(millions)
	2005	2004
SCHEDULE 1
CASH NET OF SHORT TERM BORROWING
Cash	$   54.7	$   17.8
Short Term Investments	780.4	724.0
Consolidated Entities	7.5	99.3
	842.6	841.1
Less:
Bank Overdrafts	65.4	47.0
Treasury Bills 0% Maturing 10 November 2005	---	24.0
Treasury Bills 2.44% - 2.63% Maturing 4 April 2005 -  7 July 2005	628.9	760.3
	694.3	831.3
	$   148.3	$   9.8
SCHEDULE 2
ACCOUNTS AND INTEREST RECEIVABLE
Accounts Receivable
General Receivables	$   211.9	$   231.2
Canada - Conditional Grants
Canada Mortgage and Housing Corporation	28.5	26.9
Canada/New Brunswick Highway Improvement Program	34.4	11.5
Disaster Financial Assistance Program	8.5	33.3
Infrastructure Program	3.8	4.9
Official Languages	32.4	36.1
Refund of Harmonized Sales Tax Paid	14.4	8.0
Regional Economic Development Agreement	3.7	4.5
Other Agreements	14.7	5.2
Canada - Unconditional Grants
Canada Health and Social Transfer	1.2	1.9
Guarantee Payouts	52.4	32.0
Working Capital Advances	7.0	5.3
Other	4.0	1.9
Interest Receivable
Agricultural Development Act	0.5	0.7
Economic Development Act	4.9	9.1
Fisheries Development Act	10.9	12.5
Other	9.9	8.5
Consolidated Entities	42.1	42.8
	485.2	476.3
Less: Allowance for Doubtful Accounts	132.9	118.5
	$   352.3	$   357.8

2005 PROVINCE OF NEW BRUNSWICK 43

SCHEDULES TO THE FINANCIAL STATEMENTS 
31 MARCH 2005

	(millions)
	2005	2004
SCHEDULE 3
TAXES RECEIVABLE
Gasoline and Motive Fuels Tax	$   26.0	$   21.9
Real Property Tax	395.3	384.0
Royalties and Stumpage on Timber	21.8	28.0
Sales Tax	32.7	107.7
Tobacco Tax	10.2	11.3
Other	2.9	0.3
	488.9	553.2
Less: Allowance for Doubtful Accounts	96.9	86.6
	$   392.0	$   466.6
SCHEDULE 4
INVENTORIES
Supplies
Construction and Maintenance Materials	$   8.8	$   9.5
Educational Textbooks	1.0	1.6
Machine Repair Parts	6.3	6.1
Stationery and Supplies	1.5	1.7
Veterinary Supplies	0.8	0.8
Other Supplies	5.2	6.6
Consolidated Entities	14.5	13.9
	38.1	40.2
Inventories for Resale
Properties Held for Sale	4.8	3.1
	$   42.9	$   43.3

44 PROVINCE OF NEW BRUNSWICK 2005

SCHEDULES TO THE FINANCIAL STATEMENTS
31 March 2005

	(millions)
	2005			2004
	Amount	Allowance  for Doubtful Accounts	Net	Amount	Allowance for Doubtful Accounts	Net
SCHEDULE 5
LOANS AND ADVANCES
Business New Brunswick
Agricultural Development Act	$   21.3	$   15.6	$   5.7	$   21.7	$   15.4	$   6.3
Economic Development Act	135.8	77.1	58.7	124.1	57.1	67.0
Fisheries Development Act	42.6	30.5	12.2	48.8	37.5	11.3
N.B. Agriexport Inc.	0.5	---	0.5	0.5	---	0.5
Provincial Holdings Ltd.	6.5	2.9	3.5	6.7	2.3	4.4
Education
Loans to Students	0.2	0.2	---	0.2	0.2	---
Environment and Local Government
Water and Sewerage Systems	0.4	---	0.4	0.4	---	0.4
Other Loans	0.2	0.2	---	0.2	0.2	---
Executive Council
La Fondation du quotidien francophone	4.0	4.0	---	4.0	4.0	---
Family and Community Services
New Brunswick Housing Act	33.6	2.1	31.5	32.7	2.5	30.2
Finance
Loans to Municipalities	1.3	---	1.3	0.5	---	0.5
Municipalities - Department of   Regional Industrial Expansion   Agreements	0.3	---	0.3	1.1	0.6	0.5
Public Safety
City of Moncton	1.2	---	1.2	1.4	---	1.4
Unsatisfied Judgements	9.5	9.5	---	9.5	9.5	---
Regional Development Corporation
Beaverbrook Art Gallery	1.0	---	1.0	---	---	---
Fundy Trail Authority Inc.	0.3	---	0.3	---	---	---
Fundy Trail Endowment Fund	4.0	---	4.0	3.8	---	3.8
	$   262.7	$   142.1	$   120.6	$   255.6	$   129.3	$   126.3

2005 PROVINCE OF NEW BRUNSWICK 45

SCHEDULES TO THE FINANCIAL STATEMENTS 
31 MARCH 2005

	(millions)
	2005	2004
SCHEDULE 6
INVESTMENTS
Investments in Government Enterprises
Algonquin Golf Limited	$            ---	$       (2.5)
Lotteries Commission of New Brunswick	0.2	0.8
New Brunswick Liquor Corporation	11.7	11.8
New Brunswick Municipal Finances Corporation	1.1	1.0
New Brunswick Securities Commission	1.2	---
New Brunswick Power Corporation	(188.2)	(196.1)
	(174.0)	(185.0)
Other Long Term Investments	3.5	3.6
Consolidated Entities	---	35.0
	$   (170.5)	$   (146.4)
SCHEDULE 7
ACCOUNTS PAYABLE
Accounts Payable	$   433.3	$   372.4
Due to Canada
Department of Regional Industrial Expansion	0.3	0.6
Equalization and Canada Health and Social Transfer	208.3	185.4
Other Agreements	2.8	0.2
New Brunswick Housing Corporation - Third Parties	42.6	43.5
Other	0.5	0.6
	$   687.8	$   602.7

46 PROVINCE OF NEW BRUNSWICK 2005

SCHEDULES TO THE FINANCIAL STATEMENTS
31 March 2005

	(millions)
	2005	2004
SCHEDULE 8
ACCRUED EXPENDITURES
Accrued Interest	$   154.9	$   155.8
Funded Debt	1.8	2.4
Outstanding Treasury Bills	87.5	72.8
Other	244.2	231.0
Accrued Salaries Payable	207.4	188.6
Health	63.3	29.5
Holdbacks on Contracts	9.8	7.5
Liability for Injured Workers	95.7	89.6
Retirement Allowances	222.4	222.6
Other	39.7	67.4
	$   882.5	$   836.2
SCHEDULE 9
ALLOWANCE FOR LOSSES
Business New Brunswick	$   36.7	$   40.0
Education	30.7	35.1
Training and Employment Development	0.1	0.2
Consolidated Entities	0.1	0.5
	$   67.6	$   75.8

2005 PROVINCE OF NEW BRUNSWICK 47

SCHEDULES TO THE FINANCIAL STATEMENTS 
31 MARCH 2005

	(millions)
	2005	2004
SCHEDULE 10
DEFERRED REVENUE
Canada Health and Social Transfer	$   8.1	$   0.2
Motor Vehicle and Operators' Licenses	36.3	34.0
Real Property Taxes	258.3	242.9
Other	12.0	12.9
Consolidated Entities	9.2	4.5
	323.9	$   294.5
SCHEDULE 11
DEPOSITS HELD IN TRUST
Administrator of Estates of Patients in Psychiatric Facilities	$   0.4	$   0.3
Contractors' Deposits	3.3	1.2
Court of Queens Bench	6.5	5.5
Employee Contributions for Early	---	1.2
Family Support Order Services	0.5	0.6
Metallic Minerals Tax	15.0	7.9
Mining Licenses - Non-Performance Renewal Fees	1.5	1.3
New Brunswick Crop Reinsurance Fund	2.2	2.2
Sale of Property for Taxes	1.1	1.0
Scholarship Trusts	2.7	2.5
Tenants' Security Deposits	12.8	12.1
Other	6.5	10.0
	$   52.5	$   45.8
SCHEDULE 12
OBLIGATIONS UNDER CAPITAL LEASES
Moncton North School	$   7.8	$   8.0
Miramichi Youth Facility	17.9	18.2
New Brunswick Highway Corporation	823.0	837.0
Consolidated Entities	0.7	2.6
	$   849.4	$   865.8
SCHEDULE 13
PREPAID AND DEFERRED CHARGES
Unamortized Premiums, Discounts, and Issue Expenses on Debentures	$48.9	$   55.9
Social Assistance	6.1	---
Other	72.3	55.3
	$   127.3	$   111.2

48 PROVINCE OF NEW BRUNSWICK 2005

SCHEDULES TO THE FINANCIAL STATEMENTS
31 March 2005

	(millions)
	2005 Budget	2005 Actual	2004 Actual
SCHEDULE 14
TAXES ON CONSUMPTION
Gasoline and Motive Fuels Tax	$   239.3	$   239.7	$   234.9
Harmonized Sales Tax	793.7	723.0	803.1
Tobacco Tax	100.0	96.5	101.4
Other	0.1	0.1	0.1
	$   1,133.1	$   1,059.3	$   1,139.5
SCHEDULE 15
TAXES ON INCOME
Corporate Income Tax	$   149.9	$   173.1	$   111.1
Mining Tax	2.2	2.8	2.2
Personal Income Tax	983.7	1,000.2	952.3
	$   1,135.8	$   1,176.1	$   1,065.6
SCHEDULE 16
OTHER TAXES
Financial Corporation Capital Tax	$   8.8	$   10.6	$   9.8
Insurance Premium Tax	34.5	39.7	42.2
Large Corporation Capital Tax	47.9	39.5	47.3
Other	5.8	4.9	4.1
	$   97.0	$    94.7	$   103.4
SCHEDULE 17
LICENSES AND PERMITS
Fish and Wildlife	$   4.7	$   4.6	$   4.6
Liquor Licenses	3.4	0.9	3.0
Mines	0.8	1.0	0.8
Motor Vehicle	79.0	82.3	78.0
Security Frauds Prevention	5.8	2.0	6.1
Other	9.8	12.2	11.6
	$   103.5	$   103.0	$   104.1

2005 PROVINCE OF NEW BRUNSWICK 49

SCHEDULES TO THE FINANCIAL STATEMENTS 
31 MARCH 2005

	(millions)
	2005 Budget	2005 Actual	2004 Actual
SCHEDULE 18
ROYALTIES
Forest	$   61.6	$   60.2	$   62.9
Mines	6.6	10.5	7.5
	$   68.2	$   70.7	$   70.4
SCHEDULE 19
INVESTMENT INCOME
Algonquin Golf Limited	$   ---	$   ---	$   (0.8)
Fiscal Stabilization Fund	---	0.5	5.2
Lottery Revenues	121.1	118.1	116.7
New Brunswick Electric Finance Corporation	---	(0.2)	---
New Brunswick Liquor Corporation	120.3	122.6	118.6
New Brunswick Power Holding Corporation	---	8.0	(18.0)
New Brunswick Securities Commission	---	4.4	---
Other Investment Income	28.6	30.3	31.0
	$   270.0	$   283.7	$   252.7
SCHEDULE 20
OTHER PROVINCIAL REVENUE
Sales of Goods and Services	$   27.1	$   25.6	$    24.1
Institutional	7.4	7.5	8.1
Intergovernmental	18.4	19.6	18.5
Leases and Rentals	2.4	2.4	2.3
Provincial Parks	201.5	187.5	186.0
General	10.1	4.9	2.9
Fines and Penalties	24.3	36.5	29.7
Other Revenue	$   291.2	$   284.0	$   271.6
SCHEDULE 21
CONDITIONAL GRANTS - CANADA
Central Government Services	$   36.9	$   39.9	$   36.1
Economic Development	30.0	31.0	21.1
Education	138.8	131.2	128.5
Health	33.1	64.4	50.7
Transportation	0.1	0.4	0.2
Welfare	4.7	4.7	4.7
Other	9.0	21.2	18.6
	$   252.6	$    292.8	$   259.9

50 PROVINCE OF NEW BRUNSWICK 2005

SCHEDULES TO THE FINANCIAL STATEMENTS
31 March 2005

	(millions)
	2005 Budget	2005 Actual	2004 Actual
SCHEDULE 22
EDUCATION
Amortization Expense	$   23.9	$   23.9	$   23.2
Education	817.6	817.8	804.0
General Government	0.2	---	---
Maritime Provinces Higher Education Commission	185.0	185.2	179.7
New Brunswick Distance Education Network	0.1	0.3	0.9
Pension Expense	14.2	20.9	39.5
Provision Expense	1.4	2.0	1.7
Supply and Services	7.5	7.1	11.6
	$   1,049.9	$   1,057.2	$1,060.6
SCHEDULE 23
HEALTH
Amortization Expense	$   54.8	$   47.4	$   129.2
Health and Wellness	636.8	593.6	550.4
Pension Expense	2.7	3.3	2.0
Regional Health Authorities	1,110.5	1,192.7	1,106.9
	$   1,804.8	$   1,837.0	$   1,788.5
SCHEDULE 24
FAMILY AND COMMUNITY SERVICES
Amortization Expense	$   1.1	$  1.1	$   1.1
Family and Community Services	717.0	724.3	710.5
General Government	0.4	0.4	0.4
Provision Expense	4.0	4.1	4.6
	$   722.5	$   729.9	$   716.6
SCHEDULE 25
PROTECTION SERVICES
General Government	$   0.2	$   0.1	$   0.2
Justice	43.8	46.4	45.2
Pension Expense	---	(0.4)	---
Provision Expense	0.3	0.1	---
Public Safety	102.1	105.0	99.8
	$   146.4	$   151.2	$   145.2

2005 PROVINCE OF NEW BRUNSWICK 51

SCHEDULES TO THE FINANCIAL STATEMENTS 
31 MARCH 2005

	(millions)
	2005 Budget	2005 Actual	2004 Actual
SCHEDULE 26
ECONOMIC DEVELOPMENT
Amortization Expense	$   1.3	$   1.4	$   1.4
Business New Brunswick	39.2	49.2	32.2
Provision Expense	20.0	22.9	34.7
Regional Development Corporation	40.2	40.1	42.0
Regional Development Corporation - Special  Operating Agency	32.9	35.7	28.6
Tourism and Parks	27.4	29.3	28.1
	$   161.0	$   178.6	$   167.0
SCHEDULE 27
EMPLOYMENT DEVELOPMENT AND LABOUR
General Government	$   0.6	$   0.6	$   0.6
Training and Employment Development	225.63	228.7	228.4
	$   225.9	$   229.3	$   229.0
SCHEDULE 28
RESOURCE SECTOR
Agriculture, Fisheries and Aquaculture	$   29.3	$   36.6	$   28.9
AgrilExport	---	(0.3)	---
Amortization Expense	0.1	0.1	0.1
Energy	2.2	2.0	2.1
Environment	23.5	23.7	20.5
Forest Protection Limited	4.9	5.2	4.5
Natural Resources	94.1	93.8	97.0
New Brunswick Tire Stewardship Board	---	3.6	2.6
Provision Expense	0.3	2.1	3.3
	$   154.4	$   166.8	$   159.0
SCHEDULE 29
TRANSPORTATION
Amortization Expense	$   107.5	$   105.3	$   105.5
General Government	0.3	1.0	1.6
Transportation	181.6	182.2	179.1
	$   289.4	$   288.5	$   286.2

52 PROVINCE OF NEW BRUNSWICK 2005

SCHEDULES TO THE FINANCIAL STATEMENTS
31 March 2005

	(millions)
	2005 Budget	2005 Actual	2004 Actual
SCHEDULE 30
CENTRAL GOVERNMENT
Amortization Expense	$   11.8	$   8.3	$   8.1
Algonquin Golf Ltd.	---	2.3	---
Algonquin Properties Ltd.	10.7	8.5	8.1
Executive Council	2.4	2.3	4.7
Finance	74.0	74.2	78.5
General Government	(4.3)	45.7	16.3
Intergovernmental Affairs	3.2	3.1	2.1
Legislative Assembly	19.7	18.2	21.0
Local Government	39.1	35.6	38.2
New Brunswick Investment Management Corporation	8.8	8.7	8.5
Office of the Comptroller	4.9	4.4	4.6
Office of Human Resources	5.6	5.3	5.6
Office of the Premier	1.1	1.1	1.1
Pension Expense	131.9	126.3	121.6
Provision Expense	6.0	0.8	8.5
Service of New Brunswick	54.5	50.1	48.4
Supply and Services	98.1	103.3	93.1
	$   467.5	$   498.2	$   468.4

EX-99.2

Office of the	Bureau du
Auditor General	vérificateur général

Exhibit (f)

CONSENT OF AUDITOR GENERAL

I hereby consent to the inclusion of the report of the Auditor General on the financial statements of the Province of New Brunswick for the fiscal year ended 31 March 2005 as exhibit (f) to the Annual Report on Form 18-K of the Province of New Brunswick for the fiscal year ended 31 March 2005.

Fredericton, New Brunswick

K. D. Robinson, CA

23 December 2005

Deputy Auditor General

Tel./Téléphone:

P.O. Box 758

Case postale 758

(506) 453-2243

Fredericton

Fredericton

Fax/Télécopieur:

New Brunswick

Nouveau-Brunswick

(506) 453-3067

Canada  E3B 5B4

Canada  E3B 5B4

EX-99.3

T A B L E    O F    C O N T E N T S
Message from the Chair	1
Message from the President & CEO	2
Restructuring	4
The NB Power Group	6
NB Power Generation Corporation	8
NB Power Nuclear Corporation	10
NB Power Transmission Corporation	12
NB Power Distribution and Customer Service Corporation	14
NB Power Holding Corporation	16
System Map	18
Financial Review 2004/05	19
- Management’s Discussion and Analysis	20
- Management’s and Auditors’ Reports	36
- Combined Financial Statement	37
- Notes to the Combined Financial Statements	41
- Statistical Overview	56
Governance	60
TSX Corporate Governance Guidelines	62
Board of Directors	66
Senior Management	67
Glossary	68

FINANCIAL HIGHLIGHTS
Financial Performance (in millions)
	2004/05		2003/04		2002/03
Net income (loss)	$	9	$	(18)	$	(77)
Cash flow from operations	$	245	$	256	$	139
Free cash inflow (outflow)	$	(161)	$	(376)	$	(86)
Reduction (increase) in net debt	$	204	$	(321)	$	(149)
Financial Ratios and Percentages
	2004/05		2003/04		2002/03
Operating margin		15%		14%		12%
Operating cash flow / capital expenditures		0.72x		0.52x		0.66x
Operating cash flow / total debt		0.08x		0.08x		0.05x
Per cent of debt in capital structure		96%		106%		106%
Interest coverage ratio		0.97x		0.88x		0.68x

September 30, 2005

To His Honour

The Honourable Herménégilde Chiasson Lieutenant-Governor of New Brunswick

Sir:

New Brunswick Power Holding Corporation begs leave to submit, in accordance with the Electricity Act, Part II, Division A, 10(1), the report for the fi scal year ended March 31, 2005.

I am, Your Honour,

Yours very truly,

M E S S A G E     F R O M    T H E    C H A I R With the proclamation of the new Electricity Act on Oct. 1, 2004, and the coincident restructuring of the New Brunswick Power Corporation, this year marked an exceptional year for corporate governance. Under the leadership of Leon Furlong, the Board ensured the measured development and implementation of a holding company structure and four subsidiary operating companies. A common board and CEO oversee all of the companies. The new structure signaled the transition to transparent management and oversight of the holding company and the operating companies. The Board membership saw signifi cant changes, effective Oct. 1^st, starting with the appointment of a new Chair. In all, there were two members who stepped down, four members reappointed and seven new members being named to the Board. For the fi rst time, an independent external fi rm was engaged to search for potential candidates with the goal of broadening the range of expertise and experience available to the Board. All of the new members were selected through this process. In light of governance evolution, the Board focused on emerging corporate governance and management practices. Clear roles and responsibilities between directors and management and more rigorous processes for establishing strategic direction, set the course for signifi cant change. These moves ensure responsible management and prudent decisions are being made in the best interest of New Brunswick’s ratepayers. Consistent with the principles which underlie the restructuring, signifi cant effort has been dedicated to providing consistent and open communication between management, the Board and our Shareholder, the Government of New Brunswick. This effort has been extended to employees, regulators and the public as the Board and the companies have continued the course toward improved financial accountability and decision-making. Looking ahead, we are committed to continuous improvement in our operations. We are working diligently with management and the Shareholder to bolster the operations and governance across the NB Power Group. I would encourage you to read the expanded section on Governance in this Annual Report to see examples of the work we have been doing and the direction in which we are headed as we continue to make decisions that consider all options to build and sustain a power grid for the province that is safe, reliable and fairly-priced for all New Brunswickers.  

