Annual Report 2017 Cover photo: Aishihik Lake. Goran Sreckovic table of contents
2 President’s Welcome
4 Vision, Mission, Values
5 2017 Board of Directors
6 Yukon Energy By the Numbers
10 Our Customers
13 Our Staff
18 Strategic Priorities
21 Key 2017 Capital Projects
23 Health and Safety
25 Sustainability
28 Supporting Our Communities
30 Management Discussion and Analysis
33 Financial Statements
Table of Contents Yukon Energy Annual Report 2017 1 president’s welcome
I am pleased to present the 2017 Yukon Energy Annual Report. This was a year of highs and lows for the Corporation. On the positive side, we celebrated our 30th anniversary, marking this milestone with a series of public events. We were also honoured to become the first northern utility, and only the fifth in Canada, to receive a Sustainable Electricity Company™ designation from the Canadian Electricity Association. However it was also a difficult year for us, after the sudden deaths of two of our employees and a third former staff member who had only recently retired. While none of the deaths occurred on the job, it does not make the loss any less tragic. Through it all, our team of professional and dedicated employees and Board of Directors continued to work extremely hard to serve Yukoners every day. We strive for excellence in everything we do…from delivering affordable, reliable and sustainable power to attracting and retaining a skilled and engaged workforce and to our respect for the environment and for the communities and people we serve. We hope you see these values reflected in this 2017 annual report.
Andrew Hall President and CEO
Matt Jacques Photography
2 Yukon Energy Annual Report 2017 President’s Welcome President’s Welcome Yukon Energy Annual Report 2017 3 In 2017, Yukon Energy staff, management, and board members were involved in an exercise to update the company’s mission, values, and vision. We believe these statements better reflect our philosophy, goals and aspirations.
vision values To establish a sustainable legacy for Safety Yukon’s future Accountability
Continuous Improvement mission Teamwork To enable Yukon’s prosperity with sustainable, Professionalism cost-effective and reliable electricity Good Corporate Citizenship
4 Yukon Energy Annual Report 2017 Vision, Mission, Values 2017 board of directors
Kells Boland, Chair Susan Craig Joanne Fairlie
John Jensen Cam Malloch Clint McCuaig
Wendy Shanks Curtis Shaw Erin Stehelin
2017 Board of Directors members. Christian Kuntz Photography
Audit Committee Human Resources and Planning and Compensation Committee Governance Committee Erin Stehelin, Chair Wendy Shanks, Chair Kells Boland, Chair Kells Boland Kells Boland Erin Stehelin Cam Malloch Susan Craig Wendy Shanks Wendy Shanks John Jensen Clint McCuaig Curtis Shaw Clint McCuaig Susan Craig Cam Malloch
2017 Board of Directors Yukon Energy Annual Report 2017 5 archbould.com
yukon energy by the numbers
6 Yukon Energy Annual Report 2017 Yukon Energy By the Numbers 1 of a few isolated grids in North America
Jim Petelski
generating stations hydro stations YEC Hydro 3 YEC LNG
YEC Diesel
Transmission and Distribution Lines backup LNG plant
Dawson City
Elsa 1 Keno Mayo Stewart Crossing
Pelly Crossing Minto Mine Faro Carmacks Ross River backup diesel
Aishihik generating stations Whitehorse 4 Haines Junction Johnson’s Crossing
Tagish Teslin Carcross
Yukon Energy By the Numbers Yukon Energy Annual Report 2017 7 1,10 0 kilometres of power lines
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12,000 power poles
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Longest wooden fish ladder in the world
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8 Yukon Energy Annual Report 2017 Yukon Energy By the Numbers 2017 TOTAL GENERATION TYPE
