<DOCUMENT>
<TYPE>EX-99.11
<SEQUENCE>12
<FILENAME>file016.txt
<DESCRIPTION>EX G-1 EMERA'S ANNUAL REPORT
<TEXT>

EXHIBIT G-1



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<PAGE>





NS Power  Holdings  Inc. is a  diversified  energy and  services  company,  with
440,000 customers, and $2.8 billion in assets. Our primary operating subsidiary,
Nova Scotia  Power,  is the dominant  electricity  supplier in Nova Scotia.  Our
energy  product line also includes  bunker oil, and diesel fuel,  and we deliver
100 million  litres of light fuel oil annually.  We have a 12.5% interest in the
Maritimes & Northeast  Pipeline.  At NS Power  Holdings,  we are  realizing  our
vision to be the customers' choice in energy and services.


<PAGE>


Earnings
(in millions)


94.8    90.0    92.7    85.4    100.4

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 95      96      97      98      99




Dividends
($)


0.78    0.80    0.81    0.82    0.83

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 95      96      97      98      99



Dividend Yield

* Average Canadian 10-Year Bond Yield
* NSH

8.50______________________________________


7.00______________________________________


5.50______________________________________


4.00______________________________________
        95      96      97      98      99



Cash from Operations
(in millions)


197.1   194.0   304.7   228.0   223.7

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 95      96      97      98      99



<PAGE>

---------- ---------------------------------------------------------------------
   1999    Corporate Highlights

---------- ---------------------------------------------------------------------

           Earnings of $100.4 million, an 18% increase over 1998

---------- ---------------------------------------------------------------------

           Earnings per share of $1.16

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           Record electrical energy sales of $790.2 million (10,365 GWh)

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           Third consecutive year without an electricity price increase

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           10.8% return on equity in electric utility, near the top of allowed
           range

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           Maritimes & Northeast Pipeline makes first Sable Gas deliveries

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           Home heating and light fuel oil sales of more than 100 million litres

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           Dividend increase in 1999 and 2000

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           Natural gas development driving strong regional economy

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<PAGE>









2        Letter to Shareholders
6        Progress Report

         8        Customer Advantage
         10       Operations Efficiency
         12       Business Development
         14       Community Investment

16       Management Discussion and Analysis
30       Management Report
31       Auditors' Report
32       Financial Statements
46       Corporate Governance
IBC      Executives and Directors




                                    [PICTURE OMITTED]



<PAGE>

fellow shareholders

----------------------------------------------------------------------

                    In 1999 our company delivered more energy,
                    in more forms, to more  customers, than
                    ever before.  The Nova Scotia economy surged,
                    and that meant record numbers of residential,
                    commercial and industrial customers, and
                    record sales.

02   We can  capture the  essence of  everything  that went on in our company in
     1999 with eight simple,  but powerful words - we  accomplished  what we set
     out to do. We faced challenges, we seized opportunities,  we made progress,
     and we positioned ourselves for continued growth.

     We said we would  restore  earnings  success,  and we did. In 1999 earnings
     were  $100.4  million,  an 18%  increase  from $85.4  million in 1998.  The
     majority  of these  earnings  flowed  from the  strength  of our  regulated
     electric  utility,  which achieved a satisfying  return on common equity of
     10.8%,  compared to 9.5% last year,  despite  continued  warmer-than-normal
     temperatures.  Industrial  sales drove revenue growth,  increasing 12% over
     1998,  due  largely  to  expanded  operations  at  our  largest  industrial
     customer, Stora Enso, Port Hawkesbury.

     We said we would  capitalize  on  Sable  Gas,  and we did.  One of the most
     exciting  devel-opments  in 1999  was the  completion  of the  Maritimes  &
     Northeast Pipeline (M&NP),  which delivered Sable Island natural gas to its
     first  customers just before  year-end.  Our 12.5% interest in the pipeline
     gives us a unique vantage point on Sable gas development and its promise of
     other potential  investment  opportunities for our company.  More than half
     the  pipeline  is in the  northeastern  United  States,  marking  NS  Power
     Holdings'  first  investment  in operating  interests  outside Nova Scotia.
     Management  will  continue to  carefully  assess  investment  opportunities
     beyond our provincial  borders,  where we con-tribute  unique strengths and
     can achieve significant gains for our shareholders.

     We said we would become more than an  electricity  company,  and we did. In
     less than a year,  we have built our home heating  business to deliver over
     100 million litres annually. We


<PAGE>




                                    [PICTURE OMITTED]

                        Derek Oland Chairman of the Board
                David Mann President and Chief Executive Officer


also  expanded  our heavy fuel oil  business in 1999,  and added  diesel oil and
industrial  lubricants to our product mix. Providing these complementary  energy
products  builds  revenues and grows  earnings,  as  operational  synergies  are
achieved in areas such as customer service, billing systems and buying power.

We  said  we  would  build  success  through  our  customers,  and we  did.  Our
competitive   growth   opportunity  is  grounded  in  the  value  of  our  solid
relationship with our existing  customers.  That relationship is built on trust,
created  by  reliably  and safely  delivering  the  energy,  and  providing  the
services,  that are  essential  to their  comfort,  success and well  being.  We
strengthened  that  customer   connection  in  1999,  by  making  it  our  third
consecu-tive  year  without  an  electricity  price  increase.  Strong  customer
confidence in our core electric business  accelerates customer acceptance of the
new products and services we introduce.

We said we would stay focused on cost management, and we did. It is essential to
our  profitability  today,  and  to  our  competitiveness   tomorrow.  Fuel  for
generation  comprises over one-third of our total costs. We use more coal in our
power generation than any other fuel source.  We cannot overstate the importance
of a reliable, high quality and competitively priced source of this staple input
to our business.  In 1999, close attention to fuel pricing and plant efficiency,
and effective fuel switching  strategies kept fuel cost increases to 4% in spite
of a 6% increase in  production.  Operating,  maintenance  and general  expenses
increased  as our  customer  base grew,  and demand  for  electricity  and other
services rose,  but efficiency  gains across the  organization  mitigated  these
volume-related  increases. As we move into 2000 and beyond,  increasing capacity
utilization  will be critical to managing  our costs  downward.  By  encouraging
customers  to move some of their  demand to off-peak  hours,  we will be able to
defer investment in additional generation assets.


<PAGE>


Our advance into competitive energy businesses

has important implications for our regulated electric

business. The sales, marketing and customer service

skills, and entrepreneurial mindset necessary for

success in these businesses become more critical

to our electric business every day.


04   We said we would  enhance  earnings  quality,  and we did. 1998 reminded us
     that while the  shareholders'  opportunity  for reward  from the  regulated
     utility is limited,  their  opportunity  for risk is not.  During 1999,  we
     implemented  a  progressive  Enterprise  Risk  Management  system to ensure
     dynamic management of commodity prices and fuel sources,  foreign exchange,
     interest rates,  and even the effects of weather  variance on our revenues.
     Our strategy enjoyed  considerable  success, not the least of which was the
     realization  of $2.7 million of net proceeds  from  weather-risk  contracts
     that substantially offset the effects of warmer temperatures this year.

     We said we would prepare for increased competition, and we did. The arrival
     of  natural  gas  in  Nova  Scotia  will  present  challenges  as  well  as
     opportunities.  Our  exposure  is  limited by the fact that only 20% of our
     residential  electric  demand comes from space heating.  As well,  costs to
     convert to gas from both  electricity and oil are high. Our ongoing success
     in maintaining  stable prices, and in giving customers options for managing
     their energy costs positions us to manage natural gas  competition  when it
     arrives. We are also working  proactively with our industrial  customers to
     implement  a new,  favourable,  "load  retention"  rate,  which  would make
     electricity pricing competitive with self-generation using alternative fuel
     sources.

     Our advance into competitive  energy businesses has important  implications
     for our  regulated  electric  business.  The sales,  marketing and customer
     service skills, and entrepreneurial  mindset necessary for success in these
     businesses  become more  critical to our  electric  business  every day. In
     diversifying  our  company,  we  provide  an  opportunity  for  all  of our
     employees to benefit from the knowledge and  experience in these areas that
     staff members


<PAGE>



from our new  ventures  bring  to the  company.  The  transfer  of those  skills
strengthens the customer focus in our core electric business.  By operating with
the customer  interest at the forefront of every  decision and every action,  we
will be ready for deregulation whenever it arrives.

     We said we would live up to our environmental responsibilities, and we did.
As a consumer of primary energy  sources,  we must utilize those resources in an
efficient manner,  minimizing and managing the impact we have on the environment
where we, and our  customers,  work and live.  In 1999 we made good  progress in
achieving our environmental  goals. In 2000, the completion of the conversion of
our Tufts Cove  generator to burn natural gas as well as oil will further reduce
our emissions.

     Our employees made this year the success that it was. They continue to rise
to  the   chal-lenges   of  increased   competitiveness,   and  to  embrace  our
customer-focused  strategy.  Their commitment  strengthened our organization and
turned our goals into reality. In addition to their contribution to our company,
many helped  extend our  commitment  to improving  the quality of life,  and the
environment,  in our  communities.  On  behalf  of  management  and the Board of
Directors, we express sincere thanks for a job well done.

     Operational  expertise in our core  electric  utility,  increased  customer
focus,  disciplined growth in complementary lines of business, and sophisticated
risk management,  work together to increase the quality of earnings.  This gives
the Board of Directors confidence to once again increase the dividend payable to
all common shareholders.

     In closing,  we would like to acknowledge the expert  guidance  provided by
the  Board of  Directors  of the  company  and  offer  our  thanks  to them.  In
particular,  we acknowledge the outstanding  contribution  made by Mr. Thomas R.
Hall, a director since 1992, who will be retiring in May of 2000.

     We entered 1999 with the strategy to be our customers' choice in energy and
services. We accomplished much in the year. We enter 2000 with the foundation of
people, performance, growth opportunities, and customer focus to declare that we
are indeed on course.

Derek Oland Chairman of the Board (signed)
David Mann President and Chief Executive Officer (signed)



<PAGE>


[PICTURE]


At NS Power Holdings  Inc., our vision is to be the customers'  choice in energy
and services. We live that vision every day, through accomplishments in four key
areas.

o    Customer Advantage - acknowledging our customers as our greatest asset, and
     treating them accordingly;

o    Operations   Efficiency  -  maintaining  high   reliability,   and  service
     excellence, while keeping costs down for our customers;

o    Business  Development - offering our customers a full  complement of energy
     products and services; and

o    Community Investment - investing in the communities where our customers and
     employees work and live.

     We have set a focused and disciplined course for success and growth. We are
achieving  results  through the  execution of our own unique plan.  The progress
report in the following pages proves that we are on course.

Above,  Left to right > Trudy Cromwell,  Customer  Representative,  Call Centre;
Point  Tupper  Generating   Station;   Maritimes  &  Northeast   Pipeline  under
construction;  Erin C. MacNeil,  Centennial  Scholarship  Winner,  Sydney,  Nova
Scotia Opposite > Katherine Barss,  residential customer,  Hammonds Plains, Nova
Scotia



<PAGE>



our greatest asset

---------------------------------------------

                       Our company has 440,000 customers, and every
                       one of them relies on us to provide a
                       service that is integral to their
                       well-being, success and comfort. We do it,
                       reliably and efficiently. Their trust, and
                       our ability to deliver, is the foun-dation
                       for a relationship with our customers that
                       is, quite simply, our single greatest asset,
                       and the one on which we will build our
                       success in the 21st century.

08   Maintaining  customers'  confidence,  and  developing our  relationship  to
     provide other products and services,  depends on our ability to provide the
     best service at the best price.  We're proud of the fact that our customers
     have not faced an  electricity  price  increase in three years.  We have no
     plans to interrupt that trend in 2000.

     We are going further,  helping customers to reduce energy costs by offering
lower rates for electricity purchased outside of peak periods.  Electric thermal
storage units, part of our product mix, make this possible, enabling residential
and  commercial  customers to bank energy at night and use it during the day. In
addition,  we are seeking regulatory approval to offer new,  competitive,  "load
retention" rates to major industrial customers,  to ensure they continue to look
to us for their electricity needs.  Keeping industrial users on the system helps
keep prices  stable for all of our  customers,  because it ensures the  system's
fixed costs continue to be shared over a wide customer base.

     Standards  for  service  have  never  been  higher  than they are now.  Our
customers'  expec-tations  of us are not only  driven by what we do, but also by
every other service  provider they encounter.  Nothing less than excellence will
suffice.  Accordingly,  in 1999 No va Scotia  Power  created a  "Customer  Needs
Team", in which  operations  staff,  field personnel and customer  service staff
work  together  to  fundamentally  change  the way we serve  customers.  We also
installed High Volume Call  Answering  technology,  to increase the  information
flow during times when weather or other  difficulties  disrupt power supply.  We
enhanced our Interactive  Voice Response  telephone system to make it easier for
customers to communicate  with us every day, and, toward the end of the year, we
introduced  the  convenience  of Internet  billing  ("e-bill")  for  residential
customers.


<PAGE>

                                      440
                                      000
                                customers strong


     Our  customers  are  responding  to our  efforts.  Each  year we  conduct a
customer  survey,  and the 1999 results  show overall  opinion of us is high and
continuing to increase. The importance of this result cannot be overstated.  Our
customers'  impressions  of Nova  Scotia  Power  as  knowledgeable,  dependable,
responsive,  friendly and  trustworthy  will one day influence their decision to
continue to do business with us when competition for electricity arrives. And it
will also persuade them to purchase  other products and services that are key to
our growth.

     We entered the year with a strategy to be our customers'  choice for energy
and  related  services.  We're on  course,  with a greater  portfolio  of energy
products and related services, an improved ability to deliver them, and a larger
and more loyal customer base choosing to buy from NS Power.


A DIVERSIFIED CUSTOMER BASE



37% Industrial         34% Residential       25% Commercial         4% Other




<PAGE>


2 > O P E R AT I O N S E F F I C I E N C Y
essential service

---------------------------------------------------------------------

                       Electricity generation, transmission and distribution
                       have comprised the core of our business for more than
                       75 years. In 1999, we achieved record volumes,
                       delivering essential energy services to a broad base
                       of residential, commercial, and industrial customers.
                       essential services

Competitive  benchmarking  in our power  generation  business places Nova Scotia
Power in the top third of North American  utilities for  reliability and cost of
service.  Our  success  in  generation  is  evidenced  by the high  reliability,
low-cost  production,  and fuel efficiency  that we achieved during 1999.  While
sales volumes increased,  plant operating and fuel costs were closely controlled
by managing the increased volumes through improved asset  utilization,  shifting
demand to off-peak times,  and managing our fuel mix to increase  efficiency.  A
number of employee-driven  production  improvements  during the year, as well as
enhanced  staffing   flexibility,   also  helped  increase  overall   operations
efficiency.

     Fuel accounts for over one-third of our power  generation  expense,  so not
surprisingly,  the company places  particular  focus on managing these costs. In
1999, the Cape Breton Development Corporation was unable to deliver a portion of
the coal they supply to the company under a long-term  contract,  which led Nova
Scotia  Power  to  increase  its use of  lower-priced,  imported  coal.  We also
utilized fuel-switching  strategies to reduce our oil consumption;  particularly
important  in light of the  increase in the price of this  commodity  during the
year.

     We're  expanding  our fuel  sources to  further  increase  fuel  management
opportunities.  The Tufts Cove generating  station is in the final stages of the
conversion  that will enable it to operate  with either  natural gas or oil. The
Point  Aconi  plant,  with its  advanced  emissions-control  equipment,  has the
capacity to burn a significant  amount of petroleum coke,  which is considerably
lower in cost than coal.


<PAGE>




                                    [PICTURE]

     Our progressive Enterprise Risk Management program will greatly enhance our
control over our fuel costs in 2000, and beyond. Dynamic management of commodity
price and foreign exchange,  with a comprehensive portfolio of fixed price, swap
and option  contracts,  has eliminated  substantially  all of the variability in
fuel prices for 2000.

     Emphasis  on meeting  customers'  needs while  controlling  costs drove the
creative  initiative that will allow us to deliver the increased electric energy
needs of one growing Nova Scotia community without making a significant  capital
investment.  By re-routing  services and making only minor  upgrades to existing
infrastructure and distribution networks, we will eliminate the need for a major
new distribution  system.  Strategic and creative thinking will turn a potential
$10 million expenditure into a $1 million expenditure!

     Our efficiency gains never come at the expense of safety. In 1999, the Nova
Scotia Construction Safety Association recognized Nova Scotia Power workers with
one of the highest  scores ever awarded in a safety audit.  Extending our safety
commitment to overall  health,  we implemented a program that offers health risk
assessment to all employees.  Our power  production unit broadened the company's
safety initiative,  piloting a home safety awareness program that makes safety a
24-hour a day focus.

Above, Left > Ken Francis, System Operator,  Ragged Lake Control Centre Centre >
Ken Wentzell,  Maintenance  Services  Supervisor,  Tufts Cove Generating Station
Right > Top: Wayne Joudrey, Leading Power Line Technician, Metro Region; Bottom:
Phil Stevens, Leading Power Line Technician, Metro Region


<PAGE>


 3 > B U S I N E S S D E V E L O P M E N T
energy solutions for customers
------------------------------

                       "Knowledgeable", "trustworthy", "friendly" and
                       "reliable".  These words are frequently used by
                       customers to describe our core electric utility, Nova
                       Scotia Power.  Building on the strength of this
                       existing relationship with customers, we are becoming
                       their clear choice for a new array of energy products
                       and services.

Through our  growth-oriented  subsidiary,  Enercom, we have expanded our product
line to provide more choices in energy,  including home heating fuel, industrial
lubricants,  bunker oil and diesel  fuel.  Nova Scotia  Power is also  providing
customers with new and value-added  services like "Log One", an automated system
that  uses  motion  sensors  to  determine  when   residential   apartments  are
unoccupied,  and then  slowly  lowers the room  temperature,  enabling  building
managers to control costs on an apartment-by-apartment basis. On a recent pilot,
Log One  proved it could  reduce  winter  energy  costs by as much as 33%.  Many
customers have embraced our broader product and service offerings. For example:

o Maritime  Life,  a  prominent  Canadian  insurance  company  headquartered  in
Halifax,  worked with us to better  understand  their energy use, and contracted
for furnace oil and other services.

o A commercial  customer,  Urchin  Property  Management,  with 18 apartment  and
business  complexes  under  management,  purchases  furnace oil, uses our energy
management  services,  and  installed  Electric  Thermal  Storage units to lower
energy costs.

o Eastlink Cable,  which serves 190,000  customers across the province relies on
us for fibre optic design engineering and construction services.