2004 | 2005 ANNUAL REPORT NB POWER GROUP 1

M E S S A G E    F R O M    T H E    P R E S I D E N T    &    C E O This past year was one of signifi cant change and evolution for the NB Power Group, marked most significantly by the opening of the New Brunswick electricity market to competition. Approximately 40 per cent of our load can now elect to have their power supply come from a source other than NB Power. The impetus for these changes was to ensure that New Brunswick has the service, system and supply it needs for the future at an affordable price. The restructuring of NB Power into a holding company and four operating companies encourages efficiency and profitability. This new structure provides greater transparency because each company has its own business plan and financial statements. At the same time, our Shared Services organization supplies common services on a cost effective basis to each of the NB Power companies. Direct billing to the operating companies encourages the right behaviour on both sides. The result is the opportunity for more effective public oversight with an understanding of the risks involved. Increased financial accountability allows the corporations to improve business decision-making. The corporations took the strengths of the past – strong engineering and the strong operational performance of diverse generation, transmission and distribution systems – and built on them with more attention to considering the impacts of their decisions. This year, the NB Power Group recorded a net income of $9 million on total revenues of $1.4 billion. The Group paid $5 million in dividends to the New Brunswick Electric Finance Corporation and made $16 million in special payments in lieu of taxes. The NB Power Group’s diversified energy portfolio allowed the companies to more effectively manage fuel costs in the wake of rising fuel prices and increased in-province load. Taking advantage of the hydro flows and displacing the use of high-cost thermal fuels to produce electricity for the province provided out-of-province sales opportunities. It also helped mitigate the impact of reduced output from the Point Lepreau Generating Station. The impact of lower transmission revenues was also reduced as neighbouring utilities increased their short-term reservations on the transmission system. Throughout the year, it became evident that rising fuel costs would add in the order of $70 million to the Group’s production costs in 2005-2006. As a result, the NB Power Group undertook a Business Excellence program to focus efforts on providing safe, reliable, cost-effective service while reducing the upward pressure on rates. The program involved cost reductions, a staff adjustment program, an improved business planning and budgeting process and the use of a balanced scorecard methodology to increase efficiency and reduce costs. The staff adjustment program led to a 10 per cent staff reduction and together with other operational changes has contributed to the projected reduction of $40 million in annual costs for 2005-2006 and future years. As a result of the staff reductions, the Group is redesigning processes to sustain the cost reductions while, at the same time, maintaining strong operational performance.  

2  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

The NB Power Group’s drive for excellence also focused attention on the ongoing business pressures related to several major issues: seeking an alternative lower-cost fuel for the Coleson Cove Generating Station; obtaining a decision on the future of the Point Lepreau Generating Station; and dealing with rising fuel costs and the resulting pressure on rates. In December of 2004, the refurbishment of the Coleson Cove Generating Station was completed on time and on budget. This achievement provides reliable generation to 2030 while reducing environmental impact. As sourcing of alternative fuels continues, the Station is continuing to burn heavy fuel oil. In the winter of 2004, the Government of New Brunswick commissioned Dr. Robin Jeffrey to conduct an independent, third-party review of the Station refurbishment project. In response to Dr. Jeffrey’s recommendations, the NB Power Group renegotiated contracts with Atomic Energy of Canada Limited (AECL), considered private sector involvement and explored fossil fuel alternatives before making a recommendation to the Province on the refurbishment of the Point Lepreau Generating Station. In July 2005, the province announced that the station would be refurbished in partnership with AECL. In April 2004, prior to restructuring, NB Power Corporation implemented an overall 2.5 per cent rate increase. In March 2005, after restructuring, NB Power Distribution and Customer Service Corporation (Disco) implemented a 3.0 per cent rate increase. In addition, Disco submitted an application for 2005-2006 to the New Brunswick Board of Commissioners of Public Utilities (PUB) to increase rates to address rising fuel prices. That submission was subsequently converted to a 2006-2007 application and includes Disco’s proposed modifi ed pricing structures to better refl ect the full cost of service and reduce cross-subsidization among rate classes. Looking forward, the NB Power Group will continue its transition to a leaner, more cost-effective organization; it will examine exciting options including an increasing focus on energy conservation, renewable energy sources and regional approaches to energy issues. With the approval of the Point Lepreau Generating Station refurbishment there will be an intense focus on the project and the operation of the Station until 2008. On the regional front, work will continue on the second International Power Line, a transmission line and interconnection with Maine, which will benefi t New Brunswickers and provide more energy options. The NB Power Group remains focused on a bright future. The objective is straightforward – reduce and manage costs, because a sound, stable NB Power Group benefi ts the province as a whole. The Group will continue to fi nd opportunities to provide New Brunswickers with electricity safely, reliably, at a reasonable price with respect for the environment, while providing a return to our Shareholder, the Government of New Brunswick.

2004 | 2005 ANNUAL REPORT NB POWER GROUP 3

R E V I E W O F A C T I V I T I E S R E S T R U C T U R I N G Following proclamation of the Province of New Brunswick’s Electricity Act on Oct. 1, 2004, New Brunswick Power Corporation was restructured into a holding company with four subsidiary companies (formerly operated as business units within the integrated utility). The companies created by the Electricity Act are New Brunswick Power Holding Corporation (Holdco), which has generation (conventional and nuclear), transmission and distribution subsidiaries New Brunswick Power Generation Corporation (Genco), which assumed the conventional generation business of NB Power New Brunswick Power Nuclear Corporation (Nuclearco), which assumed the operation of Point Lepreau Generating Station New Brunswick Power Transmission Corporation (Transco), which assumed the transmission business of NB Power New Brunswick Power Distribution and Customer Service Corporation (Disco), which assumed the distribution and customer service business of NB Power Genco wholly-owns two subsidiaries New Brunswick Power Coleson Cove Corporation (Colesonco), which owns and operates Coleson Cove Generating Station, with a generating capacity of 978 MW included in Genco’s total capacity NB Coal Limited (NB Coal), which mines local coal to supply Grand Lake Generating Station Transco is unique in the NB Power Group, being the only subsidiary with a commercial capital structure that includes debt and equity. The commercial return provided to the Shareholder is an allowed regulated rate of return on equity. The purpose of restructuring NB Power was to facilitate the creation of a competitive market within New Brunswick separate the integrated utility into functional entities and eliminate cross-subsidization between businesses allow stand-alone analysis for management incentive and efficiency allow the Province to undertake a debt/equity swap that would allow the operating companies to finance in debt markets without a provincial guarantee

4  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

The restructuring resulted in

• a common Chair, President & Chief Executive Officer (CEO) and Board members for Holdco and each operating company
• debt for equity swap in Transco only ($140 million)
• debt for debt swap in other operating companies
• access to long- and short-term debt requirements from New Brunswick Electric Finance Corporation (Electric Finance) until companies are able to borrow on their own credit
• dividends and other rights as prescribed in a shareholder’s agreement
• negative net worth removed from the NB Power balance sheet ($187 million)

Restructuring did not create any new revenue in the system; it simply meant that existing revenue had to be allocated among the various companies to cover capital and operating costs.

Disco collects revenue from the sale of power to in-province customers to cover its capital and operating expenses, as well as targeted returns.

Genco and Nuclearco each generate revenue from Disco. The amounts Disco pays Genco and Nuclearco for the power to supply Disco customers are determined by the terms of power purchase agreements.

Genco, and to a much lesser degree Nuclearco, also generate revenue by selling power out-of-province. One-third of Genco’s revenue is derived from out-of-province sales, many of which are made into New England.

Transco generates revenue from the Open Access Transmission Tariff, which is regulated by the New Brunswick Board of Commissioners of Public Utilities. The New Brunswick System Operator is responsible for tariff design and implementation, while Transco is responsible for determining and justifying its revenue requirement. Transco’s tariff revenue is derived from delivering electricity from the generating stations to distribution system customers, large industries fed from the transmission system and neighbouring utilities.

2004 | 2005 ANNUAL REPORT NB POWER GROUP 5

R E V I E W    O F    A C T I V I T I E S T H E    N B    P O W E R    G R O U P The NB Power Group provides reliable, safe and reasonably-priced electricity generated at 15 facilities, delivered via power lines, substations and terminals to more than 360,000 direct and indirect customers within New Brunswick and surrounding markets. BUSINESS DEVELOPMENT In December, Genco completed the Coleson Cove Generating Station Refurbishment Project that began in 2002 and employed more than 1,600 workers at peak construction. The Station is the largest in the NB Power system and provides one-third of New Brunswick’s energy requirements during the winter months. The refurbishment of Coleson Cove Generating Station will allow Genco to meet stricter environmental requirements and produce reliable generation to 2030. During construction the Station continued to operate thus ensuring reliable power generation for the people of New Brunswick. In the winter of 2004, the New Brunswick Government commissioned Dr. Robin Jeffrey to conduct an independent, third-party review of the proposed Point Lepreau Generating Station refurbishment. In response to the Dr. Jeffrey’s report, the NB Power Group renegotiated contracts with Atomic Energy of Canada Limited (AECL), considered private sector involvement and explored alternative fuels before making a recommendation to the Province on the refurbishment project. After considering options arising from these endeavours, the Province announced in July 2005 that Nuclearco would refurbish the Station in partnership with AECL. BUSINESS EXCELLENCE In response to rising fuel price pressure, the NB Power Group embarked on a Business Excellence program in the fall of 2004 with an immediate focus on near-term and sustainable cost reductions. This program consisted of four components Cost reduction – a program examining all aspects of the business, aimed at improving processes, increasing efficiency, and lowering the cost of doing business Staff adjustment program – an early retirement plan that resulted in the workforce being reduced by 10 per cent Business planning and budgeting – an enhanced planning process, driven by cascading strategy maps and multi-year target setting, aimed at ensuring focus and alignment within and across the Group while integrating staff and other cost reductions Balanced Scorecard – a performance management and measurement tool, introduced to heighten management accountability and improve ongoing communication about corporate direction and priorities

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The Business Excellence program resulted in 278 regular positions being permanently eliminated from the NB Power Group and yielded $40 million in annual savings for 2005/06 onward.

ENVIRONMENT

Environmental considerations remained high on the list of priorities for the Group. NB Power maintained its commitment to managing with respect for the environment through the Group’s environmental management systems. This year’s accomplishments included

• sulphur dioxide emissions below regulated limits
• particulate emissions below federal levels for new station sources
• tested wastewater effluents below regulated annual limits
• more than 200,000 tonnes of generation by-products recycled
• renewed regulatory air quality approval to operate Courtenay Bay Generating Station
• various regulatory approvals for wastewater treatment systems and/or domestic sewage systems at Coleson Cove, Courtenay Bay and Grand Lake generating stations

SOCIAL RESPONSIBILITY

The NB Power Group also continued its commitment to social responsibility in its contributions to a more vibrant New Brunswick. The companies played an active role in the community by leading liaison committees and participating in information forums regarding Coleson Cove, Point Lepreau, the second International Power Line, and a fl y ash plant at Belledune. The company also extended its services beyond the province, sending line crews to Daytona to spend almost two weeks helping restore electricity after Hurricane Frances.

Employees got involved in their communities by planting trees and shrubs to celebrate Arbor Day and acting as advisors in the Junior Achievement Program. In addition, employees also made donations, fundraised and supported charitable organizations like the Dalhousie Medical Research Foundation, the United Way Campaign, Snowarama, the IWK Children’s Hospital and the Canadian Breast Cancer Foundation’s Run for the Cure.

SAFETY

The company continued its focus on public and employee safety through campaigns like LookOut for the Lines and Safety Takes You Home. The Group continues its safety education by providing school teachers with information on electrical safety, how electricity is produced, nuclear power and other electrical issues.

2004 | 2005 ANNUAL REPORT NB POWER GROUP 7

R E V I E W    O F    A C T I V I T I E S N B    P O W E R     G E N E R A T I O N    C O R P O R A T I O N With the restructuring of NB Power, Genco assumed the conventional generation business of NB Power. Genco operates and maintains one of North America’s most diverse generating systems consisting of 14 hydro, coal, oil, diesel and Orimulsion^® powered stations. Genco’s network of conventional generating stations has an installed net capacity of 3,313 MW comprised of 1,903 MW of thermal capacity, 884 MW of hydro capacity and 526 MW of combustion turbine capacity. During the year Genco purchased two units at the Millbank Generating Station to meet current capacity and future load requirements. On Oct. 1, 2004, Genco entered into a power purchase agreement with Disco, its sole in-province customer. The contract requires Genco to provide its existing energy supply to Disco in priority to any other customer. Genco also manages the fuel procurement and economical dispatch of generating units on behalf of Disco. In 2004/05, Genco continued to supply reliable wholesale energy products to in-province and export markets as it faced increasing pressure from rising fuel prices. Genco focused on refurbishing its largest generating station, maintaining strong operational performance, improving productivity and managing fuel costs. It also extended its union agreement two years through to 2006, providing the benefi t of continued labour stability. Genco strives to fi nd creative ways to use generation by-products to reduce landfi lls. It has sent more than 245,000 metric tonnes (MT) of gypsum, a by-product of the fl ue gas desulphurization units at Dalhousie and Belledune, for processing into wallboard. Genco also entered into a 15-year agreement with an outside party to build and operate an ash separation facility in Belledune. Through the separation process, approximately 120,000 MT of fl y ash, a by-product from burning a solid combustible fuel at the Belledune Generating Station, will be diverted from landfi ll annually through either sale or reburn. OPERATING STATISTICS Number of employees 511 Facilities owned 14 Net load capacity 3,313 MW Supply approximately 74% of in-province load Customers Disco
Export Markets  

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In December 2004, Genco completed the Coleson Cove Generating Station Refurbishment Project that began in 2002 and employed more than 1,600 workers at peak construction. The Station is the largest in the NB Power system and provides one-third of New Brunswick’s energy requirements during the winter months. During construction the Station continued to operate, as each of the three units was refurbished separately, thus ensuring reliable power generation for the people of New Brunswick. The refurbishment of the Station will allow Genco to meet stricter environmental requirements and produce reliable generation to 2030. Equipment installations and modifications were designed to reduce SO₂ emission rates by 77 per cent, NO_x emission rates by 70 per cent and particulate release rates by 75 per cent. In response to rising fuel price pressure, Genco participated in a Business Excellence program to reduce costs and gain effi ciencies in its operations by leveraging its diverse fuel mix to optimize fuel use. It also increased the use of lower cost fuels such as petroleum coke and effectively hedged fuel prices. Hydro fl ows during the year were below the previous year while six per cent higher than the historical average. In light of the dramatic increase in world fuel prices, operating Grand Lake Generating Station and NB Coal continues to be economic. As a result, the planned shut-down of both operations has been deferred. Costs were further reduced through the Business Excellence program when 50 long-service employees accepted a voluntary staff adjustment program that allowed them to leave the company. Genco restructured its management team and staff to address its operational needs and to focus on strategic objectives. Throughout its operations, Genco continued to promote safety as a way of life at work. Joint health and safety committees and safety programs such as loss control meetings, management safety reviews and safety days have helped create a strong safety culture. This was demonstrated when employees at the hydro generating facilities in Mactaquac, Beechwood, Grand Falls and Milltown celebrated a major milestone by reaching one million hours of work without a lost-time accident. Moving forward, Genco will continue to produce electricity safely, reliably and with respect for the environment. It will achieve these objectives through continued focus on reducing and managing costs, improving operations to ensure availability and reliability, optimizing fuel procurement and utilization and improving marketing processes in an effort to maximize export margins.

2004 | 2005 ANNUAL REPORT NB POWER GROUP 9

R E V I E W    O F    A C T I V I T I E S N B    P O W E R     N U C L E A R    C O R P O R A T I O N With the restructuring of NB Power, Nuclearco assumed the operation of the Point Lepreau Generating Station. Nuclearco operates and maintains a CANDU – 6 reactor that provides New Brunswick with 635 MW of electricity, up to 30 per cent of New Brunswick’s electrical energy requirements. On Oct. 1, 2004, Nuclearco retained its Agent of the Crown status due to its signifi cant long-term decommissioning obligations. In addition, Nuclearco secured a market for its generation through long-term contracts with both Disco and Maritime Electric Company, Limited. Nuclearco is important to NB Power’s environmental performance as it avoids signifi cant carbon dioxide, sulphur dioxide and nitrogen oxide emissions. In 2004/05, Nuclearco focused on supplying safe and reliable energy as it prepared for a decision on Station refurbishment to extend the Station’s life to 2034. In the winter of 2004, the Government of New Brunswick commissioned Dr. Robin Jeffrey to conduct an independent, third-party review of the proposed Station refurbishment project. In response to Dr. Jeffrey’s recommendations, the NB Power Group entered into contract renegotiations with Atomic Energy of Canada Limited and also exercised due diligence in pursuing third-party investment in the Station. After considering options arising from these endeavours, the Province announced in July 2005 that Nuclearco would refurbish the Station in partnership with AECL. Throughout the year, Nuclearco’s progression on a number of action items from the Canadian Nuclear Safety Commission (CNSC) supported an ongoing positive working relationship with the regulator. Nuclearco is continuing work to correct items identifi ed by the CNSC in the areas of human performance, emergency preparedness and equipment fi tness for service. OPERATING STATISTICS Number of employees 738 Facility CANDU - 6 nuclear reactor Net load capacity 635 MW Supply approximately 25% of in-province load Customers Disco (95%)
Export Markets (5%)  

10  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

The CNSC reported Nuclearco had improved its safety program through the development and implementation of an integrated quality management program. Completing the program was a major milestone for the Station and provides the basis for implementing improvements to other programs. While Nuclearco met or exceeded all of its targets for nuclear safety performance, industrial safety results suffered. A number of minor accidents led to management identifying and addressing the need for increased safety training and awareness. The 2004 World Association of Nuclear Operators peer review recognized resolution of all but one previously identified area for improvement. It also identified new areas for improvement, which management will address through a structured approach. Overall, the physical condition of the plant has improved, with a significant reduction in corrective maintenance backlog and a general shift toward more proactive maintenance. However, plant reliability continues to be an ongoing business risk facing Nuclearco. Increased maintenance challenges, particularly related to the aging of the feeder tubes that transport pressurized heavy water from the fuel channels to the boilers, mean a continuing possibility of unplanned outages. Financial performance will remain vulnerable until the Station is refurbished. The Station achieved a 77 per cent capacity factor compared to a target of 80 per cent for the year. The reduced production resulted primarily from an extension of the planned maintenance outage to address feeder aging issues. The reduced capacity factor resulted in increased costs for the NB Power Group as higher cost energy was required to replace the shortfall. Management realigned planned work to cover the incremental maintenance costs. Nuclearco also completed 80 per cent of its multi-year capital plan through projects prioritized relative to impacts on license requirements, safety and reliability. Nuclearco enjoys a positive working relationship with the International Brotherhood of Electrical Workers Local 37 and in October 2004 extended its union contract to Dec. 31, 2010. This extension will provide labour stability as Nuclearco prepares for and executes Station refurbishment. As Nuclearco moves forward, it will continue to operate the Point Lepreau Generating Station safely and reliably, while preparing for the successful refurbishment completion.