96.8% HYDRO 1,10 0 kilometres of power lines 0.1% WIND 96.8% renewable in 2017 2.1% NATURAL GAS 1% DIESEL
2017 SALES
2% 78% SECONDARY SALES WHOLESALES TO ATCO ELECTRIC YUKON 10% INDUSTRIAL
GWh supplied in 2017 456 10% COMMUNITIES
$45.0 million in 2017 sales
133 megawatt generating capacity
Yukon Energy By the Numbers Yukon Energy Annual Report 2017 9 archbould.com
our customers
10 Yukon Energy Annual Report 2017 Our Customers ELECTRICITY GENERATION
460 456 450
440 423 418 422 406 400
360
320 HYDRO 280 DIESEL 240 200 NATURAL GAS 160 WIND 120
80
40 GENERATION (IN GWH) 0 2013 2014 2015 2016 2017
2017 GENERATION BY MONTH
2000
1800
1600
1400
1200
1000 HYDRO
800 DIESEL 600 NATURAL GAS 400
200 WIND
0 01 01 01 01 01 01 01 01 01 01 01 01 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
92.69 megawatts, new all-time peak set on December 30, 2017
Our Customers Yukon Energy Annual Report 2017 11 TOTAL POWER OUTAGES
70
62 60 59 59 56
50 48 46 43 42 43 40 39 OUTAGES TOTAL
30 UNCONTROLLABLE OUTAGES
20 16 14 16 16 CONTROLLABLE OUTAGES 10 9
0 2013 2014 2015 2016 2017
OUTAGES PER CUSTOMER
15 15 13
10.5 10 10 NUMBER OF OUTAGES 7 PER CUSTOMER TOTAL TIME OF ALL OUTAGES 6 6 5 DURING THE YEAR (IN HOURS) 5 3.9 AVERAGE LENGTH OF 2 EACH OUTAGE (IN HOURS)
.8 .5 .4 .8 .45 0 2013 2014 2015 2016 2017
12 Yukon Energy Annual Report 2017 Our Customers archbould.com
our staff
Our Staff Yukon Energy Annual Report 2017 13 our staff
83 WHITEHORSE 6 DAWSON
5 MAYO 94 permanent, temporary, and term employeess
employees received close to 66 2,000 hours of training in 2017
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14 Yukon Energy Annual Report 2017 Our Staff Jim Petelski
person completed his 2 people completed apprenticeships 1 apprenticeship equivalent Lowell Tait Dieter Brenner Heavy Duty Equipment Technician Systems Control Centre Operator Heavy Equipment and Truck and Transport Technician
Jordan Corbeil Powerline Technician
years is the average retirements in 2017 6 9.5 length of service
Steve Milner John Aldrich Bill Haydock Ron Kirkwood Sulem Darani Danny Sutherland Our Staff Yukon Energy Annual Report 2017 15 Yukon Energy
long service recipients
5 YEARS 10 YEARS Michael Brandt Jeremy Germaine Dieter Brenner Wesley Marsh Graham Cochrane Melanie Pettefer Jason Epp Travis Ritchie Ken Hasler Ramona Toth Kathy Krehbiel Luke Mahilum Matt O’Brien
15 YEARS 30 YEARS Barbara Bowen Steve Blysak Darryel Collins Guy Morgan Darcie Schroeder
16 Yukon Energy Annual Report 2017 Our Staff Sadly, there were three sudden (non-work-related) deaths in our Yukon Energy family. Our hearts go out to the family and friends of Justin Kolla, Rick Falbo, and Sulem Darami.
archbould.com Our Staff Yukon Energy Annual Report 2017 17 archbould.com
strategic priorities
18 Yukon Energy Annual Report 2017 Strategic Priorities 2017
Achieve All Injury Frequency Achieve Motor Vehicle Accident Achieve 10 or less Rate of 1.0 or less Frequency Rate of 4 or less controllable outages
For 2017 Yukon Energy For 2017 Yukon Energy had an had a motor vehicle accident All Injury Frequency Rate of 5.1, frequency rate of 13.4, up from We had 16 controllable compared to 6.1 in 2016 and 5.0 in both 2015 and 2016. outages in 2017, compared to 6.2 in 2015. We are trending in We are concerned about this 9 in 2016 and 16 in 2015. the right direction and striving statistic and are working with to do better in 2018. our staff to make significant improvements in 2018.
Confirm funding and Complete major overhaul of our Achieve a Return on Equity construction plan of Stewart Keno Whitehorse Hydro #4 Unit on time, of 8.82 percent Transmission Line Project on budget ($4.3M)
Target federal funds were Goal achieved. We expect a Goal achieved. This project identified and funding Return on Equity for 2017 was completed on time and applications are planned of 9.15 percent. below budget. for 2018.