We're  not only  expanding  our  product  and  service  line - we are  expanding
geographically too. Our 12.5% interest in the Maritimes & Northeast Pipeline has
enabled us to diversify our energy  platform,  and stretched our boundaries into
the  northeastern  United States.  The pipeline is now  delivering  Sable Island
natural gas to its first customers in Maine and Massachusetts.

The success and strength of our core  electric  business  positions us now, more
than any  other  time in our  history,  to grow  with the  energy  and  services
opportunities  available to us in Nova Scotia,  throughout  the  Maritimes,  and
beyond.

Opposite,  Inset > Diesel Cardlock System Top > Bill Camp,  Manager  Development
and Systems, ABT Canada Left > Raw material prior to processing Right > Exterior
hardboard siding awaiting shipment to customers


<PAGE>


                                    [PICTURE]


ABT Canada Limited,  a Louisiana  Pacific Company operates a 240,000 square foot
facility in East River,  Nova  Scotia.  The plant  produces  exterior  hardboard
siding,  door  facings,  industrial  hardboard  products and wall  panelling for
customers in 25 countries around the world.

NS Power Holdings  supplies Bunker C oil, light fuel oil and electricity for ABT
Canada's  operations and installed  structured  wiring for their  communications
systems.

NS Power Holdings also operates a  state-of-the-art  cardlock system at the site
for convenient, high speed dispensing of diesel oil for trucks.



<PAGE>


C O M M U N I T Y I N V E S T M E N T
doing well by doing good
-------------------------------------------------------------------------

                       Together with our employees, NS Power Holdings
                       commits more than three quarters of a million
                       dollars, and countless hours each year supporting our
                       com-munity.  Helping young people has long been a
                       focus of these contributions. In addition, we
                       concentrate our efforts on safety and the
                       environment; two areas where we have particular
                       interest and expertise.

We made a  significant  investment  in the young  people of Nova Scotia in 1999,
funding 80 university  scholarships.  We also  contributed  to Regional  Science
Fairs,  the Junior  Achievement  Economics  of Staying  in School  program,  and
sponsored  children to attend Sunship Earth, a five-day  summer camp,  where fun
and environmental awareness go hand-in-hand.

Our focus on youth extends to their safety. We partner with the IWK Grace Health
Centre in funding the Nova Scotia  Child Safety and Injury  Prevention  Program,
which focuses on reducing the incidence and severity of childhood injuries.  Our
safety projects expanded in 1999, when we responded to a pressing community need
by sponsoring a  province-wide  Crosswalk  Safety  Program in  partnership  with
several other leading Nova Scotia companies.

Environmental  considerations  play  an  important  part  in  all  our  business
decisions. We contribute directly to improving our environment through a variety
of  community-run  programs.  Our  Waterwork  program,  which  began  in 1992 in
partnership with the Nova Scotia Department of the Environment,  has funded over
140 projects  improving and protecting Nova Scotia waterways.  In 1999, the Nova
Scotia  Nature Trust was one of several  environmental  enhancement  programs we
supported.  Clean Nova Scotia honoured us as their "Sponsor of the Year" for our
support of their environmental focus efforts.

Our  employees  are at the heart of our giving - their  dedication is inspiring.
Spreading the "Good Neighbour" philosophy,  NS Power staff have raised funds for
numerous  charities,  volunteered with the IWK Grace Children's  Miracle Network
Telethon,  donated money, food, and toys to families in need, and provided their
time, their skills,  and their hard work, for all types of worthwhile  community
endeavours.

At NS Power Holdings, we sincerely believe that supporting our communities is an
investment in our employees, our customers, and our future.


<PAGE>







                                    [PICTURE]


<PAGE>




M A N A G E M E N T D I S C U S S I O N A N D A N A LY S I S

1 9 9 9  NS P o w e r H o l d i n g s I n c .

The  Management  Discussion  and  Analysis  (MD&A)  provides  a  review  of  the
significant  developments  that affected NS Power  Holdings  Inc.'s  performance
during 1999 relative to 1998, and its current financial  position.  Factors that
could  impact  future  operations  are also  discussed.  Such  comments  will be
affected by, and may involve,  known and unknown risks and  uncertainties  which
may cause the actual  results of the  company to be  materially  different  from
those  expressed or implied.  To enhance  shareholders'  understanding,  certain
multi-year  historical  financial  and  statistical  information  is  presented.
Throughout this discussion, "NS Power Holdings Inc." and "NSH" refer to NS Power
Holdings Inc. and all of its consolidated subsidiaries and affiliates.

F i n a n c i a l H i g h l i g h t s

NS Power Holdings  Inc.'s success in  implementing  its strategic  objectives is
reflected in the following financial performance indicators:

Revenues - Despite continued warmer-than-normal temperatures,  electric revenues
increased  5%, to $790.2  million in 1999,  from $750.8  million in 1998.  Other
revenues  increased  54%,  from $22.3  million in 1998 to $34.4 million in 1999,
reflecting growth in new lines of business.

Earnings - Net earnings  applicable to common shares increased to $100.4 million
or $1.16 per share in 1999 from $85.4 million or $0.99 per share in 1998.

Dividends - NSH  maintained its  commitment to dividend  growth,  increasing the
common  share  dividend  by  $0.01,  to $0.83 in 1999.  A further  $0.01  annual
increase  commenced  in January  2000.  Higher  earnings in 1999  resulted in an
improvement in the dividend payout ratio, from 83% to 72%.

Cash  from   Operations  -  Net  cash  provided  by  operating   activities  was
significant,  at $223.7 million,  comparable to the $228.0 million  generated in
1998.

I n t ro d u c t i o n

NS Power Holdings Inc. (NSH) is a diversified energy and services company, which
incorporates three primary operating units:

o NSH's primary  subsidiary is Nova Scotia Power Inc.  (NSPI),  a  wholly-owned,
fully-integrated  electric  utility,  with $2.8  billion of assets,  that serves
440,000 customers in Nova Scotia.  NSPI is the primary  electricity  supplier in
Nova Scotia,  providing the vast majority of the  generation,  transmission  and
distribution of electricity in the province.

o NSH's  vehicle  for growth and  diversification  outside of its core  electric
business is its Enercom Inc.  subsidiary.  Enercom's mandate is to lever assets,
including  strong customer  relationships  and operational  expertise,  into new
lines  of  business,   complementary  to  NSH's  existing  energy  and  services
portfolio.  Accordingly,  Enercom has  expanded  NSH's  energy  product  line to
include distribution of a wide range of fuel oil products,  and related products
and services.

o NSH has a 12.5%  equity  investment  in the  Maritimes  &  Northeast  Pipeline
(M&NP),  which transports Sable Island natural gas to markets in Maritime Canada
and the northeastern United States.

In addition to these operating units,  certain  functions are carried out in the
NS Power Holdings Inc.  corporation,  including  strategic planning and business
development  activities.  The  individual  corporation  is referred to herein as
Holdings Corporate, to distinguish it from the NSH consolidated entity.

ORGANIZATION STRUCTURE

                                        NSH
       ------------------------------------------------------------------
       |                                 |                               |
       NSPI (100%)                  ENERCOM (100%)           M&NP (12.5%)



<PAGE>



This Management  Discussion and Analysis presents information by operating unit,
beginning with an overview of each business;  followed by discussion of its 1999
operating results and liquidity and capital resource  details;  then the outlook
for 2000.  The MD&A concludes with a discussion of business risks and enterprise
risk management on a consolidated basis.

Enercom and M&NP are of strategic  importance to NSH, and are expected to have a
significant financial impact over time. Accordingly, detailed commentary on each
of these operations is provided in this report

1999 Financial Highlights                                        Earnings before
                                                                        Interest

----------------------------------------- ------- ------ -------- -------------

NSPI                                                                   $ 242.9
Enercom                                                                    1.3
M&NP                                                                       7.4
Holdings Corporate                                                       (3.4)
----------------------------------------- ------- ------ -------- -------------
Total                                                                  $ 248.2

Less:

Interest                                                                 136.5
Preferred shares                                                          11.3
----------------------------------------- ------- ------ -------- -------------
Consolidated net earnings                                              $ 100.4
----------------------------------------- ------- ------ -------- -------------
                                           1999    1998    1997
Cash provided by                           223.7  228.0   304.7
  Operating activities (millions of $)
Dividends per common share                $ 0.83  $ 0.82  $ 0.81
Earnings per common share                 $ 1.16  $ 0.99  $ 1.07



N o v a S c o t i a P o w e r I n c .

Overview

-----------------------------------------------------------------------

The core business of NSH is electricity.  The sustained  success of its electric
utility,  NSPI, is integral to the creation of  shareholder  value,  providing a
quality  earnings  stream and cash flow to support  growth and  diversification.

NSPI  is the  primary  electricity  supplier  in  Nova  Scotia  with  97% of the
generation, 99% of the transmission and 95% of the distribution in the province.
Approximately  70% of the company's  generation is  coal-fired,  with  oil-fired
generation and hydro production offering generation management options. In 2000,
the  conversion of NSPI's Tufts Cove  generating  station to burn natural gas as
well as oil  will be  complete,  providing  the  company  with  additional  fuel
switching capabilities, and improved environmental emissions performance.

1999 was a record year for NSPI,  despite the fact that Nova Scotia  experienced
its second  consecutive  year of  warmer-than-normal  temperatures.  The company
utilized   weather   contracts  to  mitigate  the  impact  of  warm  weather  on
space-heating  revenue;  successfully  managed  coal  supply  issues  created by
ongoing  production  difficulties  at its primary  coal  supplier by  increasing
consumption  of import coal;  and utilized fuel  switching  strategies to manage
generation costs in the face of increasing oil prices.

     NSPI's  commitment to being the customers' choice in energy and services is
stronger than ever. The rational customer chooses the supplier that provides the
best quality  service at the best value,  and NSPI is  determined  to deliver on
both counts.  The company has successfully  executed a cost-management  strategy
that resulted in 1999 being the third consecutive year without price increases.

     1999 also saw an increased  focus on the quality  service  component of the
customer value equation.  NSPI created a "Customer Needs Team", where operations
staff, field personnel and customer service staff work together to fundamentally
change  the way we serve our  customers.  We also  installed  High  Volume  Call
Answering  technology,  and enhanced our  Interactive  Voice Response  system to
increase our capacity to answer customer calls and improve service.


<PAGE>


MANAGEMENT DISCUSSION AND ANALYSIS

     We are also  coordinating  customers'  desire for stable  pricing  with our
objective  of moving  electrical  load off peak.  This will enhance our capacity
utilization,  and  enable  NSPI  to  delay  or  avoid  investment  in  increased
generation,  while  maintaining  highly  reliable  service,  and keeping overall
costs, and prices, as low as possible.

     The regional  economy is strong,  largely due to the  development  of Sable
Island natural gas reserves.  Provincial  economic growth was 3% in 1999, and is
expected to maintain  that level in 2000.  Employment  grew 3% in the past year,
and retail sales were 4% higher in 1999.

Review of 1999

-----------------------------------------------------------------------

1999 was NSPI's  most  successful  year ever.  The  electric    ----------------
utility's   contribution   to   consolidated   net  earnings    | Net Earnings |
increased to $100.1  million from $85.5 million in 1998. The    | Increase     |
contribution  is net of $3.1  million  gain  on the  sale of    |              |
Enercom shares to NSH, which is eliminated on consolidation.    | GRAPH        |
NSPI  earned  a return  on  common  equity  of 10.8% in 1999    |              |
compared  to 9.5% in 1998.  The  utility  is pleased to have    |              |
pro-vided  a  return  near the top of its  allowed  range of    |              |
10.5% - 11%.                                                    ----------------

<TABLE>
<CAPTION>
REVENUE                 1999             Sales      % Change      1998          Sales      % Change    1997           Sales Mix %
Electric Sales Volume                     Mix %     1998-1999                   Mix %      1997-1998
(GWh)
----------------------- ---------------- ---------- ------------- ------------- ---------- ----------- -------------- --------------
<S>                     <C>              <C>        <C>           <C>           <C>        <C>         <C>            <C>
Residential             3,494.6          33.7       3.5           3,377.9       34.6       (3.5)       3,498.9        36.8
----------------------- ---------------- ---------- ------------- ------------- ---------- ----------- -------------- --------------
Commercial              2,582.8          24.9       3.9           2,485.9       25.4       (0.8)       2,506.7        26.3
----------------------- ---------------- ---------- ------------- ------------- ---------- ----------- -------------- --------------
Industrial              3,834.8          37.0       12.0          3,423.7       35.0       20.4        2,842.6        29.9
----------------------- ---------------- ---------- ------------- ------------- ---------- ----------- -------------- --------------
Other                   453.2            4.4        (6.4)         484.4         5.0        (27.5)      667.7          7.0
----------------------- ---------------- ---------- ------------- ------------- ---------- ----------- -------------- --------------
                        10,365.4         100.0      6.1           9,771.9       100.0      2.7         9,515.9        100.0
----------------------- ---------------- ---------- ------------- ------------- ---------- ----------- -------------- --------------

----------------------- ---------------- ---------- ------------- ------------- ---------- ----------- -------------- --------------
Electric Sales Revenue  1999             Sales      % Change      1998          Sales      % Change    1997           Sales Mix %
(millions of $)                          Mix %      1998-1999                   Mix %      1997-1998
----------------------- ---------------- ---------- ------------- ------------- ---------- ----------- -------------- --------------
Residential             340.6            43.1       2.7           331.5         44.2       (2.2)       339.0          45.7
----------------------- ---------------- ---------- ------------- ------------- ---------- ----------- -------------- --------------
Commercial              221.3            28.0       2.9           215.1         28.6       0.2         214.6          29.0
----------------------- ---------------- ---------- ------------- ------------- ---------- ----------- -------------- --------------
Industrial              193.7            24.5       11.7          173.4         23.1       17.2        147.9          19.9
----------------------- ---------------- ---------- ------------- ------------- ---------- ----------- -------------- --------------
Other                   34.6             4.4        12.3          30.8          4.1        (22.8)      39.9           5.4
----------------------- ---------------- ---------- ------------- ------------- ---------- ----------- -------------- --------------
                        790.2            100.0      5.2           750.8         100.0      1.3         741.4          100.0
</TABLE>



Residential Revenue - Residential revenue increased 3% to $340.6 million in 1999
from $331.5  million in 1998,  largely due to the relative  strength of the Nova
Scotia economy.  NSPI's residential load generally comprises appliance usage and
lighting (60%);  space heating (20%); and water heating (20%). A 31% increase in
housing starts in 1999 led to three thousand new  residential  customers,  and a
positive impact on revenues.

During the first and fourth quarters,  continued warmer temperatures  negatively
affected residential demand from space heating needs. The warm weather continued
through the summer,  but only resulted in a slight  revenue  increase since less
than 5% of NSPI's residential  customers utilize air conditioning.  Weather risk
management  contracts  mitigated  the  negative  impact  of   warmer-than-normal
temperatures on the residential load. These simple option contracts  protected a
significant  portion  of  the  lost  space  heating  margin  from  unanticipated
variations  caused  by  warmer-than-normal  winter  temperatures.  Weather  risk
management  contracts are fully  described in the Business  Risks and Enterprise
Risk Management  section.  Proceeds from weather risk  management  contracts are
included in Other Electric Revenue.


<PAGE>


Commercial Revenue - Commercial revenue increased 3% from $215.1 million in 1998
to $221.3 million in 1999. NSPI's commercial  customer base includes  everything
from small retail operations,  to large office and commercial complexes, and the
province's  universities  and hospitals.  The strong Nova Scotian  economy had a
positive impact on the commercial  sector,  and unlike the  residential  sector,
warmer summer  temperatures  increased the commercial cooling load. Weather risk
management   contracts   mitigated  the  negative  impact  of  warm  weather  on
electricity consumption for space heating needs during the winter months.

Industrial  Revenue - Industrial  revenue  increased 12%, from $173.4 million in
1998 to $193.7  million in 1999.  Much of this increase was driven by the growth
of NSPI's largest industrial customer, Stora Enso Port Hawkesbury.  In addition,
growth in the provincial economy,  including development of Sable Island natural
gas and  construction  of the Maritimes & Northeast  Pipeline,  resulted in a 6%
increase in the small and medium industrial categories.

Revenue / MWh - Revenue / MWh  decreased  slightly  from $77 to $76,  due to the
increased  weighting of industrial  sales in the sales mix. The regulated  rates
established by the Utility and Review Board for industrial  sales are lower than
for  residential  and  commercial  sales,  in  recognition  of the lower cost of
service for industrial customers.

Other Electric Revenue

Other  electric  revenue/1  increased $3.8 million from $30.8 million in 1998 to
$34.6  million in 1999.  This  increase  is  primarily  due to $2.7  million net
proceeds  realized from weather risk  management  contracts  (referred to in the
discussion of residential/commercial  revenue), which were in place in the first
and fourth quarters.

FUEL FOR GENERATION AND POWER PURCHASED
Capacity - Management of capacity is a critical element of operating efficiency.
The provision of sufficient  generating  capacity to meet peak demand inevitably
results in excess capacity in non-peak periods.  NSPI's daily load is highest in
the early  evening;  its  seasonal  load is highest  through the winter  months.
Summer cooling load is not a significant factor.

     To ensure  reliability  of service,  NSPI  maintains a generating  capacity
greater  than  firm  peak  demand.  Generating  capacity  is  composed  of 2,183
megawatts of thermal and  hydroelectric  plant and 25 megawatts  contracted with
independent  power  producers.  This  capacity  maintains  a planned  generation
reserve  margin  of at  least  20%,  which  can  be  expanded  further  with  an
interruptible load of 16%.