2004 | 2005 ANNUAL REPORT NB POWER GROUP 11

R E V I E W    O F    A C T I V I T I E S N B    P O W E R     T R A N S M I S S I O N    C O R P O R A T I O N With the restructuring of NB Power, Transco assumed the transmission business of NB Power. Transco operates and maintains 46 terminals and switchyards that are interconnected by over 6,700 km of transmission lines ranging in voltage from 69 kV to 345 kV. The system is also interconnected with electrical systems in northeastern North America including Quebec, Maine, Nova Scotia and Prince Edward Island. Following restructuring on Oct. 1, 2004, Transco became unique in the NB Power Group in that it is the only subsidiary with a commercial capital structure that includes debt and equity. The commercial return to the Shareholder is an allowed regulated rate of return. Transco is responsible to reliably deliver electricity from the generating stations to distribution system customers, large industries fed from the transmission system and neighbouring utilities. Transco also provides technical and maintenance support to other NB Power companies, including maintenance and vegetation management at substations and terminals located on Disco’s and Genco’s properties. In 2004/05, Transco focused on ensuring system reliability and enhancing process efficiency. It achieved a fault rate of 1.75 faults per 100 km of line, significantly lower than the 10-year average. Transco continued its capital program to improve the reliability of the aging, lower voltage (69 kV and 138 kV) facilities. Transco participated in a Business Excellence program to reduce costs and gain efficiencies in its operations. Transco began achieving work efficiencies with the successful implementation of a work management system. Further system development will lead to additional efficiencies and greater cost reductions. Costs were further reduced through the Business Excellence program when 36 long-service employees accepted a voluntary staff adjustment program that allowed them to leave the company. This resulted in signifi cant changes to Transco’s workforce and work processes, which Transco addressed through the implementation of its succession plans. OPERATING STATISTICS Number of employees 275 Number of km of transmission lines 6,708 Export capacity 2,377 MW Supply 1,680 MW

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Since 2001, Transco and Bangor Hydro, a wholly-owned subsidiary of Emera Inc., have partnered to construct the second International Power Line from Point Lepreau, New Brunswick, to Orrington, Maine. The construction is a $50 million project on the Canadian side, funded primarily through long-term fi rm transmission reservations. In August 2004, the NB Power Board of Directors approved this expenditure based on conditions relating to permitting requirements and project fi nancing. The line construction will provide increased revenue opportunities for Transco, a more secure supply of energy for the Province and enhanced system reliability and effi ciency. In 2004/05 Transco continued its work to comply with the conditions of the National Energy Board construction permit. It prepared a detailed route for fi ling with the National Energy Board and continued to meet with landowners to negotiate settlements for land rights. Transco’s construction permit requires that the appropriate approvals be in place on the U.S. side before construction begins. Transco continues to work with Bangor Hydro to secure the permits and to coordinate their respective construction schedules. Through the proclamation of the Electricity Act, the New Brunswick System Operator (System Operator) assumed responsibility for designing and administering the Open Access Transmission Tariff. The System Operator submitted an application to the New Brunswick Board of Commissioners of Public Utilities to align the terms and conditions of the tariff with market rules. Changes to the tariff were made to transfer some of Transco’s costs to the System Operator and to introduce a self-generator rate in response to concerns raised during the 2003 tariff hearing about the impact of the tariff on this customer class. Moving forward, Transco will supply safe, reliable transmission services with respect for the environment while achieving the allowed regulated return on equity for the Shareholder. It will achieve this through continued focus on integrating staff and cost reductions, improving productivity, ensuring a reliable transmission system at a competitive price and meeting customer expectations.    

2004 | 2005 ANNUAL REPORT NB POWER GROUP 13

R E V I E W    O F    A C T I V I T I E S NB POWER DISTRIBUTION & CUSTOMER SERVICE CORPORATION With the restructuring of NB Power, Disco was established as the standard service supplier that is responsible for securing adequate capacity and energy supplies to meet customer demand. Disco is responsible for operating and maintaining the distribution system that serves residential, commercial, industrial and wholesale customers across New Brunswick. Disco delivers safe, reliable and competitively-priced energy to its customers by way of its 20,000 km of distribution lines and substations. It also provides valuable customer services through its regional offi ces, customer contact centres, account managers and energy advisors. After restructuring on Oct. 1, 2004, long-term power purchase agreements with Nuclearco and Genco provide Disco its primary source of electricity supply. Throughout 2004/05, Disco continued to provide a reliable supply of electricity to meet in-province demand. In response to rising fuel pressure, Disco participated in a Business Excellence program to reduce costs and gain effi ciencies in its operations. The management team focused on reducing costs and increasing revenues while managing customer needs, safety and reliability. It targeted engineering and operations costs by reducing overtime, improving the effectiveness of planning work and increasing productivity through the use of technology. Costs were further reduced through the Business Excellence program when 150 long-service employees accepted a voluntary staff adjustment program that allowed them to leave the company. Disco restructured its regions from fi ve to three, reducing costs and providing similar customer service levels while maintaining a local presence at operating centres throughout the province. During the same time period, Disco achieved targets for frequency and duration of service interruptions. In the last quarter of the fi scal year, signifi cant effort was directed towards improving safety performance in response to increased employee safety incidents, all relatively minor in nature. The safety focus will continue through Disco’s renewed efforts to ensure everyone goes home safely. OPERATING STATISTICS Number of employees 275 Number of direct customers 325,258 Number of indirect customers (wholesale) 41,672 Number of calls per year (inbound and outbound) 850,000 Number of poles 363,000 Number of km of primary wires 19,982

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The company increased revenues and decreased costs by entering into third party agreements with those attached to the NB Power structures. In a joint venture with Aliant, Disco personnel now complete work common to the two utilities, resulting in more efficient planning, more effective use of resources, reduced costs and improved customer service. In April 2004, prior to restructuring, NB Power Corporation implemented an overall 2.5 per cent rate increase. In March 2005, after restructuring, NB Power Distribution and Customer Service Corporation implemented a 3.0 per cent rate increase. In addition, Disco submitted an application to the New Brunswick Board of Commissioners of Public Utilities to increase rates in 2005/06 to address the rising fuel prices. Disco’s rate application proposed modified pricing structures to better reflect the full cost of service and reduce cross-subsidization among rate classes. Disco mitigated the risk of a capacity deficiency in 2007/08 by contracting additional supply from Genco and increasing future import opportunities by making long-term transmission reservations on Transco’s International Power Line. Disco’s response to the increasing demands for electricity means it has secured adequate capacity to 2014/15 at a time when neighbouring jurisdictions are facing near-term capacity deficiencies. NB Power entered into a 20-year power purchase agreement with Eastern Wind Power Inc. to purchase 20 MW of wind energy. The wind energy that will be produced at Dark Harbour on the western coast of Grand Manan is part of Disco’s overall plan to seek additional supply from renewable energy sources. The plan will help address the growing demand for electricity while meeting emission stabilization and reduction targets under the Province’s proposed Renewable Portfolio Standard. In addition, Disco will implement policies for net metering and embedded generation that will allow purchases from independently-owned generators. Moving forward, Disco will supply safe and reliable electricity and competitively-priced products and services with respect for the environment while providing a return for the Shareholder. It will achieve this through continued focus on integrating staff and cost reductions, productivity and process improvements, while achieving rates that refl ect the costs of service.    

2004 | 2005 ANNUAL REPORT NB POWER GROUP 15

R E V I E W    O F    A C T I V I T I E S N B    P O W E R     H O L D I N G    C O R P O R A T I O N Holdco, through its corporate services, provides strategic direction, governance and support to the subsidiaries for communications, finance, human resources, legal and governance, and strategic planning. It also provides shared services on a cost-recovery basis in areas such as environment, information technology, real estate and records and information management. CORPORATE COMMUNICATIONS Building on the former Public Affairs unit, Corporate Communications provided the strategic communications direction required as the NB Power Group worked towards business excellence. As it refocused its efforts, the division continued to support major projects including the Coleson Cove and Point Lepreau Generating Station refurbishments, the second International Power Line, restructuring activities, the staff adjustment program and other aspects of business excellence. CORPORATE STRATEGIC PLANNING The Corporate Strategic Planning division provided business, financial, economic and regulatory support to allow the NB Power Group to meet its short- and long-term objectives. The division led the development of a rate strategy to meet future revenue requirements and address cross-subsidization between customer classes. It also developed plans for renewable energy, including the ongoing development of wind energy and policies to allow net metering and embedded generation. FINANCE Finance provided strategic direction and services in the areas of financial reporting, business planning, treasury and internal audit. It also focused on effecting the mid-year restructuring and continuing to improve tools, processes and reporting capabilities as the business units transitioned into operating companies. The division also played an integral role in the Point Lepreau Generating Station refurbishment analysis and recommendation. As part of Business Excellence, Finance improved the budgeting and business planning processes and introduced the balanced scorecard to support the Group in focusing, aligning and increasing accountability. HUMAN RESOURCES The restructuring of NB Power saw Human Resources integrate its functions into the operating companies and Shared Services to continue providing successful employee programs and services in their respective areas. Human Resources also preserved a corporate division to provide strategic human resource direction and common employee programs and services.

16  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

The NB Power Group and the IBEW Local 37 continued to derive benefi ts from their strong partnership. This was supported by a wellness culture that yielded results in employee work attendance 33 per cent better than the national average and health care cost escalation 50 per cent better than average. In addition, an agreed-to staff adjustment program reduced the regular work force by 10 per cent and provided growth opportunities across the organization for the remaining employees.

LEGAL

The Legal division provided strategic legal counsel and day-to-day legal services to support the NB Power Group. The division addressed legal requirements leading up to and as a result of the corporate restructuring. It developed a corporate governance model with the Board of Directors that clearly defi ned the role of the Board and set the limitation policies of the President and Chief Executive Officer. The division also supported negotiations leading up to a decision on the Point Lepreau Generating Station refurbishment.

SHARED SERVICES

The Shared Services division provided business support services to allow the holding and operating companies to focus on their core business while creating effi ciencies in the delivery of services common to the operating companies. The division played an active role in assisting the operating companies to implement business process changes. Shared Services focused on managing and reducing costs that led to cost savings for the operating companies. The improved cost management also allowed Shared Services to better understand and refi ne its cost of service model and decrease its rates for the upcoming year. The team balanced cost reductions with high customer satisfaction rates and met service level agreement targets for the year. Shared Services continues to integrate new services with the addition of supply chain and fl eet management.

2004 | 2005 ANNUAL REPORT NB POWER GROUP 17

 

18  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

Management's Discussion and Analysis......................................................20

Management's & Auditors' Reports............................................................36

Combined Financial Statements................................................................37

Notes to the Combined Financial Statements...............................................41

Statistical Overview............................................................................... 56

2004 | 2005 ANNUAL REPORT NB POWER GROUP 19

F O R    T H E   Y E A R    E N D E D   M A R C H   31,    2005 M A N A G E M E N T ’ S    D I S C U S S I O N    A N D    A N A LY S I S Management’s Discussion and Analysis reviews financial results from operations for the fi scal year ended March 31, 2005 and the Corporation’s financial position at March 31, 2005, relative to the previous fiscal year. This section should be read in conjunction with the Combined Financial Statements and accompanying notes. The Combined Financial Statements include the accounts of Holdco and those of its subsidiaries listed below (collectively the Corporation). CORPORATE AND MARKET RESTRUCTURING With the proclamation of the Electricity Act on Oct. 1, 2004, the Government of New Brunswick allowed for the creation of a competitive market for wholesale and large industrial electricity customers and expanded opportunities for development of non-utility generation. A new Crown Corporation, the New Brunswick System Operator (System Operator) is now responsible for market operation. Coincident with electricity sector transformation, New Brunswick Power Corporation (NB Power) - a Crown Corporation with vertically integrated generation, transmission and distribution functions -has been restructured as a holding corporation with subsidiary operating companies. Corporate Restructuring Under the Electricity Act, NB Power was restructured into five successor corporations, New Brunswick Power Holding Corporation (Holdco) and four subsidiaries New Brunswick Power Generation Corporation (Genco) New Brunswick Power Nuclear Corporation (Nuclearco) New Brunswick Power Transmission Corporation (Transco) New Brunswick Power Distribution and Customer Service Corporation (Disco) Additionally, Genco has two wholly-owned subsidiaries, New Brunswick Power Coleson Cove Corporation (Colesonco) and NB Coal Limited (NB Coal). Each company shares a common Chair, President & CEO and common directors. The Boards of Directors are responsible for directing the affairs of each of the Corporations consistent with the Business Corporation Act and the Electricity Act. The new operating companies are expected to manage their revenues and costs, achieve targeted returns and make dividend and special payments in-lieu-of income and capital taxes. Over time, the restructuring will also allow the Province to undertake a debt/equity swap that would allow the operating companies (excluding Nuclearco) to finance in debt markets without a provincial guarantee. Holdco provides strategic direction and support to the subsidiaries for communications, finance, risk management, human resources, legal and strategic planning through its corporate services. It also provides shared services on a cost-recovery basis in areas such as environment, information technology, real estate and records and information management.

20  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

Market Restructuring
The New Brunswick Energy Policy 2001-2010 directed a managed restructuring of the electricity sector beginning with the introduction of competition for existing wholesale and large industrial customers and allowing for greater non-utility generation. In 2003/04, a multi-stakeholder Market Design Committee developed a market structure and operating rules.

Disco has been designated as the standard service supplier and is supplied electricity through long-term power purchase agreements with Genco and Nuclearco. As generating assets retire or additional supply is required, Disco procures supply through the competitive market.

Customers who are not eligible or who decide not to enter the market are entitled to a standard service consistent with service provided by NB Power prior to Oct. 1, 2004. Those that choose to enter the market and purchase electricity other than from Disco may be subject to an exit fee so as not to financially burden remaining customers.

The Electricity Act created two other Crown Corporations necessary for market and corporate restructuring

1. The New Brunswick System Operator (System Operator), who is an independent, not-for-profit Crown Corporation that directs the operation of the electricity market, maintains the long-term adequacy and reliability of the electricity system and administers the Open Access Transmission Tariff
2. The New Brunswick Electric Finance Corporation (Electric Finance), whose purpose is to facilitate the conversion of NB Power’s debt to appropriate levels in the subsidiary operating companies and to assume and reduce the remaining portion of NB Power’s debt

On Oct. 1, 2004, Electric Finance assumed the obligations of NB Power with respect to notes and debt instruments previously issued to the Province or to other third-party debt holders. These obligations included all notes and debentures existing at Sept. 30, 2004, including US dollar debentures and cross-currency interest rate swaps, as well as related accrued interest and deferred debt costs.

In exchange for the transfer, Electric Finance issued a new debt portfolio to the Corporation, along with related accrued interest, common share equity of $140 million and contributed surplus of $187 million.

FINANCIAL VIABILITY
NB Power's business plan is designed to ensure the availability of supply, environmental acceptability, economic efficiency and financial viability.  In 2004/05, NB Power undertook two key initiatives to focus its efforts to achieve financial viability.

2004 | 2005 ANNUAL REPORT NB POWER GROUP 21

F O R    T H E   Y E A R    E N D E D   M A R C H   31,    2005

M A N A G E M E N T ’ S    D I S C U S S I O N    A N D    A N A LY S I S

Business Excellence
In response to rising fuel price pressure, the NB Power Group embarked on a Business Excellence program with an immediate focus on near-term and sustainable cost reductions. The program was developed in fall 2004 to enable NB Power to continue to provide safe, reliable service on a cost-effective basis while reducing the upward pressure on rates.

The Business Excellence program involved cost reductions, a staff adjustment program, an improved business planning and budgeting process and use of a balanced scorecard methodology to increase effi ciency and reduce costs. The staff adjustment program led to a staff reduction of 10 per cent and contributed to the projected reduction of $40 million in annual costs.

Rates Strategy
In April 2004, prior to restructuring, NB Power Corporation implemented an overall 2.5 per cent rate increase. In March 2005, after restructuring, NB Power Distribution and Customer Service implemented a 3.0 per cent increase. In addition, Disco submitted an application to the PUB to increase rates in 2005/06 to address the rising fuel prices. Disco’s rate application proposed modifi ed pricing structures to better refl ect the full cost of service and reduce cross-subsidization among rate classes.

BUSINESS DEVELOPMENT
The NB Power Group’s long-term business plan includes the following projects.

Coleson Cove Generating Station Refurbishment
The Coleson Cove Generating Station is a three-unit, 978 MW net generation facility capable of burning a wide range of liquid fuels. Generation from the station is required to meet future demand and investment was necessary to meet more stringent environmental standards.

In December 2004, Genco completed the Coleson Cove Generating Station Refurbishment Project that began in 2002 and employed more than 1,600 workers at peak construction. The Station is the largest in the NB Power system and provides one-third of New Brunswick’s energy requirements during the winter months. During construction the Station continued to operate, as each of the three units was refurbished separately, thus ensuring reliable power generation for the people of New Brunswick.

The refurbishment of the Station will allow Genco to meet stricter environmental requirements and produce reliable generation to 2030. Equipment installations and modifi cations were designed to reduce SO₂ emission rates by 77 per cent, NOX emission rates by 70 per cent and particulate release rates by 75 per cent.

22  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

—  C O N T I N U E D

Point Lepreau Nuclear Generating Station Refurbishment
The Point Lepreau Generating Station is important to NB Power’s environmental performance as it avoids signifi cant carbon dioxide, sulphur dioxide and nitrogen oxide emissions. Its continued operation is also of particular importance due to the volatility in thermal fuel pricing and diversifi cation of supply.

Increased maintenance challenges, particularly related to the aging of the feeder tubes that transport pressurized heavy water from the fuel channels to the boilers, mean a continuing possibility of unplanned outages. Financial performance will remain vulnerable until the Station is refurbished.

Throughout 2004/05, NB Power continued its preparations for the Point Lepreau Generating Station Refurbishment project, scheduled to occur during an 18-month outage beginning in April 2008. The $1 billion project will replace all 380 fuel channel and calandria tube assemblies and feeders. Other equipment replacements, inspections and upgrades will also be undertaken. Successfully completing the project will allow the station to operate for an additional 30 years. Expenditures to March 31, 2005 were $90 million, primarily for feasibility studies, engineering, analysis and project planning.

In the winter of 2004, the Government of New Brunswick commissioned Dr. Robin Jeffrey to conduct an independent, third-party review of the Station refurbishment project. In response to Dr. Jeffrey’s recommendations, NB Power entered into contract renegotiations with Atomic Energy of Canada Limited (AECL), pursued third-party investment in the Station, and sought thermal alternatives to the nuclear plant’s refurbishment. After considering options arising from these endeavours, the NB Power Board of Directors recommended to the Province that it proceed with the refurbishment of the plant. The Province announced in July 2005 that Nuclearco would refurbish the Station in partnership with AECL.

International Power Line Project
Since 2001, Transco and Bangor Hydro, a wholly-owned subsidiary of Emera Inc., have partnered to construct the second International Power Line from Point Lepreau, New Brunswick, to Orrington, Maine. The construction is a $50 million project on the Canadian side, funded primarily through long-term fi rm transmission reservations. The line construction will provide increased revenue opportunities for Transco, a more secure supply of energy for the Province and enhanced system reliability and effi ciency.

In 2004/05, Transco continued its work to comply with the conditions of the National Energy Board construction permit. It prepared a detailed route for fi ling with the National Energy Board and continued to meet with landowners to negotiate settlements for land rights. Transco’s construction permit requires that the appropriate approvals be in place on the U.S. side before construction begins. Transco continues to work with Bangor Hydro to secure the permits and to coordinate their respective construction schedules. The NB Power Board of Directors approved this expenditure based on conditions relating to permitting requirements and project fi nancing.

2004 | 2005 ANNUAL REPORT NB POWER GROUP 23

	F O R    T H E   Y E A R    E N D E D   M A R C H   31,    2005 M A N A G E M E N T ’ S    D I S C U S S I O N    A N D    A N A LY S I S FINANCIAL AND OPERATING STATISTICS Financial and Operating Performance Factors (in millions)
		2004/05		2003/04		2002/03
	Hydro net generation as percentage of long-term average		106%		120%		76.8%
	Point Lepreau Generating Station net capacity factor		76.7%		85.6%		71.6%
	Canadian dollar at March 31st ($US equivalent)	$	0.828	$	0.763	$	0.681
	Average heavy fuel oil price ($US/bbl Platt’s NY 3%)	$	26.50	$	23.23	$	23.49
	Average natural gas price ($US/mmBTU)	$	6.12	$	5.44	$	4.22
	Average ICR* coal marker price ($US/ton)	$	65.32	$	46.91	$	28.91
	Average New England on-peak prices ($US/MWh)	$	59.85**	$	48.58**	$	51.29
	* International Coal Report ** net of congestion and marginal losses The following factors have a signifi cant impact on financial performance because they affect the cost of generation or price competitiveness in export markets Hydro Generation – As NB Power’s lowest-cost fuel to generate electricity, hydro accounts for approximately 15 per cent of total production. When flows are below anticipated levels, other more expensive fuels are used to account for the shortfall thereby increasing generation costs. Nuclear Generation – Supplying 30 per cent of New Brunswick’s energy requirements, and up to 25 per cent of total production, consistent performance from the Point Lepreau Generating Station is essential to positive financial performance. Planned maintenance outages have been scheduled annually with increased emphasis on feeder inspections. Nuclear performance continues to be an ongoing business risk facing the Corporation. Exchange Rates – NB Power is exposed to foreign exchange risk through fuel and purchased power, priced in US dollars, that exceeds revenue received in US dollars. The Corporation hedges a significant portion of the net known and forecasted US dollar requirements. Oil Prices – Heavy fuel oil represents approximately 50 per cent of fuel costs and it is also used as the replacement fuel when low-cost nuclear and hydro generation is unavailable. To minimize short- to medium-term heavy fuel oil price exposure, the Corporation hedges its forecasted in-province and firm export requirements 18 months forward. Natural Gas Prices – The Corporation, effective 2004/05, has two contracts tied to natural gas prices and price fluctuations will affect the cost to supply in-province load. The Corporation hedges a significant percentage of this exposure. These contracts represent 13 per cent of the total fuel costs. Coal Prices – Coal represents 15 per cent of total fuel costs and is purchased through tendered contracts of one to two years.