Launch Independent Power Place order for 3rd engine Develop and launch updated Producers Standing Offer to expand capacity of LNG Asset Management Program Program in collaboration backup power plant with ATCO Electric Yukon
There was a delay as we worked with the Yukon Goal achieved. The engine was Goal achieved. government on this program. ordered in September 2017. The target is to launch the initiative in early 2019.
Strategic Priorities Yukon Energy Annual Report 2017 19 2018
Achieve All Injury Frequency Achieve a Motor Vehicle Achieve 10 or fewer Rate of 1 or less Accident Rate of 0 controllable outages
Complete LNG 3rd Engine Complete 2018 scope of Achieve a Return on Equity Project on time and on budget Transmission Refurbishment of 7.35 percent Project on time and on budget
Develop and implement Complete key deliverables Confirm path forward Generation Resource for Year 1 of the Asset for addressing long-term Management process Management Program energy capacity requirement
Submit Aishihik Relicensing Develop expanded Demand YESAB application with support Side Management Program from the Champagne and Aishihik First Nations
20 Yukon Energy Annual Report 2017 Strategic Priorities archbould.com
key 2017 capital projects
Key 2017 Capital Projects Yukon Energy Annual Report 2017 21 key 2017 capital projects
Completed a major overhaul of our largest Whitehorse hydro unit (known as the Fourth Wheel).
Developed an updated Asset Management Program, which is allowing us to manage our assets and systems in an integrated and optimized way, and is providing a key link between operational requirements and strategic decision making.
Completed Year 1 of electrical and controls upgrades at our Aishihik hydro facility.
Placed order for 3rd engine to expand capacity of LNG backup power plant.
Finalized 2016 Resource Plan and submitted to the Yukon Utilities Board for review. resourceplan.yukonenergy.ca
Received continued positive response to our inCharge rebate programs. In 2017 Yukoners received more than 3,600 rebates on LED lights and block heater timers. We also provided 30 smart learning thermostats to customers with central electric heating systems, and distributed 500 energy saving kits to customers. The inCharge website was translated into French. inchargeyukon.ca/fr
22 Yukon Energy Annual Report 2017 Key 2017 Capital Projects Matt Jacques Photography
health and safety Safety is a part of every decision we make and every action we take.
Health and Safety Yukon Energy Annual Report 2017 23 health and safety
Provided more than 270 SAFETY 67% of our employees ORIENTATIONS participated in our corporate to staff and over wellness program 100 contractors
There was a participation Participated in a test rate in 2017 of of our LNG 88% EMERGENCY among employees RESPONSE PLAN attending safety meetings
Began work with the Provided Village of Mayo to install an SAFETY EDUCATION EARLY WARNING as a part of school tours siren in the community to at our facilities alert residents in the event of a dam breach
24 Yukon Energy Annual Report 2017 Health and Safety Derek Crowe
sustainability Key to everything we do.
Sustainability Yukon Energy Annual Report 2017 25 stewardship and biodiversity
Migratory Birds Salmon Climate Change
• Major sponsor for the • 1,226 Chinook salmon • Partnered with Yukon College Celebration of Swans festival travelled through our White- and a graduate school horse Rapids Fishladder, down connected with the University from 1,556 the year before of Quebec on a multi-year research project related to • Raised and released about climatic changes in the Mayo 145,000 Chinook fry from our and Aishihik basins Whitehorse Rapids Hatchery • Key partner in Bike to Work • Long-time supporter of Week, which saw more than the Salmon in the Schools 100 people biking a total of program more than 3,100 kilometres
• Partnered once again with • Promoted Earth Hour – the Ta’an Kwach’an Council Yukoners reduced their on the Fox Creek Salmon consumption by approximately Restoration Program one megawatt, enough to power the Village of Mayo and about two percent of the total load on the grid
Jim Petelski Derek Crowe Yukon Energy
Presented with a Sustainable Electricity Company™ designation; only the fifth utility in Canada to receive this recognition and the first in Northern Canada
26 Yukon Energy Annual Report 2017 Sustainability economic sustainability
• Filed an application to our regulator, the Yukon • Secondary sales: customers connected to our SCADA Utilities Board, for the first rate increase since 2013. system include the Yukon Law Courts, Holy Family School in Whitehorse, and J.V. Clark School in Mayo. • Signed an agreement with Victoria Gold for the supply of grid power to the Eagle Gold Mine near Mayo. The agreement was filed with the Yukon Utilities Board in November for review.
