##### 



Cedar Dam Generating Station Final approval was obtained for the construction of a new 9 MW hydroelectric
station on the Lièvre River in Quebec to increase annual generation by 62 GWh
of energy. Completion of this $24 million project is expected in the summer of
2005. The station, to be built onto the existing dam structure, will optimize
use of existing water resources. All power produced by this facility will be
sold to Hydro-Québec under a long-term power purchase agreement. Overhaul of Weldon Generating Facility During the second quarter, we started the US$14 million project to overhaul
each of our four generating units at the Weldon hydroelectric generating
station located on the Penobscot River in Maine. Although the purpose is to
preserve the value, reliability and flexibility of the station, the project is
expected to add 12 GWh to the Companys generation annually. This project is
expected to be completed by the fall of 2005. Refinancing of the Maine and New Hampshire Bridge Facility In the second quarter of 2004, we refinanced US$110 million of the Great Lakes
Hydro America bridge loan facility with 10-year, interest only, senior notes.
The notes are secured by a first ranking lien on all our New England power
assets and bear an annual interest rate of 5.54 percent payable quarterly.
Upon conclusion of the refinancing, our weighted average interest rate and
term to maturity for long-term debt are 7.5 percent and 10.6 years
respectively. The completion of the refinancing reduces our exposure to
possible interest rate increases, extends the average maturity date and
improves cash flow available for unitholders. OUTLOOK Water conditions at the end of the quarter are in line with long-term average.
Given the strength of our first two quarters, we are confident we will be able
to achieve our operating target in 2004.  /s/ Harry Goldgut  Harry Goldgut  Chief Executive Officer
August 10, 2004
 MANAGEMENT DISCUSSION & ANALYSIS INTRODUCTION In December 2003, the Canadian securities regulators released National
Instrument 51-102, Continuous Disclosure Obligations. The management
discussion and analysis (MD&A) of Great Lakes Power Inc. (Great Lakes) for
Q2/2004 is in compliance with the requirements of regulation 51-102. The
purpose of this document is to provide a second quarter and year-to-date
update to the more comprehensive information contained in the MD&A section of
the Great Lakes annual report. A copy of the Great Lakes Power Inc. annual
report can be downloaded in portable document format (PDF) from the on the
SEDAR web-site for Canadian regulatory filings at www.sedar.com. Additional
information relating to Great Lakes Power Inc. can also be found on the
companys website at www.brascanpower.com and on the SEDAR website. Unless
expressly indicated otherwise, all dollar amounts reflected are Canadian. The following discussion and analysis should be read in conjunction with the
accompanying unaudited financial statements and the related notes. 2




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##### 



OVERVIEW OF THE BUSINESS After completion of the Reliant Acquisition, the Company will operate 120
power generating stations with a combined generating capacity of 2,618
megawatts (MW). Great Lakes is also involved in power transmission and
distribution. Great Lakes conducts its power generating operations primarily
in Ontario, Quebec and the northeastern United States, with other power
operations in British Columbia, Louisiana and Brazil. These operations are
mainly wholly owned, either directly or through the Great Lakes Hydro Income
Fund (Income Fund), in which the company owns a 50.1% interest. Great Lakes
also holds a portfolio of financial investments. POWER OPERATIONS Generating
    
    Generating
    
    Installed
    
    Long-termstations
    
    units
    
    capacity
    
    average(MW)
    
    (GWH)ONTARIOGreat Lakes Power
    
    
    12
    
    
    
    21
    
    
    
    349
    
    
    
    1,610Lake Superior Power(1)
    
    
    1
    
    
    
    3
    
    
    
    110
    
    
    
    850Mississagi Power
    
    
    4
    
    
    
    8
    
    
    
    488
    
    
    
    750Valerie Falls Power
    
    
    1
    
    
    
    2
    
    
    
    10
    
    
    
    5218
    
    
    
    34
    
    
    
    957
    
    
    
    3,262QUEBECLièvre River Power
    
    
    3
    
    
    
    10
    
    
    
    238
    
    
    
    1,428Pontiac Power
    
    
    2
    
    
    
    7
    
    
    
    28
    
    
    
    2105
    
    
    