     Over time, NSPI's capacity management strategy is to encourage customers to
consume electricity in non-peak periods, to enhance overall plant utilization to
meet higher demand, and to defer investment in additional generation capacity.

--------
1.  In October 1998,  NSPI purchased  Kentville  Electric  Commission and is now
serving its 3,600 Residential and Commercial customers. Prior to this date, NSPI
sold electricity to the municipality who then resold it to Kentville  customers.
For comparative  purposes,  Kentville  Electric  Commission revenue for 1998 has
been reclassified from "Other" revenue to the appropriate NSPI customer classes.


<TABLE>
<CAPTION>
Production Volume (GWh)      1999         Mix %        % Change        1998          Mix %     % Change     1997         Mix %
                                                       1998-1999                               1997-1998
---------------------------  ------------ -----------  --------------- ------------- --------- ------------ ------------ ---------
<S>                          <C>          <C>          <C>             <C>           <C>       <C>          <C>          <C>
Coal                         7,816.0      70.5         11.4            7,015.0       66.8      (14.9)       8,246.5      80.0
Oil                          1,870.9      16.9         (20.7)          2,358.3       22.4      202.0        781.4        7.6
Hydro                        980.7        8.9          10.1            890.9         8.5       (4.7)        934.9        9.1
Purchased Power              411.3        3.7          70.0            242.0         2.3       (28.9)       340.2        3.3
---------------------------- ------------ ---------                    ------------- ---------              ------------ ---------
Total                        11,078.9     100.0        5.5             10,506.2      100.0     2.0          10,303.0     100.0
---------------------------- ------------ -----------  --------------- ------------- --------- ------------ ------------ ---------

Average Unit Fuel
Costs                                     % Change                     % Change
($ per MWh)                  1999         1998-1999    1998            1997-1998     1997
---------------------------- ------------ -----------  --------------- ------------- --------- ------------ ------------ ---------
                             $24.15       (1.4)        $24.49          2.3           $23.92
---------------------------- ------------ -----------  --------------- ------------- --------- ------------ ------------ ---------
</TABLE>



<PAGE>


M A N A G E M E N T D I S C U S S I O N A N D A N A LY S I S

Fuel Expense - Total cost of fuel for generation and power  purchased  increased
by 4.0% over 1998,  from  $257.3  million  to $267.5  million,  reflecting  a 6%
increase in production to meet higher sales volumes.

     Coal,  the  utility's  dominant  fuel source,  has the lowest per unit fuel
cost, after hydro production, which of course has no fuel cost component. Oil is
more expensive, and purchased power can be 2.5 to 3 times as costly as coal. The
average fuel cost per MWh of power  produced  was reduced  slightly to $24.15 in
1999,  from $24.49 in 1998,  the result of a combination of fuel mix and pricing
factors, including:

o decreased  oil-fired  generation in 1999 compared to the prior year, when coal
supply  interruptions  with  the  Cape  Breton  Development  Corporation  (CBDC)
necessitated a greater reliance on oil;

o  increased  hydro   production,   which  approached   normal  levels  after  a
particularly dry year in 1998;

o increased consumption of lower-priced import coal;

o an  increase  in the  cost  of  CBDC  coal,  primarily  due to  volume-related
discounts imbedded in the 1998 pricing structure,  as well as small inflationary
increases pursuant to the contract; and

o an  increase  in  purchased  power,  as the  Point  Aconi  generating  station
underwent  maintenance and  modifications to enable it to burn petroleum coke, a
low-cost fuel.

     CBDC, historically the company's primary coal supplier,  permanently closed
its Phalen mine in 1999, due to ongoing geological difficulties. Output from the
other CBDC colliery,  Prince,  was less than  anticipated.  As a result, in 1999
NSPI purchased  significant  amounts of its coal from  international  suppliers.
While  international coal spot prices were approximately 25% lower than the CBDC
contracted amounts, the higher cost of arranging for transportation of shipments
on short notice eroded much of the fuel price benefit in 1999.

     The company  manages  exposure to commodity  price risk through fixed price
contracts,  as well as swap  and  option  contracts;  foreign  exchange  risk is
managed through forward and option  contracts.  Further details on the company's
fuel cost risk  management  strategies  are included in the  Business  Risks and
Enterprise Risk Management section.

OPERATING, MAINTENANCE AND GENERAL EXPENSES
NSPI's  continued  emphasis on cost management  kept operating,  maintenance and
general  expense (OM&G)  increases at less than 3% over 1998,  despite growth in
the company's  customer base, and the ensuing increase in demand for electricity
and related services. OM&G costs in 1999 were $144.0 million, compared to $140.1
million in the prior year.  Efficiency gains and costs savings across the entire
company  mitigated  the impact of higher  payroll costs  associated  with the 6%
increase in electricity production and higher amortization costs associated with
the 1997 Early Retirement Incentive Program.

GRANTS IN LIEU OF PROPERT Y TAXES
NSPI  pays  annual  grants  to  municipalities  in Nova  Scotia,  in lieu of all
municipal  taxation  other than deed transfer tax.  Since 1998, it has also been
required to make a grant to the  Province  of Nova  Scotia,  commencing  with $2
million in the first year,  and increasing by $2 million each year, to an annual
maximum of $10 million.  In 1999 these expenses totaled $8.9 million compared to
$5.5 million in 1998.

DEPRECIATION
Depreciation  expense  increased  slightly in 1999 to $94.2  million  from $91.1
million in 1998 as a result of a higher level of  in-service  assets  throughout
1999.  Depreciation expense will increase marginally in 2000 largely as a result
of capital investment in the gas conversion project at the Tufts Cove generating
station.

INTEREST
Interest  expense was $131.5 million in 1999 compared to $132.3 million in 1998,
a decrease of 1%. The $88.1 million  reduction in total debt  outstanding led to
interest  savings of $2.6  million;  debt  refinancings  at lower rates  reduced
interest  expense by  another  $2.9  million.  Interest  on loans to  affiliated
companies  contributed $0.5 million in earnings.  These savings were offset by a
$5.2 million  reduction in defeasance  gains.  During 1998 NSPI  capitalized  on
downturns in the stock market,  which  increased the spread between  Federal and
Provincial  bonds,  by selling  certain  defeasance  investments  and  acquiring
replacement qualifying investments for a net gain of $7.0 million.

     The company manages exposure to interest rate risk through a combination of
fixed and floating borrowing, and hedging. Interest rate swaps are the principal
instrument  used to hedge interest rate risk.  Further  details on the company's
interest rate risk management  strategies are included in the Business Risks and
Enterprise Risk Management section.

<PAGE>


AMORTIZATION OF POINT ACONI EXPENSES
The  regulator-approved  plan for  deferral  and  amortization  of  Point  Aconi
expenses was  completed in 1999.  The final year's  amortization  of Point Aconi
expense was $23.1 million, an increase of $6.4 million from 1998.

ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
NSPI  provides  for the  borrowing  costs of  construction  work-in-progress  by
capitalizing  an  allowance  for funds used  during  construction  (AFUDC) as an
addition  to the  cost of  property  constructed.  This  amount  is  charged  to
operations through depreciation over the service life of the related assets, and
recovered through future revenues.  The  capitalization  rate for 1999 was 8.71%
(1998 - 8.89%), resulting in $4.8 million in AFUDC (1998 - $3.8 million).

TAXES
NSPI is subject to  provincial  capital  tax  (0.25%),  large  corporations  tax
(0.225%),  corporate income tax (45.12%) and Part VI.1 tax relating to preferred
dividends (40%).

NSPI  used  sufficient  capital  cost  allowance,  cumulative  eligible  capital
deductions and loss  carry-forwards  to eliminate  corporate income tax in 1998,
and 1999, and expects to do the same in 2000.

Therefore,  in 1999  income  tax costs  consisted  only of Part VI.1 tax on NSPI
preferred  dividends  of $5.3  million.  In 1998,  income  tax  costs  were $6.8
million,   which  included  $1.9  million  representing  the  final  portion  of
amortization of an  uncollectible  rebate under the Public  Utilities Income Tax
Transfer Act (PUITTA).  For financial reporting purposes, the Part VI.1 tax must
be allocated between income tax expense,  and preferred dividends as illustrated
in the following table:


<PAGE>


(In millions of dollars)                        1999             1998
----------------------------------------------- ---------------- -------------
Income Tax expense                              $ 7.3            $7.6
Preferred dividends                             ($2.0)           ($0.8)
----------------------------------------------- ---------------- -------------
Total tax cost                                  $5.3             $6.8

The  company  has filed  amended  income tax  returns  for  previous  years that
increase the tax depreciation  (capital cost allowance) available to be deducted
against the company's  future taxable  income.  Those returns were reassessed by
Revenue Canada to disallow the deductions  claimed.  The reassessments have been
objected to and the issue is expected to be litigated.

Liquidity and Capital Resources

-------------------------------------------------------------------------

CASH FLOW HIGHLIGHTS
NSPI's operations  consistently generate substantial cash resources,  sufficient
to fund the utility's capital expenditure requirements, and still provide for an
increasing dividend.

During 1999,  NSPI's  operations  generated  $264.7 million,  compared to $198.1
million in 1998. This $66.6 million increase included $17.8 million of increased
earnings, and $6.4 million from increased Point Aconi amortization.  The balance
is primarily due to changes in working capital.

Net  capital  expenditures  were $118.9  million in 1999,  as compared to $131.2
million  in 1998.  Included  in the total is $13.6  million  related  to the gas
conversion  project at the Tufts Cove  generating  station;  $14.2  million  for
thermal plant reliability  enhancements;  $13.3 million in hydro projects;  Year
2000 com-pliance testing and upgrades of $2.5 million;  and routine distribution
system capital  replacement of  approximately  $33.0 million.  In the year, NSPI
also issued $180.0 million in mid-term notes, and raised $31.3 million through a
preferred  share  and  purchase  warrant  offering.  The  proceeds  were used to
refinance $158.4 million of maturing debt.

PREFERRED SHARES
In order to  capitalize  on favorable  interest  rates,  and reduce  refinancing
exposure on the  redemption  in September,  2000 of $200  million,  6%, Series A
Preferred Shares , new preferred  equity shares were issued in March,  1999. The
First  Preferred Share Units were issued at $6.25 each, and comprised one Series
B share,  and one Series C Purchase  Warrant.  Beginning in October,  2000, unit
holders can acquire one Series C share in exchange  for one Series B share,  one
purchase  warrant  and  $18.75.  Series C will have a dividend  rate of 4.9% and
matures October,  2009. $31.3 million was raised from the March issue, which was
applied

<PAGE>


M A N A G E M E N T  D I S C U S S I O N  A N D  A N A LY S I S

to reduce debt until the funds are required to finance the Series A  redemption.
If all warrants are exercised,  an additional  $93.7 million in preferred equity
will be raised, bringing the total from this issue to $125 million. Full details
of  the  First  Preferred  Shares  are  provided  in  Note  9 to  the  financial
statements.

COMMON EQUITY
The Utility and Review Board regulates NSPI's capital structure, limiting common
equity   (common  share   capital  and  retained   earnings)  to  35%  of  total
capitalization.  In 1999, NSPI reached that common equity limit.  The limit will
not  increase  unless there are  additions  to the asset base,  and since NSPI's
strategy is to service additional demand through enhanced capacity  utilization,
the company is not  anticipating  significant  new  investment in generating and
other assets.  This means that common equity,  which would  otherwise grow every
year with the addition of earnings  less  dividends,  must be  maintained at its
year-end  1999  level by paying out  earnings  in their  entirety  to the parent
company, NS Power Holdings Inc.

DEBT                                             Long-Term Debt Levels
                                                 ($ millions)
     Success in operations, and the resulting
cash flows enabled NSPI to reduce its debt by     ||      ||
5% in 1999, to $1,507.7 million from $1,595.8     ||  ||  ||  ||
million in 1998.                                  ||  ||  ||  ||  ||  ||  ||
                                                  ||  ||  ||  ||  ||  ||  ||
     The weighted-average coupon rate on          ||  ||  ||  ||  ||  ||  ||
NSPI's long-term debt outstanding at             ____________________________
December 31, 1999, was 7.58% (1998 - 7.99%).      93  94  95  96  97  98  99
This debt matures over the next 97 years as
shown in Note 10 to the financial statements.    1993 $1,710.1   1994 $1,553.0
The quoted market-weighted-average interest      1995  1,713.3   1996  1,468.2
rates for the same or similar issues of the      1997  1,308.1   1998  1,247.2
same remaining maturities was 7.16% as of        1999  1,268.6
December 31, 1999 (1998 - 6.27%).

     In 1999,  NSPI issued $180.0  million of medium-term  notes,  with interest
rates ranging from 5.20% to 5.65%,  maturing over seven to 10 years. These notes
were  issued  primarily  to replace  maturing  long-term  obligations  of $158.4
million, with a weighted-average interest rate of 8.44%.

    NSPI has  established the following  short-term  credit  facilities:
o $350  million  commercial  paper  program  secured  with a 100% backup line of
credit; and
o $150 million operating line of credit.

     The company has a shelf  prospectus  for the issue of $500  million of debt
securities  to the  public.  The  securities  may be  either  long-term  debt or
medium-term  notes, and are available as funds are required until the prospectus
expires in August 2001. These funds will be used to refinance  maturing debt and
to provide  financing for investment  opportunities.  At December 31, 1999, $450
million of the shelf prospectus remains available.

     Based on our available  credit and credit  ratings,  and past experience in
public  financing  since  privatization,  NSPI expects to have access to capital
when needed.

Accounts Receivable  Securitization - NSPI signed an agreement with the Canadian
Imperial  Bank  of  Commerce  in  March,  1997,  whereby  it can  sell  accounts
receivable and unbilled revenue to the bank on a revolving basis. As of December
31, 1999, the company had sold $81.4 million of accounts receivable and unbilled
revenue,  net of a $7.4  million  holdback  (1998  - $82.5  million  net of $7.5
million  holdback).  The net proceeds from the sale were used to repay a portion
of the company's debt,  thereby reducing net interest costs. The agreement is in
place until 2002.

Outlook

--------------------------------------------------------------------------------

ELECTRIC SALES

Volume - Electric sales volume in 2000 is expected to increase  approximately 2%
over 1999 levels.

Residential  and  commercial  sales are  expected to  increase  with an expected
return to normal weather and continued  economic growth in Nova Scotia.  Weather
risk management  contracts have been purchased for the first and fourth quarters
of 2000  which  protect  approximately  90% of the  profit  margin  at risk from
unanticipated weather-related variations in residential and commercial demand.


<PAGE>


Industrial  sales are  expected  to increase  slightly in 2000,  with Stora Enso
maintaining  its  demand,  and  planned  expansions  by other  large  industrial
customers.  Other electric  revenue is projected to show a 4% increase over 1999
due to continued strong demand in export markets.

Pricing - As part of its  strategy to retain  industrial  market  share with the
arrival of natural gas to Nova Scotia,  NSPI is seeking  regulatory  approval to
implement  favourable "load retention" rates for certain  qualifying  industrial
customers.  If  approved,  the  company  anticipates  that this will result in a
marginal  reduction in  industrial  revenue in 2000,  while  maintaining a broad
customer base for system cost recovery.

In addition, NSPI has applied to the UARB to implement an enhanced "time-of-use"
rate structure, which, if applied, would provide the company's customers with an
additional   tool  for  energy  cost   management,   and  improve  our  capacity
utilization.

The combined effect of the proposed load retention and time-of-use  rate changes
is estimated to reduce annual revenues by approximately 2%.

FUEL

Fuel and purchased power costs in 2000 are expected to increase  marginally over
1999, to support increased  generation to meet anticipated higher sales volumes.
This  increase  in  generation-related  fuel costs will be largely  offset by an
anticipated  reduction in coal prices.  Coal is expected to make up the majority
of 2000 generation, at 80%, with oil/gas comprising 11% and hydro at 9%.

In  2000,  the  majority  of  NSPI's  fuel  supply  is  expected  to  come  from
international  suppliers, and is subject to commodity price and foreign exchange
risk. As part of its  Enterprise  Risk  Management  (ERM)  program,  the company
manages commodity pricing risk through fixed price contracts and swap and option
contracts; forward contracts are used to manage the exposure to fluctuating U.S.
dollar exchange rates.  Additional  details on the company's ERM are included in
the Business Risks and Enterprise Risk Management section.

CBDC's  Prince  Colliery  in Cape  Breton  is  expected  to  supply  much of the
company's remaining coal requirements for 2000. The company's long-term contract
with CBDC provides for  renegotiation  of both prices and minimum  quantities at
periodic intervals.  NSPI is now negotiating price and quantity details to cover
the time period until the Government of Canada completes the sale of CBDC.

In the fall of 2000,  NSPI  will  complete  the  conversion  of its  Tufts  Cove
generating  station to allow that plant to burn natural gas in addition to heavy
fuel oil. The  completion  coincides  with the expected  in-service  date of the
Halifax lateral of the Maritimes & Northeast Pipeline, which will deliver gas to
the plant. The company has entered into a long-term  contract for gas supply for
the plant, which fixes the price for a substantial portion of the gas volumes.

OPERATING, MAINTENANCE AND GENERAL EXPENSES

Operating, maintenance and general expenses are expected to increase in 2000 due
primarily  to  increased  pension  expense  due  to  earlier  expense  recording
following adoption of new accounting standards as outlined below:

o Liability  for pension  benefits  payable upon  retirement  must be accrued as
earned over the service lives of the  employees.  Effective in 2000,  there is a
new  requirement  to  include  non-pension  post-retirement  benefits,  (such as
retirement  awards  and health  benefits  payable to  retirees)  in the  accrual
instead of accounting for the benefits on a pay-as-you-go basis. This difference
in accounting treatment will increase the company's current benefit expense.

o In 1999,  the discount rate used to calculate the liability  accrual was based
on management's  best estimate of the pension plan's long-term rate of return on
its pension fund assets.  Beginning in 2000, the company must use a market-based
discount rate which will be based on high quality bond yields.  The market-based
discount rate is lower than  management's  best  estimate of the pension  fund's
long-term  rate of  return.  The  use of a lower  discount  rate  results  in an
increase in the present value of the pension  liabilities and an increase in the
company's current annual pension expense.

o There is a one-time  transitional  liability of  approximately  $50.0 million,
which is intended to reflect  what the deferred  pension  amount would have been
had the new rules always been in effect. The transitional  amount is required to
be written off over the expected  average  service  life of the employee  group.
However,  in a regulated entity, it is important that past costs not be borne by
future ratepayers.  Accordingly,  NSPI has applied to the UARB for permission to
accelerate the write-off of the transitional amount.