First Nation partnerships
• Continued to work with the Champagne and Aishihik • Worked towards completion of a First Nation First Nations (CAFN) to co-manage the Aishihik re- Recruitment Policy, a First Nations Engagement licensing process. The relationship between Yukon Register, and a First Nations Procurement Policy. With Energy and CAFN was strengthened when six staff support of the Yukon Chamber of Commerce and members participated in an Aishihik culture camp individual First Nations, Yukon Energy launched an in August. online First Nations business directory.
• Continued engagement with Carcross/Tagish First • Continued to work with the First Nation of Na-cho Nation (CTFN) and Kwanlin Dün First Nation (KDFN) Nyak Dun (NND) to secure a Project Agreement on the proposed Southern Lakes Enhancement for the Stewart to Keno City Transmission Line project. project. CTFN has indicated its support to move to This includes a Trappers Compensation Agreement the next phase of planning and to prepare a Yukon that is awaiting signature by NND. Environmental and Socio-economic Assessment Board project proposal. • Continued to engage with various First Nations as they work towards becoming potential Independent Power Producers.
Sustainability Yukon Energy Annual Report 2017 27 Melissa Naef
supporting our communities
28 Yukon Energy Annual Report 2017 Supporting Our Communities Forty-five staff and board Provided $85,000 to more members raised more than than 40 community groups $10,000 for the 2017 United (money taken from profits; Way Campaign. Yukon Energy rates are not impacted). was the largest business contributor this year.
Yukon Energy
Long-time supporter of the Association of Yukon Communities Sustainability Award.
Jordi Mikeli-Jones Yukon Energy
Our staff volunteered at Provided scholarships to three the Whitehorse Food Bank, deserving Yukoners: Yukon River Trail Marathon, Yukon Energy Dempster to Alex Hanson – $3,000 Dawson Solstice Run, and Aiden Bradley – $3,000 the Faro Sheep and Crane Sean Balsillie – $3,000 Festival among others.
Yukon Energy
Supporting Our Communities Yukon Energy Annual Report 2017 29 management discussion and analysis
3. Disciplined Financial Management: Given the rate CORE BUSINESS AND STRATEGY pressures faced by YEC’s customers and the prospect Our business is the generation, transmission and for future rate increases driven by the Corporation’s distribution of electrical energy to most of Yukon. capital investment needs, disciplined financial We strive for energy production that is cost-effective, management of YEC’s operating and project-related sustainable, and reliable. Our primary source of power business is essential. YEC is also committed to comes from our legacy hydro assets and our goal is to continuous improvement as a management minimize the use of non-renewable sources due to philosophy to drive sustained improvements in higher variable cost and environmental impacts. YEC’s operational performance and efficiency.
4. Rigorous and Proactive Planning: YEC applies Yukon Energy’s strategy is based on the following key industry best practices and processes for the strategic pillars: planning of future capital investments required to sustain the Corporation’s ageing infrastructure and 1. Sustainability: YEC is committed to the principles address growing demand for energy and capacity. of sustainability in all our business practices, with Rigorous planning of future investments is required the objective of protecting and enhancing Yukon’s to optimize and prioritize capital expenditures, human and natural resources. YEC developed a accounting for the financial constraints within which Sustainability Policy in 2017, and was awarded the the Corporation operates. Key business processes “Sustainable Electricity Company” designation by that support these planning activities include the Canadian Electricity Association (CEA) in 2017. In Integrated Resource Planning and Asset Management. terms of the development of new energy resources, YEC has developed and periodically updates its YEC is committed to developing renewable resources, 5-year capital plan, including investments required recognizing the limitations of certain forms of to sustain existing assets and meet future growth, renewable generation in meeting the energy and as a key tool to document and communicate the capacity needs of Yukon’s isolated grid. Thermal Corporation’s longer-term capital needs. sources will continue to play an important role in cost effectively meeting peak electricity demand, and 5. Stakeholder and Employee Engagement: As a public providing insurance against contingent events such utility, YEC is committed to broadly consult with as drought and outages of key hydro facilities. YEC stakeholders during the planning of new projects applies a social cost of carbon to the economics of and initiatives, and to incorporate to the extent future thermal generation resources, in order to level possible, the preferences of stakeholders in those the playing field between renewable and fossil fuel plans. This consultation is essential to securing social options when planning new resource investments. license for corporate initiatives, while also balancing the obligations of the Corporation to its shareholder 2. First Nations Relationships: YEC is committed to and its primary regulators (the Yukon Utilities Board active engagement with Yukon First Nations, striving and the Yukon Water Board). In addition, the to meet the spirit and intent of Land Claims obliga- Corporation’s employees are critical to the company’s tions. We recognize First Nations as governments success. Maintaining a safe, strong and engaged and potential energy proponents, partners and in- workforce capable of executing YEC’s ambitious vestors. We seek to leverage YEC’s ongoing business plans remains a key strategic priority. operations and future project development work to create opportunities for economic, social and cultural development for Yukon First Nations. Key First Na- tions initiatives include project-specific agreements, and YEC’s First Nations Employment and Procure- ment policies. YEC is pursuing certification under the Aboriginal Business Council’s Progressive Aboriginal Relations (PAR) program as a means to manage and benchmark its First Nations engagement program.