    17
    
    
    
    266
    
    
    
    1,638NORTHEAST UNITED STATESMaine Power
    
    
    7
    
    
    
    32
    
    
    
    129
    
    
    
    747New Hampshire Power
    
    
    8
    
    
    
    25
    
    
    
    45
    
    
    
    263Erie Boulevard L.P.(2)
    
    
    71
    
    
    
    164
    
    
    
    674
    
    
    
    2,908Carr Street Generating Station(2)(1)
    
    
    1
    
    
    
    2
    
    
    
    102
    
    
    
    850White Mountain Energy(1)
    
    
    1
    
    
    
    1
    
    
    
    25
    
    
    
    18488
    
    
    
    224
    
    
    
    975
    
    
    
    4,952OTHERLouisiana Hydroelectric Power
    
    
    1
    
    
    
    8
    
    
    
    192
    
    
    
    677Pingston Power (British Columbia)
    
    
    1
    
    
    
    3
    
    
    
    45
    
    
    
    78Powell River (British Columbia)
    
    
    2
    
    
    
    7
    
    
    
    82
    
    
    
    261Brazil
    
    
    5
    
    
    
    12
    
    
    
    101
    
    
    
    4119
    
    
    
    30
    
    
    
    420
    
    
    
    1,427120
    
    
    
    305
    
    
    
    2,618
    
    
    
    11,279
   (1)
    
    Cogeneration stations(2)
    
    On May 18, 2004 Great Lakes successfully entered into an agreement to
acquire 71 hydroelectric power generating plants, totalling 674 megawatts of
capacity, and one 102 megawatt co-generation facility, in upstate New York,
from Reliant Energy Inc., for US$900 million. 3




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##### 



QUARTERLY ANALYSIS OF RESULTS Revenues and net operating income for 2004 compared to the same period in 2003
are shown below: Three months ended June 30
    
    Six months ended June 30CDN $ millions
    
    2004
    
    2003
    
    2004
    
    2003Revenues
    
    $
    169
    
    
    $
    106
    
    
    $
    349
    
    
    $
    180Net operating incomePower generating income
    
    
    84
    
    
    
    61
    
    
    
    182
    
    
    
    100Transmission & distribution income
    
    
    8
    
    
    
    6
    
    
    
    16
    
    
    
    14$
    92
    
    
    $
    67
    
    
    $
    198
    
    
    $
    114
 The Company reported net operating income of $92 million in the three months
ended June 30, 2004, up from $67 million during the same period last year. Power generationwas in line with normal levels across most of our power
systems during the second quarter. The Companys power generation totalled
2,090 GWh, representing an increase of 32% over the same period last year.
This higher production was driven by improved water conditions since last
fall/winter throughout most regions and the contribution of the generating
stations we acquired or commissioned in 2003. As of June 30, 2004, all our
reservoirs are at expected levels. Long-term average generation remains the
best estimate at the present time for the rest of the year. Revenuefor the quarter increased significantly to $169 million, a 59%
change over the same period last year. Revenue in the second quarter of 2004
includes power sales to an affiliate for an amount of $40 million compared to
$13 million in the same quarter of the previous year. Overall higher revenues
were also driven by increased generation output and a series of optimization
initiatives. Generation and net operating income in each region are shown
below. Cash operating expensestotalled $77 million for the quarter, compared to
$39 million in the same quarter last year. Operating and maintenance costs for
the second quarter of 2004 were $14 million, up $1 million from the prior
year. Property taxes and water rental increased from $6 million to $7 million,
as a result of increased generation. GEOGRAPHICAL INFORMATION GENERATION Three months ended June 30
    
    Six months ended June 30Long-term
    
    
    
    
    
    
    
    
    
    Long-termGigawatt hours
    
    2004
    
    2003
    
    average
    
    2004
    
    2003
    
    averageOntario
    
    
    892
    
    
    
    768
    
    
    
    920
    
    
    
    1,822
    
    
    
    1,553
    
    
    
    1,717Québec
    
    
    495
    
    
    
    346
    
    
    
    462
    
    
    
    1,013
    
    
    
    573
    
    
    
    875Northeast United States
    
    
    245
    
    
    