<PAGE>


M A N A G E M E N T D I S C U S S I O N A N D A N A LY S I S

Partially  offsetting this increase will be reduced  amortization costs of early
retirement incentive programs, and the cessation of Year 2000 remediation costs.

GRANTS IN LIEU OF PROPERTY TAXES
In accordance with the annual escalation in provincial grants, grants in lieu is
expected to increase by  approximately  $2.0 million,  in 2000, to approximately
$11.0 million.

INTEREST

Interest  expense in 2000 is  anticipated  to be  consistent  with 1999  levels,
reflecting the company's mature capital structure.

NET EARNINGS

The cessation of Point Aconi amortization, and the anticipated reduction in unit
fuel costs  achieved  through  increased use of imported coal have a significant
positive impact on net earnings beginning in 2000. NSPI is working with the UARB
to implement a strategy that would share this benefit with customers  through an
enhanced   "time-of-use"  price.  The  balance  will  be  preserved  through  an
accelerated  write-off  of  the  transitional  pension  costs.  In  addition  to
providing  effective rate reduction through time-of-use  pricing,  this strategy
would support continued price stability, further enhancing customer value.

CAPITAL EXPENDITURES

NSPI expects capital  expenditures to be  approximately  $113.0 million in 2000,
including  $10.0 million to complete the Tufts Cove gas  conversion.  Other 2000
capital program spending will be directed at maintaining the electric generation
infrastructure,  hydro  safety and  information  technology  to  support  system
reliability and enhance customer service.  Expenditures will be financed by cash
flow from the company's operations.

Regulation

Nova Scotia  Power Inc. is a public  utility as defined in the Public  Utilities
Act (Nova Scotia) and is subject to regulation  under the Act by the Utility and
Review  Board  (UARB).  The Act gives the UARB  supervisory  powers  over NSPI's
operations  and  expenditures.  Electricity  rates for NSPI  customers  are also
subject to UARB  approval.  The UARB also regulates  NSPI's  capital  structure,
limiting  common equity  (common share capital and retained  earnings) to 35% of
total  capitalization.  The  company is not  subjected  to an annual rate review
process,  but rather participates in hearings from time-to-time at the company's
or the regulator's request.

Enercom Inc.

Overview

     Enercom Inc. is the NSH  subsidiary  leading the  corporation's  pursuit of
growth and  diversification  outside  of the core  electric  utility.  Enercom's
growth strategy focuses on leveraging  corporate assets,  including  operational
expertise  and  solid  customer  relationships,   into  complementary  lines  of
business,  and bundled  product  offerings.  Enercom intends to build success in
local markets, which can then be replicated elsewhere.

     Enercom has expanded  NSH's energy  product  line  through  acquisition  of
independent fuel distribution businesses, which accounted for 59% of its revenue
in 1999.  Industrial cabling operations  comprised another 27% of revenue,  with
the  remaining  14% derived from an array of smaller  product and service  lines
that have since been discontinued in keeping with the company's refined focus.

     Building on the corporation's superior operational expertise gained in Nova
Scotia,  Enercom is  investigating  opportunities  for  electrical  distribution
outside the province, in recently restructured marketplaces.

     Fundamental  to the  successful  execution  of  Enercom's  strategy  is the
company's  ability to  leverage  customer  relationships  to expand its share of
customer  spending,  and to  realize  operational  synergies  in  areas  such as
service, call centers,  billing systems, and buying power, to enhance both gross
and net margins.

     Expansion  into  non-regulated  businesses  increases  the overall NSH risk
profile modestly.  Accordingly,  additional investments are expected to generate
returns higher than those of the regulated entity.

Review of 1999

     Revenues  increased  70%, to $29.0  million in 1999,  from $17.1 million in
1998. This growth was largely driven by the  acquisition of several  independent
fuel distribution  businesses in Nova Scotia. As a result,  Enercom will deliver
approximately 100 million litres of fuel annually to 11,000 customers throughout
the province.  Furnace fuel  comprises  the majority of sales.  The product line
also  includes  heavy fuel oil,  diesel,  lubricants  and related  products  and
services such as furnaces and  maintenance.  1999 earnings  before  interest and
taxes of $1.0 million  reflect the fact that the fuel  businesses  were acquired
after the  winter-heating  season, as well as significant  business  development
spending appropriate for a company in the early stages of a growth mandate.

     In  1999,   Enercom   invested  $11.5  million  in  its   business-building
activities.  These investments were substantially  financed with a $10.3 million
debenture from NSH,  bearing  interest at prime plus 0.5%.  Cash from operations
was affected by increased  investments in accounts receivable and inventories as
a result of the company's entry into the fuel distribution  business.  In total,
Enercom's operating, financing and investing activities absorbed $1.3 million in
cash in 1999.

Outlook

     Enercom  anticipates  building  its energy  business  in Nova  Scotia,  and
beyond,   through  acquisition  over  the  next  three  years.   Continuing  its
disciplined  approach to growth,  Enercom will  concentrate on  opportunities of
sufficient scale, that provide appropriate  returns.  Further investment will be
funded with free cash flow from the parent  company,  NSH. In addition,  Enercom
will focus on  realizing  operational  synergies in its  complementary  lines of
business.

M a r i t i m e s & N o r t h e a s t P i p e l i n e

Overview

     NS  Power  Holdings  Inc.  owns a  12.5%  interest  in the  1000  kilometre
Maritimes & Northeast  Pipeline (M&NP),  which  transports  natural gas from the
Sable Offshore Energy Project,  to markets in Nova Scotia, New Brunswick and the
Northeastern United States. The investment provides an excellent  opportunity to
pursue growth and  diversification in the energy industry,  while maintaining an
appropriate  risk profile.  The other owners of M&NP are Duke Energy,  Westcoast
Energy and Exxon Mobil.

     The M&NP has an estimated in-service cost of $2.0 billion, including $215.0
million  for the  Halifax,  Point  Tupper and Saint John  laterals.  NSH's total
equity investment to date is $54.7 million.  The M&NP, which is regulated by the
National  Energy  Board  (NEB)  in  Canada  and the  Federal  Energy  Regulatory
Commission  (FERC)  in the  U.S.,  has an  overall  allowed  rate of  return  of
approximately 13.5%. The investment is accounted for on the equity basis.

Review of 1999
M&NP came into service at the end of 1999, with the successful completion of the
mainline  from Nova  Scotia to  Massachusetts.  The Point  Tupper,  Nova  Scotia
lateral was also completed.

     Due to the regulated  nature of the pipeline,  M&NP is entitled to a return
on its  investment  as  funds  are  advanced  during  the  construction  period.
Accordingly, in 1999, M&NP contributed $6.3 million of equity earnings to NSH.

M A N A G E M E N T D I S C U S S I O N A N D A N A LY S I S

     In 1999, $24.2 million was invested as an additional  equity  contribution.
The investment in the pipeline is currently  being financed  through an NSH line
of credit bearing interest at prime plus 0.5%.

Outlook
Laterals to Halifax, Nova Scotia and Saint John, New Brunswick are planned to be
in service by late 2000. Projected levels of demand indicate that M&NP will earn
an annual return toward the top of its allowed range of approximately 13.5%.

H o l d i n g s C o r p o r a t e

Overview and Review of 1999

The  unconsolidated  NSH entity,  referred to herein as Holdings,  serves as the
financing  vehicle  for  the  corporation's  business  outside  of the  electric
utility.  In  addition,  certain  corporate  functions  are  carried  out within
Holdings,  including strategic planning, and investigation of potential business
opportunities  beyond the scope of Enercom.  These costs, and interest  expenses
related to its financing  activities  noted above, had a combined impact of $2.2
million on consolidated net earnings.  In addition,  in 1999,  Holdings expensed
$2.9 million of deferred  costs  related to one of two  geographically  distinct
coal  bed  methane  projects,   because  of  concerns   regarding  the  economic
feasibility  of  developing  a market for  production  from this site.  Holdings
revenue   consists  of   intercorporate   interest,   which  is   eliminated  on
consolidation,  and therefore has no impact on net earnings.  Holdings cash flow
is sustained by its earnings from NSPI and M&NP.

DEBT MANAGEMENT

NSH increased its debt by $76.0 million in 1999, to finance its own  activities,
and those of its subsidiaries and investments.  $51.0 million is invested in the
Maritimes & Northeast Pipeline, and $15.0 million provided to Enercom.

     NSH has established a $150 million operating line of credit.

DIVIDEND POLICY AND PAYOUT RATIOS

For 1999, NS Power Holdings'  common dividend rate increased to $0.83 per common
share.  Higher  earnings  improved the payout ratio to 72%, from 83% in 1998. In
January  2000,  the Board of  Directors  declared  an increase in the 2000 first
quarter common share dividend from $0.2075 to $0.21 per share.  Earnings  growth
is anticipated to exceed  dividend  growth over the next several years resulting
in a continuing improvement in the dividend payout ratio.

Business Risks and Enterprise Risk Management

Risk Management at NS Power Holdings Inc.

NS Power  Holdings Inc.  understands  the risks  inherent in its business and is
taking a disciplined and comprehensive approach to risk management.  NSH defines
risk  broadly,  as  anything  which  could  impact its  ability  to achieve  its
strategic objectives.  The company's  sophisticated  approach to risk management
ensures  the  consolidated  risk  portfolio  is  dynamically  managed  and  that
management decisions are optimized within a predefined level of risk tolerance.

   All  significant  risk  management  activities  for NSH are  monitored by the
Executive Risk Management  Committee to ensure the resulting  exposure is within
predefined  tolerance  levels.  The Board of Directors  will  receive  quarterly
reports from the Committee  and must approve the strategic  direction and annual
risk management program parameters prior to implementation.

Financial Risks

NSH's risk management objective is to ensure predictable and stable earnings and
cash flow from the  company's  core  electric  business.  Achieving  the maximum
allowable  return on equity in NSPI will  provide  cash flow for  investment  in
growth  opportunities,  support price stability for customers,  and solidify the
dividend to shareholders.  Accordingly, the company's risk management activities
have been focussed on those areas which most significantly  impact profitability
and quality of earnings.  These risks include,  but are not limited to, exposure
to commodity  prices,  foreign  exchange,  interest  rates and weather,  and are
discussed below.

Commodity Prices

In the past,  NSH's  exposure to  commodity  price risk has been  limited,  with
approximately  85% of fuel  requirements  supplied by CBDC and other  indigenous
coal  suppliers  under  long-term,  fixed-price  contracts.  With the closure of
CBDC's Phalen Colliery and addition of natural gas as a fuel source, exposure to
commodity price risk has increased.  Approximately  60% of the company's  annual
fuel requirement for 2000 is subject to fluctuations in commodity market prices.

COAL
With the restructuring of the coal industry in Cape Breton,  the majority of the
company's  coal  supply will come from  international  suppliers  at  prevailing
market prices. To ensure  reliability of both fuel supply and price, the company
has  entered  into  fixed-price  contractual   arrangements  with  several  coal
suppliers.  Approximately 70% of anticipated  import  requirements for 2000 have
been fixed. Physical contracts are used to hedge coal price risk due to the lack
of liquidity in the financial markets for coal.

HEAVY FUEL OIL
Heavy  fuel  oil  will  meet  approximately  10%  of  the  company's  2000  fuel
requirements.  NSH manages exposure to changes in the market price of heavy fuel
oil through the use of swap and option  contracts.  As of December 31, 1999, the
price for approximately 88% of the anticipated heavy fuel oil purchases for 2000
was set at an average of $US12.56 per barrel.

NATURAL GAS
Beginning  in late 2000,  NSH  expects to consume  natural gas at its Tufts Cove
Generating Station. The company has entered into a ten-year contract to purchase
62 million  cubic feet of natural  gas per day from Shell  Canada  Limited.  The
contract  fixes the price for a  substantial  portion  of the gas  volumes;  the
balance is  exposed  to market  price  fluctuations,  and will be managed  using
financial instruments.

FUEL MIX
The risk inherent in the Canadian dollar cost of fuel is measured and managed on
a portfolio  basis.  The ability to fuel switch provides a dynamic,  operational
and very  effective  option in  managing  commodity  price and  supply  risk and
capitalizing on opportunities for revenue growth.

Foreign Exchange

In 2000, the company expects  approximately 60% of its anticipated fuel costs to
be  denominated in US dollars.  Forward and option  contracts are used to manage
the exposure to fluctuating $US exchange rates.  Foreign exchange  contracts are
in place for all of 2000's  anticipated  $US fuel  costs.  $US income from NSH's
12.5%  interest in the  Maritimes & Northeast  Pipeline  will  provide a natural
hedge against a portion of $US denominated fuel costs.

Weather

Warm winters can have a negative  impact on earnings.  Electricity  and fuel oil
sales to  residential  and  commercial  customers for space  heating  during the
winter months  contribute  significantly to the company's  annual  earnings.  In
1999, the company piloted the use of financial  instruments to protect  earnings
in the event of warmer-than-normal winter temperatures. As a result, the company
realized  proceeds of $2.7  million,  which  mitigated the effect of 1999's warm
weather on earnings.  A similar  instrument  has been  purchased for 2000.  This
simple   option   contract  will   protect,   after  a  reasonable   deductible,
approximately 90% of the lost space heating margin from unanticipated variations
caused by warmer-than-normal winter temperatures.

Interest Rates

NSH manages  interest  rate risk  through a  combination  of fixed and  floating
borrowing and a hedging  program.  Floating-rate  debt is estimated to represent
approximately  16% of total debt in 2000.  Interest rate caps are used to insure
against extreme movements in interest rates on floating debt. In 2000,  interest
on approximately 67% of the company's anticipated floating debt is limited to an
average rate of 6.6%.

    Interest  rate  collars  are used to hedge  reinvestment  risk on  long-term
fixed-rate  debt.  Fixed-rate  debt  maturities  are limited in any one year and
continually monitored to reduce rollover exposure.

Counterparty Risk

NSH reduces its exposure to financial  counterparty default by dealing only with
counterparties  who  have a  credit  rating  of A or  better  and by  allocating
derivative positions to several counterparties.

Strategic Risks

NSH's  comprehensive  risk  management  program  also  includes  risks  having a
long-term  impact  on the  company's  competitiveness.  These  risks  have  been
identified, assessed and are being managed through the design and implementation
of the company's strategic plan.

Deregulation of the Electricity Industry

    Deregulation of the electric industry in Nova Scotia is not on the immediate
horizon,  but in all likelihood will eventually occur. When electric competition
arrives,  the province's  geographic  location,  the limits of  intra-provincial
transmission  links, and the diversity of the company's  customer base will help
to reduce the impact on NSPI. In addition, the company is committed to enhancing
its strong competitive and financial position by:

o maintaining rate stability;
o working with  customers to help them reduce  energy costs  further,  including
providing them with greater access to time-of-use pricing;
o continuously improving customer service;
o  managing  costs  through  enhanced  capacity  management,  reduced  fuel  and
operating costs and efficient capital investment; and
o ensuring that employees are prepared and committed to carry out its strategy.

   The  ability to lever  existing  customer  relationships  into  complementary
energy  and  services  businesses,  and to invest  cash flow in  quality  growth
opportunities is integral to the company's  strategy and its future success in a
competitive marketplace.

Introduction of Natural Gas

   Natural gas will be available in Nova Scotia in 2000. Provincial distribution
rights have been awarded,  and the  completion of the Halifax  lateral,  late in
2000, will provide  customers in the most densely populated area of the province
with the option of using natural gas for heating and other uses.

   In 1998, after much consideration,  the company elected not to pursue natural
gas distribution rights.  A clear benefit gained  from the  research  associated
with  the project was  an enhanced understanding of the  impact natural gas will
have in the province.

   The major  residential  use  expected  for natural gas is for space  heating,
which  makes up less  than 20% of NSPI's  total  electrical  load.  The costs to
convert from electric heat are  significant.  Accordingly,  natural gas may have
little  appeal for  existing  homes,  but be more  popular in new  construction.
NSPI's ongoing success in maintaining rate stability, and its efforts to provide
customers  with options for managing  their  energy  needs,  with such things as
electric  thermal  storage  units  which  allow  customers  to store heat during
non-peak hours, will position the company to manage natural gas competition when
it arrives.

   The  relative  price of natural gas versus  furnace oil is a critical  factor
customers  will consider when choosing  between these two fuel sources.  Current
and forward prices for both commodities suggest the costs to convert from oil to
natural gas may outweigh  price savings for many years,  reducing the likelihood
that existing  customers will make the switch.  Enercom's customer service staff
are working  with our fuel oil  customers to help them  understand  their energy
needs and how best to manage them, to ensure that furnace oil continues to be an
attractive fuel source.

    NSPI has applied to its  regulator  for  permission to introduce a favorable
"load retention" rate - aimed at those industrial  customers who are considering
self generation using  alternative fuel sources.  NSPI is of the opinion that if
this rate is  approved,  electrical  pricing  to  industrial  customers  will be
competitive with alternative fuel sources.

Environmental Considerations

NS Power  Holdings is committed to conducting  its business in a manner which is
respectful  and  protective  of  the   environment,   and  which  complies  with
environmental laws and regulations.  Environmental  management systems have been
established  to  maintain  and  enhance  environmental  performance  and  verify
compliance with all significant  aspects of current  environmental  regulations.
Details of the company's  environmental  programs can be found on its website at
www.nspower.ca.

ISO 14001

By the  end  of  1999,  the  company  had  processes  and  procedures  in  place
substantially  equivalent to the ISO 14001  standard.  This  voluntary  standard
provides a framework for the  implementation  and  maintenance of  environmental
policy throughout the company.

