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1 MAY JUNE 2012 COME VISIT US ONLINE AT $6.00

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3 As an undergrad, Toronto-born Jim Davidson originally set his sights on a teaching career. To that end, he studied economics, kinesiology, geography and urban studies before finally settling on a degree in environmental science from the University of Waterloo. Profile But a life at the head of the classroom simply wasn t in the cards. When he failed to find a position in his chosen field, Mr. Davidson abandoned a plan to head to graduate school and accepted an unexpected offer to enter the brokerage business. Needless to add, it turned out to be a perfect fit. Today, Mr. Davidson is the chairman and CEO of FirstEnergy Capital Corp., Canada s leading underwriter of oil and gas securities. Under his supervision, FirstEnergy Capital Corp. has been cited as one of Canada s 50 best-managed companies. Nominated for an award as Canada s outstanding CEO in 2008, Mr. Davidson is the last of four original co-founders who remains active with the firm. Although he s comfortable rubbing shoulders with the most important corporate players in Canada, Mr. Davidson is probably more proud of the remarkable run of philanthropic and charitable work generated by FirstEnergy s partners and staff members during the past 19 years. As he puts it, active support for charities, the arts and culture has been part of FirstEnergy s DNA since the company was founded in On his own, Mr. Davidson also cochaired a drive that raised $10.5 million to build a state-of-the-art facility for the Calgary Humane Society and made a multimillion-dollar contribution to Calgary s Edge School for a new recreational centre, now known as the Jim Davidson Sports Complex. As a trustee of the Calgary Parks Foundation, Mr. Davidson is a primary driver behind the proposed Greenway project, an 80-kilometre green corridor and recreational pathway to link more than 40 Calgary communities and parks. In terms of business performance, FirstEnergy Capital has helped its corporate clients to raise more than $67 billion in more than 950 equity financings since inception. Nor has the company ever failed to record a quarterly profit in all that time. Q: Most people refer to FirstEnergy Capital Corp. as an investment bank. How would you describe the company? A: We are a specialist boutique, the term generally applied to smaller investment banking firms in Canada. Peters & Co. Ltd., Haywood Securities Inc. and Dundee Wealth Management would be described the same way. Generally, the smaller brokerage firms tend to specialize. We are an investment boutique that specializes in energy, serving as a conduit between capital that needs to find a rate of return and entrepreneurs who need capital to expand. We re a bridge between the needs of our clients and capital. Q: So your team is quite different from a private equity firm, for example? A: Private equity firms invest other clients money, on a managed basis. Private equity firms can in fact be our clients. We re on the other side of the street. We help to package up, help to finance and offer advice to management teams that occupy the energy space. Q: We re currently enjoying a period of robust oil prices, but the price of natural gas has fallen to alarming levels. Is the spring of 2012 a good or a bad time to be in your particular line of work? A: (Laughs) From a macro perspective, the world is unsettled and things don t seem to be settling down as quickly as we hoped they would. Spain seems to be having major problems, with Greece and Portugal hovering in the background. So from a macro perspective, it s difficult. In terms of the energy industry, we have a made-in-north America problem, with natural gas prices as low as they ve been since I can remember. Oil prices are strong, but there are also differentials between the WTI and Brent crude prices that are causing problems. Part of the difficulty is the oil backup in Cushing, Oklahoma, the central clearing area for the American Midwest, which brings us back to the lack of pipeline space available. We need better access to different markets to try and reduce the bottlenecks that are negatively affecting pricing for our clients. Q: Are soft natural gas prices having an adverse effect on the activity level at FirstEnergy? A: Oh, yeah, definitely. Our clients cannot make a profit with gas priced around $1.50 per million cubic feet. Low prices affect activity levels and they affect the amount of financing we can do. Our activity levels are suppressed. We are managing to maintain our market share among those financing deals and M&A transactions that are currently taking place, but it s a much tougher environment. Q: Your company tends to work with publicly traded companies more frequently than with privately held companies. What services do you provide for your publicly traded clients? Energy Processing Canada May/June 12 19

4 Profile A: All public companies start out their lives as private companies. And private companies need management teams, boards of directors and seed capital to begin. We help to provide that seed capital. Then, as they continue to grow, drill wells and make acquisitions, we continue to finance them. Once they have grown to a point where the next logical step is to go public, we will assist them in that process. The speed of their growth tends to accelerate after that and their financing needs and drilling activity tend to pick up as well. We assist them at these stages as well, by finding assets for them to buy and raising capital for them when it s appropriate. Ultimately in the life-cycle of each company, there comes a time to sell. And we assist them in that process as well. Q: Would you describe this type of company as an ideal client? A: Yes, it s kind of a womb to tomb relationship. Because of the nature of the (energy) business, there s a possibility that each of these CEOs and management teams can come back a second or even a third time. Once they have built up a sizable asset and it becomes attractive to somebody else, they sell it. They then take a little bit of time off, as they should do, and often come back to us to raise money and start all over again. In actuality, the process can repeat itself with the same management team several times. Q: You have always been proud of FirstEnergy s lengthy unbroken string of profitable quarters. Is that winning streak still intact? A: Yes, it is. Right at the moment, we continue to be profitable. In September of 2013, the company will be 20 years old. Thus far, we have never recorded an unprofitable quarter in our corporate history. Naturally, we re hoping that will continue. Q: Your personal background is quite interesting. As a young man, you worked with underprivileged kids, earned a degree in environmental science and didn t really seem to be headed for a financial career. Can you explain how you wound up where you are today? 20 May/June 12 Energy Processing Canada