30 Yukon Energy Annual Report 2017 Management Discussion and Analysis CAPABILITY TO DELIVER RESULTS RESULTS
In order to deliver on our strategic goals and achieve Net income for the 2017 fiscal year was $10.5 million, planned results, Yukon Energy maximizes the use of $2.4 million more than the previous year. The increase available resources while considering risks and impacts in net income was primarily due to a broad increase in to stakeholders. These resources include leadership, sales of power. labour force, working capital, systems and processes, other aspects of liquidity, and capital resources. Revenue from sale of power was $45 million; $5 million higher than the prior year due to an We continue to develop human resources policies to increase in all power sales categories resulting from adapt to our seasoned work force. increased rates and increased consumption.
We monitor and forecast our cash and financial strength The regulated rate of return on equity for 2016 is on an on-going basis, including current and future 8.88 percent, up from 8.69 percent the prior year. projections. We expect to require cash to finance our capital projects in 2018 and are in the process of securing these resources. OUTLOOK
Through established policies and procedures Yukon Net income for 2018 is forecast to decrease by Energy maintains a capital structure ratio of 60 percent $1.8 million due to an increase in fuel and interest debt and 40 percent equity. costs. Projected revenue from power sales is forecast to increase by $1.6 million. We continually monitor and evaluate the condition of our assets, and allocate a material portion of our capital The forecast return for 2018 is 6.66 percent, 2.16% less budget for maintenance of these assets, thereby ensuring than the Return on Equity that we are applying for in our reliability of service to our customers. 2017–2018 GRA of 8.82 percent.
We make it a priority to maintain and improve our Yukon Energy is planning for a General Rate Application key relationships with Yukoners including the Yukon (GRA) for 2019 –2020. The GRA will give us the government, Yukon Development Corporation, local First opportunity to adjust rates and get approval for new Nations, stakeholders, and our primary banker, TD Bank. capital builds.
Management Discussion and Analysis Yukon Energy Annual Report 2017 31 RISK MANAGEMENT KEY PERFORMANCE DRIVERS
Yukon Energy is exposed to numerous risks in providing There are several performance drivers and key service to our customers. Risk impacts include safety, performance indicators that are critical to the successful financial, reputation, long-term and short-term load/ implementation of our strategy and achievement of our resource balance, stakeholder relationships and funding. goals. Below is an outline of three of our most important These risks can range in scale from minor to catastrophic. performance drivers. Yukon Energy endeavors to manage all the risks we face on a cost effective basis, taking into account 1. Return on Equity (ROE): in the process of regulating the potential reward to be gained in return for the and setting rates for Yukon Energy, the Yukon acceptance of the risk. We have an enterprise risk Utilities Board must ensure that the rates are management framework that provides the basis for sufficient to allow us to provide reliable electric consistently applying risk management practices. service, meet our financial obligations, comply with government policy and achieve a reasonable ROE.