GREENHOUSE GAS EMISSIONS

In 1995,  Canada  established a National  Action Program on Climate  Change.  In
1998,  Canada  signed  the Kyoto  Protocol,  which  commits  to a  reduction  in
greenhouse gas (GHG) emissions.  The Protocol, which awaits ratification by most
countries,  including Canada,  requires Canada to reduce its GHG emissions by 6%
from 1990 levels during the period 2008 - 2012. While the specific  requirements
associated with, and potential impact of these initiatives will not be known for
some time,  they will influence the company's  choice of fuel and the technology
that will replace or improve generating facilities as they age.

   This is an important issue for NSH as 90% of the company's  generation  comes
from CO2-emitting fossil fuels. Throughout 1999, NSH has been a full participant
in both the federal and provincial  processes  aimed at developing  Canada's and
Nova Scotia's  strategies for reducing  emissions of greenhouse  gases. One such
program is the  Voluntary  Challenge  and Registry  program.  NSH supports  this
program and has offered a number of  initiatives  to reduce  emissions  of GHGs.
With success of these  initiatives,  the emission  rate of GHG per unit of power
sold is projected to decrease from 0.791 kg/kWh in 1990 to 0.66 kg/kWh in 2008.

SULPHUR DIOXIDE

The Air Quality  Regulations  under the Nova Scotia  Environment  Act  currently
limit  NSPI's  emission  of sulphur  dioxide to a maximum of 145,000  tonnes per
year. Further reductions from this limit are expected as a result of two ongoing
initiatives:  The Canadian Post-2000 Acid Rain Strategy and the Acid Rain Action
Plan of the Conference of New England  Governors and Eastern Canadian  Premiers.
The company continues to reduce sulphur dioxide emissions.  The plan has, as its
cornerstone,  the circulating  fluidized bed combustion  technology at the Point
Aconi  generating  station.  Compared to a conventional  pulverized  coal plant,
Point Aconi is designed to achieve a 90% reduction in sulphur dioxide  emissions
as well as a 65% to 75% reduction in nitrogen  oxide  emissions.  In addition to
reductions  achieved at Point Aconi, lower sulphur coal is an increasing part of
the fuel mix throughout the system.  Finally, as part of the company's long-term
strategy to reduce sulphur dioxide emissions, the Tufts Cove generating station,
which now burns oil, will be converted by Fall 2000 to enable it to burn cleaner
natural gas as well. In 1999,  sulphur dioxide  emissions were 141,644 tonnes, a
decrease from 143,546 tonnes in 1998.

<PAGE>


F I N A N C I A L I N F O R M A T I O N

Management Report

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

The  accompanying  consolidated  financial  statements of NS Power Holdings Inc.
(NSH) and the  information  in this  annual  report  are the  responsibility  of
management and have been approved by the Board of Directors (Board).

The  consolidated  financial  statements  have been  prepared by  management  in
accordance  with generally  accepted  accounting  principles.  When  alternative
accounting methods exist,  management has chosen those it deems most appropriate
in the  circumstances.  Nova Scotia Power Inc. (NSPI),  NS Power Holdings Inc.'s
electric  utility and  principal  subsidiary,  is  regulated  by the Nova Scotia
Utility and Review  Board,  which also examines and approves  NSPI's  accounting
policies and  practices.  In  preparation  of these  statements,  estimates  are
sometimes  necessary when transactions  affecting the current  accounting period
cannot be finalized with certainty  until future  periods.  Management  believes
that such  estimates,  which have been  properly  reflected in the  accompanying
consolidated  financial  statements,  are based on  careful  judgements  and are
within reasonable limits of materiality.  Management has determined such amounts
on a  reasonable  basis in  order to  ensure  that  the  consolidated  financial
statements  are  presented  fairly  in all  material  respects.  Management  has
prepared the financial  information presented elsewhere in the annual report and
has  ensured  that it is  consistent  with  that in the  consolidated  financial
statements.

NSH maintains systems of internal accounting and administrative controls of high
quality,  consistent with reasonable  cost. Such systems are designed to provide
reasonable  assurance that the financial  information is relevant,  reliable and
accurate and that NSH's assets are  appropriately  accounted for and  adequately
safeguarded.

The  Board  is   responsible   for  ensuring   that   management   fulfills  its
responsibilities  for  financial  reporting and is  ultimately  responsible  for
reviewing and approving the consolidated financial statements. The Board carries
out this responsibility principally through its Audit Committee.

The Audit Committee is appointed by the Board, and its members are directors who
are not  officers or  employees of NS Power  Holdings  Inc. The Audit  Committee
meets  periodically  with management,  as well as with the internal auditors and
with the external  auditors,  to discuss  internal  controls  over the financial
reporting process,  auditing matters and financial  reporting issues, to satisfy
itself  that each party is properly  discharging  its  responsibilities,  and to
review the annual report, the consolidated financial statements and the external
auditors'  report.  The Audit  Committee  reports its  findings to the Board for
consideration when approving the consolidated  financial statements for issuance
to the shareholders. The Audit Committee also considers, for review by the Board
and approval by the shareholders,  the appointment of the external auditors. The
consolidated  financial  statements  have been audited by Ernst & Young LLP, the
external  auditors,  in accordance with generally accepted auditing standards on
behalf of the  shareholders.  Ernst & Young LLP has full and free  access to the
Audit Committee.

February 1, 2000

David Mann President and Chief Executive Officer (signed)
Jay Forbes, CA Senior Vice President and Chief Financial Officer (signed)

<PAGE>


A u d i t o r s ' R e p o r t

TO  THE  SHAREHOLDERS  OF  NS  POWER  HOLDINGS  INC.

We have audited the consolidated  balance sheets of NS Power Holdings Inc. as at
December  31,  1999 and  1998,  and the  consolidated  statements  of  earnings,
retained  earnings and changes in cash position for the years then ended.  These
financial  statements are the  responsibility of the company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

   We conducted  our audits in  accordance  with  auditing  standards  generally
accepted in Canada. 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 significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.

    In our opinion,  these consolidated  financial statements present fairly, in
all material respects,  the financial position of the company as at December 31,
1999 and 1998 and the  results  of its  operations  and the  changes in its cash
flows  for the  years  then  ended  in  accordance  with  accounting  principles
generally accepted in Canada.

Halifax, Canada
February 1, 2000

Ernst & Young LLP Chartered Accountants (signed)






<PAGE>


<TABLE>
<CAPTION>
Consolidated statement of earnings
------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31 (millions of dollars, except earnings per common share)                         1999            1998
------------------------------------------------------------------------------------------------------ --------------- -------------
<S>                                                                                                    <C>            <C>
Revenue
    Electric (note 1c)                                                                                         $790.2         $750.8
    Other                                                                                                        34.4           22.3
------------------------------------------------------------------------------------------------------ --------------- -------------
                                                                                                                824.6          773.1

------------------------------------------------------------------------------------------------------ --------------- -------------
Cost of operations
  Fuel for generation and power purchased                                                                       267.5          257.3
  Cost of goods sold                                                                                             23.3           14.0
  Operating, maintenance and general                                                                            155.5          142.5
  Grants in lieu of property taxes                                                                                8.9            5.5
  Provincial capital tax (note 4)                                                                                 7.0            6.7
  Depreciation                                                                                                   94.8           91.3
------------------------------------------------------------------------------------------------------ --------------- -------------
                                                                                                                557.0          517.3

------------------------------------------------------------------------------------------------------ --------------- -------------
Earnings from operations                                                                                        267.6          255.8
Equity earnings in Maritimes & Northeast Pipeline                                                                 6.3              -
Amortization of Point Aconi expenses (notes 1d and 7)                                                          (23.1)         (16.7)
Allowance for funds used during construction (note 1e)                                                            4.8            3.8
------------------------------------------------------------------------------------------------------ --------------- -------------

Earnings before interest and taxes                                                                              255.6          242.9
Interest (note 3)                                                                                               136.5          132.7
------------------------------------------------------------------------------------------------------ --------------- -------------
Earnings before taxes                                                                                           119.1          110.2
Large corporations tax (note 4)                                                                                   6.1            5.9
Income tax - current (note 4)                                                                                     7.5            7.7
Income tax - deferred (note 4)                                                                                  (6.2)              -
------------------------------------------------------------------------------------------------------ --------------- -------------
Net earnings before minority interest                                                                           111.7           96.6
Minority interest (notes 1a and 4)                                                                               11.3           11.2
------------------------------------------------------------------------------------------------------ --------------- -------------
Net earnings applicable to common shares                                                                       $100.4          $85.4

------------------------------------------------------------------------------------------------------ --------------- -------------
Earnings per common share                                                                                       $1.16           $.99
------------------------------------------------------------------------------------------------------ --------------- -------------

See accompanying notes to the financial statements.

------------------------------------------------------------------------------------------------------ --------------- -------------
consolidated statement of retained earnings

------------------------------------------------------------------------------------------------------ --------------- -------------
Year Ended December 31 (millions of dollars)                                                           1999            1998
------------------------------------------------------------------------------------------------------ --------------- -------------
Retained earnings at beginning of year                                                                         $238.7         $224.4
Reorganization costs (note 1a)                                                                                  (1.1)              -
Net earnings applicable to common shares                                                                        100.4           85.4
------------------------------------------------------------------------------------------------------ --------------- -------------
                                                                                                                338.0          309.8
------------------------------------------------------------------------------------------------------ --------------- -------------
Dividends

Common                                                                                                           72.2           71.1
------------------------------------------------------------------------------------------------------ --------------- -------------
Retained earnings at end of year                                                                               $265.8         $238.7
------------------------------------------------------------------------------------------------------ --------------- -------------
</TABLE>
See accompanying notes to the financial statements.


<PAGE>

<TABLE>
<CAPTION>

Consolidated balance sheet
------------------------------------------------------------------------------------------------------ --------------- -------------
As at December 31 (millions of dollars)                                                                          1999           1998
------------------------------------------------------------------------------------------------------ --------------- -------------
<S>                                                                                                   <C>             <C>
Assets
------------------------------------------------------------------------------------------------------ --------------- -------------
Property, plant and equipment (notes 1f and 5)                                                               $2,315.0       $2,298.4
Construction work in progress                                                                                    47.3           30.5
------------------------------------------------------------------------------------------------------ --------------- -------------
                                                                                                              2,362.3        2,333.9
------------------------------------------------------------------------------------------------------ --------------- -------------
Investment in Maritimes & Northeast Pipeline (note 1n)                                                           54.7           30.5
------------------------------------------------------------------------------------------------------ --------------- -------------
Other assets
    Deferred charges (note 7)                                                                                   319.5          361.4
    Deferred income tax (note 4)                                                                                  6.2              -
    Goodwill (note 1o)                                                                                            6.8              -
------------------------------------------------------------------------------------------------------ --------------- -------------
                                                                                                                332.5          361.4
------------------------------------------------------------------------------------------------------ --------------- -------------
Current assets
    Cash                                                                                                          2.7            0.1
    Accounts receivable (note 6)                                                                                 35.6           24.0
    Unbilled revenue (notes 1c and 6)                                                                            30.4           25.6
    Inventory (note 1h)                                                                                          82.4           58.6
    Income taxes recoverable (note 4)                                                                             0.6              -
------------------------------------------------------------------------------------------------------ --------------- -------------
                                                                                                                151.7          108.3
------------------------------------------------------------------------------------------------------ --------------- -------------
                                                                                                             $2,901.2       $2,834.1

------------------------------------------------------------------------------------------------------ --------------- -------------
Shareholders' Equity and Liabilities                                                                             1999           1998
------------------------------------------------------------------------------------------------------ --------------- -------------
Shareholders' equity
     Common
         Shares (note 8)                                                                                       $676.5         $672.5
         Retained earnings                                                                                      265.8          238.7
------------------------------------------------------------------------------------------------------ --------------- -------------
Minority interest (note 9)                                                                                      942.3          911.2
                                                                                                                231.3          200.0
------------------------------------------------------------------------------------------------------ --------------- -------------
                                                                                                              1,173.6        1,111.2
------------------------------------------------------------------------------------------------------ --------------- -------------

Long-term debt (note 10)                                                                                      1,260.7        1,083.7
------------------------------------------------------------------------------------------------------ --------------- -------------
Deferred credits                                                                                                  2.2            2.2
------------------------------------------------------------------------------------------------------ --------------- -------------
Current liabilities

------------------------------------------------------------------------------------------------------ --------------- -------------
    Debt due within one year (note 11)                                                                          328.3          517.4
    Accounts payable and accrued charges                                                                        105.8           87.3
    Dividends payable                                                                                             3.4            3.0
    Income taxes payable (note 1g)                                                                                  -            1.0
    Accrued interest on long-term debt                                                                           27.2           28.3
------------------------------------------------------------------------------------------------------ --------------- -------------
                                                                                                                464.7          637.0
------------------------------------------------------------------------------------------------------ --------------- -------------
                                                                                                              2,901.2        2,834.1
------------------------------------------------------------------------------------------------------ --------------- -------------
</TABLE>

Commitments and contingencies (note 14)
See accompanying notes to the financial statements


APPROVED ON  BEHALF OF THE BOARD OF DIRECTORS

(signed)                   (signed)
Derek Oland                 David Mann
Chairman                   President and Chief Executive Officer


<TABLE>
<CAPTION>
Consolidated statement of changes in cash position
------------------------------------------------------------------------------------------------------ --------------- -------------
Year Ended December 31 (millions of dollars)                                                                   1999           1998
------------------------------------------------------------------------------------------------------ --------------- -------------
<S>                                                                                                   <C>             <C>
Operating activities
Net earnings before minority interest                                                                          $111.7          $96.6
Non-cash items:
   Depreciation                                                                                                  94.8           91.3
   Amortization of deferred charges                                                                              24.0           25.6
   Amortization of Point Aconi expenses                                                                          23.1           16.7
   Equity earnings in Maritimes & Northeast Pipeline (note 1n)                                                  (6.3)              -
Change in operating working capital                                                                            (23.6)          (2.2)
------------------------------------------------------------------------------------------------------ --------------- -------------
Net cash provided by operating activities                                                                       223.7          228.0
------------------------------------------------------------------------------------------------------ --------------- -------------
Financing activities

(Repayment of) increase in short-term debt                                                                     (33.6)           28.1
Proceeds from issue of common shares, net                                                                         4.0            4.9
Increase in minority interest                                                                                    31.3              -
Proceeds from long-term debt, net                                                                               180.0          140.0
Repayment of long-term debt                                                                                   (158.4)        (200.9)
Net changes in matching notes receivable (sinking funds)                                                            -           47.7
Other financing activities, net                                                                                (30.5)         (14.7)
------------------------------------------------------------------------------------------------------ --------------- -------------
Net cash (used in) provided by financing activities                                                             (7.2)            5.1
------------------------------------------------------------------------------------------------------ --------------- -------------
Investing activities:
Property, plant and equipment, net                                                                            (112.0)        (114.2)
Construction work in progress, net                                                                             (11.8)         (17.9)
Investment in Maritimes & Northeast Pipeline                                                                   (17.9)         (30.5)
------------------------------------------------------------------------------------------------------ --------------- -------------
Net cash used in investing activities                                                                         (141.7)        (162.6)
------------------------------------------------------------------------------------------------------ --------------- -------------
Dividends:
Common shares                                                                                                  (72.2)         (71.1)
------------------------------------------------------------------------------------------------------ --------------- -------------
Increase (decrease) in cash position                                                                              2.6          (0.6)
Cash position at beginning of year                                                                               $0.1           $0.7
------------------------------------------------------------------------------------------------------ --------------- -------------
Cash position at end of year                                                                                     $2.7           $0.1
------------------------------------------------------------------------------------------------------ --------------- -------------
</TABLE>

See accompanying notes to the financial statements.


<PAGE>


Notes to the Consolidated Financial Statements

December 31, 1999

NS Power Holdings (NSH or the company),  through its principal subsidiary,  Nova
Scotia  Power Inc.  (NSPI),  is engaged in the  production  and sale of electric
energy,  which is regulated by the Nova Scotia  Utility and Review Board (UARB).
NSH follows generally accepted accounting  principles (GAAP).  NSPI's accounting
policies are in accordance with GAAP and are subject to examination and approval
by the UARB  and are  similar  to those  being  used by other  companies  in the
electric utility industry.

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a.  Reorganization  Effective  January 1, 1999, the common  shareholders of NSPI
exchanged  their common shares for common shares of NS Power  Holdings Inc. on a
one-for-one  basis.  NSPI became a subsidiary of NSH. The NSH common shares have
substantially  the same rights,  privileges,  restrictions and conditions as the
NSPI common shares.  NSPI's existing  preferred  shares are recorded as minority
interest in NSH.  Reorganization  costs of $1.1 million were charged to retained
earnings.

b. Consolidation The consolidated  financial  statements include the accounts of
the company and its wholly-owned  subsidiaries  NSPI, Enercom Inc., NSP Pipeline
Inc.,  NSP U.S.  Holdings  Inc.,  Strait Energy Inc., NS Power Services Inc. and
Stellarton Basin Coal Gas Inc. (SBCGI).

c. Revenue  Recognition  Revenues are  recognized  on the accrual  basis,  which
includes an estimate of the value of  electricity  consumed by  customers in the
year but billed subsequent to year-end.

d.  Amortization  of Point Aconi  Expenses  The Point Aconi  generating  station
became  operational in March 1994. To enhance rate stability,  the UARB approved
NSPI's  request  to defer a portion of the  depreciation  and  interest  expense
pertaining to Point Aconi, together with an imputed cost-of-capital charge, at a
rate of 50% in 1994 and 33 1/3% in 1995.  An amount  representing  the  interest
cost of carrying  the  previously  deferred  balance was  deferred in 1996.  The
deferred  amount was  amortized to earnings  annually  from 1997  through  1999.
Amortization is now complete.

e.  Allowance  for Funds Used During  Construction  For the  regulated  electric
business  carried on by NSPI,  the company  provides  for the cost of  financing
construction  work in progress by including  an allowance  for funds used during
construction  as an  addition  to the  cost  of  property  constructed,  using a
weighted average  cost-of-capital.  This allowance will be charged to operations
through  depreciation  over the service life of the related assets and recovered
through future revenues.

f. Property,  Plant and Equipment Property,  plant and equipment are recorded at
original cost net of  contributions  in aid of  construction.  Expenditures  for
additions,   replacements  and  improvements,   which  comprise  direct  labour,
material,  engineering,  and related  overhead costs,  are  capitalized  whereas
repairs and  maintenance  are charged to operations.  When  property,  plant and
equipment  are  replaced or retired,  the original  cost plus any removal  costs
incurred, (net of salvage), are charged to accumulated depreciation.

