Ontario Power Generation Reports 2014 First Quarter Financial Results

TORONTO, May 15, 2014 /CNW/ - Ontario Power Generation Inc. (OPG or Company) today reported its financial and operating results for the three months ended Mar. 31, 2014.  Net income attributable to the Province for the first quarter of 2014 was $242 million compared to $28 million for the same quarter in 2013.

Tom Mitchell, President and CEO said, "The long, cold winter put an unusually high demand on Ontario's electricity system.  Our increased income, in part, resulted from OPG's ability to meet the demand for electricity when people needed it.  The price paid to OPG continues to lower the overall price paid by Ontarians for electricity."

Mr. Mitchell added, "I am especially pleased by the continued positive performance of our Darlington Nuclear Generating Station.  In fact, in April, the station received its second consecutive excellent safety and performance evaluation from the World Association of Nuclear Operators.  Last year Pickering Nuclear received a strong performance review, the best in that station's history."

Mr. Mitchell said Ontario will continue to get value out of the Darlington station for many years to come. "We are deep into the preparations for the refurbishment that would keep the four units in operation until the middle of this century.  It is a very valuable asset for the province as it provides about 20 per cent of Ontario's power every year."

Net income attributable to the Province for the first quarter of 2014 increased by $214 million compared to the same quarter in 2013.  This increase was primarily due to the favourable impact of higher market prices resulting in higher revenue from electricity sales in the inter-jurisdictional market.  This was caused by unseasonably cold temperatures during the first quarter of 2014.  These increases were partially offset by lower earnings from the Nanticoke generating station (GS) and the Lambton GS, which ended coal-fired generation in 2013.

The end of coal-fired operations at the Nanticoke GS and the Lambton GS also resulted in a 90 per cent reduction in carbon dioxide and acid gas emissions during the first quarter of 2014, compared to the same quarter in 2013.

Business Segment, Generating, and Operating Performance

OPG's income before interest and income taxes from the electricity generation business segments was $346 million in the first quarter of 2014.  This compared to $109 million in the same quarter of 2013.  The increase was due primarily to the favourable impact of higher market prices received for the generation produced by hydroelectric generating stations that are subject to market price volatility.  The increase was partially offset by the impact of ending coal-fired operations at the Nanticoke GS and Lambton GS.

The nuclear waste management business segment recorded a loss before interest and income taxes of $34 million in the first quarter of 2014, compared to a loss before interest and income taxes of $63 million in the same quarter of 2013.  The improvement was primarily due to higher earnings on the Used Fuel Segregated Fund, partially offset by higher accretion expense which reflected the increase in asset retirement obligations due to the passage of time.

The increase in income before interest and income taxes of $27 million for the Services, Trading, and other Non-Generation business segment was primarily a result of higher trading margin for electricity sold to neighbouring energy markets.

Total electricity generated during the three months ended March 31, 2014 was 20.5 terawatt hours (TWh) compared to 21.3 TWh for the same quarter in 2013.  This decrease was mainly due to ending coal-fired operations at the Nanticoke GS and the Lambton GS in 2013.

The capability factor at the Darlington nuclear station was 96.0 per cent in the first quarter of 2014 compared to 84.1 per cent for the same quarter in 2013, and reflected a decrease in planned outage days.  The Pickering stations had a 66.6 per cent capability factor compared to 79.0 per cent in the first quarter of 2013, primarily as a result of an increase in outage days.  The availability of OPG's hydroelectric generating stations remained at high levels.

Generation Development

OPG is undertaking a number of generation development and life extension projects to support Ontario's long-term electricity supply requirements.  Significant developments during the year are as follows:

Darlington Refurbishment

• The Darlington Refurbishment project is currently in the definition phase.  Refurbishment of the four Darlington units is currently estimated to cost less than $10 billion in 2013 dollars, excluding capitalized interest and escalation.  The project is currently estimated to be completed by 2025.  A detailed cost and schedule estimate for the refurbishment of the four units is expected to be completed in 2015.
  
  
• The full-scale reactor mock-up facility to be used for tool testing and training for the refurbishment project was made available for service in the first quarter of 2014, ahead of schedule.  OPG is progressing with the design and construction of facilities and infrastructure and safety improvement projects required at the Darlington site for the refurbishment and continued operation of the station.
  
  
• In April 2014, the Canadian Nuclear Safety Commission (CNSC) accepted the Global Assessment Report as meeting all regulatory requirements set out in the Life Extension of Nuclear Power Plants and provided feedback on the Integrated Implementation Plan.  OPG expects the CNSC's final review and approval by the end of 2014 as part of the renewal of the Darlington GS Power Reactor Operating Licence.

Lower Mattagami

• The Lower Mattagami River project is expected to be completed on schedule by June 2015 and within the approved budget of $2.6 billion.  The 78 MW incremental unit at Harmon GS is expected to be declared in-service during the second quarter of 2014, ahead of its original target completion date of September 2014.  The Little Long GS was declared in-service in January 2014, also ahead of schedule.  As incremental units are placed in-service, the Amisk-oo-Skow Finance Corporation, a corporation wholly owned by the Moose Cree First Nation, may acquire up to a 25 per cent interest in the assets through its investment in the Lower Mattagami Limited Partnership. The life-to-date capital expenditures were $2,107 million as of Mar. 31, 2014.