5 A: I wanted to be a teacher and got into this business somewhat by accident. After graduating from university, I was about to head off and get my MBA. A friend at the time invited me into the brokerage business. I went in when the National Energy Program had just been announced. Alberta was getting crushed. So I picked an inopportune time to move from Toronto, where I grew up, to Calgary. But what doesn t kill you makes you stronger. So I lived through (the NEP) and came out the other side. It turned out to be a very good fit for me. I ve enjoyed every minute in this business. I enjoy the process and meeting very smart and motivated, entrepreneurial people who have vision. I like being involved in the process that helps them achieve that vision. Q: The original founders of FirstEnergy Capital are a fascinating group. Can we talk a bit about how you all got together in the first place? A: There were four founding partners. Rick Grafton, Murray Edwards, W. Brett Wilson (former panellist on CBC-TV s Dragons Den) and myself. We were all from different companies and different disciplines. We worked on planning for about a year, meeting every week in the Petroleum Club, which seems both appropriate and a bit dangerous in retrospect. We finally opened up shop in September 1993, right at the top of the (boom-and-bust) cycle, literally to the day. Q: What motivated the founders to abandon safe jobs and move forward with this proposition at that particular time? A: We thought an opportunity was presenting itself. It had been many years since a new investment boutique had appeared on the scene and we thought there was room for a new entry. And that proved to be the case because we took off almost from day one, against very good competition. Of course, there were challenges. right itself more quickly than it did, in fact. Sometimes naivete is an important quality for a young entrepreneur. Q: Where did each of the partners move from? A: I was at First Marathon Securities, Rick Grafton was at Peters & Co., Murray was independent at that time, though he had previously worked at a merchant banking arm of Peters & Co. Brett had been working at another firm. Personally, I felt it was time to make a change. I was in my early thirties and had enjoyed a certain amount of success and felt like I wanted an additional challenge. And, boy, I found one. But I liked my partners and had belief in their abilities and they believed in mine, although I didn t know the guys all that well at the time. Rick was a competitor of mine, a very able competitor, so I knew he would make a good partner. Murray was associated with Canadian Natural Resources, which I had helped to finance during the initial financing round. I had not met Brett prior to the partnership. Murray brought him into the group. We made mistakes but we didn t make too many. We were able to create a corporate culture and we managed to accomplish that in short order. Q: Speaking of your corporate culture, FirstEnergy Capital s commitment to charitable causes, most of which combined fundraising with a great deal of old-fashioned fun, made Calgary stand up and take notice quite early on. Can we talk a bit about how that particular commitment came to be? A: It goes right back to the beginning. All four founding partners had been active fundraisers prior to getting together at FirstEnergy, so it was part of our collective view of the necessity to give back. We had attained a certain level of financial success, so we decided to incorporate (a charitable component) into our business model. We saw it as a way to market ourselves, also. Profile our corporate culture, but also it was used as a marketing opportunity to align ourselves with our clients. We came up with the idea of fundraising parties very early on: for example, our annual Stampede party attracts about 1,200 people. We raise about $220,000 for four charities that are different each year. Our clients contributions to the charitable cause are their tickets to get in the door. We wanted to present ourselves in a little different fashion and we came up with that idea. We don t charge, per se. Clients decide how much they choose to contribute. We have supported 250 charities of various sizes, and if a cause is important to either our clients or our staff, we will try to support it. It s part of our DNA and it continues to this day. In addition to that, we agreed long ago to give a certain percentage of our profits to charity each year. Q: In the end, what keeps you going? A: The investment banking industry is a fascinating sector, continually evolving to meet the changing needs of the market. Over two decades FirstEnergy has had the opportunity to help redefine the energy business in Calgary. Even a decade ago, the downtown landscape remained dominated by international majors; this is no longer the case. Today, small- and mid-cap firms represent a significant portion of the province s oil and gas activity, and I am proud to say we have helped enable and facilitate this growth through our ongoing support of diverse energy players. Energy remains our core competency; it has always been our focus and will remain so moving forward. The upside of our success in this sector is both well-established relationships that foster further market development and opportunity to give back to our community, both which foster a deep level of satisfaction and gratitude. The very day we opened our office was the peak of the market and it went down for 18 months after that. It was humbling. I think we were naively optimistic that the world was going to It gave us the dual function of doing the right thing for the community and also building up goodwill with our clients that could also be leveraged into future business. So it became part of Tom Keyser is freelance writer in Kelowna, B.C. 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