24  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

—  C O N T I N U E D

MANAGEMENT’S DISCUSSION AND ANALYSIS OVERVIEW Financial Performance (in millions)
	2004/05		2003/04		2002/03
Net income (loss)	$	9	$	(18)	$	(77)
Cash fl ow from operations	$	245	$	256	$	139
Free cash infl ow (outfl ow)	$	(161)	$	(376)	$	(86)
Reduction (increase) in net debt	$	204	$	(321)	$	(149)
Financial Ratios and Percentages
	2004/05		2003/04		2002/03
Operating margin		14%		14%		12%
Operating cash fl ow / capital expenditures		0.72x		0.52x		0.66x
Operating cash fl ow / total debt		0.08x		0.08x		0.05x
Per cent of debt in capital structure		96%		106%		106%
Interest coverage ratio		0.97x		0.88x		0.68x
NB Power recorded a net income of $9 million in 2004/05 compared with a net loss of $18 million in 2003/04. The most significant factor contributing to the change in year-over-year net income was a non-recurring charge in 2003/04 against net income of $44 million for write-off of costs associated with a fuel handling system intended for delivery of Orimulsion® fuel to the Coleson Cove Generating Station. The income from operations in the previous year before the write-off was $26 million compared to the current year income from operations of $9 million. Other positive factors contributing to the year-over-year change in net income were higher in-province revenue due to the 2.5 per cent average rate increase implemented April 1, 2004 and an increase in revenue due to interruptible energy prices, which are variable and linked to generation costs higher out-of-province revenue due to higher average prices for export energy decreased finance charges arising from mid-year restructuring of the Corporation’s debt Other factors that offset the impact of these positive developments were higher fuel and purchased power costs due to decreased nuclear generation and lower hydro performance, both of which resulted in higher replacement energy costs higher operations, maintenance and administration costs as a result of a significant staff adjustment program that reduced the Corporation’s workforce by 10 per cent for 2005/06 special payments in lieu of income taxes made to the Shareholder post mid-year restructuring

2004 | 2005 ANNUAL REPORT NB POWER GROUP 25

	F O R    T H E   Y E A R    E N D E D   M A R C H   31,    2005 M A N A G E M E N T ’ S    D I S C U S S I O N    A N D    A N A LY S I S MANAGEMENT’S DISCUSSION AND ANALYSIS OVERVIEW(Continued) Cash flow from operations in 2004/05 decreased by $11 million to $245 million. This resulted primarily from a decrease in net income (excluding the one-time 2003/04 write-off of $44 million for fuel handling facility costs). The Corporation’s debt decreased by $204 million in 2004/05 due to the net reduction of debt from financial reorganization of NB Power and principal repayments made during the year, offset by a new debt issue to fund capital spending at Coleson Cove Generating Station. On Oct. 1, 2004, Electric Finance assumed the obligations of NB Power with respect to notes and debt instruments previously issued to the Province or to other third-party debt holders. These obligations included all notes and debentures existing at Sept. 30, 2004, including US dollar debentures and cross-currency interest rate swaps, as well as related accrued interest and deferred debt costs. In exchange for the transfer of these items, Electric Finance issued a new debt portfolio to the Corporation, along with related accrued interest, common share equity of $140 million and contributed surplus of $187 million. Further information on the financial reorganization of NB Power is described in Note 2 of the financial statements.
	OPERATING RESULTS 2004/05
	Revenue Overview (in millions)
		2004/05		2003/04		2002/03
	Sales of power
	In-province	$	1,049	$	1,009	$	993
	Out-of-province		251		246		227
	Miscellaneous		62		56		53
	Transmission		41		-		-
	Total revenues	$	1,403	$	1,311	$	1,273
	Per cent increase year-over-year		7%		3%		(3.5)%
	Total revenues was $1,403 million in 2004/05, which is an increase of $92 million or 7 per cent from 2003/04.

26  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

—  C O N T I N U E D

OPERATING RESULTS 2004/05(Continued)
In-Province Revenue (in millions)		2004/05	2003/04		2002/03
Residential	$	427	$	409	$	393
Industrial		319		306		316
General service		203		196		190
Wholesale		81		80		77
Street lights		19		18		17
Total	$	1,049	$	1,009	$	993
GWh		14,606		14,648		14,540
In-province revenue was $1,049 million in 2004/05, representing an increase of $40 million or 4.0 per cent from 2003/04. The main contributors to the year-over-year variance were a 2.5 per cent average rate increase implemented April 1, 2004, which increased revenue by $24 million higher interruptible energy prices for large industrial customers increased revenue by $12 million; these prices are variable and linked to generation costs changes in overall sales mix and weather-adjusted sales volumes increased revenue by $4 million
Out-of-Province Revenue (in millions)		2004/05		2003/04		2002/03
Revenue	$	251	$	246	$	227
GWh		3,813		3,922		3,069
Out-of-province revenue increased $5 million or 2.0 per cent from 2003/04. The main contributors to the year-over-year variance were an increase in revenue of $11 million due to a higher average price for export energy, partially offset by lower hydro and nuclear generation, which decreased the availability of surplus energy for export and resulted in a 3 per cent decrease in export sales volumes and a $6 million decrease in revenue Miscellaneous Revenue Miscellaneous revenue consists primarily of water heater rentals, pole attachment fees, the sale of steam and generation by-products, and fees for secondment services provided to the System Operator (commenced after Oct. 1, 2004). Miscellaneous revenue increased $6 million or 11 per cent to $62 million in 2004/05, primarily due to third party billings, steam sales, and water heater rentals. Transmission Revenue and Expense Transmission revenue was $41 million for the year and transmission expense was $46 million for the year. These items represent the revenue and expense amounts received from or charged by the System Operator during the period. The transmission revenue represents recoveries from the System Operator for the transmission revenue requirement. The transmission expense includes charges for connection fees, point-to-point tariff, scheduling services, and energy imbalance. The establishment of the System Operator created an external party through which these expenses and revenues flow.

2004 | 2005 ANNUAL REPORT NB POWER GROUP 27

	F O R    T H E   Y E A R    E N D E D   M A R C H   31,    2005 M A N A G E M E N T ’ S    D I S C U S S I O N    A N D    A N A LY S I S EXPENSES
	Expenses Overview (in millions)
			2004/05			2003/04			2002/03
			$	%		$	%		$		%
	Fuel and purchased power	$	497	36	$	467	36	$	528		39
	OM&A		384	28		355	27		334		25
	Amortization and     decommissioning		219	15		213	16		216		16
	Transmission		46	3		-	-		-		-
	Taxes other than     special payments		41	3		33	2		30		2
	Write-off of fuel     handling system costs		-	-		44	3		-		-
	Finance charges		202	15		217	16		242		18
	Special Payments		5	-		-	-		-		-
	Total	$	1,394	100	$	1,329	100	$	1,350		100
	Percentage increase    (decrease) year over year			5%			(2%)				4%
	Total expenses increased 5 per cent to $1,394 million in 2004/05. This $65 million increase resulted from the following factors $30 million increase in fuel and purchased power costs due to decreased nuclear and hydro generation, resulting in higher energy replacement costs $29 million increase in operations, maintenance and administration costs primarily due to a significant staff adjustment program that reduced the Corporation’s workforce by 10 per cent for 2005/06 onward $46 million in transmission expenses paid to the System Operator $11 million in special payments in lieu of income and capital taxes paid to Electric Finance $8 million in amortization and decomissioning, and property taxes Offsetting these increases were the following factors $44 million write-off of costs associated with expenditures on the Orimulsion® fuel handling system for the Coleson Cove Generating Station in 2003/04 $15 million decrease in finance charges arising from mid-year financial reorganization of NB Power
	Fuel and Purchased Power (in millions)
				2004/05			2003/04			2002/03
			$	%		$	%		$		%
	Hydro	$	0	0	$	0	0	$	0		0
	Nuclear		9	2		10	2		7		1
	Thermal		366	74		364	78		409		78
	Purchases		122	24		93	20		112		21
	Total	$	497	100	$	467	100	$	528		100

28  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

—  C O N T I N U E D

EXPENSES (Continued) The cost of fuel and purchased power was $497 million in 2004/05, an increase of $30 million or 6.4 per cent from 2003/04. Heavy fuel oil represented 39 per cent of this spending while purchased power from utilities in Nova Scotia, Maine, Quebec and New Brunswick accounted for 25 per cent. The year-over-year increase in fuel and purchased power costs was attributable to the following factors hydro flows were 106 per cent of the long-term average in 2004/05 compared to 120 per cent in 2003/04. Decreased availability of this low-cost energy increased generation costs by $20 million. Point Lepreau’s net capacity factor was 77 per cent during 2004/05 compared to 86 per cent in 2003/04. Decreased availability of this low-cost energy increased generation costs by $28 million. These increases were offset by an overall lower load decrease ($11 million) and other variances in generation and purchased power mix, and an overall decrease in fuel prices, net of the hedging impact ($7 million). Operations, Maintenance and Administration (in millions)
		2004/05		2003/04		2002/03
OM&A expenses	$	384	$	355	$	334
Operations, maintenance and administration costs were $384 million in 2004/05, an increase of $29 million or 8.2 per cent from 2003/04. This was mainly due to the following factors early retirement costs were $23 million higher due to a significant staff adjustment program that decreased the Corporation’s workforce by 10 per cent for 2005/06 onward labour, hired services, and material costs were $13 million higher mainly due to the timing and extent of maintenance outages in Nuclearco and Genco These increases were offset by a $10 million reduction in costs, including reduced pension costs and decreased hired services and other related costs from restructuring. Amortization and Decommissioning(in millions)
		2004/05		2003/04		2002/03
Amortization and Decommissioning	$	219	$	213	$	216
Amortization and decommissioning costs were $219 million in 2004/05, an increase of $6 million or 2.8 per cent from 2003/04. This was primarily due to the completion and capitalization of the Coleson Cove Generating Station refurbishment project in December 2004.

2004 | 2005 ANNUAL REPORT NB POWER GROUP 29

	F O R    T H E   Y E A R    E N D E D   M A R C H   31,    2005 M A N A G E M E N T ’ S    D I S C U S S I O N    A N D    A N A LY S I S EXPENSES (Continued) Taxes, other than Special Payments in lieu of Income Taxes (in millions)
			2004/05		2003/04		2002/03
	Taxes, other than Special Payments in lieu of Income Taxes	$	41	$	33	$	30
	Taxes, other than special payments in lieu of income taxes were $41 million in 2004/05, an increase of $8 million or 24.2 percent from 2003/04. This was mainly due to an increase in property tax assessments and payment to Electric Finance of special payments in lieu of provincial capital taxes which commenced Oct. 1, 2004.
	Write-off of Fuel Handling System Costs (in millions)		2004/05		2003/04		2002/03
	Write-off of Fuel Handling System Costs	$	-	$	44	$	-
	The one-time write-off in March 2004 related to expenditures for the development and construction of an off-loading facility capable of handling the delivery of Orimulsion® fuel for the Coleson Cove Generation Station.
	Finance Charges (in millions)		2004/05		2003/04		2002/03
	Finance Charges	$	202	$	217	$	242
	Finance charges were $202 million in 2004/05, a decrease of $15 million or 6.9 per cent from 2003/04. This was mainly due to the reduction in debt resulting from the reorganization of the Corporation on Oct. 1, 2004.
	Special payments in lieu of Income Taxes (in millions)		2004/05		2003/04		2002/03
	Special payments in lieu of Income Taxes	$	6	$	-	$	-
	Effective Oct. 1, 2004, the Corporation was required to make special payments in lieu of income taxes to Electric Finance. These payments consist of an income tax component based on accounting net income and a federal capital tax component. LIQUIDITY AND CAPITAL RESOURCES
	Capital Expenditures (in millions)		2004/05		2003/04		2002/03
	Major project capital expenditures	$	220	$	412	$	118
	Regular project capital expenditures		115		85		94
	Total capital expenditures	$	335	$	497	$	212
	Capital expenditures, net of proceeds on disposal and customer contributions, were $335 million in 2004/05, a decrease of $162 million or 33 per cent from 2003/04.

30  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

—  C O N T I N U E D

LIQUIDITY AND CAPITAL RESOURCES(Continued) The primary reason for the decrease was reduced spending on the Coleson Cove Generating Station Refurbishment Project ($200 million versus $400 million the previous year) as the project was completed in December 2004. This decrease was offset by an increase in regular capital expenditures by Genco, and an increase in capital spending on pre-engineering work required for refurbishment of the Point Lepreau Generating Station. Transmission and distribution infrastructure upgrade projects were also completed during the year.
Cash Flow from Operations (in millions)		2004/05		2003/04		2002/03
Cash Flow from Operations	$	245	$	256	$	139
Cash fl ow from operations was $245 million in 2004/05, a decrease of $11 million from 2003/04. This resulted primarily from a decrease in net income (excluding the one-time 2003/04 write-off of fuel handling facility costs of $44 million).
Free Cash Inflow (Outflow) (in millions)		2004/05		2003/04		2002/03
Cash flow from operations	$	245	$	256	$	139
Capital expenditures		(335)		(497)		(212)
Other investments		(6)		-		-
Decrease (increase) in working capital		(51)		29		14
Nuclear decommissioning and used fuel     management funds, installments     and earnings		(13)		(156)		(20)
Other		(1)		(8)		(7)
Free cash inflow (outflow)	$	(161)	$	(376)	$	(86)
Free cash outfl ow was $161 million in 2004/05, an increase of $215 million from 2003/04. The primary reasons for the increase were reduced capital spending reduced funding of the used nuclear fuel management and nuclear decommissioning liabilities due to a one-time funding in 2003/04 to meet CNSC licensing requirements

2004 | 2005 ANNUAL REPORT NB POWER GROUP 31

	F O R    T H E   Y E A R    E N D E D   M A R C H   31,    2005 M A N A G E M E N T ’ S    D I S C U S S I O N    A N D    A N A LY S I S LIQUIDITY AND CAPITAL RESOURCES(Continued)
	Reduction (increase) in net debt (in millions)		2004/05		2003/04		2002/03
	Free cash inflow (outflow)	$	(161)	$	(376)	$	(86)
	Foreign exchange adjustment and deferred debt costs		(3)		-		(18)
	Net reduction in debt due to restructuring		365		-		-
	Change in cash		3		55		(45)
	Reduction (increase) in net debt	$	204	$	(321)	$	(149)
	Net debt decreased by $204 million in 2004/05 compared to an increase in 2003/04 of $321 million. This was mainly due to the following factors reduced capital spending reduced funding of the used nuclear fuel management and decommissioning liabilities a net reduction in debt due to the restructuring of the Corporation’s debt portfolio on Oct. 1, 2004 See Note 2 and Note 17 of the financial statements for information on the restructuring of the Corporation’s debt portfolio.
	Total Net Debt (in millions)		2004/05		2003/04		2002/03
	Long-term debt	$	2,816	$	2,883*	$	2,744*
	Short-term indebtedness		340		477		295
	Total net debt	$	3,156	$	3,360	$	3,039
	Debt/capital		96%		106%		106%
	Cash flow from operations/total debt		.08		.08		.05
	* Long-term debt is net of sinking fund investments
	The Corporation’s debt levels will increase in future years with refurbishment of the Point Lepreau Generating Station and construction of the International Power Line. The level of short-term borrowings fl uctuates depending on the timing of debt maturities and capital investment requirements. Since restructuring on Oct. 1, 2004 the Corporation issues long and short-term notes to Electric Finance. Under the authority of the Electricity Act, Electric Finance issues debt in the name of the Province of New Brunswick.

32  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

—  C O N T I N U E D

SEGMENTED INFORMATION

The Corporation is organized and operates under fi ve reportable business segments. On Oct. 1, 2004, the restructuring of NB Power resulted in each of the business segments becoming incorporated companies as described in Note 1 of the financial statements. As these segments existed for the full year, the results presented are representative of the full year activities of the segments. The segments are as follows

• Genco – responsible for operating and maintaining the oil, hydro, coal, Orimulsion^®, and diesel powered generating stations
• Nuclearco – responsible for operating and maintaining the Point Lepreau Generating Station
• Transco – responsible for operating and maintaining the transmission system
• Disco – responsible for operating and maintaining the distribution system. Disco is designated as the standard service supplier for the Province of New Brunswick and is obligated to provide standard services to residential, commercial, wholesale and industrial customers located throughout the province
• Holdco – responsible for providing corporate and shared services to the other business segments

Financial Overview (in millions)
	Genco	Nuclearco	Transco	Disco	Holdco	Eliminations	Total
Total Revenues	$  869	$  226	$  102	$  1,093	$  139	$  (1,026)	$  1,403
Fuel & Purchased Power	488	12	-	820	-	(823)	497
Transmission	33	2	3	55	-	(47)	46
QM&A	111	135	44	119	55	(80)	384
Amortization & decommissioning	84	73	18	41	3	-	219
Taxes, other than special payments in lieu of income taxes	15	6	8	12	-	-	41
Income (loss) before finance charges & special payments in lieu of income taxes	138	(2)	29	46	81	(76)	216
Finance charges	83	11	14	34	128	(68)	202
Special payments in lieu income taxes	27	(3)	6	5	(30)	-	5
Net income (loss) for the year	$  28	$  (10)	$  9	$  7	$  (17)	$  (8)	$  9

2004 | 2005 ANNUAL REPORT NB POWER GROUP 33

F O R    T H E   Y E A R    E N D E D   M A R C H   31,    2005

M A N A G E M E N T ’ S    D I S C U S S I O N    A N D    A N A LY S I S

SIGNIFICANT ACCOUNTING ESTIMATES

Amortization

NB Power has an amortization review process whereby the service life of major asset categories are reviewed every fi ve years or more frequently as circumstances warrant. These reviews include physical inspection of the asset and review of maintenance and retirement history, technological obsolescence and industry practices. The current estimated useful lives of assets are in Note 3(a) of the Financial Statements.

The estimated service life of the Coleson Cove Generating Station was extended by 25 years upon completion of the refurbishment project. When the Point Lepreau Generating Station Refurbishment project proceeds, it is expected that the useful life of the station will be extended by 25 years.

The amortization expense for the year ended March 31, 2005 is $201 million (2004 – $196 million).

Plant Decommissioning and Used Nuclear Fuel Management

Effective April 1, 2002, NB Power adopted the Canadian Institute of Chartered Accountants standard for asset retirement obligations requiring recognition of the net present value of these liabilities when incurred. The key assumptions on which the liabilities are based are disclosed in Note 18 of the Financial Statements and these assumptions are updated on a periodic basis. As the Point Lepreau Generating Station Refurbishment project proceeds, the used nuclear fuel liability will increase because more fuel will be consumed and the decommissioning liability will decrease as the time period to decommission will be longer.

The Government of Canada enacted the Nuclear Fuel Waste Act in 2002 creating the Nuclear Waste Management Organization. The organization’s mandate is to recommend to the federal government the best approach for management of used nuclear fuel waste. The approach selected by the federal government could signifi cantly change the liability currently recorded in the Financial Statements for used nuclear fuel management.

The thermal and nuclear decommissioning expense for the year ended March 31, 2005 is $18 million (2004 - $17 million).

34  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

Future Employee Benefi ts

Employees of NB Power Group belong to the Province of New Brunswick’s superannuation defi ned benefi t pension plan (see Note 15 of the Financial Statements). The Corporation also has a retirement allowance program and at times has early retirement costs (see Note 19).

Unbilled Revenue

As NB Power bills residential and general service customers on a cyclical basis, the revenue for energy supplied but not billed at the end of each fi scal period is estimated and recorded. This estimate is based on substation readings and average rates. The revenue accrued at March 31, 2005 was $36 million (2004 - $32 million).

Overhead to Capital

As described in Note 3(a) of the Financial Statements, the Corporation adds an overhead to capital projects for indirect charges for administration and other expenses. The amount of overhead charged to capital in the year ended March 31, 2005 is $11 million (2004 - $12 million).