KEY STRATEGIES BY IMPACT AREA 2. Workforce: a stable workforce is crucial for delivering services required to achieve our business objectives. • The safety of our employees, contractors, and We regularly monitor our vacancy and turnover rate members of the public is managed through a to ensure that our staffing is at appropriate levels. well-developed health and safety program that We set our human resources policies to recruit and meets or exceeds established standards for retain a competent work force, provide opportunities the industry. for professional development and perform succession planning. • Yukon Energy is exposed to reputational impacts from a number of risks including Key Asset Failure, 3. Reliability of Service: reliability of service is one First Nations Consent, Social License, IT Security, our most important objectives. Improving reliability and Insufficient Installed Capacity. Mitigation requires a long-term investment strategy and strategies used to address these risks include commitment. Trends in recent performance adequate stakeholder engagement, development measures are compared against past results. of an asset management plan, and long-term Senior management reviews performance indicators resource planning. and takes action when actual performance deviates from forecast. • Risks that can potentially have a negative financial impact include Financing Risk, Government & Shareholder Relationship Risk, Project Costs and Timeline Overrun, Regulatory Risk, and Loss of Demand. These are managed through an extensive budgeting process, board oversight of major projects, and keeping the Yukon Utilities Board informed of company plans and activities through regulatory hearings.
32 Yukon Energy Annual Report 2017 Management Discussion and Analysis financial statements
34 Management’s Responsibility for Financial Reporting
35 Independent Auditor’s Report
37 Statement of Financial Position
38 Statement of Operations and Other Comprehensive Income
39 Statement of Changes in Equity
40 Statement of Cash Flows
41 Notes to Financial Statements
Financial Statements Yukon Energy Annual Report 2017 33 34 Yukon Energy Annual Report 2017 Financial Statements Financial Statements Yukon Energy Annual Report 2017 35 36 Yukon Energy Annual Report 2017 Financial Statements Financial Statements Yukon Energy Annual Report 2017 37 38 Yukon Energy Annual Report 2017 Financial Statements Financial Statements Yukon Energy Annual Report 2017 39 40 Yukon Energy Annual Report 2017 Financial Statements Financial Statements Yukon Energy Annual Report 2017 41 42 Yukon Energy Annual Report 2017 Financial Statements Financial Statements Yukon Energy Annual Report 2017 43 44 Yukon Energy Annual Report 2017 Financial Statements Financial Statements Yukon Energy Annual Report 2017 45 46 Yukon Energy Annual Report 2017 Financial Statements Financial Statements Yukon Energy Annual Report 2017 47 48 Yukon Energy Annual Report 2017 Financial Statements Financial Statements Yukon Energy Annual Report 2017 49 50 Yukon Energy Annual Report 2017 Financial Statements Financial Statements Yukon Energy Annual Report 2017 51 52 Yukon Energy Annual Report 2017 Financial Statements Financial Statements Yukon Energy Annual Report 2017 53 54 Yukon Energy Annual Report 2017 Financial Statements Financial Statements Yukon Energy Annual Report 2017 55 56 Yukon Energy Annual Report 2017 Financial Statements Financial Statements Yukon Energy Annual Report 2017 57 58 Yukon Energy Annual Report 2017 Financial Statements Financial Statements Yukon Energy Annual Report 2017 59 60 Yukon Energy Annual Report 2017 Financial Statements Financial Statements Yukon Energy Annual Report 2017 61 62 Yukon Energy Annual Report 2017 Financial Statements Financial Statements Yukon Energy Annual Report 2017 63 64 Yukon Energy Annual Report 2017 Financial Statements Financial Statements Yukon Energy Annual Report 2017 65 66 Yukon Energy Annual Report 2017 Financial Statements Financial Statements Yukon Energy Annual Report 2017 67 68 Yukon Energy Annual Report 2017 Financial Statements Financial Statements Yukon Energy Annual Report 2017 69 70 Yukon Energy Annual Report 2017 Financial Statements Financial Statements Yukon Energy Annual Report 2017 71 72 Yukon Energy Annual Report 2017 Financial Statements Financial Statements Yukon Energy Annual Report 2017 73 74 Yukon Energy Annual Report 2017 Financial Statements Section 2017 Yukon Energy Annual Report 75 Yukon Energy Corporation #2 Miles Canyon Road, Box 5920, Whitehorse, Yukon Y1A 6S7 (867) 393-5333 [email protected]