     Depreciation  is  determined  by the  straight-line  method,  based  on the
estimated  remaining service lives of the depreciable assets in a category.  The
estimated  average  service lives and average  depreciation  rates for the major
categories of plant in service are summarized as follows:

<TABLE>
<CAPTION>
Functions                                         Average Service Life in Years          Average Depreciation Rate
------------------------------------------------- -------------------------------------- -----------------------------------
<S>                                              <C>                                     <C>
Generation:  Thermal                                                               43.3                               2.33%
                     Gas Turbine                                                   33.9                               2.04%
                     Hydroelectric                                                 77.4                               1.18%
------------------------------------------------- -------------------------------------- -----------------------------------
Transmission                                                                       45.4                               2.71%
Distribution                                                                       31.2                               3.82%
General Plant                                                                      15.4                               5.28%
------------------------------------------------- -------------------------------------- -----------------------------------
</TABLE>

N o t e s  t o  t h e  C o n s o l i d a t e d  F i n a n c i a l
S t a t e m e n t s

     The  estimated  service  lives of  depreciable  assets and the  significant
assumptions  underlying  the  estimates of removal costs for NSPI are subject to
periodic review by the UARB.  Provisions for future removal and site restoration
costs are charged to  depreciation  expense over the life of the related assets.
As at December 31, 1999,  the company had  recorded an estimated  liability  for
future  removal  and  site  restoration  costs of  $16.6  million  (1998 - $15.4
million).

     In  accordance  with  regulatory  authority,  assets of NSPI  which are not
currently  being  used,  but will be  useful  in  providing  future  service  to
customers,  are not  depreciated.  Financing  costs  associated  with assets not
currently being used are deferred as incurred.  Depreciation will occur when the
asset goes into  service.  Significant  costs in removing the asset from service
may be deferred and  amortized to earnings over a five-year  period,  subject to
regulatory approval.  Significant costs to return the asset to service are added
to the capital cost of the asset.

g. Income Taxes NSH and its  subsidiaries,  except for NSPI, follow the deferral
method of income tax  allocation  for  providing  for income  taxes.  NSPI, as a
rate-regulated  utility,  uses the taxes-payable method as there is a reasonable
expectation  that all taxes payable in future years will be included in approved
rates and recoverable from customers of NSPI at that time.

h.  Inventory  Inventories of materials and supplies are valued at average cost.
Coal and oil inventory is valued at cost using the first-in, first-out method.

i. Deferred Severance Costs In order to achieve rate stability,  the UARB allows
NSPI to defer the cost of large early  retirement  and severance  programs,  and
amortize  the  resulting  deferred  charges  on a  straight-line  basis  over  a
three-year period, commencing in the period in which the program is initiated.

j. Pension Plans and  Post-Retirement  Benefits  Pension  costs are  actuarially
determined  using the  projected  unit credit  method  prorated on services  and
management's   best  estimate   assumptions.   Adjustments   arising  from  plan
amendments,  experience gains and losses,  and changes in actuarial  assumptions
are  amortized on a  straight-line  basis over the estimated  average  remaining
service life of employees. Pension fund asset values are calculated using market
values at year-end.  The difference  between pension expense and pension funding
is recorded as a deferred asset or credit.

NSPI provides medical care and life insurance  benefits to eligible retirees and
their dependents. Post-retirement benefit costs are expensed as paid.

k. Foreign Currency Translation  Monetary assets and liabilities  denominated in
foreign  currencies  are  converted  to  Canadian  dollars at rates of  exchange
prevailing at the balance  sheet date.  The  resulting  differences  between the
translation  at the  original  transaction  date and the balance  sheet date are
charged to operations as they arise.

     Non-monetary  items  are  translated  to  Canadian  dollars  at  historical
exchange rates.

     Revenue and  expenses  are  converted at rates of exchange in effect at the
date of the transaction.

l. Debt Financing and Defeasance Costs Financing costs pertaining to debt issues
are  amortized  over the life of the  related  debt.  The  excess of the cost of
defeasance  investments  over the face value of the related debt is deferred and
amortized over the life of the defeased debt.

m. Hedging Instruments The company is party to derivative  financial  instrument
contracts,  mainly interest rate contracts,  forward foreign exchange contracts,
oil swap and  weather  temperature  agreements,  all of which  are used to hedge
existing  exposures.  Premiums paid are deferred and recognized over the life of
the agreements.

n.  Investment  in  Maritimes & Northeast  Pipeline The  company's  12.5% equity
investment  in Maritimes & Northeast  Pipeline is accounted for using the equity
method  whereby  the  amount of the  investment  is  adjusted  annually  for the
company's pro-rata share of the income or loss of Maritimes & Northeast Pipeline
and reduced by the amount of any dividends received.

o. Goodwill  Goodwill is stated at cost and is amortized using the straight-line
method over 20 years.

p. Stock Based  Compensation Plan No compensation  expense is recognized for the
plan when stock  options are issued to  executives.  Any  consideration  paid by
participants  in the plan on  exercise  of stock  options is  credited  to share
capital.

NOTE 2. SEGMENT INFORMATION

The company has three reportable segments:  Nova Scotia Power Inc., Enercom Inc.
and Maritimes & Northeast Pipeline.

a. Measurement of segment income (loss) and segment assets The company evaluates
performance based on earnings before interest and taxes. The accounting policies
of the  reportable  segments  are the same as those  described in the summary of
significant accounting policies.

b. Factors  management  uses to identify the  enterprise's  reportable  segments
Reportable  segments are  determined  based on NSH's  operating  activities  and
regulation. NSPI is engaged in the production and sale of electric energy, which
is regulated by the Nova Scotia  Utility and Review  Board  (UARB).  Maritimes &
Northeast  Pipeline companies (NSP Pipeline Inc. and NSP U.S. Holdings Inc.) own
a 12.5% equity investment in Maritimes & Northeast Pipeline,  which is regulated
by the National  Energy Board (NEB) in Canada and the Federal Energy  Regulatory
Commission  (FERC) in the U.S.  Enercom Inc. is an unregulated  subsidiary which
has expanded NSH's energy product line to include  distribution  of a full range
of fuel oil products.

c. Segment information

<TABLE>
<CAPTION>
Years ended December 31, 1999 and 1998 (millions of dollars)

                              Nova Scotia              Enercom           Maritimes &            Other                 Total
                               Power Inc.                Inc.             Northeast
                                                                           Pipeline
------------------------ ----------- ----------- --------- ---------- --------- -------- --------- --------- ----------- -----------
                         1999        1998            1999  1998       1999      1998     1999      1998      1999        1998
------------------------ ----------- ----------- --------- ---------- --------- -------- --------- --------- ----------- -----------
<S>                      <C>        <C>         <C>       <C>        <C>       <C>      <C>        <C>       <C>         <C>
Revenues from

  External customers         $798.9      $756.1     $29.0      $17.1         -        -    ($3.3)    ($0.1)      $824.6      $773.1
Depreciation expense           94.2        91.1       0.6        0.2         -        -         -         -        94.8        91.3
Operating expenses            521.4       500.7      33.9       16.5       0.5      0.1       1.2         -       557.0       517.3
Net intersegment
   Revenues/expenses            4.3         5.3     (4.3)      (5.3)         -        -         -         -           -           -

Equity earnings                   -           -         -          -       6.3        -         -         -         6.3           -
Earnings before
    Interest and taxes        259.2       242.5       1.0        0.6         -        -     (4.6)     (0.2)       255.6       242.9
Segment assets              2,811.2     2,828.3      26.4        8.6      56.5     30.5       7.1    (33.3)     2,901.2     2,834.1
Capital expenditures          117.6       129.4      11.5        1.4      17.9     30.5         -         -       147.0       161.3

------------------------ ----------- ----------- --------- ---------- --------- -------- --------- --------- ----------- -----------
1. Other  consists of items  related to SBCGI,  corporate  activities  and other
affiliates.

------------------------------------------------------------------------------------------------------------------------------------
NOTE 3. INTEREST
------------------------------------------------------------------------------------------------------------------------------------
Millions of dollars                                                                                           1999        1998
------------------------------------------------------------------------------------------------------------- ----------- ----------
Interest on long-term debt                                                                                         $98.2      $103.7
------------------------------------------------------------------------------------------------------------- ----------- ----------
Amortization of debtfinancing and defeasance costs                                                                 20.8        21.4
------------------------------------------------------------------------------------------------------------- ----------- ----------
Interest on short-term debt                                                                                         18.6        13.9
------------------------------------------------------------------------------------------------------------- ----------- ----------
Foreign exchange costs                                                                                               0.7         0.8
------------------------------------------------------------------------------------------------------------- ----------- ----------
                                                                                                                   138.3       139.8
------------------------------------------------------------------------------------------------------------- ----------- ----------

Less:
   Defeasance earnings and other interest income                                                                     1.8         7.1
------------------------------------------------------------------------------------------------------------- ----------- ----------
                                                                                                                  $136.5      $132.7
------------------------------------------------------------------------------------------------------------- ----------- ----------
</TABLE>


<PAGE>


NOTE 4. TAXES

PROVINCIAL CAPITAL TAX
Effective April 1, 1997, the company became subject to a provincial  capital tax
at a rate  of  0.25%  of  taxable  capital.  This  provincial  capital  tax is a
temporary tax, in effect for five years.

LARGE CORPORATIONS TAX
NSH is subject to federal large corporations tax (LCT) at a rate of 0.225%. As a
percent of income, the LCT is 5.1% (1998 - 5.3%).

INCOME TAX
With the exception of the Part VI.1 tax on NSPI preferred dividends, the company
has claimed  sufficient  capital cost  allowance,  cumulative  eligible  capital
deductions and loss  carry-forwards  to eliminate all income tax payable in 1999
and 1998.

<TABLE>
<CAPTION>
--------------------------------------------------------- -------------------------- ------------------------
                                                                               1999                     1998
                                                                  Percent of Income        Percent of Income
--------------------------------------------------------- -------------------------- ------------------------
<S>                                                       <C>                        <C>
Statutory income tax                                                          41.1%                    45.1%
Public Utilities Income Tax Transfer Act,
  Net of clawback                                                                 -                      1.7
Excess deductions for tax purposes                                           (38.8)                   (39.8)
Tax losses                                                                    (5.2)                        -
--------------------------------------------------------- -------------------------- ------------------------
Effective income tax rate                                                      1.1%                     7.0%
--------------------------------------------------------- -------------------------- ------------------------
</TABLE>


NSPI has filed amended  income tax returns for previous  years that increase the
tax depreciation  (capital cost allowance)  available to be deducted against the
company's future taxable income. Those returns were reassessed by Revenue Canada
to disallow the deductions claimed.  The reassessments have been objected to and
the issue is expected to be  litigated.  Without the benefit of this  additional
deduction,  it is estimated  that the company's tax liability in 1999 would have
been  approximately $39 million.  If the company is unsuccessful in this matter,
it would be entitled to recover these costs through the regulatory process.

     At December 31, 1999,  providing for the effect of the amended returns, the
tax  value of the  company's  assets  exceeded  the  related  carrying  value by
approximately  $1.0  billion  (1998  -  $1.1  billion).  The  company  also  has
non-capital  loss carry forwards of  approximately  $156 million:  $36.2 million
expiring in 2001,  $80.5 million  expiring in 2002,  $30.3  million  expiring in
2003, and $9.0 million  expiring in 2004. These losses are attributable to NSPI.
In accordance with the taxes payable accounting  method,  which is used by NSPI,
the potential tax benefits  related to these amounts have not been  reflected in
these  financial  statements.  Such  potential  benefits  will be  recognized as
realized for income tax purposes.

MINORITY INTEREST
Minority Interest relates to NSPI preferred dividends and includes Part VI.1 tax
of $5.3 million (1998 - $4.8  million),  net of a recovery of Part I tax of $7.3
million (1998 - $5.6 million)  resulting  from using Part VI.1 tax deductions to
reduce income tax payable in the current year.

<TABLE>
<CAPTION>
-------------------------------------------------------- -------------------------- ------------------------
Millions of dollars                                                           1999                     1998
-------------------------------------------------------- -------------------------- ------------------------
<S>                                                                          <C>                      <C>
Preferred share dividend                                                     $13.3                    $12.0
Part VI.1 (recovery)                                                         (2.0)                    (0.8)
-------------------------------------------------------- -------------------------- ------------------------
                                                                             $11.3                    $11.2
-------------------------------------------------------- -------------------------- ------------------------
</TABLE>



<PAGE>


<TABLE>
<CAPTION>
NOTE 5 PROPERTY, PLANT AND EQUIPMENT
------------------------------------------------- -------------------------- -------------------------- --------------------
Millions of dollars                                         Property, Plant                       1999                  Net
                                                              and Equipment   Accumulated Depreciation           Book Value
------------------------------------------------- -------------------------- -------------------------- --------------------
<S>                                              <C>                        <C>                        <C>
Generation:
  Thermal                                                          $1,498.7                     $475.6             $1,023.1
  Gas turbine                                                          27.4                       20.0                  7.4
  Hydroelectric                                                       325.6                      103.6                222.0
Transmission                                                          543.9                      294.2                339.7
Distribution                                                          854.1                      321.7                532.4
Other plant, land and equipment                                       232.2                       41.8                190.4
------------------------------------------------- -------------------------- -------------------------- --------------------
                                                                   $3,481.9                   $1,166.9             $2,315.0
------------------------------------------------- -------------------------- -------------------------- --------------------

------------------------------------------------- -------------------------- -------------------------- --------------------
Millions of dollars                                         Property, Plant                       1999                  Net
                                                              and Equipment   Accumulated Depreciation           Book Value
------------------------------------------------- -------------------------- -------------------------- --------------------
Generation:
  Thermal                                                          $1,471.9                     $450.4             $1,021.5
  Gas turbine                                                          27.1                       19.3                  7.8
  Hydroelectric                                                       316.0                      100.5                215.5
Transmission                                                          539.2                      190.7                348.5
Distribution                                                          823.4                      295.8                527.6
Other plant, land and equipment                                       214.5                       37.0                177.5
------------------------------------------------- -------------------------- -------------------------- --------------------
                                                                   $3,392.1                   $1,093.7             $2,298.4
------------------------------------------------- -------------------------- -------------------------- --------------------
</TABLE>

Thermal Generation includes the Glace Bay generating station at a net book value
of $32.3  million  (1998 - $29.3  million).  The plant has not been  depreciated
since it was removed from service in 1995 (note 1f).

NOTE 6. ACCOUNTS RECEIVABLE SECURITIZATION
On March 5, 1997, NSPI entered into an agreement with a financial institution to
sell up to $88 million of trade  receivables and unbilled revenue on a revolving
basis.  At December  31,  1999,  trade  receivables  and  unbilled  revenue sold
amounted  to $74  million  compared to $75  million in 1998.  The  agreement  is
scheduled to expire in 2002.

<TABLE>
<CAPTION>
NOTE 7. DEFERRED CHARGES
------------------------------------------------------------------------------------ ------------------- -----------------
Millions of dollars                                                                                1999              1998
------------------------------------------------------------------------------------ ------------------- -----------------
<S>                                                                                 <C>                 <C>
Unamortized debt financing and defeasance costs                                                 $ 272.4           $ 287.6
Unamortized Point Aconi expenses                                                                      -              23.1
Deferred pension assets and retiree benefits                                                       14.8               9.2
Unamortized severance costs (note 1i)                                                               9.0              13.3
Holdback on accounts receivable securitization                                                      7.4               7.5
Deferred coal bed methane exploration costs (SBCGI)                                                 5.5               7.2
Other                                                                                              10.4              13.5
------------------------------------------------------------------------------------ ------------------- -----------------
                                                                                                 $319.5            $361.4
------------------------------------------------------------------------------------ ------------------- -----------------
</TABLE>


<PAGE>


N o t e s t o t h e C o n s o l i d a t e d F i n a n c i a l
S t a t e m e n t s


NOTE 8. COMMON SHARES
Authorized:
Unlimited number of non-par value Common Shares.

Issued and outstanding:
<TABLE>
<CAPTION>
                                                                                   Millions of Shares     Common Share Capital
------------------------------------------------------------------------------ ----------------------- ------------------------
<S>                                                                            <C>                    <C>
December 31, 1997                                                                               86.50                   $667.6
Issued for cash under the Dividend Reinvestment Plan in 1998                                     0.20                      3.9
Issued under the Employee Common Share Purchase Plan                                             0.05                      0.8
Options exercised                                                                                0.05                      0.2
------------------------------------------------------------------------------ ----------------------- ------------------------
December 31, 1998                                                                               86.80                   $672.5
------------------------------------------------------------------------------ ----------------------- ------------------------

January 1, 1999
Issued in exchange for all issued and outstanding common                                        86.80                   $672.5
  Shares of NSPI under the reorganization described in note 1a
Issued for cash under the Dividend Reinvestment Plan in 1999 Issued under                        0.20                      3.2
the Employee Common Share Purchase Plan                                                          0.05                      0.8
Options exercised                                                                                   -                        -
------------------------------------------------------------------------------ ----------------------- ------------------------
December 31, 1999                                                                               87.05                   $676.5
------------------------------------------------------------------------------ ----------------------- ------------------------
</TABLE>

DIVIDEND REINVESTMENT AND EMPLOYEE COMMON SHARE PURCHASE PLANS
The company has a Common Shareholder Dividend  Reinvestment Plan and an Employee
Common Share Purchase Plan,  which provide an opportunity for  shareholders  and
company  employees to reinvest  dividends and make cash  contributions,  for the
purpose of purchasing common shares.