2004 | 2005 ANNUAL REPORT NB POWER GROUP 35

F O R    T H E   Y E A R    E N D E D   M A R C H   31,    2005 M A N A G E M E N T ’ S    D I S C U S S I O N    A N D    A N A LY S I S
MANAGEMENT REPORT  August 4, 2005  The NB Power Group’s financial statements have been prepared by management, who are responsible for the integrity, accuracy and fairness of the information.  The accounting principles followed in the financial statements are generally accepted in Canada. The financial information presented throughout the annual report is consistent with the financial statements. Systems of internal control and supporting procedures are maintained to provide assurance that transactions are authorized, assets are safeguarded and records properly maintained. These controls and procedures include • system security and various financial controls • quality standards in hiring and training of employees • a code of conduct • an organizational structure that provides a well-defi ned division of responsibilities • performance accountability • communication of policies and guidelines through the Corporation Internal controls are reviewed and evaluated by audit programs which are subject to scrutiny by external auditors. The ultimate responsibility for the financial statements rests with the Board of Directors. The Board is assisted in its responsibilities by the Audit Committee, which reviews the recommendations of internal and external auditors for improvements in internal control and the action of management to implement such recommendations. In carrying out its duties and responsibilities, the Audit Committee meets regularly with management and with external and internal auditors to review the scope and timing of their respective audits, to review their fi ndings and to satisfy itself that its responsibility has been properly discharged. The Audit Committee reviews the financial statements and recommends them for approval by the Board of Directors. The Corporation’s external auditors, Deloitte & Touche LLP, have conducted an independent examination of the financial statements in accordance with auditing standards generally accepted in Canada, performing such tests and other procedures as they consider necessary to express the opinion in their Auditors’ Report. The external auditors have full and unrestricted access to the Audit Committee to discuss their audit and related fi ndings as to the integrity of the Corporation’s financial reporting and the adequacy of internal control systems.	AUDITORS’ REPORT  The Honourable Herménégilde Chiasson Lieutenant-Governor of New Brunswick Fredericton, New Brunswick Sir: We have audited the combined balance sheet of NB Power Holding Corporation (the “Corporation”) as at March 31, 2005 and the combined statements of income and defi cit and cash fl ows for the year then ended. These Financial Statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these Financial Statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance 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 signifi cant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these combined financial statements present fairly, in all material respects, the financial position of the Corporation as at March 31, 2005 and the results of its operations and its cash fl ows for the year then ended in accordance with Canadian generally accepted accounting principles. Deloitte & Touche LLP  Chartered Accountants  Saint John, NB June 6, 2005 Except as to Note 25 which is as of August 4, 2005

36  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

C O M B I N E D    F I N A N C I A L    S T A T E M E N T S

Combined Statement of Income for the year ended March 31 (in millions)
		2005		2004
Revenues (Note 4)
Sales of power
In-province	$	1,049	$	1,009
Out-of-province		251		246
Miscellaneous		62		56
Transmission		41		–
		1,403		1,311
Expenses
Fuel and purchased power		497		467
Transmission (Note 4)		46		–
Operations , maintenance and administration		384		355
Amortization and decommissioning (Note 5)		219		213
Taxes, other than special payments in lieu of income taxes (Note 6)		41		33
Write-off of fuel handling system costs (Note 7)		–		44
		1,187		1,112
Income before fi nance charges and special payments in lieu of income taxes		216		199
Finance charges (Note 8)		202		217
Income (loss) before special payments in lieu of income taxes		14		(18)
Special payments in lieu of income taxes (Note 9)		5		–
Net income (loss) for the year	$	9	$	(18)
Combined Statement of Deficit for the year ended March 31 (in millions)
		2005		2004
Deficit, beginning of year	$	(195)	$	(177)
Net income (loss) for the year		9		(18)
Dividends declared (Note 10)		(5)		–
Deficit, end of year	$	(191)	$	(195)

2004 | 2005 ANNUAL REPORT NB POWER GROUP 37

C O M B I N E D    F I N A N C I A L    S T A T E M E N T S

Combined Balance Sheet as at March 31 (in millions)
		2005		2004
Current Assets
Cash and short-term investments (Note 11)	$	4	$	7
Accounts receivable (Note 21)		217		181
Materials, supplies and fuel		106		96
Prepaid expenses		3		3
		330		287
Property, Plant and Equipment
Land, buildings, plant and equipment, at cost		6,320		6,016
Less: accumulated amortization		3,047		2,870
		3,273		3,146
Long-Term Assets
Nuclear decommissioning and used fuel management funds (Note 13)		189		176
Other investments (Note 14)		6		–
		195		176
Other Assets
Future special payments in lieu of income taxes (Note 9)		5		–
Deferred debt costs, less amounts amortized (Note 2)		–		50
Deferred pension benefi t (Note 15)		71		67
Other deferred charges		–		3
		76		120
Total Assets	$	3,874	$	3,729
On behalf of New Brunswick Power Holding Corporation

38  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

Combined Balance Sheet as at March 31 (in millions)
		2005		2004
Current Liabilities
Short-term indebtedness (Note 16)	$	340	$	477
Accounts payable and accruals (Note 21)		199		201
Accrued interest (Note 21)		60		70
Current portion of long-term debt (Note 17)		357		69
		956		817
Long-Term Debt (Note 17)
Debentures and other loans		2,459		3,217
Less: sinking funds		–		403
		2,459		2,814
Deferred Liabilities
Plant decommissioning and used nuclear fuel management (Note 18)		251		240
Other (Note 19)		72		53
		323		293
Shareholder’s Equity
Capital stock (Note 10)		140		–
Contributed surplus (Note 2)		187		–
Deficit		(191)		(195)
		136		(195)
Total Liabilities and Shareholder’s Equity	$	3,874	$	3,729

2004 | 2005 ANNUAL REPORT NB POWER GROUP 39

C O M B I N E D    F I N A N C I A L    S T A T E M E N T S

Combined Statement of Cash Flows for the year ended March 31 (in millions)
		2005		2004
Operating Activities
Net income (loss) for the year	$	9	$	(18)
Amounts charged or credited to operations not requiring      a current cash payment (Note 20)		236		274
		245		256
Nuclear decommissioning and used fuel management funds      installments and earnings		(13)		(156)
Decommissioning liability expenditures		(1)		(3)
Additions to deferred charges		–		(5)
Net change in non-cash working capital balances		(51)		29
		180		121
Investing Activities
Expenditure on property, plant and equipment, net of proceeds     on disposal and customer contributions		(335)		(497)
Other investments		(6)		–
		(341)		(497)
Financing Activities
Debt retirements		(58)		(102)
Sinking fund installments and earnings		(27)		(55)
Proceeds from long-term debt obligations		297		296
Increase (decrease) in short-term indebtedness		(54)		182
		158		321
Net cash outflow		(3)		(55)
Cash, beginning of year		7		62
Cash, end of year	$	4	$	7

40  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

F O R    T H E   Y E A R    E N D E D   M A R C H    3 1 , 2 0 0 5  -   i n    m i l l i o n s

N O T E S    T O    T H E    C O M B I N E D    F I N A N C I A L    S T A T E M E N T S

1. INCORPORATION AND BASIS OF PRESENTATION Incorporation The New Brunswick Power Corporation (NB Power) was established as a Crown Corporation of the Province of New Brunswick in 1920 by enactment of the New Brunswick Electric Power Act. On Oct. 1, 2004 the Province of New Brunswick proclaimed the Electricity Act, which resulted in the reorganization of NB Power and the restructuring of the electricity industry in New Brunswick. NB Power was continued as New Brunswick Power Holding Corporation (Holdco) with four new subsidiary operating companies that commenced operations on this date. The subsidiaries include New Brunswick Power Generation Corporation* (Genco) New Brunswick Power Nuclear Corporation (Nuclearco) New Brunswick Power Transmission Corporation (Transco) New Brunswick Power Distribution & Customer Service Corporation (Disco) * Including the New Brunswick Power Coleson Cove Corporation (Colesonco), formed as a subsidiary of Genco upon restructuring, and NB Coal Limited (NB Coal) Basis of presentation The accompanying combined financial statements have been prepared in accordance with Canadian generally accepted accounting principles applied on a basis consistent with the preceding year. The combined financial statements include the accounts of Holdco and those of its subsidiaries listed above (collectively the Corporation). 2. RESTRUCTURING Government entities The Electricity Act resulted in the establishment of the New Brunswick Electric Finance Corporation (Electric Finance), a Crown Corporation and agent of the Crown, whose purpose is to facilitate the conversion of NB Power’s debt to appropriate levels in the subsidiary operating companies and to assume and reduce the remaining portion of NB Power’s debt. The Electricity Act also resulted in the establishment of the New Brunswick System Operator (System Operator), a not-for-profit body whose primary objective is to independently direct the operation of the electricity market and maintain the long-term adequacy and reliability of the electricity system. Debt restructuring On Oct. 1, 2004, Electric Finance assumed the obligations of NB Power with respect to notes and debt instruments previously issued to the Province or to other third-party debt holders. These obligations included all notes and debentures existing at Sept. 30, 2004, including US dollar debentures and cross-currency interest rate swaps, as well as related accrued interest and deferred debt costs. In exchange for the transfer of the above items, Electric Finance issued a new debt portfolio to the Corporation, along with related accrued interest, which was reduced by common share equity and contributed surplus to offset the deficit that existed at Sept. 30, 2004. The following is a summary of the amounts transferred and received from Electric Finance
	Received		Transferred		Variance
Long-term debt	$	2,837	$	3,537	$	(700)
Sinking funds		-		(418)		418
Short-term debt		295		378		(83)
Accrued interest		71		83		(12)
		3,203		3,580		(377)
Deferred debt costs		-		(50)		50
Common share equity		140		-		140
Contributed surplus		187		-		187
Total	$	3,530	$	3,530	$	-
Common shares As part of the incorporation of the new operating companies and the restructuring of NB Power, the following common shares were issued or transferred Holdco issued one Class A common voting share of nominal value to the New Brunswick Minister of Energy each subsidiary company issued one Class A voting common share of nominal value to Holdco Colesonco issued one Class A voting common share of nominal value to Genco the voting common shares of NB Coal were transferred from Holdco to Genco each company, excluding NB Coal, issued one Class B non-voting common share of nominal value to Electric Finance Transco issued an additional 1,000 Class B non-voting common shares to Electric Finance with a stated value of $140 million

2004 | 2005 ANNUAL REPORT NB POWER GROUP 41

F O R    T H E   Y E A R    E N D E D   M A R C H    3 1 ,  2 0 0 5  -   i n    m i l l i o n s

N O T E S    T O    T H E    C O M B I N E D    F I N A N C I A L    S T A T E M E N T S   -    C O N T I N U E D

Transfer of net assets On Oct. 1, 2004, the assets and liabilities associated with each of the business segments were transferred from Holdco to the respective operating companies at their net book value. Result of capital restructuring The above noted transactions resulted in the following allocation of assets, liabilities, equity and contributed surplus amounts as at Oct. 1, 2004							Power Purchase Agreement – NB Power Generation Corporation Disco and Genco entered into a long-term power purchase agreement whereby Genco will supply capacity and energy to Disco. The agreement continues until nominated capacity under the terms of the agreement is reduced to zero. The commitment at March 31, 2005 was 2,425 MW of base capacity and 1,258 MW of peaking capacity, including capacity supplied through third-party power purchase agreements. Under this power purchase agreement, Genco is also responsible to procure and deliver fuel on behalf of Disco to the Coleson Cove Generating Station. 3.  SIGNIFICANT ACCOUNTING POLICIES a. Property, plant and equipment The cost of additions to property, plant and equipment is the original cost of contracted services, direct labour and material, interest and allowance for funds used during construction, indirect charges for administration and other expenses, less credits for the value of power generated during commissioning. Property, plant and equipment also includes the present value of asset retirement obligations related to the disposal of used nuclear fuel and decommissioning of the nuclear and thermal generating stations. Interest during construction is capitalized monthly on capital construction projects within unregulated businesses based on the cost of long-term borrowings. Allowance for funds used during construction is capitalized monthly on capital construction projects within regulated businesses based on the weighted average cost of capital. Contributions in aid of construction, which include amounts received from customers as well as research and development grants in respect of new facilities, are netted against the cost of related assets. The cost of distribution system assets retired, net of dismantlement and salvage, is charged to accumulated amortization. For all other property, plant and equipment dispositions, the cost and accumulated amortization is removed from the accounts, with the gain or loss on disposal being reflected in income. Amortization is provided for all assets sufficient to amortize the cost of such assets less estimated salvage values over their estimated service lives. The estimated service lives of fixed assets are periodically reviewed and any changes are applied prospectively. All assets are amortized on a straight-line basis.
	Holdco	Genco*	Nuclearco	Transco	Disco	Total
Net assets	$      5	$  1,9550	$  382	$  345	$  661	$ 3,343
Opening Deficit	165	22	-	-	-	187
Short term debt	5	69	113	4	104	295
Accrued Interest Payable	-	47	7	5	12	71
Long term debt	-	1,834	262	196	545	2,837
Contributed Surplus	165	22	-	-	-	187
Common Share Equity	-	-	-	140	-	140
* including Colesonco and NB Coal
Signifi cant inter-company agreements On Oct. 1, 2004 the following contracts were entered into: Power Purchase Agreement – NB Power Nuclear Corporation Disco and Nuclearco entered into a power purchase agreement whereby Disco will purchase 95 per cent of the Point Lepreau Generating Station capacity and 95 per cent of the electricity produced by the station. The term of the agreement is until the end of the current service life of the generating station if it is not refurbished, or 25 years after the refurbished station returns to service if it is refurbished, with annual renewal options in favour of Disco thereafter. Power Purchase Agreement – NB Power Coleson Cove Corporation Disco and Colesonco entered into a 25-year power purchase agreement whereby Disco will purchase tolling capacity and related services to convert fuel to electricity. The agreement requires the sale of all energy generated at the Coleson Cove Generating Station to Disco.

42  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

The main categories of property, plant and equipment are being amortized based on the following estimated service lives
Assets	Years
Hydro generating facilities	35 - 100
Thermal generating stations	25 - 35
Nuclear generating station	25
Combustion turbine generating stations	25
Terminals and substations	40
Transmission system	45 - 60
Distribution system	10 - 35
Buildings
General	40
Head Office	50
Communications and computer systems	3 - 15
Mining equipment	20 - 35
Motor vehicles	4 - 10
b. Cash and short-term investments Cash and short-term investments, which are stated at cost, consist of balances with banks and investments in money market instruments. c. Inventories Inventories of materials and supplies and fuel other than nuclear fuel are valued at average cost. Nuclear fuel is valued at cost using the fi rst-in, fi rst-out method. d. Deferred debt costs As part of restructuring, the deferred debt costs were transferred to Electric Finance on Oct. 1, 2004 (see Note 2). Prior to restructuring, the Corporation amortized debenture discounts and premiums, the expenses of issues and the deferred interest related to debt refinancing over the lives of the issues to which they pertained. e. Foreign exchange transactions Monetary assets and liabilities denominated in foreign currencies are translated to Canadian dollars at rates of exchange prevailing at the balance sheet date except where such items have been hedged by the acquisition of a forward exchange contract, in which case the rate established by the terms of the contract is used in the translation. Exchange gains and losses resulting from foreign currency translation are reflected in income. f. Long-term debt Long-term debt is recorded on the balance sheet at cost. The estimated fair value of long-term debt is disclosed in the notes to the financial statements using market values or estimates of market values based on debt with similar terms and maturities. The estimated fair value does not include costs that would be incurred to exchange or settle the debt. g. Sinking funds As part of restructuring, the sinking funds were transferred to Electric Finance on Oct. 1, 2004 (see Note 2). Prior to restructuring, the Minister of Finance of the Province of New Brunswick, as Trustee for the Corporation, maintained sinking funds for all debenture issues. Sinking fund earnings are reflected in the Corporation’s income and sinking fund investments deducted from long-term debt as a legally enforceable right to offset did exist. h. Asset retirement obligations Nuclear and Thermal Generating Stations In order to provide for the estimated future costs of permanently disposing of used nuclear fuel and decommissioning the nuclear and thermal generating stations to return the sites to a state of unrestricted use, the Corporation recognizes these liabilities taking into account the time value of money. The following costs have been recognized as a liability as at March 31, 2005 the estimated present value of the costs of decommissioning the nuclear and thermal generating stations at the end of their useful lives the estimated present value of the fixed cost portion of used nuclear fuel management activities that are required regardless of the volume of fuel consumed and the estimated present value of the variable cost portion of used nuclear fuel management activities to take into account actual fuel volumes incurred up to March 31, 2005 The liability for used nuclear fuel management is increased for nuclear fuel bundles used each year with the corresponding amounts charged to operations through fuel expense. The liabilities for nuclear and thermal plant decommissioning and used nuclear fuel management are increased for the passage of time by calculating accretion (interest) on the liabilities. The accretion expense is calculated using the Corporation’s credit adjusted risk-free rate and is included with amortization expense.

2004 | 2005 ANNUAL REPORT NB POWER GROUP 43

F O R    T H E   Y E A R    E N D E D   M A R C H    3 1 ,  2 0 0 5  -   i n    m i l l i o n s

N O T E S    T O    T H E    C O M B I N E D    F I N A N C I A L    S T A T E M E N T S   -    C O N T I N U E D

The calculations of the anticipated future costs are based on detailed studies that take into account various assumptions regarding the method and timing of dismantlement of the nuclear and thermal generating stations, the cost of transportation of nuclear material to permanent disposal facilities and estimates of infl ation rates in the future. Expenditures incurred on a current basis relating to used nuclear fuel management and plant decommissioning are charged against the deferred liability accounts. In view of potential developments in the technology of decommissioning and used nuclear fuel management and the various assumptions and estimates inherent in the calculations, the Corporation reviews such calculations periodically. In accordance with the Nuclear Fuel Waste Act, which came into force in November 2002, the Nuclear Waste Management Organization was formed to prepare and review alternatives and provide recommendations for long-term management of used nuclear fuel. The Nuclear Waste Management Organization’s recommendations are to be submitted within three years of the Act coming into force. The federal government will determine the strategy for dealing with the long-term management of used nuclear fuel based on submitted alternatives. The strategy determined by the federal government could significantly change management’s estimate of the used nuclear fuel management liability. Hydro Generating Stations The Corporation currently has no intention of decommissioning its hydro generating stations. With either maintenance efforts or rebuilding, the assets are expected to be used for the foreseeable future. Therefore, no removal date can be determined and consequently a reasonable estimate of the fair value of any related asset retirement obligations cannot be made at this time. If at some future date it becomes possible to estimate a fair value cost of removing assets that the Corporation is legally required to remove, an asset retirement obligation will be recognized at that time. Transmission and Distribution assets
Although some of the Corporation’s transmission and distribution assets may have asset retirement obligations, the Corporation expects to use the majority of its transmission and distribution assets for an indefi nite period of time. Therefore, no removal date can be determined and consequently a reasonable estimate of the fair value of any related asset retirement obligation cannot be made at this time. If at some future date it becomes possible to estimate the fair value cost of removing assets that the Corporation is legally required to remove, an asset retirement obligation will be recognized at that time. i. Pension plans
Corporation employees are members of the Province of New Brunswick Public Service Superannuation Plan. This multi-employer, defined benefit plan provides pensions based on length of service and the average of the highest five consecutive years of earnings. Pension benefits paid are escalated each year based on the Consumer Price Index to a maximum of 5 or 6% depending on retirement date. The Corporation and its employees make contributions to the plan as prescribed in the Public Service Superannuation Act and its regulations. NB Coal maintains a private defined benefit pension plan for its employees. Under both plans, future salary levels affect the amount of employee future benefits, and therefore the projected benefit method pro-rated on services has been used to determine the accrued benefit obligation. The expected return on plan assets is based on the fair value of plan assets. Actuarial gains or losses in excess of 10% of the greater of the accrued benefit obligation and the fair value of the plan assets at the beginning of the year are amortized over the expected average remaining service life of the employee group. The transitional asset (fair market value of the plan assets less the accrued benefit obligation as determined at April 1, 2000), is also amortized over the average remaining service life of the employee group. j. Retirement allowance
The Corporation has a retirement allowance program for employees that provides a lump-sum payment equal to one week of pay for each full year of employment to a maximum of 26 weeks of pay. Actuarial calculations are prepared to determine the amount of the Corporation’s obligations for retirement allowances. The actuarial method used incorporates management’s best estimate assumptions to determine the present value of the accrued retirement allowance obligation based on projections of salaries and wages to expected retirement dates. The actuarial present value of accrued retirement allowance obligations for past service is amortized on a straight-line basis over the expected average remaining service life of the employee group.

44  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

k. Early retirement programs The present value of the estimated future costs of early retirement programs is charged to income in the year the program is initiated, irrespective of when payments are actually made. l. Revenue Billings to residential and general service customers are rendered monthly on a cyclical basis. All other customers are billed at the end of each month. Revenue in respect of items not billed at the end of a fiscal period is estimated and accrued. m. Derivative financial instruments In accordance with its hedging policies and objectives, the Corporation enters into derivative financial instruments to manage underlying exposures. The Corporation formally documents all relationships between hedging instruments and hedged items, as well as its hedging objectives and strategy underlying various hedge transactions. This process includes linking all derivatives to specific assets and liabilities on the balance sheet or to specific forecasted transactions. Hedge accounting, which allows deferral of gains and losses until settlement, is applied when the derivative instrument is designated as a hedge and the derivative is expected to be effective throughout the life of the hedged item. Effectiveness is achieved when changes in the cash flows or fair value of the derivative instrument substantially offset changes in the cash flows or fair value of the hedged item. The Corporation assesses both at inception and on an ongoing basis whether the derivatives used in hedging transactions are effective. Effective derivatives that meet hedge criteria are not recorded on the balance sheet and any gain or losses on these instruments are deferred and only recognized at the settlement date. Derivative instruments not meeting hedge criteria are accounted for on the balance sheet at fair value and subsequent changes in fair value are recorded in earnings. If a derivative instrument ceases to exist and is not replaced, the termination gain or loss is deferred and recognized when the hedged item is settled. If a hedged item ceases to exist or is no longer probable of occurring, any previously deferred gains or losses associated with a derivative instrument are recognized in earnings. If a hedging relationship is terminated or ceases to be effective, any previously deferred gains or losses are carried forward and recognized in earnings in the same period as the hedged item and any subsequent gains or losses on the fair value of the instrument are recognized in earnings.