    159
    
    
    
    312
    
    
    
    546
    
    
    
    262
    
    
    
    616Other Power Operations
    
    
    458
    
    
    
    316
    
    
    
    428
    
    
    
    866
    
    
    
    564
    
    
    
    8002,090
    
    
    
    1,589
    
    
    
    2,122
    
    
    
    4,247
    
    
    
    2,952
    
    
    
    4,008
 4




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##### 



NET OPERATING INCOME Three months ended June 30
    
    Six months ended June 30CDN $ millions
    
    2004
    
    2003
    
    2004
    
    2003Ontario
    
    $
    44
    
    
    $
    39
    
    
    $
    92
    
    
    $
    64Québec
    
    
    20
    
    
    
    8
    
    
    
    43
    
    
    
    15Northeast United States
    
    
    10
    
    
    
    6
    
    
    
    26
    
    
    
    9Other Power Operations
    
    
    18
    
    
    
    14
    
    
    
    37
    
    
    
    26$
    92
    
    
    $
    67
    
    
    $
    198
    
    
    $
    114
 Ontario In Ontario, power generation contributed $44 million of net operating income
during the second quarter compared to $39 million in the second quarter of
2003. Variance in net operating income is due to higher volumes as generation
in Ontario increased to 892 GWh compared to 768 GWh for the same period last
year. The increase is also the result of asset enhancement initiatives which
positively impacted our average price. Québec In Québec, both the Lièvre River and Pontiac Power systems contributed
significantly to the increase in generation and net operating income for the
quarter. Generation for both power systems was 495 GWh compared to 346 GWh
for the same period last year representing an increase of over 43%. As in
Ontario, asset enhancement initiatives also had a positive impact on prices we
received from our generation and as a result, net operating income increased
by $12 million or 150% to $20 million. Northeast United States In the Northeast United States, power generation contributed $10 million of
net operating income for the quarter compared to $6 million for the same
period last year, primarily due to increased generation from 159 GWh to 245
GWh. The variance in net operating income and generation can be explained by
higher generation resulting from water inflows and by the acquisitions of
Brassua, Errol and Pontooks generating stations in November 2003. Other power operations Other power operations include the results of Louisiana HydroElectric Power,
Powell River Energy, Pingston Power and Brazil. These facilities added an
additional $18 million to net operating income, an increase of $4 million from
the prior year. Generation for the quarter also increased from 316 GWh to 458
GWh for an overall increase of 142 GWh or 45% as a result of the addition of
the Pingston and Brazil facilities. CONSOLIDATED QUARTERLY RESULTS Variations in quarterly results are directly related to the amount of
electricity generated in any given quarter, which is in turn dependent on
available water inflows. Other marketing and asset enhancement initiatives
also impact the quarterly results. Quarterly results are also impacted by
acquisitions as previously mentioned. 5




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##### 



SELECTED ANNUAL INFORMATION CDN $ millions (except otherwise noted)
    
    2003
    
    2002
    
    2001Power generated (GWh)
    
    
    6,279
    
    
    
    5,584
    
    
    
    3,959Gross revenues
    
    
    528
    
    
    
    432
    
    
    
    374Power revenues
    
    
    448
    
    
    
    340
    
    
    
    270Net operating income
    
    
    241
    
    
    
    247
    
    
    
    157Net income
    
    
    97
    
    
    
    167
    
    
    
    131Diluted income per share
    
    
    0.77
    
    
    
    1.32
    
    
    
    1.04Power generating assets
    
    
    2,139
    
    
    
    2,155
    
    
    
    1,357Long-term financial liabilities
    
    
    1,603
    
    
    
    1,498
    
    
    
    1,152
 Additional information concerning variations in operating results can be found
in the Companys 2002 and 2003 annual reports. CDN $ millions (except otherwise noted)
    
    2004
    
    2003
    
    2002Q2
    
    Q1
    
    Q4
    
    Q3
    
    Q2
    
    Q1
    
    Q4
    
    Q3Power generated (GWh)
    
    
    2,090
    
    
    
    2,157
    
    
    
    1,835
    
    
    
    1,492
    
    
    
    1,589
    
    
    
    1,363
    
    
    