STOCK-BASED COMPENSATION PLAN

a.  Description  The company has a stock  option  plan which  grants  options to
Executive  Officers of NSH for a maximum term of ten years. The option price for
the shares that are the subject of any option is the market  price of the shares
on the day the option is granted.

     All options granted to date are exercisable on a graduated basis with up to
25 percent of options  exercisable on the first  anniversary date and in further
25 percent increments on each of the second,  third and fourth  anniversaries of
the grant.  If an option is not exercised  within ten years,  it expires and the
optionee loses all rights thereunder.  The holder of the option has no rights as
a  shareholder  until the option is exercised  and shares have been issued.  The
maximum  number of such shares  optioned  to any one  Executive  Officer  cannot
exceed one percent of the issued and  outstanding  common shares on the date the
option is granted.


<PAGE>

b.  Status of Plan

<TABLE>
<CAPTION>
------------------------------------------------ ---------------- ---------------- ------------------- --------------------
                                                 1999             Weighted-average 1998 Shares under   Weighted-average
                                                 Shares under     exercise price   option              exercise price
                                                 option
------------------------------------------------ ---------------- ---------------- ------------------- --------------------
<S>                                             <C>               <C>              <C>                 <C>
Outstanding at beginning of year                         308.750           $15.13             193,750               $12.65
Exercisable at end of year                               228,750           $14.46             208,750               $14.22
Granted                                                  122,500           $17.00             115,000               $19.32
Exercised                                                      -                -              17,500               $11.31
Outstanding at end of year                               431,250           $15.66             308,750               $15.13
------------------------------------------------ ---------------- ---------------- ------------------- --------------------
</TABLE>



<PAGE>


NOTE 9.  MINORITY INTEREST

The minority interest  represents  preferred shares that are held in Nova Scotia
Power Inc.

Authorized:
Unlimited number of First Preferred Shares, issuable in series.

Unlimited number of Second Preferred Shares, issuable in series.

<TABLE>
<CAPTION>
Issued and outstanding:
-------------------------------------------------------------------------------- ---------------- --------------------------
Millions  of Dollars                                                             Millions of      Common Share Capital
                                                                                 Shares
-------------------------------------------------------------------------------- ---------------- --------------------------
<S>                                                                             <C>              <C>
December 31, 1997
6% Cumulative, Redeemable Series A First Preferred Shares                                    8.0                     $200.0
-------------------------------------------------------------------------------- ---------------- --------------------------
December 31, 1998                                                                            8.0                     $200.0

5.15% Cumulative, Redeemable Series B First Preferred Shares
  with non-detachable Series C Purchase Warrants                                             5.0                      $31.3
-------------------------------------------------------------------------------- ---------------- --------------------------
December 31, 1999                                                                           13.0                     $231.3
-------------------------------------------------------------------------------- ---------------- --------------------------
</TABLE>


SERIES A PREFERRED SHARES
The Series A preferred shares are redeemable at $25 per share.

Prior  to the  reorganization,  NSPI  had the  option  to  redeem  the  Series A
preferred shares. Following the reorganization,  NSPI became obligated to redeem
the Series A preferred shares by September 1, 2000.

SERIES B PREFERRED SHARES AND SERIES C PURCHASE WARRANTS
On March 8, 1999, NSPI issued 5,000,000 First Preferred Share Units (Units) with
each Unit consisting of one non-detachable Cumulative Redeemable First Preferred
Share,  Series B (Preferred Share Series B) and one Cumulative  Redeemable First
Preferred  Share,  Series C Purchase  Warrant  (Warrant) at a price of $6.25 per
Unit.  Until  October 1, 2000,  each  Preferred  Share Series B is entitled to a
fixed cumulative preferential cash dividend of 5.15% per share per annum, as and
when declared by the Board of Directors of NSPI (the Board of Directors),  which
accrue  from the date of issue  and are  payable  quarterly  on the first day of
January,  April,  July and September of each year.  After  October 1, 2000,  the
Series B shares will be entitled to a $0.04 per share per annum fixed cumulative
preferential cash dividend as and when declared by the Board of Directors.  Unit
holders  have the right to convert  their units with a cash payment of $18.75 on
October 1, 2000, January 1, 2001 and April 1, 2001, to one Cumulative Redeemable
First Preferred Share, Series C (Preferred Share Series C) of NSPI.

     Each  Preferred  Share  Series C will be entitled to a $1.225 per share per
annum fixed cumulative  preferential dividend, as and when declared by the Board
of Directors,  which will accrue from the date of issue and be payable quarterly
on the first day of January, April, July and September of each year. On or after
April 1, 2009,  NSPI may redeem for cash the Preferred  Share Series C, in whole
at any time or in part from time to time at $25.00  per share plus  accrued  and
unpaid dividends.


<PAGE>


<TABLE>
<CAPTION>
NOTE 10. LONG-TERM DEBT
-------------------------------------------------------------------------------- ---------------- --------------------------
Millions  of Dollars                                                             1999                                  1998
-------------------------------------------------------------------------------- ---------------- --------------------------
<S>                                                                             <C>               <C>
Debentures and notes payable                                                           $ 1,268.8                  $ 1,247.2
Less: Current portion                                                                      (8.1)                    (163.5)
-------------------------------------------------------------------------------- ---------------- --------------------------
                                                                                       $ 1,260.7                   $1,083.7
-------------------------------------------------------------------------------- ---------------- --------------------------
</TABLE>

All  long-term  debt  instruments  are issued  under trust  indentures  at fixed
interest rates, and are unsecured.


Long-term debt is summarized by year of maturity in the following table:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
Millions of dollars              December 31, 1999                                  December 31, 1998
----------------------------------------------------------------------------------------------------------------------------
Year of Maturity           Principal            Weighted Average         Principal             Weighted Average Coupon Rate
                           Outstanding          Coupon Rate              Outstanding
-------------------------- -------------------- ------------------------ --------------------- -----------------------------
                                                                      %                                                   %
-------------------------- -------------------- ------------------------ --------------------- -----------------------------
<S>                       <C>                  <C>                      <C>                   <C>
1999                                                                                   $163.5
2000                                      $8.1                                            3.2
2001                                     120.7                                          120.5
2002                                     120.0                                          120.0
2003                                     150.0                                          150.0
2004                                      50.0                                              -
-------------------------- -------------------- ------------------------ --------------------- -----------------------------
Total 1 - 5 Years                        448.8                     7.56                 557.2                          7.83
6 - 10   Years                           380.0                     6.29                 250.0                          7.07
11 - 15 Years                                -                        -                     -                             -
16 - 20 Years                            165.0                     9.18                  70.0                          8.40
21 - 25 Years                                -                        -                  95.0                          9.75
26 - 30 Years                            165.0                     8.77                 165.0                          8.77
31 - 40 Years                             60.0                     8.30                  60.0                          8.30
41 - 100 Years                            50.0                     7.60                  50.0                          7.60
-------------------------- -------------------- ------------------------ --------------------- -----------------------------
                                      $1,268.8                     7.58              $1,247.2                          7.99
-------------------------- -------------------- ------------------------ --------------------- -----------------------------
</TABLE>


NOTE 11. DEBT DUE WITHIN ONE YEAR
Debt due within one year is normally  refinanced  from the proceeds of long-term
financing.  Short-term debt consists of commercial paper,  bankers'  acceptances
and libor loans issued  against an operating line of credit.  Commercial  paper,
bankers'  acceptances  and libor loans bear interest at prevailing  market rates
which on December 31, 1999, averaged 5.15%, 5.55% and 6.63% respectively (1998 -
5.13%,  5.55% and nil).  The operating line of credit is due on demand and bears
interest at prime which on December 31, 1999, was 6.50% (1998 - 6.75%).

<TABLE>
<CAPTION>
millions of dollars                                                                                     1999           1998
-------------------------------------------------------------------------------------------- ---------------- --------------
<S>                                                                                           <C>            <C>
Short-term debt                                                                                       $320.2         $353.9
Current portion of long-term debt (note 10)                                                              8.1          163.5
-------------------------------------------------------------------------------------------- ---------------- --------------
                                                                                                      $328.3         $517.4
</TABLE>


<PAGE>


NOTE 12. PENSION PLANS
NSPI   maintains   contributory   defined-benefit   pension   plans  that  cover
substantially  all of its employees.  The market value of pension fund assets at
December 31, 1999,  was $402.3  million (1998 - $360.4  million).  The estimated
actuarial  present  value of accrued  pension  benefits  attributed  to services
rendered to December 31, 1999, was $382.9 million (1998 - $358.6 million).

NOTE 13. FINANCIAL INSTRUMENTS

<TABLE>
<CAPTION>
------------------------------- --------------------------------------- ---------------------------------------------------
                                           Carrying Amount                                  Fair Value
------------------------------- ------------------ -------------------- --------------------------- -----------------------
Millions of dollars                          1999                 1998                        1999                    1998
------------------------------- ------------------ -------------------- --------------------------- -----------------------
<S>                            <C>                  <C>                 <C>                         <C>
Long-term debt                        ($ 1,268.8)          ($ 1,247.2)                 ($ 1,326.8)             ($ 1,429.4)
Short-term debt                         ($ 320.2)            ($ 353.9)                   ($ 318.4)               ($ 355.3)
Hedging instruments                       ($ 0.3)              ($ 0.4)                       $ 1.4                 ($ 0.6)
------------------------------- ------------------ -------------------- --------------------------- -----------------------
</TABLE>

LONG-TERM DEBT AND SHORT-TERM DEBT
The fair value of NSH's  long-term and short-term debt is estimated based on the
quoted  market  prices for the same or similar  issues,  or on the current rates
offered to NSH, for debt of the same remaining maturities.

HEDGING INSTRUMENTS
The fair value of hedging  instruments  is  estimated  by  obtaining  prevailing
market rates from invest-ment dealers.

     The company  uses  derivative  instruments  to reduce  specific  underlying
interest rate, commodity price, foreign exchange and weather exposure.

     The company periodically enters into interest rate contracts to convert the
interest characteristics of outstanding short-term debt from floating to a fixed
rate basis.

     Interest rate contracts  converting floating interest on average borrowings
of $265.0 million (1998 - $395.0  million) to a weighted  average fixed interest
rate of 6.20% (1998 - 6.66%) were outstanding at December 31, 1999.

     The company enters into oil swap and option  contracts to limit exposure to
fluctuations  in world prices of heavy fuel oil. As at December  31,  1999,  the
company had entered into oil swap contracts that fix 0.9 million  barrels of oil
at an average price of U.S. $12.56 per barrel.

     Oil and part of the company's coal requirements are priced in U.S. dollars.
NSH enters into foreign  exchange forward and option contracts to limit exposure
to currency rate  fluctuations.  Currency  forwards are used to fix the Canadian
dollar cost to acquire  U.S.  dollars,  eliminating  exposure  to currency  rate
fluctuations.  Forward  contracts to buy U.S. $107 million at an average rate of
CAD $1.4706 were out-standing for 2000 and U.S. $4 million at an average rate of
CAD $1.4565 were  outstanding for 2001, at December 31, 1999.  Foreign  exchange
options  to buy  U.S.  $4  million  with an  average  rate of CAD  $1.5400  were
outstanding at December 31, 1999.

     The  company  enters  into  weather  temperature  contracts  that limit its
exposure  to revenue  losses  from  abnormally  warm  weather  during the winter
heating  season.  At December  31, 1999 the  company  limited its  exposure to a
significant  portion of the first and  fourth  quarters  of 2000  space  heating
losses.

     NSH is exposed to  credit-related  losses in the event of nonperformance of
counterparties to financial  instruments.  The company has a policy of accepting
as  counterparties  only those  institutions  meeting the three  highest  rating
categories  as  determined  by  two  recognized  security  rating  institutions.
Accordingly,  it does  not  expect  any  counterparties  to  fail to meet  their
obligations.

NOTE 14. COMMITMENTS AND CONTINGENCIES

NSH had the following significant commitments at December 31, 1999:

o    A  requirement  to purchase the coal output of the Cape Breton  Development
     Corporation's  (CBDC)  Prince  Mine  which is not  expected  to exceed  1.1
     million  tonnes of coal.  Purchases  from CBDC may be reduced to the extent
     that the company  purchases coal from  alternative  sources in the event of
     production problems at CBDC, as was the case in 1999.

o    Annual  requirement  to purchase  approximately  $15 million of electricity
     from independent power producers for each of the next five years.

o    NSH is responsible for managing a portfolio of  approximately  $1.6 billion
     of defeasance  securities  held in trust.  The defeasance  securities  must
     provide the principal and interest  streams of the related  defeased  debt.
     Approximately 68%, or $1.0 billion, of the defeasance portfolio consists of
     investments in the related debt,  eliminating all risk associated with this
     portion of the portfolio.

NOTE 15. COMPARATIVE INFORMATION

The  comparative  financial  statements  have been  presented  as if NSH was the
parent company as of January 1, 1998. (See note 1a.)

     Certain of the comparative  figures have been  reclassified to conform with
the financial statement presentation adopted for 1999.


<PAGE>


<TABLE>
<CAPTION>
Operating Statistics                                                                            7-year summary
Years Ended December 31                         1999         1998          1997         1996         1995         1994         1993
---------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------ ------------
<S>                                     <C>          <C>          <C>           <C>           <C>         <C>          <C>
Electric energy sales
   (GWh)
       Residential                           3,494.6      3,377.9       3,498.9      3,471.9      3,380.3      3,445.3      3,400.3
       Commercial                            2,582.8      2,485.9       2,506.7      2,505.7      2,483.9      2,455.4      2,440.1
       Industrial                            3,834.8      3,423.7       2,842.6      2,754.1      2,820.9      2,715.0      2,706.3
       Other                                   453.2        484.4         667.7        413.9        349.7        350.2        347.4
---------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------ ------------
Total electric energy sales                 10,365.4      9,771.9       9,515.9      9,145.6      9,034.8      8,965.9      8,894.1
---------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------ ------------
Sources of energy
       (GWh)
      Thermal  - coal                        7,816.0      7,015.0       8,246.5      7,850.3      7,053.1      7,159.7      6,345.6
                - oil                        1,870.9      2,358.3         781.4        608.7      1,239.4      1,205.7      2,117.2
Hydro                                          980.7        890.9         934.9      1,111.6        883.2      1,012.0        877.6
Purchases                                      411.3        242.0         340.2        254.6        499.5        216.2        218.9
---------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------ ------------
Total generation
   And purchases                            11,078.9     10,506.2      10,303.0      9,825.2      9,675.2      9,593.6      9,559.3
Losses and internal use                        713.5        734.3         787.1        679.6        640.4        627.7        665.2
---------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------ ------------
Total electric energy sold                  10,365.4      9,771.9       9,515.9      9,145.6      9,034.8      8,965.9      8,894.1
---------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------ ------------
Customers
       Residential                           397,406      394,012       388,386      384,856      380,055      375,553      371,270
       Commercial                             31,753       31,942        31,727       32,329       32,383       32,342       32,289
       Industrial                              2,118        2,096         1,998        1,686        1,633        1,581        1,537
       Other                                   6,760        6,343         5,917        5,908        5,892        5,731        5,596
---------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------ ------------
Total customers                              438,037      434,393       428,028      424,779      419.963      415,207      410,692
---------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------ ------------
Capacity
Generating nameplate
   Capacity (MW)
       Coal Fired                              1,272        1,272         1,272        1,272        1,388        1,388        1,218
       Heavy Fuel Oil-Fired                      350          350           350          350          350          350          350
       Gas Turbine                               180          180           180          180          180          180          180
      Hydroelectric                              381          381           381          381          381          381          381
 Independent power producers                      25           25            25           25            3           --           --
---------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------ ------------
                                               2,208        2,208         2,208        2,208        2,302        2,299        2,129
---------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------ ------------
Number of employees                            1,588        1,634         1,742        1,907        1,935        2,181        2,213
---------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------ ------------
Km of transmission lines
   (69 kV and over)                            5,250        5,250         5,236        5,213        5,212        5,208        5,339
---------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------ ------------
Km of distribution lines
   (25 kV and under)                          24,000       23,711        23,155       23,238       23,226       24,362       24,344
</TABLE>



<PAGE>


<TABLE>
<CAPTION>
Financial Information                                                                            7-year summary
--------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Years Ended December 31                        1999          1998         1997         1996         1995         1994         1993
(millions of dollars)
--------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
<S>                                    <C>           <C>          <C>          <C>          <C>          <C>          <C>
Total revenue                                $824.6        $773.1       $748.7       $741.2       $720.6       $715.6       $709.1
--------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Cost of operations
   Fuel for generation and
    Power purchased                           267.5         257.3        246.4        238.7        244.8        246.6        246.7
Cost of goods sold                             23.3          14.0            -            -            -            -            -
Operating, maintenance
and general                                   155.5         142.5        138.6        157.7        147.7        151.3        150.5
Grants in lieu of property taxes                8.9           5.5          5.3          5.2          5.2          5.1          5.0
Voluntary separation program                      -             -            -            -            -            -         21.7
Provincial capital tax                          7.0           6.7          5.2            -            -            -            -
Depreciation                                   94.8          91.3         87.8         85.0         86.5         83.1         70.6
--------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
                                              557.0         517.3        483.3        486.6        484.2        486.1        494.5

--------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Earnings from operations                      267.6         255.8        265.4        254.6        236.4        229.5        214.6
(Amortization) deferral of
    Point Aconi expenses                     (23.1)        (16.7)       (12.8)          5.1         22.6         24.9            -
Allowance for funds used
    During construction                         4.8           3.8          4.0          4.2          1.3          9.6         46.1
Equity earnings in pipeline                     6.3             -            -            -            -            -            -
--------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Earnings before interest and
    Income taxes                              255.6         242.9        256.6        263.9        260.3        264.0        260.7
Interest                                      136.5         132.7        140.2        148.9        143.5        152.2        160.5
--------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Earnings before income taxes                  119.1         110.2        116.4        115.0        116.8        111.8        100.2
Income and large corporations tax               7.4          13.6         14.2         11.4          5.2          1.0          4.8
--------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Net earnings before
  Minority interest                           111.7          96.6        102.2        103.6        111.6        110.8         95.4
Minority interest                              11.3          11.2          9.5         13.6         16.8         16.8          3.9
--------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Net earnings applicable
   To common shares                           100.4          85.4         92.7         90.0         94.8         94.0         91.5
Common dividends                               72.2          71.1         69.9         68.7         66.7         64.8         63.9
--------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Earnings retained for use
     In company                               $28.2         $14.3        $22.8        $21.3        $28.1        $29.2        $27.6
--------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Property, plant and

  equipment, net                           $2,362.3      $2,333.9     $2,293.1     $2,280.6     $2,277.1     $2,275.6     $2,264.0
Matching notes receivable                         -             -            -         46.1        325.8        368.0        379.5
Other assets                                  332.5         361.4        430.4        435.4        355.5        272.1        180.8
Pipeline investment                            54.7          30.5            -            -            -            -            -
Current assets                                151.7         108.3        157.7        302.6        185.6        212.9        234.2
--------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Total assets                               $2,901.2      $2,834.1     $2,881.2     $3,064.7     $3,144.0     $3,128.6     $3,058.5

Common shares                                $676.5        $672.5       $667.6       $661.3       $655.9       $653.4       $650.7
Retaained earnings                            265.8         238.7       2224.4        201.6        180.3        152.2        123.0
Minority interest                             231.3         200.0        200.0        200.0        200.0        200.0        200.0
Long-term debt                              1,260.7       1,083.7      1,107.5      1,258.1      1,640.2      1,469.2      1,679.2
Deferred credits                                2.2           2.2         26.9         13.4         14.7         16.0         16.0
Current liabilities                           464.7         637.0        654.8        730.3        452.9        637.8        389.6
--------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Total equity and liabilities               $2,901.2      $2,834.1     $2,881.2     $3,064.7     $3,144.0     $3,128.6     $3,058.5
--------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Capital expenditures                         $141.7        $162.6       $100.3        $88.5        $88.0        $94.7       $125.9
--------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Cost of fuel - coal                          $186.4        $164.8       $189.2       $198.9       $189.5       $204.4       $179.6
              - oil                            56.1          76.2         35.7         22.6         39.0         35.2         60.5
Power purchased                                25.0          16.3         21.5         17.2         16.3          7.0          6.6
--------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Total cost of fuel and
    Power purchased                          $267.5        $257.3       $246.4       $238.7       $244.8       $246.6       $246.7
</TABLE>



<PAGE>


C O R P O R A T E G O V E R N A N C E

Statement of Corporate Governance Practices

NS Power  Holdings'  framework  for  corporate  governance  enables the Board of
Directors to effectively contribute to the management of the Company.