The Corporation uses derivative financial instruments to manage the following risks foreign currency exchange rates interest rates heavy fuel oil and natural gas prices Foreign Currency Exchange Rates and Interest Rates The Corporation enters into Canadian dollar – US dollar forward contracts to hedge exchange risk related to forecasted US dollar purchases. Gains or losses on forward contracts hedging forecasted US dollar purchases are deferred and recognized at the settlement date as part of the underlying item. In the event that a forward contract is terminated, the realized gain or loss would also be deferred and recognized in income at the settlement date of the related underlying item. As part of restructuring, the existing cross-currency interest rate swaps were transferred to Electric Finance on Oct. 1, 2004 (see Note 2). Prior to restructuring, the Corporation entered into Canadian dollar – US dollar cross-currency interest rate swaps to hedge exchange risk related to interest and principal obligations on US dollar denominated long-term debt. The Corporation periodically enters into interest rate swaps to hedge against the interest rate exposure associated with the future issuance of debt. The gains or losses on these interest rate swaps that meet the hedge criteria are accounted for on a settlement basis and are recognized only when the debt is refinanced. The resulting gains or losses are deferred and amortized to interest expense over the new debt term. Heavy Fuel Oil and Natural Gas Prices The Corporation enters into heavy fuel oil and natural gas swaps to hedge the anticipated exposure related to changes in the cost of heavy fuel oil in the operations of its generating stations and on purchase contracts largely based on natural gas prices. Gains or losses on these swaps are recognized at the settlement dates as an adjustment to the related underlying item. n. Special payments in lieu of taxes Effective Oct. 1, 2004, the Corporation is required to make special payments in lieu of taxes to Electric Finance. Total special payments in lieu of taxes consists of an income tax component based on accounting net income multiplied by a rate of 35.12 per cent a capital tax component based upon the large corporation tax rules contained in the federal and provincial income tax acts

2004 | 2005 ANNUAL REPORT NB POWER GROUP 45

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N O T E S    T O    T H E    C O M B I N E D    F I N A N C I A L    S T A T E M E N T S   -    C O N T I N U E D

The Corporation also recognizes the future special payments in lieu of taxes benefit of current losses when it is more likely that sufficient income will be generated in future periods to utilize losses previously incurred. No other provisions are made for future special payments in lieu of taxes as a result of any temporary differences as the tax basis of assets and liabilities and their carrying amounts for accounting purposes are considered to be the same for the purposes of the calculation. o. 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 at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from the estimates. See Note 3(h) regarding the estimate of the nuclear used fuel management liability. 4. REVENUES In-province sales of power The Corporation is regulated under a system whereby annual average rate increases greater than three per cent or the Consumer Price Index, whichever is higher, require regulatory review by the Board of Commissioners of Public Utilities of the Province of New Brunswick (PUB). Transmission revenue The PUB also regulates the Open Access Transmission Tariff (OATT), that establishes non-discriminatory access to the transmission system for generators and customers inside and outside the province and generates revenues for Transco to operate and maintain the transmission system. In its March 2003 decision, the PUB approved an initial revenue requirement that is the basis for the existing OATT rates. The OATT rates were effective Sept. 30, 2003. On Oct. 1, 2004, the System Operator assumed responsibility for the design and administration of the OATT. As such, Transco bills the System Operator for the majority of its revenue requirement, which the System Operator collects through the OATT from the various load and load-serving customers including Genco, Nuclearco, and Disco.	Other Total revenue includes $99 million (2004 - $84 million) of sales to customers in the United States. 5. AMORTIZATION AND DECOMMISSIONING
			2005		2004
	Amortization	$	201	$	196
	Decommissioning		18		17
	Amortization and Decommissioning	$	219	$	213
	6. TAXES, OTHER THAN SPECIAL PAYMENTS IN LIEU OF INCOME TAXES
			2005		2004
	Property taxes		18		16
	Utility and right of way taxes		17		17
	Special payments in lieu of provincial capital taxes		6		-
	Taxes, other than special payments in lieu of income taxes	$	41	$	33
	Utility taxes refl ect amounts charged by the Province of New Brunswick on the net book value of assets not covered by property taxes. 7. WRITE-OFF OF FUEL HANDLING SYSTEM COSTS The Corporation received environmental approvals and commenced a project in December 2002 to refurbish the 998 MW Coleson Cove Generating Station to extend its life and convert it to burn Orimulsion® fuel. The project also included development and construction of facilities and pipeline capable of handling Orimulsion® fuel. The Corporation had signed a memorandum of understanding for the development of these facilities. The site chosen required investment in a fi xed jetty, storage tanks, pumping and piping to the existing pipelines used to transport heavy fuel oil to the generating station. Of the expenses incurred on the fuel delivery system, $44 million was not expected to provide future service value and was expensed in the year ended March 31, 2004.

46  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

8. FINANCE CHARGES
		2005		2004
Interest expense	$	223	$	240
Less: Income from sinking funds,
trust funds, and other		(21)		(31)
		202		209
Guarantee / debt management fee		21		20
Amortization of deferred debt costs		3		7
Unrealized foreign exchange gains		-		(1)
Realized foreign exchange gains		(2)		(2)
		224		233
Less: Interest capitalized		(22)		(16)
Finance charges	$	202	$	217
Interest paid during the period was $221 million (2004 - $241 million). Interest received on investments during the period was $20 million (2004 - $27 million).

9. SPECIAL PAYMENTS IN LIEU OF INCOME TAXES
		2005		2004
Income before special payments
in lieu of income taxes	$	14	$	-
Less: Income up to October 1st		(8)		-
Income subject to special payments
in lieu of income taxes		6		-
Income tax rate		35.12%		-
		2		-
Special payments in lieu of federal capital taxes		3		-
Total special payments in lieu of income taxes	$	5	$	-
Components of special payments in lieu of income taxes
		2005		2004
Provision for current special payments
in lieu of income taxes	$	7	$	-
Provision for future special payments
in lieu of income taxes		(5)		-
Special payments in lieu of federal capital taxes		3		-
	$	5	$	-
Special payments in lieu of income taxes are calculated at an individual company level.  During the period that special payments in lieu of income taxes was applicable, Disco incurred a net loss and recorded a future special payments in lieu of income taxes amount, reducing the overall provision.

10. CAPITAL STOCK

The Corporation has one Class A voting common share of nominal value, issued and outstanding to the Minister of Energy.

The Corporation has 1,006 Class B non-voting common shares issued and outstanding to Electric Finance with a stated value of $140 million.

The Corporation, with Electric Finance's approval, is authorized to issue an unlimited number of Class A or Class B shares without nominal or par value.

Dividends

The holder of the Class B shares, Electric Finance, is entitled to receive dividends when declared by the Corporation's Boards of Directors. The designated percentage of the dividends declared may vary based upon the discretion of the Shareholder and the financial position of the Corporation. The holder of the Class A shares cannot be paid dividends until such time that there are no longer any Class B shares outstanding.

Dividends are declared and paid at an individual company level.

11. CASH AND SHORT-TERM INVESTMENTS
		2005		2004
Cash	$	3	$	4
Short-term investments		1		3
Cash and short-term investments	$	4	$	7

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12. PROPERTY, PLANT AND EQUIPMENT
	2005						2004
	Cost	Accumulated		Net Book			Cost	Accumulated		Net Book
		Amortization			Value			Amortization		Value
Power
generating
stations	$         4,433	$	2,187	$	2,246	$	3,742	$	2,052	$	1,690
Transmission
system	291		137		154		284		132		152
Terminals and
substations	452		232		220		428		220		208
Distribution
system	727		314		413		709		296		413
Buildings and
properties	59		31		28		59		30		29
Communications
and computer
systems	95		51		44		86		42		44
Mining
equipment
and related
assets	53		53		-		53		52		1
Motor vehicles	51		33		18		50		32		18
Miscellaneous
assets	13		9		4		18		14		4
Construction-
in-progress*	146		-		146		587		-		587
Total	$         6,320	$	3,047	$	3,273	$	6,016	$	2,870	$	3,146
*  Construction-in-progress at March 31, 2005 includes $90 million (2004 - $71 million) of expenditures on the Point Lepreau Generating Station Refurbishment Project.

13. NUCLEAR DECOMMISSIONING AND USED FUEL MANAGEMENT FUNDS
		2005		2004
Used Nuclear Fuel Management Funds The used nuclear fuel management trust funds are comprised of
1. The Corporation has established a used nuclear fuel segregated fund held in a custodial account to meet the license conditions of the Point Lepreau Generating Station set by the Canadian Nuclear Safety Commission (CNSC). Funding requirements are reviewed at the time of each license renewal.
	$	81	$	76
2. The Corporation has also established a trust fund pursuant to the Nuclear Fuel Waste Act. The Nuclear Fuel Waste Act requires major owners of used nuclear fuel in Canada to establish trust funds to finance the long-term management of used nuclear fuel. The Act requires the Corporation to contribute $4 million annually in November of each year until a long – term disposal plan is chosen. Further funding requirements beyond this time will be based on the plan chosen (see Note 3(h)). The funds contained in the established fund to meet the license conditions of the generating station described above will also be used to meet these requirements.		28		24
		109		100
Nuclear Decommissioning Fund
The Corporation has established a decommissioning segregated fund held in a custodial account to meet the license conditions for the Point Lepreau Generating Station set by the CNSC.		80		76
Total nuclear decommissioning and used fuel management funds	$	189	$	176

48  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

14. OTHER INVESTMENTS During the year, the Corporation entered into a 15-year agreement to have an outside party build and operate an ash separation facility at the Belledune Generating Station to process the fl y ash produced at the plant. The $6 million investment represents the Corporation’s required share of the cost of the facility. Pursuant to this agreement, the Corporation will receive royalties on the sale of the processed ash over the term of the agreement. 15. DEFERRED PENSION BENEFIT Corporation employees are members of the Province of New Brunswick Public Service Superannuation Plan as described in Note 3(i). Pension assets and liabilities for the Public Service Superannuation Plan are measured as at March 31, 2005 while the assets and liabilities for the NB Coal plan are measured as at Dec. 31, 2004. The most recent actuarial valuation done for funding purposes for the Public Service Superannuation Plan was April 1, 2002. The next valuation for funding purposes is required to be completed as at April 1, 2005. The significant assumptions of management include the following discount rate used to determine the accrued benefit obligation – 5.75 per cent (2004 – 6.0 per cent) expected long-term rate of return on plan assets – 6.75 per cent (2004 – 7.0 per cent) salary increases – 2.5 per cent (2004 – 2.5 per cent) The costs recognized for the period are
		2005		2004
Current service cost	$	15	$	13
Interest on accrued benefit obligation		54		50
Actual gain on plan assets		(61)		(153)
Difference between actual and expected return on plan assets		7		106
Actuarial losses on accrued benefit obligation		53		8
Difference between actuarial loss recognized for the year and actuarial loss on accrued benefit obligation for the year		(45)		3
Amortization of transitional asset		(3)		(3)
Costs recognized	$	20	$	24
An update of an accounting valuation to March 31, 2004 increased the accrued benefi t obligation and the unamortized losses by $73 million, resulting in no change to the pension asset. The status of the assets and obligations of the Corporation’s share of the Public Service Superannuation Plan and NB Coal’s private plan as at March 31, 2005 was as follows

		2005		2004
Pension fund assets at fair value	$	841	$	778
Accrued benefit obligation		987		883
Pension deficit		(146)		(105)
Unamortized transitional obligation		(37)		(40)
Unamortized losses		254		212
Deferred pension benefit	$	71	$	67

In accordance with prescribed regulations, employees contributed $10 million (2004 - $10 million) and the Corporation contributed $23 million to the plans (2004 - $23 million) during the year. Total contributions to date in excess of pension expense in the amount of $71 million (2004 - $67 million) have been recorded as a deferred charge. 16. SHORT-TERM INDEBTEDNESS The Corporation borrows funds for temporary purposes from Electric Finance. The short-term borrowings due to Electric Finance were $340 million at March 31, 2005. The $477 million of short-term borrowings due in the prior year were payable to the Province of New Brunswick.
17. LONG-TERM DEBT
		2005		2004
Debentures held by Electric Finance	$	2,815	$	-
Debentures held or guaranteed by the Province of New Brunswick		-		3,280
Other		1		6
		2,816		3,286
Less: payments due within one year		(357)		(69)
Long-term debt		2,459		3,217
Less: sinking funds		-		(403)
Long-term debt	$	2,459	$	2,814
Restructuring On Oct. 1, 2004, the existing debt portfolio of the Corporation, along with the sinking funds, was transferred to Electric Finance in exchange for a new reduced debt portfolio (see Note 2).

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Terms

The maturity dates of the debentures range from 2005 – 2020. The terms of the debentures are such that the Corporation is required to make an annual principal repayment of 1 per cent of the original amount of each debenture on the anniversary date of its maturity. These payments will be made until the actual maturity date of the debenture, at which time the remaining principal amount will be repaid.

There were no US dollar debentures outstanding at March 31, 2005 (2004 – $650 million). As part of restructuring, all existing US dollar debentures were transferred to Electric Finance on Oct. 1, 2004 (see Note 2 ).

Interest rates

The debentures bear interest at fi xed rates ranging from 2.96 per cent to 10 per cent. The weighted average coupon interest rate on all debentures outstanding at March 31, 2005 is 6.71 per cent (2004 – 6.89 per cent).

Guarantee and debt management fee

Prior to restructuring, the Corporation paid an annual guarantee fee to the Province of New Brunswick, amounting to 0.6489 per cent of the total of long-term debt guaranteed by the Province, debentures held by the Province, and short-term indebtedness to the Province, less the balance held in sinking funds, measured as at the opening balance sheet date. Effective Oct. 1^st, 2005 the Corporation is required to pay a debt management fee to Electric Finance amounting to 0.6489 per cent of the total of long-term debt and short-term indebtedness, measured as at the opening balance sheet date.

Principal repayments

Long-term debt principal repayments are due as follows

Year ending	Principal repayment
March 31, 2006	$	357
March 31, 2007		160
March 31, 2008		403
March 31, 2009		269
March 31, 2010		393
March 31, 2011 and thereafter	1,234

18. PLANT DECOMMISSIONING AND USED NUCLEAR FUEL MANAGEMENT

The Corporation’s nuclear generating station produces used nuclear fuel in the form of radioactive fuel bundles. The used nuclear fuel will need to be disposed of and the nuclear station will need to be dismantled and decommissioned at the end of its service life.

The Corporation also provides for decommissioning its thermal generating stations at the end of their service lives.

The liability for plant decommissioning and used nuclear fuel management consists of the following

		2005		2004
Used Nuclear Fuel Management
Balance, beginning of year	$	66	$	61
Add: Liabilities incurred		65		1
Add: Accretion expense		5		4
Balance, end of year		136		66
Nuclear Decommissioning
Balance, beginning of year		138		129
Add: Accretion expense		9		9
Less: Revision to cash flows, net of liabilities incurred		(72)		-
Balance, end of year		75		138
Thermal Decommissioning
Balance, beginning of year		36		35
Add: Liabilities incurred		1		-
Add: Accretion expense		3		2
Less: Expenditures		-		(1)
Balance, end of year		40		36
Total used nuclear fuel management and plant decommissioning liability	$	251	$	240

50  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

Liability for used nuclear fuel management The liability for used nuclear fuel management costs represents the cost of managing the radioactive used nuclear fuel bundles generated by the nuclear station. The liability is partially funded (see Note 13). The key assumptions on which the liability is based are the total undiscounted amount of the estimated cash flows required to settle the liability is $885 million the management of the used nuclear fuel will require cash expenditures until 2048 to settle the liability the credit adjusted risk-free rate at which the estimated cash flows have been discounted is 7.1 per cent for the initial recognition of the liability and 5.9 per cent for the subsequent recognition of the additional liability Liability for nuclear decommissioning The liability for nuclear decommissioning represents the costs of decommissioning the nuclear generating station after the end of its service life. The liability is partially funded (see Note 13). The key assumptions on which the liability is based are the total undiscounted amount of the estimated cash flows required to settle the liability is $642 million the decommissioning of the nuclear generating station will require cash expenditures until 2076 to settle the liability the credit adjusted risk-free rate at which the estimated cash flows have been discounted is 7.1 per cent for the initial recognition of the liability and 5.9 per cent for the subsequent recognition of the additional liability Liability for thermal decommissioning The liability for thermal decommissioning represents the costs of decommissioning the thermal generating stations after the end of their service lives. The liability is not funded. The key assumptions on which the liability is based are the total undiscounted amount of the estimated cash flows required to settle the liability is $98 million the decommissioning of the thermal generating stations will require cash expenditures until 2033 to settle the liability the credit adjusted risk-free rates at which the estimated cash flows have been discounted are 7.1 per cent for the initial recognition of the liability and 6.3 per cent for the subsequent recognition of the additional liability	19. DEFERRED LIABILITIES – OTHER
			2005		2004
	Early retirement programs	$	67	$	30
	Retirement allowance program		9		15
	Other future employee benefits payable		2		1
	NB Coal land reclamation		2		-
	NB Coal environmental liability		9		10
			79		56
	Less: amounts due within one year		(7)		93)
	Deferred liabilities - other	$	72	$	53
	Retirement allowance liability The interest rate used in the calculation of this obligation was 5.75 per cent (2004 –6.0 per cent) and the assumed rate of salary escalation was 2.5 per cent (2004 – 2.5 per cent). The latest actuarial calculation was completed as at April 1, 2004. The estimated retirement allowance obligation at March 31, 2005 is $26 million (2004 - $28 million). The retirement allowance expense for the period ended March 31, 2005 was $4 million (2004 - $4 million). The cumulative amount expensed in excess of amounts paid out under the retirement allowance program is recorded as a deferred liability. NB Coal environmental liability The Corporation and its subsidiary NB Coal have developed a long-term plan to treat acidic water drainage from an inactive mine. The plan involves using a permanent water treatment facility to treat the site for as long as required. NB Coal has recognized an environmental liability equal to the net present value of the expected future costs.
			2005		2004
	Balance, beginning of year	$	10	$	11
	Add: Accretion expense		1		1
	Less: Expenditures		(2)		(2)
	Balance, end of year	$	9	$	10

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20. AMOUNTS CHARGED OR CREDITED TO OPERATIONS NOT REQUIRING A CURRENT CASH PAYMENT
		2005		2004
Amortization and decommissioning	$	219	$	213
Amortization of deferred debt costs		3		7
Unrealized foreign exchange gains		-		(1)
Used nuclear fuel liabilities incurred		1		1
Retirement expenses less related funding		17		7
Pension expenses less related funding		(4)		1
Future payments in lieu of income taxes		(5)		-
Write-off of fuel handling system costs		-		44
Other		5		2
Amounts not requiring a current cash payment	$	236	$	274
21. RELATED PARTY TRANSACTIONS
Related parties of the Corporation include Electric Finance and the System Operator.
Revenues and expenses
The following related party revenue and expenses are included in the financial results for the year ended March 31, 2005
Electric Finance				System Operator
Transmission revenue	$	-	$	41
Miscellaneous revenue		-		5
Transmission expense		-		46
Interest expense		100		-
Debt management fee		10		-
Special payments in lieu of provincial capital taxes		6		-
Special payments in lieu of income taxes*		10		-
* Excluding the future payments in lieu of income taxes provision
Receivables and payables
The following related party receivable and payable balances existed as at March 31, 2005
Electric Finance				System Operator
Accounts receivable	$	4	$	10
Accounts payable		5		7
Accrued interest		60		-