    1,135
    
    
    
    1,362Gross revenues
    
    
    187
    
    
    
    199
    
    
    
    170
    
    
    
    142
    
    
    
    123
    
    
    
    93
    
    
    
    100
    
    
    
    108Power revenues
    
    
    169
    
    
    
    180
    
    
    
    149
    
    
    
    119
    
    
    
    106
    
    
    
    74
    
    
    
    78
    
    
    
    87Net operating income
    
    
    92
    
    
    
    105
    
    
    
    78
    
    
    
    49
    
    
    
    67
    
    
    
    47
    
    
    
    55
    
    
    
    68Net income
    
    
    35
    
    
    
    52
    
    
    
    19
    
    
    
    24
    
    
    
    31
    
    
    
    23
    
    
    
    29
    
    
    
    43Diluted income per share
    
    
    0.28
    
    
    
    0.41
    
    
    
    0.13
    
    
    
    0.21
    
    
    
    0.24
    
    
    
    0.19
    
    
    
    0.23
    
    
    
    0.34
 SOURCES OF LIQUIDITY Given the nature of our operations, the industry in which we operate and our
contractual arrangements, our cash margin is stable and provides a strong
credit profile. In addition to the risk of variable hydrology conditions, our
risk with respect to liquidity arises from the financing required for
acquisitions and significant capital projects. We have access to the following sources from which to fund our capital program:  
    
    Existing cash reserves;
    
    Strong cash flow from operations; and
    
    Additional available credit reserve facilities. Great Lakes Power Inc. continues to have a strong balance sheet and healthy
financial ratios. As at June 30, 2004 the Company maintained a current cash
balance of $70 million, a current ratio of 4 to 1. These factors, combined
with the additional available resources noted above, make liquidity for the
Company a negligible risk factor. In an effort to continuously improve
financial flexibility, the Company regards increasing working capital as a
constant long-term priority. 6




---



##### 



CAPITAL STRUCTURE AND FINANCING We have been successful in securing long-term, asset-backed financing on most
of our acquired facilities. These arrangements bring stability to our capital
structure. Capital Structure (composition of total structure)
    
    As at June 30, 2004
    
    As at December 30, 2003Property specific borrowings
    
    
    47
    %
    
    
    48
    %Future income taxes
    
    
    5
    %
    
    
    4
    %Minority interest
    
    
    9
    %
    
    
    9
    %Shareholders equity
    
    
    39
    %
    
    
    39
    %Total
    
    
    100
    %
    
    
    100
    %
 In Q2 2004 the bridge loan facility on the Maine and New Hampshire assets was
refinanced in order to further stabilize the Great Lakes capital base. An
amount of US$110 million of the total US$136 million bridge loan facility was
refinanced in May 2004 with senior notes. The notes are secured by a first
ranking lien on all New England Power assets, bear an annual interest rate of
5.54% payable quarterly and mature on May 28, 2014. The remaining US$26
million of the bridge facility is held by Brascan Financial, bears an annual
interest rate of US prime plus 150 basis points payable monthly and matures on
January 29, 2005. No other changes were made to contractual long-term debt
obligations during the quarter. Similarly to most borrowers, Great Lakes has provided covenants to certain of
our lenders. All of the covenants were complied with during 2003 and both the
first and second quarters of 2004. CHANGES IN ACCOUNTING POLICIES The notes to the financial statements included in the 2003 annual report
contain a summary of the critical accounting policies used in preparation of
the consolidated financial statements. There have been no changes to these
policies during the first six months of 2004. Recently Issued Standards Guarantees In the normal course of its business, the Company enters into numerous
agreements that incorporate the provision of certain guarantees to other
parties by the Company. Effective December 31, 2003, the Company implemented
Accounting Guideline 14, Disclosure of Guarantees, issued by the CICA that
requires additional disclosure of guarantees. Accordingly, Great Lakes has
reviewed its significant agreements and has disclosed relevant guarantees in
Note 18 to the Companys Consolidated Financial Statements for 2003. There
have been no changes to this disclosure in 2004. Impairment of Long-Lived Assets The CICA issued Accounting Handbook Section 3063 (Section 3063) Impairment of
Long-Lived Assets which became effective for years beginning on or after
April 1, 2003. The standard provides guidance on recognizing, measuring and
disclosing the impairment of long-lived assets and replaces the previous
standard for the write-down provisions of property and equipment. For the
fiscal 2003 year, no write-down was deemed required for the Company as at
December 31, 2003. For 2004, the Company currently does not show any
indicators of impairment and thus for the period ending June 30, 2004 this
standard has a nil impact. 7




