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Subject: A message from President and Chief Executive Officer Bob Brennan to our American customers

http://www.hydro.mb.ca/proof_exports_minnesota/exports_minnesota/message.html

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Dear American customers:

As part of our mission to be a responsible company and responsive neighbour, we strive to address any questions and concerns regarding our company by providing accurate and detailed information.

It's important for you to know that Manitoba Hydro is respectful of the environment and responsive to the communities in which we operate. Having said that, there is no means of producing significant amounts of electricity that is without environmental consequences. It is Manitoba Hydro's goal, however, to minimize its impact on the environment, mitigate any unavoidable impacts, and to compensate any impacted communities when mitigation measures are insufficient.

Manitoba Hydro is a dependable trading partner with Minnesota power suppliers, and plays a key role in meeting some of the electricity needs of residential and commercial users in Minnesota, providing low-impact, low-cost renewable energy. Currently about 10 per cent of Northern States Power's power mix includes hydroelectricity generated by Manitoba Hydro.

We know that some Manitoba Hydro projects, built in the early 1970s, had an impact on the environment and communities adjacent to northern Manitoba waterways and we've taken significant action to address that impact.

During the planning and initial implementation of these projects, Manitoba Hydro held discussions with several northern communities, to design methods of limiting the environmental effects of the projects. In the case of five northern First Nations, including Cross Lake First Nation, these discussions resulted in the signing of the Northern Flood Agreement (NFA). The governments of Canada and Manitoba also signed that Agreement which provides, amongst other things, for mitigation and remediation measures and, where required, compensation to the affected communities. Manitoba Hydro believes it is meeting and exceeding its obligations under the NFA to address adverse effects from hydro projects.

We continue to work with the Cross Lake First Nation (also known as the Pimicikamak Cree Nation) to implement the Northern Flood Agreement. Our disagreement with that community is an anomaly. We have successful, working implementation agreements with four of the five First Nations who are part of the Northern Flood Agreement. Those agreements have resulted in additional reserve land for each community, the identification of additional mitigation and remediation work, and millions of dollars in compensation and development funds.

To date, Manitoba Hydro has spent more than $396 million in northern Manitoba to mitigate damage from the hydro projects. That includes more than $35 million in compensation to the Cross Lake Cree. We continue to contribute well over $2 million per year to that community to encourage and support traditional resource harvesting, and to undertake other mitigation measures.

Several years ago we were close to signing an implementation agreement with the previous leadership from the Cross Lake Cree worth nearly $110 million. Ultimately, however, the community decided not to pursue that agreement. They take the position that the Northern Flood Agreement was intended to solve the community's unfortunate, pre-existing social problems, such as unemployment and poverty. Solving those long-standing issues is beyond our ability and beyond the scope of the Northern Flood Agreement.

Despite our differences, we remain committed to negotiating with the Cross Lake Cree in an attempt to find a solution. Our positive experiences with the other First Nations in northern Manitoba give us hope.

Currently, we are working with two of the First Nations on environmental planning for potential new hydro projects. We hope that these projects can include joint venture components with those communities and, if they proceed, will play a key economic development role for northern Manitoba and the First Nations involved. The new projects will have no impact on the Cross Lake First Nation. Stopping existing Manitoba Hydro sales to Minnesota, as advocated by representatives of Cross Lake, could not undo any of the effects, great or small, real or imagined, that hydroelectric development has had on the Cross Lake First Nation.

We're proud of our partnership with Minnesota power suppliers, and our role in helping to keep Minnesota's electricity costs among the lowest in the United States.

If you would like more information on Manitoba Hydro, the Northern Flood Agreement or hydroelectricity projects in northern Manitoba, please explore our website on these matters or call our offices at 204-474-3535(collect).

Sincerely

RB Brennan
President and CEO