Atikokan Conversion to Biomass

• Construction had been completed on the boiler and construction continues on the ancillary systems to support biomass operations.  During the first quarter of 2014, a significant milestone was achieved by successfully test firing the main unit on natural gas.  Life-to-date capital expenditures were $153 million as of Mar. 31, 2014.  The project is expected to be completed on schedule by August 2014 within the approved budget of $170 million.

Thunder Bay Conversion to Advanced Biomass

• On May 1, 2014, the Minister of Energy issued a Shareholder Resolution which clarifies certain parameters to be included in the electricity supply contract for the conversion of one unit at the Thunder Bay GS to advanced biomass fuel, which is currently being negotiated with the Ontario Power Authority.  Upon completion, the converted station is expected to have an in-service capacity of approximately 150 MW.  The Thunder Bay GS ended coal-fired operations in April 2014.
  
  

FINANCIAL AND OPERATIONAL HIGHLIGHTS
		Three Months Ended
		March 31
(millions of dollars - except where noted)		2014		2013
Earnings
	Revenue	1,387		1,255
	Fuel expense	149		183
	Gross margin	1,238		1,072
	Operations, maintenance and administration	670		700
	Depreciation and amortization	181		242
	Accretion on fixed asset removal and nuclear waste management liabilities	196		189
	Nuclear Funds (earnings) - a reduction to expense	(160)		(124)
	Income from investments subject to significant influence	(13)		(10)
	Other net expenses	14		18
	Income before interest and income taxes	350		57
	Net interest expense	12		25
	Income tax expense	95		4
	Net income	243		28
	Net income attributable to the Province	242		28
	Net Income attributable to non-controlling interest ^1	1		-
Income (loss) before interest and income taxes
	Electricity generation business segments	346		109
	Regulated - Nuclear Waste Management	(34)		(63)
	Services, Trading, and Other Non-Generation	38		11
	Total income before interest and income taxes	350		57
Cash flow
	Cash flow provided by operating activities	428		245
Electricity generation (TWh)
	Regulated - Nuclear Generation	11.6		11.6
	Regulated - Hydroelectric
	Existing regulated hydroelectric generating stations	4.8		4.7
	Hydroelectric generating stations subject to rate regulation effective July 1, 2014	3.3		3.4
	Contracted Generation Portfolio ^2	0.8		1.6
	Total electricity generation	20.5		21.3
Average sales prices and average revenue (¢/kWh)
	Average revenue for OPG ^3	6.2		5.6
	Average revenue for all electricity generators, excluding OPG ^4	10.1		9.2
Nuclear unit capability factor (per cent)
	Darlington GS	96.0		84.1
	Pickering GS	66.6		79.0
Availability (per cent)
	Regulated - Hydroelectric	92.4		93.1
	Contract Generation Portfolio - Hydroelectric	96.0		97.9
Equivalent forced outage rate
	Contract Generation Portfolio - Thermal	3.0		17.9
Return on common equity for the twelve months ended March 31, 2014		3.8		1.5
	and December 31, 2013 (per cent) ^5
Funds from operations interest coverage for the twelve months		3.0		2.8
	ended March 31, 2014 and December 31, 2013 (times) ^5

^1	Relates to the 25 per cent interest of the Amisk-oo-Skow Finance Corporation, a corporation wholly-owned by the Moose Cree First Nation, in the incremental assets of the Lower Mattagami Limited Partnership.
^2	Includes OPG's share of generation volume from its 50 percent ownership interests in the Portlands Energy Centre (PEC) and Brighton Beach.
^3	Average revenue for OPG is comprised of regulated revenues, market based revenues, revenues from energy supply agreements, and other energy revenue from cost recovery agreements.  In 2014, average revenue for OPG excludes the revenue from the cost recovery agreement for termination costs for the Nanticoke GS and Lambton GS as these stations ended coal-fired operations in 2013.  Average revenue for OPG also excludes OPG's share of revenues and generation from PEC and Brighton Beach.
^4	Revenues for other electricity generators are calculated as the sum of hourly Ontario demand multiplied by the hourly Ontario electricity price (HOEP), plus total global adjustment payments, plus the sum of hourly net exports multiplied by the HOEP, less OPG's generation revenue, including revenue from the Nanticoke GS and Lambton GS cost recovery agreement.
^5	"Funds from operations interest coverage" and "Return on equity" are non-GAAP financial measures and do not have any standardized meaning prescribed by US GAAP.  Additional information about these measures is provided in OPG's Management's Discussion and Analysis for the period ended Mar. 31, 2014, under the heading, Supplementary Non-GAAP Financial Measures.

Ontario Power Generation Inc. is an Ontario-based electricity generation company whose principal business is the generation and sale of electricity in Ontario.  Our focus is on the efficient production and sale of electricity from our generation assets, while operating in a safe, open and environmentally responsible manner.

Ontario Power Generation Inc.'s unaudited consolidated financial statements and Management's Discussion and Analysis as at and for the three months ended Mar. 31, 2014, can be accessed on OPG's Web site (www.opg.com), the Canadian Securities Administrators' Web site (www.sedar.com), or can be requested from the Company.

 

SOURCE: Ontario Power Generation Inc.

Ontario Power Generation
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