Dividends
During the period, Transco declared $5 million in dividends, payable to Electric Finance.
Debt and guarantees
The Corporation has short and long-term debt payable to Electric Finance (Note 16 and 17) as at March 31, 2005.
Electric Finance has also provided certain guarantees for the Corporation to significant third-party creditors with respect to banking arrangements, trade payables and derivative financial instrument obligations.
22. FINANCIAL INSTRUMENTS
Fair value of financial instruments
The fair value of financial instruments have been estimated by reference to quoted market prices or from valuations supplied by counter-parties for actual or similar instruments at the period end, unless otherwise noted.
Interest rate and foreign exchange risk management
At March 31, 2005, the Corporation had no forward cross-currency interest rate swaps outstanding. As part of restructuring, the cross-currency interest rate swaps were transferred to Electric Finance on Oct. 1, 2004 (see Note 2).
Cross-Currency Interest Rate Swaps
		2005		2004
US debt amount (in millions)	$	-	$	400
Weighted average interest rate		-		6.04%
Weighted average exchange rate		-		1.5883
Fair value liability (in millions)	$	-	$	(122)
At March 31, 2005, the Corporation had outstanding foreign exchange contracts maturing over the next 18 months as follows
Foreign Exchange Contracts
		2005		2004
Net commitment to purchase USD (in millions)	$	265	$	106
Weighted average exchange rate		1.2738%		1.4879%
Fair value liability (in millions)	$	(18)	$	(18)

52  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

Fuel price risk management At March 31, 2005, the Corporation had outstanding heavy fuel oil swap contracts maturing over the next 18 months as follows Heavy Fuel Oil Swaps
		2005		2004
Notional amount (in barrels)	5.0 million		3.3 million
Weighted average fi xed price/barrel (in USD)	$	27.86	$	21.92
Fair value asset (in millions)	$	36	$	9
At March 31, 2005, the Corporation had outstanding natural gas swap contracts maturing over the next 18 months as follows
Natural Gas Swaps
		2005		2004
Notional amount (in btu)	13.0 million		10.1 million
Weighted average fixed price/btu (in USD)	$	7.12	$	5.95
Fair value asset (in millions)	$	33	$	14

Under these contracts, the Corporation exchanges monthly payments based on the differential between a fi xed price and a monthly cumulative fl oating price for the associated fuel. The differential to be paid or received is refl ected in the cost of fuel and purchased power.
Fair value of long-term debt
Long-term Debt
		2005		2004
Book value (in millions)	$	2,816	$	3,286
Fair value (in millions)	$	3,126	$	3,879
Fair value of nuclear decommissioning and used fuel management funds
Nuclear Decommissioning and Used Fuel Management Funds
		2005		2004
Book value (in millions)	$	189	$	176
Fair value (in millions)	$	202	$	183
Fair value of other financial assets and liabilities The fair values of other financial assets and liabilities are not materially different from their carrying values. Credit risk Credit risk arises from the potential that a counter party will fail to perform its obligations. The Corporation conducts a thorough assessment of debtors prior to granting credit and actively monitors the financial health of its debtors on an ongoing basis. The maximum credit risk exposure is deemed to be the sum of accounts receivable net of applicable reserves and the total unrealized gains on other financial instruments exposed to credit risk. Accounts receivable net of applicable reserves is $217 million (2004 - $181 million). The total unrealized gains on other financial instruments exposed to credit risk is $69 million (2004 - $23 million). 23. COMMITMENTS AND CONTINGENCIES Belledune wharf The Corporation has entered into an operating lease expiring in 2013 with a 20-year renewal option for the port facility at Belledune. This lease provides for annual charges of approximately $5 million. Courtenay Bay Generating Station The Corporation has entered into a lease agreement for site facilities expiring in 2021 with a five-year option to extend. The tenant has re-powered an existing 100 MW unit to a 280 MW combined cycle natural gas unit, which began commercial operation effective September 2001. The Corporation also entered into a related power purchase and transmission access agreement expiring in 2021 with a five-year option to extend with the same third party. The Corporation will purchase all the electrical energy produced by the re-powered 280 MW combined cycle natural gas unit during the winter period, Nov. 1, 2004 to March 31, 2005, and from time to time some or all of the electrical energy produced during the summer period. The Corporation has also entered into an agreement expiring in 2015 for firm natural gas transportation service to the re-powered Courtenay Bay Generating Station. The cost of transportation will be recovered from the tenant referred to in the lease of the generating station.

2004 | 2005 ANNUAL REPORT NB POWER GROUP 53

F O R    T H E   Y E A R    E N D E D   M A R C H    3 1 ,  2 0 0 5  -   i n    m i l l i o n s

N O T E S    T O    T H E    C O M B I N E D    F I N A N C I A L    S T A T E M E N T S   -    C O N T I N U E D

Power purchase agreements The Corporation has entered into a 20-year power purchase agreement to purchase all the capacity and electrical energy produced by a 90 MW co-generation facility that began production in December 2004. The Corporation has an outstanding power purchase agreement for 38.5 MW of capacity and energy from a co-generation facility that expires in 2027. The Corporation has signed a contract to purchase all the electrical energy of a wind generation facility to be constructed by a third party. The facility is to be in service on or before March 31, 2006. The contract is for 20 years and is for approximately 20 MW per year. Orimulsion^® fuel supply The Corporation has an agreement with Bitor America Corporation to purchase Orimulsion^® fuel for the Dalhousie Generating Station to 2014. The Corporation also entered into a contract with Bitumenes Orinoco, S.A. (Bitor S.A.) a wholly-owned subsidiary of Petroleos de Venezuela, S.A. (PDVSA) for the purchase of Orimulsion^®‚ fuel for the Coleson Cove Generating Station for a 20-year term, beginning with the date of fi rst delivery. Bitor S.A. has failed to deliver Orimulsion^{®‚ fuel to Coleson Cove Generating Station, breaching the terms of the contract. In February 2004, the Corporation fi led a lawsuit against Bitor S.A. and PDVSA for breach of contract. Discussions between the parties are ongoing.} Transmission power line The Corporation is constructing a 345 kV transmission power line in New Brunswick to Maine, U.S. The total cost of the project to the corporation is estimated to be $50 million. To ensure the financial viability of the project, Commitment Agreements were signed with load serving entities in the Maritimes and Northern Maine, including the Corporation. Each entity committed to the equivalent of long-term fi rm reservations for 25 years, subject to regulatory approval. Transmission reservations For the purposes of delivering electricity to out-of-province markets, the Corporation has committed to certain long-term transmission reservations with the System Operator. 24. SEGMENTED INFORMATION The Corporation is organized and operates under fi ve reportable business segments. On Oct. 1, 2004, the restructuring of NB Power resulted in each of the business segments becoming incorporated companies (see Note 1). As these segments existed for the full year, the results presented are representative of the full year activities of the segments. These results will differ from the individual company statements which only report the results of the segment for the period since Oct. 1, 2004, when the company commenced operations. Genco Responsible for the operation and maintenance of the oil, hydro, coal, Orimulsion^®, and diesel powered generating stations of the Corporation. Nuclearco Responsible for operating and maintaining the Point Lepreau Generating Station. Transco Responsible for operating and maintaining the transmission system of the Corporation. Disco Responsible for operating and maintaining the distribution system of the Corporation. Disco is designated as the standard service supplier for the Province of New Brunswick and is obligated to provide standard services to residential, commercial, wholesale and industrial customers located throughout the province. Holdco Provides corporate and shared services to the Corporation’s other business segments.  

54  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

Financial Overview
		Genco		Nuclearco		Transco		Disco		Holdco	Eliminations			Total
Sales of power
In-province	$	-	$	-	$	-	$	1,049	$	-	$	-	$	1,049
Out-of-province		239		12		-		-		-		-		251
Inter-company		607		213		-		4		-		(824)		-
Miscellaneous		22		1		6		33		-		-		62
Transmission		-		-		88		-		-		(47)		41
Other inter-company		1		-		8		7		139		(155)		-
Total revenues	$	869	$	226	$	102	$	1,093	$	139	$	(1,026)	$	1,403
Fuel & purchased power		488		12		-		820		-		(823)		497
Transmission		33		2		3		55		-		(47)		46
Operations, maintenance & administration		111		135		44		119		55		(80)		384
Amortization & decommissioning		84		73		18		41		3		-		219
Taxes, other than special payments    in lieu of income taxes		15		6		8		12		-		-		41
Finance charges		83		11		14		34		128		(68)		202
Special payments in lieu of income taxes		27		(3)		6		5		(30)		-		5
Total expenses		841		236		93		1,086		156		(1,018)		1,394
Net income (loss) for the year	$	28	$	(10)	$	9	$	7	$	(17)	$	(8)	$	9
Total assets	$	2,196	$	637	$	369	$	759	$	363	$	(450)	$	3,874
Capital expenditures	$	238	$	30	$	28	$	39	$	-	$	-	$	335

25. SUBSEQUENT EVENTS On Aug. 4, 2005, Electric Finance provided consent to the Corporation to refurbish the Point Lepreau Generating Station. The planned refurbishment has a forecasted construction cost of approximately $1 billion and will extend the useful life of the station to 2034. The maintenance outage for the refurbishment will begin in the spring of 2008 and is scheduled to be completed by fall 2009.   26. COMPARATIVE FIGURES Certain 2004 fi gures have been reclassifi ed to conform to the 2005 financial statement presentation.  

2004 | 2005 ANNUAL REPORT NB POWER GROUP 55

S T A T I S T I C A L    O V E R V I E W

Statement of Generation in millions of kWh
		2004/05		2003/04		2002/03		2001/02		2000/01
Hydro		2,829		3,191		2,057		1,910		2,373
Thermal		11,096		10,838		11,510		12,206		12,507
Nuclear		4,572		5,120		4,284		4,938		3,899
Combustion Turbine		17		50		57		13		39
Purchases		1,848		1,371		1,752		1,945		2,092
Gross generation and purchases		20,362		20,570		19,660		21,012		20,910
Station service		1,006		1,012		1,044		1,121		1,086
Net generation and purchases		19,356		19,558		18,616		19,891		19,824
Losses - transformer and transmission		602		614		6481		498		603
Total energy available for distribution		18,754		18,944		17,968		19,393		19,221
1  Includes adjustment of 95 GWh primarily related to previous years
Statement of Sales in millions of kWh
		2004/05		2003/04		2002/03		2001/02		2000/01
Wholesale		1,222		1,227		1,218		1,132		1,171
Industrial		6,039		6,170		6,156		6,007		6,068
General service		2,280		2,257		2,218		2,119		2,111
Residential		4,990		4,920		4,874		4,463		4,587
Street lights		75		74		74		74		74
Total in-province sales		14,606		14,648		14,540		13,795		14,011
Interconnections		3,813		3,922		3,069		5,264		4,878
Total sales		18,419		18,570		17,609		19,059		18,889
Distribution losses		335		374		359		334		332
Total energy distributed and sold		18,754		18,944		17,968		19,393		19,221
Statement of Revenue in millions
		2004/05		2003/04		2002/03		2001/02		2000/01
Wholesale	$	81	$	80	$	77	$	70	$	73
Industrial		319		306		316		294		298
General service		203		196		190		180		178
Residential		427		409		393		358		364
Street lights		19		18		17		17		18
Total in-province sales		1,049		1,009		993		919		931
Interconnections		251		246		227		359		332
Sales of power		1,300		1,255		1,220		1,278		1,263
Miscellaneous		62		56		53		41		46
Transmission revenue		41		–		–		–		–
Total revenue	$	1,403	$	1,311	$	1,273	$	1,319	$	1,309

56  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

Statement of In-province Generation in millions of kWh
	2004/05	2003/04	2002/03	2001/02	2000/01
Hydro	2,713	3,173	2,039	1,891	2,352
Coal and Petroleum Coke	3,392	3,388	3,677	3,290	3,547
Heavy fuel oil	2,209	2,150	3,196	2,330	2,892
Orimulsion®	1,643	1,315	1,454	1,478	1,622
Nuclear	4,031	4,345	3,784	4,308	3,298
Combustion turbine	3	17	18	(1)	7
Purchases	1,638	1,249	1,379	1,331	1,226
Net generation and purchases	15,449	15,637	15,547	14,627	14,944
Losses - transformer and transmission	602	614	6481	498	603
Total energy available for distribution	14,847	15,023	14,899	14,129	14,341
1  Includes adjustment of 95 GWh primarily related to previous years; this adjustment also increased station service for the year
Peak Demand and Capacity in MW
	2004/05	2003/04	2002/03	2001/02	2000/01
System net generating capacity	3,948	3,770	3,770	3,769	3,774
Firm capacity purchases	402	506	505	499	347
Total available resources	4,350	4,276	4,275	4,268	4,121
In-province system net peak demand	3,149	3,340	3,089	2,768	2,893
Firm exports	399	366	590	863	464
Operating reserve	662	657	665	668	668
Total requirement	4,207	4,363	4,344	4,299	4,025
Operating Statistics March 31st
	2004/05	2003/04	2002/03	2001/02	2000/01
Transmission lines - km	6,708	6,689	6,696	6,665	6,706
Distribution lines - km	19,982	19,803	19,704	19,571	19,008
Residential customers	296,879	293,545	290,310	286,464	283,743
Industrial customers	1,822	1,810	1,842	1,854	1,851
General service customers	24,179	24,024	23,963	23,635	23,535
Non-metered customers	2,378	2,404	2,620	2,710	2,901
Direct customers	325,258	321,783	318,735	314,663	312,030
Indirect customers	41,672	41,656	41,502	41,777	41,694
Total customers	366,930	363,439	360,237	356,440	353,724
Employees - regular	2,495	2,525	2,545	2,489	2,428
Employees - temporary	125	121	141	131	77
Employees - NB Coal Limited	70	70	76	76	101
Total employees	2,690	2,716	2,762	2,696	2,606

2004 | 2005 ANNUAL REPORT NB POWER GROUP 57

S T A T I S T I C A L    O V E R V I E W      -    C O N T I N U E D

Income Statement Summary in millions
		2004/05		2003/04		2002/03		2001/02		2000/01
In-province revenue	$	1,049	$	1,009	$	993	$	919	$	931
Out-of-province revenue		251		246		227		359		332
Miscellaneous		62		56		53		41		46
Transmission revenue		41		–		–		–		–
Total fuel and purchased power		497		467		528		492		504
Transmission expenses		46		–		–		–		–
Operations, maintenance and administration		384		355		334		309		282
Amortization and decommissioning		219		213		216		213		218
Taxes, other than special payments in lieu of income taxes		41		33		30		30		30
Write-off of fuel handling system costs		–		44		–		–		–
Finance charges		202		217		242		256		355
Special payments in lieu of income taxes		5		–		–		–		–
Net income (loss)	$	9	$	(18)	$	(77)	$	19	$	(80)
Balance Sheet Summary March 31st — in millions
Assets		2004/05		2003/04		2002/03		2001/02		2000/01
Current assets	$	330	$	287	$	355	$	293	$	313
Property, plant and equipment		3,273		3,146		2,882		2,860		2,928
Long-term assets		195		176		20		-		-
Other assets		76		120		130		103		79
Total assets	$	3,874	$	3,729	$	3,387	$	3,256	$	3,320
Liabilities and shareholders’ equity
Current liabilities	$	956	$	817	$	682	$	941	$	584
Long-term debt		2,459		2,814		2,612		2,171		2,624
Deferred liabilities		323		293		270		244		231
Shareholders’ equity		136		(195)		(177)		(100)		(119)
Total liabilities & shareholders’ equity	$	3,874	$	3,729	$	3,387	$	3,256	$	3,320
Cash Flow Summary in millions
		2004/05		2003/04		2002/03		2001/02		2000/01
Cash flow from operations	$	245	$	256	$	139	$	234	$	214
Change in working capital		(51)		29		14		(35)		16
Nuclear trust fund payments		(13)		(156)		(20)		–		–
Other		(1)		(8)		(7)		–		–
Operating activities		180		121		126		199		230
Financing activities		158		321		131		(104)		(91)
Investing activities		(341)		(497)		(212)		(135)		(116)
Net cash inflow (outflow)		(3)		(55)		45		(40)		23
Cash and short-term investments
Beginning of year		7		62		17		57		34
End of year	$	4	$	7	$	62	$	17	$	57

58  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

Finance Charges in millions
		2004/05		2003/04		2002/03		2001/02		2000/01
Interest expense	$	223	$	240	$	256	$	265	$	282
Income from sinking funds, trust funds and other		(21)		(31)		(27)		(24)		(25)
Guarantee /debt management fee		21		20		19		19		19
Amortization of deferred debt costs		3		7		6		4		4
Foreign exchange (gain) or loss		(2)		(3)		(2)		(3)		79
Interest capitalized		(22)		(16)		(10)		(5)		(4)
Net finance charges	$	202	$	217	$	242	$	256	$	355
Financial Ratios
		2004/05		2003/04		2002/03		2001/02		2000/01
Operating margin1		13.9%		13.9%		11.6%		19.4%		19.6%
Cash fl ow from operations / capital expenditures2		0.72		0.52		0.66		1.73		1.84
Cash flow from operations / total debt		0.08		0.08		0.05		0.08		0.07
Debt / capital3		96%		106%		106%		104%		104%
Interest coverage ratio4		0.97		0.88		0.68		1.06		1.00
Operating margin = (net income before fi nance charges - guarantee/ debt management fee) / total revenue Capital expenditures are net of proceeds on disposal and customer contributions Debt ratio = (debt) / (debt + equity), where debt =(long-term debt + short-term indebtedness) Interest coverage ratio = [net income before fi nance charges + (income from sinking funds, trust funds, and other investments -guarantee/debt management fee)] / (interest expense)
Other Statistics
		2004/05		2003/04		2002/03		2001/02		2000/01
Rate increase1		2.5%		2.6%		2.1%		–		3.0%
CPI (New Brunswick)		1.5%		3.4%		3.4%		1.7%		3.3%
GDP increases (New Brunswick)		2.5%		2.5%		4.8%		1.3%		3.1%
Capital expenditures (millions)2	$	341	$	497	$	212	$	135	$	116
Change in total debt (millions)	$	(204)	$	321	$	149	$	(81)	$	–
% Breakdown of long-term debt
Canadian dollar		100%		71%		68%		68%		67%
US dollar3		0%		29%		32%		32%		33%
Weighted average coupon interest rate		6.7%		6.9%		7.2%		8.1%		8.4%
Canadian Dollar - March 31st	$	0.827	$	0.763	$	0.681	$	0.628	$	0.634
Rate increase at April 1, 2004 (does not include 3.0% rate increase at March 31, 2005); rate increase in 2000-2001 was for residential customers only Capital expenditures are net of proceeds on disposal and customer contributions All US denominated debt was transferred to the New Brunswick Electric Finance Corporation on October 1, 2004

2004 | 2005 ANNUAL REPORT NB POWER GROUP 59

  G O V E R N A N C E RESTRUCTURING With restructuring, the companies in the NB Power Group share a common Chair, President & CEO and common directors. The Boards of Directors are responsible for directing the affairs of each of the Corporations consistent with the Business Corporations Act and the Electricity Act. The NB Power Group has a joint Audit Committee for the holding company and all of the operating companies. Each Corporation also has a Human Resources, Governance and Nominating Committee, as well as an Environment Committee. In addition to these committees, NB Power Nuclear Corporation has a Nuclear Oversight Committee. Audit Committee The Audit Committee is mandated to assist the Boards in meeting their responsibilities with respect to financial reporting, internal control and risk management. The committee directly interacts with the internal and external auditors. Human Resources, Governance and Nominating Committee The Human Resources, Governance and Nominating Committee has three mandates: 1. Human Resources
The committee in this role exists to assist the Boards in establishing and maintaining appropriate board policies to guide the companies regarding outcomes to be achieved in the management and handling of human resources. 2. Governance
The committee in this role exists to assist the Boards in establishing and maintaining an effective system of corporate governance. 3. Nominating
The committee in this role exists to assist the Boards in maintaining a full slate of directors with the appropriate personal characteristics, experience and skill sets that provide for a mix of competencies on the Boards and facilitates diversity of opinion and effective governance of the Corporations. Environment Committee The Environment Committee exists to assist the Boards in establishing and maintaining appropriate Board policies that guide the companies in respect to the outcomes to be achieved in meeting or exceeding their environmental obligations.

60  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

Nuclear Oversight Committee

The Nuclear Oversight Committee, reporting to the New Brunswick Power Nuclear Corporation Board of Directors, is responsible for monitoring the nuclear performance of the Corporation, particularly with respect to safety and operations issues, oversight of any refurbishment process and nuclear risk.

GOVERNANCE PRACTICES

The new Boards continued the evolution of the governance process, striving to further enhance governance practices. This includes striving to meet the best practice in corporate decision-making. The Boards adopted a new governance model, that is policy-based and includes Board policies for Board processes, CEO and Board linkage, executive limitations and ends policies. A Governance Manual was developed, which included the process and structure used to direct and manage the business affairs of the NB Power Group, with the objective of enhancing shareholder value.

Since 2004, the Corporations have worked to benchmark practices with industry best practice and to position the Boards to be consistent with guidelines set forth by the Toronto Stock Exchange (TSX). These guidelines address key areas of effective corporate practice, including identification of responsibilities for stewards of the Corporations and clear communication of roles and responsibilities between the Boards and management.