---



##### 



Variable Interest Entities In June 2003, the CICA issued Accounting Guideline 15, Consolidation of
Variable Interest Entities (AcG 15). Taking into account a recent
announcement by the CICA, which deferred the effective dates of this
guideline, AcG 15 requires consolidation of certain Variable Interest Entities
(VIEs) beginning in the first quarter of 2005 (for those companies with
calendar fiscal years). A VIE is any type of legal structure not controlled by
voting equity, but rather by contractual or other financial arrangements.
Great Lakes may be exposed to certain variable interest entities. Given that
the rules for AcG 15 are complex and continue to evolve, the Company will
re-assess its current position as further clarification is provided by the
CICA and amendments forth come. CRITICAL ACCOUNTING ESTIMATES The consolidated financial statements are prepared in accordance with Canadian
generally accepted accounting principles, which requires the use of estimates
and judgment in reporting assets, liabilities, revenues, expenses and
contingencies. In the judgment of management, none of the estimates outlined
in Note 1 (Summary of Accounting Policies) of the 2003 annual report are
considered critical accounting estimates as defined in regulation 51-102. Key
significant estimates for the Company include accruals, depreciation and those
relevant to the defined pension benefit plans. Estimates are based on
historical experience, current trends and various other assumptions that are
believed to be reasonable under the circumstances. Actual results could differ
from those estimates. CONTRACTUAL OBLIGATIONS During the second quarter of 2004, there have been no significant changes to
the specified contractual obligations that are outside the ordinary course of
business. Significant Contractual Obligations Due by Period In the final six
    
    In years
    
    In years
    
    In years
    
    Beyond$ in millions
    
    Total
    
    months of 2004
    
    2005-2009
    
    2010-2014
    
    2015-2019
    
    2020Long-term debt (CDN)
    
    $
    934
    
    
    $
    20
    
    
    $
    98
    
    
    $
    25
    
    
    $
    25
    
    
    $
    766Long-term debt (USD)
    
    $
    511
    
    
    $
    175
    
    
    $
    226
    
    
    $
    110
    
    
    $
    
    
    
    $
    
 BUSINESS ENVIRONMENT The unique nature of hydroelectric generation provides many advantages over
other forms of electricity generation. The advantages of hydroelectric power
include high level of reliability, low operating costs, operational
flexibility to meet ongoing base load electricity needs and peak demands,
minimal environmental impacts, and its reliance on water, a renewable
resource. Reliability: The equipment involved in producing hydroelectric power has
relatively few moving parts. Since the process does not include combusting
fossil fuels at high temperatures or creating steam, there is minimal wear and
tear on the machinery, which contributes to long life and low maintenance
requirements. Unplanned outage rates for hydroelectric units are among the
lowest in the electricity industry. 8