BOARD MANDATE
The Board of Directors is responsible for management of the business and affairs
of the Company.  The Board has established  three  committees which assist it in
fulfilling its responsibilities. The Board appoints the Company's management and
delegates authority and responsibility to management for all aspects of NS Power
Holdings'  business and affairs.  Management  is expected to achieve  objectives
established  by  the  Board  and  its  performance  is  evaluated  against  such
objectives.

     Management's discussion and analysis of the Company's operating performance
for 1999 is included in this Annual Report.

BOARD COMPOSITION
The  Company's  by-laws  provide  that the size of the  Board be no less than 10
members and no more than 15 members.  To assure the independence of the Board of
Directors,  the  Company's  by-laws also provide that no more than two Directors
may be employees of the Company or of a subsidiary  or affiliate of the Company.
The  Chair  of the  Board  and the  Chief  Executive  Officer  must be  separate
individuals.  Each Board Committee is made up of Directors who are not employees
of the Company or its subsidiaries or affiliates.

     The Board is  satisfied  this  number of  Directors  results  in  effective
decision-making by the Board. One Director, Mr. David Mann, is the President and
Chief  Executive  Officer and is an employee of the Company.  The Board believes
that all of the other current Directors are unrelated  Directors.  Each of those
Directors is independent of management, none has any interest, business or other
relationship that could or could reasonably be perceived to materially interfere
with his or her ability to act in the best interests of the Company. None of the
Directors receive remuneration from the Company other than Directors' retainers,
fees or retainers for service as Chair of the Board or Chair of a Committee.

     The Board has adopted a number of operating  procedures  to address  issues
associated  with  Directors'  performance,  Board  composition,  and conflict of
interest.  These  procedures are intended to enhance the ability of Directors to
carry  out their  duties  and to ensure an  orderly  rotation  of Board  members
without impairing Board operations.

     Upon  reaching age 70, a Director is not eligible  for  re-election  at the
next annual  meeting.  No person may hold the position of Chair of the Board for
three consecutive years without a review by the Board.

     The  Company's  voting  shares  are widely  held and there are  legislative
provisions  which prohibit an individual  shareholder  from holding more than 15
percent of the voting shares of the Company.  There is currently no  shareholder
with the  ability to  exercise a majority  of the votes for the  election of the
Board of Directors.

BOARD COMMUNICATION
A regular flow of information from management to the Board of Directors  ensures
that the Board has  sufficient and timely  information  concerning the Company's
affairs.  This  information is used by the Board to assess both the direction of
the Company's business and the performance of management. The Board of Directors
receives a briefing  package from  management  in advance of all  meetings.  The
Directors also receive  regular  communications  between  meetings which include
information  respecting  any  new  developments  which  might  affect  NS  Power
Holdings'  business  and  that of its  subsidiaries,  in  addition  to  specific
information  provided  to  individual  Directors  to allow them to fulfil  their
duties as members of a Board committee.

     The Directors  are kept  informed of Company  operations at the meetings of
the Board and its  committees  and through  reports  from and  discussions  with
Management. Board and committee meetings are held on a regularly scheduled basis
and  communications  between  the  Directors  and  management  occur  apart from
regularly scheduled Board and committee meetings in the form of oral and written
briefings or specially-called meetings. Management reports on Company operations
and results at such meetings and responds to questions from the Directors.

     An orientation and education  program is provided to all new members of the
Board.  New  members  of the Board  are  given  briefings  on the  Company,  its
strategic plan, and past history of Board operations.

     The Board and its Committees, at their option, regularly meet independently
of management to discuss various issues. While there is no specific provision in
the by-laws, the Board has engaged outside advisors in appropriate circumstances
in the past.

BOARD FUNCTIONS
The Board makes all major  decisions  for the Company,  including  those set out
below.  Many Board  functions  are  carried out by the three  Committees  of the
Board. The Board and its Committees are responsible for these main functions:

o    adopting a strategic planning process and overseeing its implementation;

o    identifying  principal  risks in the business and  implementing  systems to
     manage these risks;

o    ensuring business risks are properly identified and managed,  and approving
     decisions involving significant risks to the Company;

o    monitoring  the  effectiveness  of  the  Company's   corporate   governance
     practices and approving any necessary changes;

o    succession  planning for senior  management and monitoring,  appointing and
     training senior management;

o    setting performance objectives and monitoring results;

o    overseeing   communications   with  shareholders  and  other  stakeholders,
     including reviewing the quarterly financial  statements,  and approving the
     annual financial statements, annual report and annual information form;

o    approving  the  financial  statements  and the  Management  Discussion  and
     Analysis in the Annual Report;

o    ensuring proper  financial  reporting and financial  control systems are in
     place including proper inspection, control and audit systems;

o    approving the issue of securities;

o    the integrity of internal control and management information systems;

o    approving  operating  and capital  budgets and specific  requests for major
     capital expenditures;

o    developing  position  descriptions  for the  Board  and  for the  Executive
     Officers  of the  Company,  including  the  corporate  objectives  for  the
     President and Chief Executive Officer;

o    reviewing and approving  compensation for Directors and Executive  Officers
     and compensation policies for the Company; and

o    establishing general corporate policies.

SHAREHOLDER FEEDBACK
NS Power  Holdings  provides  information  to, and responds to,  inquiries  from
shareholders.  Through  toll-free  lines,  shareholders,  customers  and  others
receive  information  from  the  Company  and  may  also  contact  the  Company.
Shareholders  may contact the Company at the Office of the  Corporate  Secretary
and  General  Counsel  or  through  its  Investor  Services  group.  Shareholder
inquiries or suggestions that are addressed to the Board, a specific  department
or person, are forwarded to the intended recipient.

BOARD COMMITTEES
NS Power  Holdings'  Board of  Directors  has three  Committees  to assist it in
carrying out its duties.  The Company's  by-laws  provide that  Committees  must
consist of Directors who are not employees of the Company or its subsidiaries or
affiliates.  Board  Committees are appointed  annually and the  composition  and
Chair of all Committees is reviewed at least every three years.

     The by-laws of the Company  state that the Board of Directors may establish
an Executive  Committee of the Board of Directors  which may include  members of
management.  The  Directors  have  determined,  however,  that  because  of  the
relatively  small size of the Board,  it is not appropriate to constitute such a
Committee at this time.  This helps to ensure that all Directors are equally and
fully briefed on issues relating to the Company's business and affairs.

AUDIT COMMITTEE
The Audit Committee must consist of at least three Directors.  This Committee is
responsible for ensuring that  appropriate  internal  control  procedures are in
place relating to the internal and external audit of the Company's accounts. The
Audit  Committee  reviews  investment  issues and policies.  It also reviews and
recommends to the Board of Directors for approval,  documents such as the Annual
Report, the Annual Information Form, the Management Discussion and Analysis, the
audited financial  statements and the unaudited interim reports to shareholders.
The Audit  Committee  meets at least  quarterly  with the  internal and external
auditors and management and at each quarterly meeting,  meets independently with
each of these parties to the exclusion of the others.

     This  Committee  also  receives   reports  on  and  reviews  the  financial
performance of Company  pension plans,  including  pension fund and fund manager
performance, and reviews investment guidelines for the pension plans.

    This Committee currently consists of the following Directors:
    Mr. Thomas R. Hall, Committee Chair
    Mr. M. Edward MacNeil
    Mr. Kenneth C. Rowe
    Ms. Rosemary Scanlon

MANAGEMENT RESOURCES AND COMPENSATION COMMITTEE
The  Management  Resources  and  Compensation  Committee  (the "MRC  Committee")
reviews  compensation  policies,  benefits and other matters  relating to senior
management and monitors  succession  planning.  It reviews the annual  incentive
plan for all Executive Officers, makes recommendations to the Board of Directors
in respect of these matters and evaluates the  performance  of the President and
Chief Executive Officer.

     The MRC  Committee  consists of three  Directors and is required to meet at
least annually. The MRC Committee reports regularly to the Board.

     The MRC Committee currently consists of the following directors:
     Mr. Purdy Crawford, Committee Chair
     Mrs. R. Irene d'Entremont
     Dr. E. Parr-Johnston

NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The Nominating and Corporate  Governance  Committee consists of three Directors.
It is responsible  for developing and  communicating  the Company's  approach to
corporate  governance  issues.  It also  identifies  nominees  for  election  as
Directors and ensures that such nominees are, in the  reasonable  opinion of the
Committee,  individuals  who have the  ability  to  contribute  and  devote  the
necessary time to the Board of Directors.

     The effectiveness of the Board, individual Directors, and the Committees is
assessed by the Nominating and Corporate Governance Committee which solicits and
reviews Directors'  comments and may propose  modifications to improve the Board
functions,  Committee  functions,   composition,  and  the  Company's  corporate
governance processes.

     The Nominating and Corporate Governance Committee currently consists of the
following Directors:
       Mr. Paul D. Sobey, Committee Chair
       Mr. George A. Caines
       Mr. James K. Gray

CORPORATE GOVERNANCE COMPLIANCE
Corporate  governance is the process and structure used to direct and manage the
business and affairs of the Company with the objective of enhancing  shareholder
value,  which  includes  ensuring the financial  viability of the business.  The
process and structure define the division of power and establish  mechanisms for
achieving  accountability  among  shareholders,   the  Board  of  Directors  and
management.  The direction and  management of NS Power  Holdings'  business also
takes  into  account  the  impact  on  other  stakeholders  such  as  employees,
customers, suppliers and communities.

     The Company's corporate governance practices comply with the guidelines for
corporate governance of The Toronto Stock Exchange.


<PAGE>


EXECUTIVES                                                      ---------------
                                                                |              |
David Mann, President and Chief Executive Officer               |              |
(pictured  on page 3)                                           |   [PICTURE]  |
                                                                |              |
Standing (left to right)                                        |              |
Jay  Forbes,  Senior  Vice  President  and  Chief  Financial    |              |
Officer; Phil Sidebottom,  Vice President, Power Production;    |              |
Liz  MacDonald,  Vice  President,   Human  Resources;  Chris    |              |
Huskilson,  Executive  Vice  President,   Operations:  Wayne    |              |
Crawley, Vice President, Marketing and Growth, President and    |              |
CEO, Enercom.                                                   ---------------

Seated (left to right)
Murray Coolican, Vice President, Public Affairs; Rick Smith, Corporate Secretary
and General Counsel


<PAGE>


BOARD OF DIRECTORS

Derek Oland
(Chairman of the Board)
Chairman and
Chief Executive Officer
Moosehead Breweries Limited
New River Beach, New Brunswick

David McD. Mann, Q.C.
President and
Chief Executive Officer
NS Power Holdings
Incorporated and
Nova Scotia Power Incorporated
Halifax, Nova Scotia

George A. Caines, Q.C.
Nova Scotia Managing Partner
Stewart McKelvey Stirling Scales
Halifax, Nova Scotia

Purdy Crawford, O.C.
Counsel, Osler, Hoskin & Harcourt
Chair, AT&T Canada Corp.
Toronto, Ontario

R. Irene d'Entremont
President
M.I.T. Electronics Inc.
Yarmouth, Nova Scotia

James K. Gray
Chairman
Canadian Hunter
Exploration Ltd.
Calgary, Alberta

Thomas R. Hall (1)
Company Director
Halifax, Nova Scotia

M. Edward MacNeil
Company Director
Sydney, Nova Scotia

Dr. Elizabeth Parr-Johnston
President and Vice-Chancellor
University of New Brunswick
Fredericton, New Brunswick

Kenneth C. Rowe
Chairman and Chief
Executive Officer
IMP Group International Inc.
Halifax, Nova Scotia

Rosemary Scanlon
Economic Consultant
New York City, New York

Paul D. Sobey
President and
Chief Executive Officer
Empire Company Limited
New Glasgow, Nova Scotia

COMMITTEES:

AUDIT COMMITTEE

Thomas R. Hall (Chair)
M. Edward MacNeil
Kenneth C. Rowe
Rosemary Scanlon

MANAGEMENT RESOURCES
AND COMPENSATION
COMMITTEE

Purdy Crawford (Chair)
R. Irene d'Entremont
Dr. Elizabeth Parr-Johnston

NOMINATING AND
CORPORATE GOVERNANCE
Paul D. Sobey (Chair)
George A. Caines
James K. Gray

CREDITS
Design Ove Design & Communications Ltd.
Photography John Sherlock (Excepting Mr.
Oland & Mr. Mann, Page 3: Don Robinson; 1. Retiring May, 2000

Ms. Cromwell,  Page 6: Marvin Moore; Point Tupper,  Page 6: Roger Cormier;  M&NP
Construction,  Page 6: Courtesy of M&NP; Ms. MacNeil,  Page 6: Owen Fitzgerald.)
Printing Atlantic Nova Print Co. Inc.


<PAGE>


<TABLE>
<CAPTION>
Dividend Payments in 2000                                        Head Office
-------------------------                                        -----------
<S>                                                             <C>
Subject to approval by the Board of Directors, common share
dividends for NS Power Holdings Inc. are payable on or about     Nova Scotia Power Inc.
the 15th of February, May, August and November. A first          P.O. Box 910
quarter dividend of $0.21 has been declared payable February     Halifax, Nova Scotia B3J 2W5
15th, 2000.                                                      T: 902.428.6250

A quarterly dividend of $0.375 is payable on the first day of    Transfer Agent
January, April, July and October for Nova Scotia Power Inc.'s    Montreal Trust
Series A 6% Preferred Shares.                                    P.O. Box 36012, 1465 Brenton Street
                                                                 Halifax, Nova Scotia B3J 3S9
A quarterly dividend of $0.0804687 is payable on the first day   T: 902.420.2211
of January, April, July and October for Nova Scotia Power        F: 902.420.2764
Inc.'s Series B First Preferred Share Units.
                                                                 Investor Services
Dividend Reinvestment and Share Purchase Plan                    T: 902.428.6060 or 1.800.358.1995
NS Power Holdings Inc.'s Dividend Reinvestment and Share         F: 902.428.6181
Purchase Plan is available to shareholders resident in Canada.   E: investors@nspower.ca

The Plan provides shareholders with a convenient and             Financial Analysts, Portfolio Managers
economical means of acquiring additional common shares through   and other Institutional Investors
the reinvestment of dividends. Plan participants may also        T: 902.428.6999
contribute cash payments of up to $5,000 per quarter.            F: 902.428.6181
Participants of the plan pay no commissions,                     E: judy.steele@nspower.ca
service charges or brokerage fees for shares purchased under
the Plan.                                                        Share Listings
                                                                 Toronto Stock Exchange (TSE)
Please contact Investor Services if you have questions or wish   Common shares: NSH
to receive a copy of the plan brochure and enrollment form.      Preferred shares: NSI.PR.A, NSI.UN

Direct Deposit Service                                           Shares Outstanding
Shareholders may have dividends deposited directly into          (as at December 31, 1999)
accounts held at financial institutions which are members of     Common shares: 87 million
the Canadian Payments Association. To arrange this service,
please contact Investor Services.                                Share Trading Summary
                                                                 (TSE, January 1 to December 31, 1999)
Earnings Reporting                                               High $19.30
Quarterly  earnings are expected to be announced                 Low $13.00
on May 3rd, August 10th and November 10th, 2000.                 Close $14.40
Year end results for 2000 will be released in February 2001.     Volume 26.4 million
Annual General Meeting
Wednesday, May 3, 2000; 11:00 A.M.; World Trade                  Dividends Paid in 1999
and Convention                                                   $0.83 per common share
Centre, Halifax, Nova Scotia
</TABLE>

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