2004 | 2005 ANNUAL REPORT NB POWER GROUP 61

	T S X    C O R P O R A T E    G O V E R N A N C E    G U I D E L I N E S
	TSX Corporate  Governance Guidelines	NB Power Group	Consistent with TSX Guidelines?
	1. The Board should explicitly assume responsibility for the stewardship of the Corporation, and specifi cally for:
	(a) The adoption of a strategic planning process	The Boards’ job description, as described in the Governance Manual, sets out their responsibility to approve all strategic and business plans, as well as operating and capital budgets.	Yes
	(b)  The identifi cation of the principal risks of the Corporation’s business and ensuring the implementation of appropriate systems to manage these risks.	The Audit Committee oversees the Corporations’ risk management process. The auditors oversee the implementation and effectiveness of risk management programs and systems.	Yes
	(c)  Succession planning, including appointing, training and monitoring senior management.	The Human Resources, Governance and Nominating Committee monitors human resources trends, assists the Boards in developing policy that will guide the CEO in attracting, compensating and retaining qualifi ed offi cers and employees and co-ordinates the annual President & CEO evaluation.	Yes
	(d)  A communications policy for the Corporation.	Communication policies have been implemented.  The Boards strive to communicate in an open and transparent manner through the CEO and Chair to keep the Shareholder, Shareholder’s representatives, regulators, stakeholders and the public informed.  The Corporations are committed to the values of open communication and transparency in its communications with the Shareholder, employees, stakeholders and the public.	Yes
	(e)  The integrity of the Corporation’s internal control and management information systems.	The Audit Committee is responsible for the oversight of financial reporting, internal controls and risk management. The committee regularly reviews the integrity of financial information and risk management reporting systems. The committee interacts with internal and external auditors in fulfi lling this responsibility.	Yes

62  NB POWER GROUP  2004 | 2005 ANNUAL REPORT 

TSX Corporate  Governance Guidelines	NB Power Group	Consistent with  TSX Guidelines?
2.(a) The Board should be constituted with a majority of individuals who qualify as “unrelated” directors. An unrelated director is a director who is independent of management and is free from any interest and any business or other relationship which could, or could reasonably be perceived to; materially interfere with the director’s ability to act with a view to the best interests of the Corporation, other than interests and relationships arising from shareholding.	Eleven of the 12 directors on the Boards are external and unrelated to management. The President & CEO is the only internal director.	Yes
(b) The Board should disclose if the Corporation has a “signifi cant shareholder” and how the Board reflects the interests of shareholders other than the significant shareholder.	All companies in the NB Power Group are Crown corporations.	N/A
3. The Board should disclose whether the Board has a majority of unrelated directors with an analysis of how this conclusion was reached.	Eleven of the 12 directors on the Boards are external and unrelated to management. None of the unrelated directors has received remuneration from the Corporations in excess of fees and compensation as directors and committee members, nor have they engaged in material contracts to perform other services for any of the Corporations in the NB Power Group.	Yes
4. The Board should appoint a committee of directors composed exclusively of outside (i.e. non management) directors, a majority of whom are unrelated, with the responsibility for proposing to the full Board new nominees to the Board and for assessing directors on an ongoing basis.	Responsibility for proposing new Boards nominees and assessing the Boards’ effectiveness is mandated to the Human Resources, Governance and Nominating Committee. All members of the committee are outside directors, except for the President & CEO. The committee evaluates prospective candidates against the criteria established for directors and makes a recommendation to the Boards.	Yes
5. The Board should implement a process for assessing the effectiveness of the Board as a whole, the committees of the Board and the contribution of individual directors.	The Human Resources, Governance and Nominating Committee is responsible to ensure the effectiveness of the Boards’ decision-making processes. The committee coordinates a review of the effectiveness of the Boards and individual directors. The process is facilitated by the chair of the committee who summarizes results of the evaluation and reports the results to the respective boards.	Yes

2004 | 2005 ANNUAL REPORT NB POWER GROUP 63

T S X    C O R P O R A T E    G O V E R N A N C E    G U I D E L I N E S
TSX Corporate  Governance Guidelines	NB Power Group	Consistent with TSX Guidelines?
6. The Board should provide an orientation and education program for new directors.	The Corporations have an orientation program for new directors and at the directors’ discretion provides for training and development of directors. New Board members are provided with orientation materials and orientation presentations at the Board and committee level.	Yes
7. The Board should examine its size with a view to facilitate more effective decision-making.	The Human Resources, Governance and Nominating Committee of the Boards are charged with the responsibility for assessing the effectiveness of the various committees and the Boards with a view to ensuring effective decision-making processes are in place.	Yes
8. The Board should review the adequacy and form of the compensation of directors to ensure the responsibilities and risks involved in being an effective director are reflected.	Pursuant to the Shareholder’s Agreement, remuneration of directors is subject to consent of Executive Council of the Province of New Brunswick.	N/A
9. Board committees should generally be composed of outside (i.e. non management) directors, a majority of whom are unrelated.	All Board committees are composed of outside directors and are unrelated to the management of the Corporation. The only exception to this is the President & CEO, who sits on all committees.	Yes
10. The Board should appoint a committee responsible for developing the Corporation’s approach to governance issues and these guidelines.	The Human Resources, Governance and Nominating Committee is responsible for developing the Corporations’ approach to governance issues and reviewing effectiveness of guidelines and processes.	Yes
11.(a)  The board should develop position descriptions for the Board and for the CEO, involving the definition of the limits to management’s responsibilities.	The Boards of Directors have defined the role of the Board. The President & CEO is governed by the Executive Limitations Policy. The Executive Limitations Policy clearly defines the lines of authority within which the President & CEO must function.	Yes
(b) The Board should develop the corporate objectives, which the CEO is responsible for meeting.	The Boards have a formal evaluation process in place for the CEO where the CEO reports against expected CEO outputs, defined in ends policies, and organizational operation within boundaries, established in executive limitations policies.	Yes

64  NB POWER GROUP  2004 | 2005 ANNUAL REPORT 

TSX Corporate  Governance Guidelines	NB Power Group	Consistent with  TSX Guidelines?
12. The Board should have in place appropriate structures and procedures to ensure that the Board can function independently of management.	The independence of the Boards is ensured through the coordination of Board matters by the Chair, who is an outside and unrelated director. At each meeting of the Boards, an in-camera session is held where all staff, including the President & CEO, are excused.	Yes
13. The Audit Committee of the Board should be composed only of outside directors and its roles and responsibilities should be specifically defined.	The Audit Committee of the Boards, with the exception of the President & CEO, is composed of outside directors who are not related to the Corporations. The Committee has terms of reference that specifi cally sets out its roles and responsibilities.	Yes
14. The Board should implement a system, which enables individual directors to engage outside advisers at the expense of the Corporation in appropriate circumstances.	Under the Governance process Board policy, individual directors as well as committees of the Board, subject to advising the Board, have the right to engage outside expert advice on significant issues at the Corporation’s expense.	Yes

2004 | 2005 ANNUAL REPORT NB POWER GROUP 65

	B O A R D    O F    D I R E C T O R S(March 31, 2005)
Derek H. Burney, OC | A | H | N | Chair Mr. Burney is past president and CEO of CAE Inc. He has also served as chairman and CEO of Bell Canada International Inc., Canada’s Ambassador to the United States and the chief of staff to the Prime Minister.			Lise Bastarache | E | Ms. Bastarache is the former VP for the RBC Financial Group. She is a director of Le Groupe Jean Coutu (PJC) Inc. and a member of the Board of Governors of l’Université de Moncton. She also sits on the Board of the Royal Bank Mortgage Corporation and is the Honorary Patron of the La Fondation Portage fundraising campaign.
Norm Betts | A | Dr. Betts is an assistant professor, Faculty of Administration, University of New Brunswick. He serves as director and chair of the Audit Committee for both Minacs Worldwide Inc. and Slam Exploration Ltd. He co-chairs the board of trustees of the UNB Pension Plan for Academic Employees and is a director of the Nature Conservancy of Canada – Atlantic region.			Graham Brown | N (Chair) | Mr. Brown is president and CEO of Carillion Canada Inc. He is past COO of Ontario Power Generation and has also been a board director with National Power in the U.K., as COO and interim CEO. He has served in a managerial capacity with several petroleum companies and as a senior advisor to Prime Minister Margaret Thatcher.
Lino Celeste | A (Chair) | Mr. Celeste is former CEO of NBTel and chairman of the board of directors of Aliant Inc. He also served as president of the Saint John Board of Trade and currently serves on the board of Manulife Financial Corporation and as chair of the Saint John Foundation.			Bernard Cyr | E (Chair)| Mr. Cyr owns Cyr Holdings and is also owner and franchisor of the Dooly’s group. He is a director of the National Bank of Canada and the Dr. Georges-L. Dumont Hospital Foundation.
Eloi Duguay | H | Mr. Duguay is president of Pattison Sign Group. He is past-president and co-owner of Imperial Signs and a former city administrator for the City of Edmundston. He has been a member of numerous professional engineer associations, was president of the New Brunswick Economic Council, and is a past president of the New Brunswick Association of Professional Engineers.			Leon Furlong | H (Chair) | Mr. Furlong is past president and CEO of Atlantic Blue Cross Care. He serves on the board of directors for several companies including Blue Cross Life Insurance Company of Canada and Resurgo Inc.
David D. Hay, President & CEO | A | E | H | N | ex offi cio Mr. Hay is president & CEO of the NB Power Group. He has been a managing director of Delgatie Inc., a senior vice president and director with Merrill Lynch Canada Inc. and managing director within Merrill Lynch’s Investment Banking Division in London, England.			Susan Hicks | A | Ms. Hicks is currently CEO and President of Technology Venture Corporation. Her previous posts include VP, Finance with Spielo as well as serving as CFO and regulatory compliance officer.
Shirley Mears | H | Ms. Mears is a Senior VP and CFO with Hydro Ottawa Holding Inc. Her previous posts include VP and treasurer of both Zarlink Semiconductor Inc. and Mitel Corporation, and VP, Human Resources Canada and Corporate Taxation.			Jean-Marc Violette | N | Mr. Violette is a farmer and woodlot manager who has been active in the agriculture sector. He has served on the Farm Debt Review Board and the Farm Development Board.

CEO Chief Executive Officer
COO Chief Operating Officer
CFO Chief Financial Officer
VP Vice President Committees: | A| Audit 
| E | Environmental
| H | Human Resources and Corporate Governance
| N | Nuclear Oversight
(Chair) signifi es chair of the committee NOTES: Philippe DesRosiers and Thomas Soucy were both members of the board until October 2004. Prior to August 15, Ms. Mears was on the human resources and corporate governance committee and Ms. Hicks was on the audit committee. On August 15, 2005, Ms. Mears joined the audit committee and Ms. Hicks joined the environment committee.

68  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

S E N I O R    M A N A G E M E N T   (March 31, 2005)

David D. Hay President & CEO, NB Power Group Mr. Hay became president & CEO NB Power Group in March 2004. He spent the previous eight years as managing director, Delgatie Inc. Prior to that he was senior vice president and director with Merrill Lynch Canada Inc. and managing director within the firm’s Investment Banking Division in London, England.
Darrell Bishop Vice President, NB Power Generation Corporation Mr. Bishop was appointed vice president in April 2004, prior to which he was director of Energy Marketing and Fuels. He joined NB Power in 1971 as a control engineer and subsequently held a series of positions of increasing responsibility in the areas of system operations, contract development, planning, engineering and customer service.			Rod White Vice President, NB Power Nuclear Corporation Mr. White joined NB Power in 1967 and held positions of increasing responsibility including station manager at Coleson Cove and Belledune, as well as general manager of Generation. Mr. White became vice president of Nuclear in 1997.
Wayne Snowdon Vice President, NB Power Transmission Corporation Mr. Snowdon was appointed vice president in May 2004, prior to which he served as general manager for Transmission. He was previously a director, Energy Control Centre and has worked closely with electric utility reliability and co-coordinating councils in North America.			Gaëtan Thomas Vice President, NB Power Distribution and Customer Service Corporation Mr. Thomas was appointed vice president in February 2005. During his 22 year career with NB Power, he has held several positions of increasing responsibility, and led the Coleson Cove Refurbishment Project.
Andrew Cormier Vice President – Shared Services,  NB Power Holding Corporation and President - NB Coal Mr. Cormier has been vice president – Shared Services since 2003. He joined NB Power in 1987 as president and general manager of NB Coal when it became a subsidiary of NB Power. In 1996 he was appointed vice president of Performance Improvement of NB Power.			Sharon MacFarlane Vice President – Finance, NB Power Group Ms. MacFarlane has been vice president – Finance and chief financial offi cer since 2003. She joined NB Power in 1997 as managing director of Finance and became vice president of Finance and Information Systems one year later. Prior to 1997, she was vice president of Finance and Administration at Mount Allison University.
Rock Marois Vice President – Corporate Strategic Planning, NB Power Holding Corporation Mr. Marois joined NB Power in September 2004.Prior to that he was general manager at Enbridge Gas New Brunswick.			Paul Thériault Vice President, Human Resources, NB Power Group Mr. Thériault became vice president in 1992. Prior to joining NB Power he held senior positions in human resources with the provincial Department of Transportation.
Brian Duplessis Director – Corporate Communications, NB Power Holding Corporation Mr. Duplessis joined NB Power in February 2005 as director - Corporate Communications. He previously held progressively senior executive positions with Group Michelin in Canada, the United States, Asia and Europe.			Wanda Harrison Corporate Secretary and General Counsel, NB Power Group Ms. Harrison was appointed corporate secretary and general counsel in 2002. She joined NB Power in 1989 as solicitor and co-ordinator of Regulatory Affairs and then served as senior solicitor. In 2000 she was appointed associate corporate secretary.

NOTES: Since the reporting date of the annual report the following management changes have been made (April 1, 2005 – September 2005): Gaëtan Thomas: Vice President – NB Power Nuclear Corporation
Rock Marois: Vice President – NB Power Distribution and Customer Service Corporation 
Michael Gorman: Vice President Legal – NB Power Group 
Brian Duplessis: Vice President Corporate Communications – NB Power Holding Corporation

2004 | 2005 ANNUAL REPORT NB POWER GROUP 67

GLOSSARY

Term	Definition	Term	Definition
Capacity	The maximum power that a generating unit, generation station or other electrical apparatus can supply, usually expressed in megawatts.	New Brunswick Board of Commissioners of Public Utilities (PUB)	An administrative tribunal charged with the economic regulation of public utilities in the province. The PUB regulates Disco in the areas of charges, rates and tolls for service requests for proposals for the supply of electricity any fees to be paid by transmission or wholesale customers reducing their standard service requirement or exiting standard service (exit fees) The PUB regulates Transco in the area of the Open Access Transmission Tariff.
Carbon Dioxide (CO2)	A colourless, odourless, non-poisonous gas that is a normal part of the ambient air. Carbon dioxide is also a product of fossil fuel combustion. It is a greenhouse gas that traps terrestrial (i.e., infrared) radiation and contributes to the potential for global warming.
Combined Financial Statements	The combined financial statements include the accounts for Holdco and those of Genco, Nuclearco, Transco and Disco (see Note 1 & 2 to the financial statements). The financial statements are referred to as combined and not consolidated. They are referred to as combined because the companies are under common management. They are not referred to as consolidated because the right and ability to obtain the future economic benefi ts of these companies does not rest with Holdco. For the combined financial statements as presented for the year ended March 31, 2005, similar principles as presented for the year ended March 31, 2004 have been applied resulting in the format and content of the financial position and operating results between the two periods being comparable.	New Brunswick System Operator (System Operator)	An independent, not-for-profi t Crown Corporation that directs the operation of the electricity market, maintains the long-term adequacy and reliability of the electricity system and administers the Open Access Transmission Tariff.
		Nominated Capacity	The portion of Genco’s capacity that Disco has elected to be available to meet its needs for supply.
		Nitrogen Oxides (NOX)	Gases consisting of one molecule of nitrogen and varying numbers of oxygen molecules. Nitrogen oxides are produced, for example, by the combustion of fossil fuels in vehicles and electric power plants. In the atmosphere, nitrogen oxides can contribute to formation of photochemical ozone (smog) and impair visibility.
Debt/Equity Swap	A refi nancing deal in which a debt holder gets an equity position in exchange for cancellation of the debt.	Open Access Transmission Tariff	Establishes non-discriminatory access to the transmission system for generators and customers inside and outside the province and generates revenues for Transco to operate and maintain the transmission system, based on the cost of providing services.
Economical Dispatch of Generating Units	The scheduling of power production as demand for electricity varies, according to the lowest cost generation sources available to the System Operator, given transmission limits and other constraints.	Orimulsion®	An emulsion containing about 70% bitumen (thick oil) and 30% water that is used to fuel Dalhousie Generating Station. The bitumen is extracted from the Orinoco belt in Venezuela in the northern basin of the Orinoco River.
Embedded Generation	Generation produced by a generator connected to Disco’s distribution system and not connected to the SO controlled grid.	Particulate Release	Emissions of any small diameter material, except moisture, which exists in a power plant’s stack, as a liquid or solid.
Energy Imbalance Service	The hourly difference between the actual and scheduled energy flow.	Point-to-point Tariff	The fees charged for point-to-point transmission service from one specifi c point to another. Typically this service is used for transporting energy through or out of the province.
New Brunswick Electric Finance Corporation (Electric Finance)	Crown Corporation that facilitates the conversion of NB Power’s debt to appropriate levels in the subsidiary operating companies and assumes and reduces the remaining portion of NB Power’s debt.	Power Purchase Agreements	Supply contracts between two parties for the supply of electricity.
Fly Ash	Represents the fi nely divided particles of ash suspended in gases resulting from the combustion of fuel. Electrostatic precipitators are used to remove fl y ash from the gases prior to the release from a power plant’s stack.	Renewable Portfolio Standard	Requirement that a certain amount of electricity sold in a competitive market includes some amount produced from renewable sources.
Gigawatt Hour (GWh)	One million kilowatt-hours.	Scheduling Services	Service required to schedule the movement of power through, out of, within, or into a control area. It can only be provided by the operator of the control area in which the transmission facilities used for transmission service are located.
Interruptible Energy Prices	Compensation paid to consumers for arrangements made between consumers and the System Operator in which the consumer agrees to shed load at the discretion of the System Operator. Customers may offer this load to the System Operator as Operating Reserve.
Kilowatt-hour (kWh)	The basic unit of electric energy equal to one kilowatt of power supplied to or taken from an electric circuit steadily for one hour.	Sulphur Dioxide (SO2)	Belongs to a family of sulphur oxide gases (SOX) and is a colourless gas. It is formed from the sulphur contained in raw materials such as coal, oil and metal-containing ores used during combustion and refi ning processes. Flue gas desulphurization units are used to remove SO2 from the gases prior to the release from a power plant’s stack.
Load	The amount of electric power delivered or required at any specifi c point or points on a system. The requirement originates at the energy consuming equipment of the consumer.
Megawatt (MW)	Unit of electrical power to measure the generating capability of a generating station or the maximum demand of an electricity consumer.	Standard Service Supplier	The provider responsible for supplying adequate capacity and energy to meet customer demand for those customers not served by a competitive supplier. Disco is designated as the standard service supplier for New Brunswick.
Net Metering	Net metered applications are special circumstances of embedded generators that are less than 100 kW and use renewable fuel.

68  NB POWER GROUP  2004 | 2005 ANNUAL REPORT

To obtain additional or French copies of this report, please contact: NB Power Holding Corporation
Corporate Communications 
P.O. Box 2010 
Fredericton, New Brunswick 
Canada E3B 5G4 Telephone: (506) 458-4448 
Fax: (506) 458-4249 The NB Power Group is committed to the achievement of excellence and innovation in protecting the environment of the province while meeting its mandate to provide economic and reliable energy to the people of New Brunswick.
The Group considers that the environmental performance of its facilities is as important to its customers as the quality of the service they receive. To view the Environmental Performance Report 2004 go to: http://www.nbpower.com/en/commitment/environment/report/report.aspx For more information on the NB Power Group of companies, go to: www.nbpower.com  

w w w. n b p o w e r. c o m

EX-99.4

Deloitte & Touche LLP 

Brunswick House

 44 Chipman Hill, 7th Floor 

P.O. Box 6549 Saint John NB E2L 4R9 

Canada 

Tel: (506) 632-1080 

Fax: (506) 632-1210 

www.deloitte.ca

CONSENT OF DELOITTE & TOUCHE LLP

We hereby consent to the inclusion of the report of Deloitte & Touche LLP on the financial statements of New Brunswick Power Holding Corporation for the fiscal year ended March 31, 2005 as Exhibit (g) to the Annual Report on Form 18-K of the Province of New Brunswick for the fiscal year ended March 31, 2005.

Chartered Accountants Saint John, New Brunswick

December 16, 2005