---



##### 



Low Operating Costs: Other than water royalties paid to governmental
authorities, hydroelectric facilities do not have any fuel costs, which can be
significant and highly volatile for fossil-fuelled plants. As well, most
hydroelectric plants can be operated remotely by a single person from a
centralized control centre. Combined with the low maintenance and outstanding
reliability of equipment, operating expenses are comparatively low. High Operational Flexibility: Hydroelectric plants can adjust quickly to
changes in demand and, depending on the flow of the river and the storage
capacity of the reservoirs, hydroelectric plants can service both the base
power requirements of its customers as well as their peak power requirements. Low Environmental Impact: Hydroelectric generation produces virtually no
greenhouse gas emissions or acid rain, both which have major impacts on the
environment. Instead of producing substantial amounts of residual wastes
during the power generation process, hydroelectric generation simply returns
the water to the river. RISKS The following represents a summary of the most relevant risk factors relating
to Great Lakes business. This summary contains only certain risk factors and
is not all-inclusive. Hydrology The revenues generated by the power systems are proportional to the amount of
electricity generated. The amount of electricity generated by the power
systems is dependent upon available water flows. Accordingly, revenues and
cash flows may be affected by low and high water flows in the watersheds.
There can be no assurance that the long-term historical water availability
will remain unchanged or that no material hydrologic event will impact the
hydrologic conditions that exist within the watershed. Annual deviations from
the long-term average can be significant. Great Lakes strives to mitigate the
risk of variable hydrology conditions by acquiring and operating a portfolio
of geographically diverse facilities. The diversified locations of our power
generating assets assist in balancing the impact of generation fluctuations in
any one geographic region. The Company also has access to hydrology insurance. Equipment Failure There is a risk of equipment failure due to wear and tear, latent defect,
design error or operator error, among other things, which could adversely
affect revenues and cash flows. Although the power systems have operated in
accordance with expectations, there can be no assurance that they will
continue to do so. Nevertheless, this risk is substantially mitigated by the
proven nature of hydroelectric technology, the design of the plants, the power
systems capital programs, adherence to prudent maintenance programs,
comprehensive insurance and significant operational flexibility as a result of
having generating units which can operate independently. Foreign Exchange The price paid for energy produced by our US operations is denominated in US
dollars and, therefore, results may be affected by the fluctuations of the
Canadian/US dollar exchange rate over time. A material increase in the value
of the Canadian dollar may negatively impact Great Lakes cash flows. The US
operations operating expenses and financing costs incurred are also
denominated in US dollars, thus providing a natural hedge. In addition, the
Company may manage the risk associated with foreign exchange rate fluctuations
by entering, from time to time, into forward foreign exchange contracts and
engaging in other hedging strategies. To the extent that the Company engages
in risk management activities related to foreign exchange rates, it will then
be subject to credit risks associated with the counterparties with which it
contracts. 9




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##### 



Energy Price Fluctuations We endeavour to maximize the stability and predictability of power generating
revenues through the use of fixed-price contracts to minimize the impact of
price fluctuations. Approximately 82% of our projected 2004 revenue is subject to long-term
bilateral and fixed-price power sales contracts or regulated rate-base
arrangements. The remaining revenue is generated through the sale of power on
a wholesale basis. Due to the low variable cost of hydroelectric power and the
ability to concentrate generation during peak pricing periods, we are able to
generate attractive margins on uncommitted capacity. Our long-term sales
contracts have an average term of 13 years and counterparties are almost
exclusively customers with long-standing credit history or investment grade
ratings. Our policy is to use financial contracts which typically have a term
of less than two years to lock in the future price of uncommitted power
generation we are likely certain to generate. This approach provides an
appropriate level of revenue stability, without exposing the Company to undue
risk of contractual shortfalls and provides the flexibility to enhance
profitability through the production of power during peak price periods. ANNUAL INFORMATION FORM Great Lakes prepares an Annual Information Form which can be accessed on SEDAR
at www.sedar.com. CERTIFICATION OF INTERIM FILINGS Form 52-109FT2  Certification of Interim Filings During Transition Period is
attached to this document. FORWARD-LOOKING STATEMENTS The Companys financial analysis and review contains forward-looking
statements within the meaning of Section 27A of the Securities Exchange Act
of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. The words believe, expect, anticipate, intend, and other
expressions which are predictions of or indicative of future events and trends
and which do not relate to historical matters identify forward-looking
statements. Reliance should not be placed on forward-looking statements
because they involve known and unknown risks, uncertainties and other factors,
which may cause the actual results, performance or achievements of the
business to differ materially from anticipated future results, performance or
achievements expressed or implied by such forward-looking statements. Factors
that could cause actual results to differ materially from those set forth in
the forward-looking statements include general economic conditions, weather
conditions, interest rates, foreign exchange rates, availability of equity and
debt financing and other risks. Great Lakes undertakes no obligation to
publicly update or revise any forward-looking statement, whether as a result
of new information, future events or otherwise.  /s/ Donald Tremblay  Donald Tremblay  Senior Vice-President and Chief Financial Officer
August 10, 2004
 10