OPG Reports 2016 Second Quarter Financial Results

Quarterly Earnings were $132 million as Preparations Continue for Canada's Largest Clean Energy Project

TORONTO, Aug. 12, 2016 /CNW/ - Ontario Power Generation Inc. (OPG or Company) today reported quarterly income of $132 million for the second quarter that ended June 30, 2016 as it continues to prepare for the start of the refurbishment on the first unit of the Darlington Nuclear Generating Station (GS) later in the year. 

"The Company's strong operating performance is evidenced by another excellent safety and performance rating for the Darlington station from the World Association of Nuclear Operators in June 2016, which maintained the station's standing among the top performing nuclear power plants in the world.  The strong operating performance provides a firm financial base for refurbishing the Darlington Nuclear Generating Station." said Jeff Lyash, President and CEO.  "Extensive plans and preparations have kept us on track to start refurbishment work on the first of the four units in the fourth quarter of this year." 

Mr. Lyash added, "OPG has successfully delivered climate change initiatives and is now ready to deliver Canada's largest clean power project.  The $12.8-billion investment in refurbishing Darlington's four units will create thousands of jobs, generate $14.9 billion in economic benefits to Ontario and will provide safe, clean, reliable, cost-effective electricity for at least another 30 years." 

Net income attributable to the Shareholder for the second quarter of 2016 was $132 million compared to $189 million for the same quarter in 2015.  Net income attributable to the Shareholder for the six months ended June 30, 2016 was $255 million compared to $423 million for the same period in 2015.  The decrease in net income for these periods was primarily due to lower nuclear generation and higher nuclear outage OM&A expenses stemming from the timing of planned outage activities at the Darlington GS during the year.  Compared to 2016, much of the planned outage work at the station in 2015 was scheduled later in the year to coincide with the execution of the four-unit vacuum building outage, a critical step in support of the station's refurbishment.

Generating and Operating Performance

Electricity generated during the three months ended June 30, 2016 was 19.4 terawatt hours (TWh) compared to 20.8 TWh for the same quarter in 2015.  Total electricity generated during the six months ended June 30, 2016 was 40.4 TWh, compared to 42.1 TWh for the same period in 2015.  The decrease was mainly due to a decrease in nuclear generation of 1.7 TWh for the three months ended and 1.6 TWh for the six months ended June 30, 2016.  The lower nuclear generation was largely a result of the timing of planned outage activities at the Darlington GS during the year compared to 2015, and an increase in planned outage activities at the Pickering GS.  Increases in electricity generated from the regulated hydroelectric generating stations during the three and six month periods ended June 30, 2016 partially offset the lower nuclear generation by 0.4 TWh and 0.1 TWh, respectively.

For the three months ended June 30, 2016, the unit capability factor at the Darlington GS was 75.9 per cent compared to 91.5 per cent for the same quarter in 2015.  For the six months ended June 30, 2016, the unit capability factor at the Darlington GS was 86.6 per cent compared to 94.7 per cent for the same period in 2015.  At the Pickering GS, the unit capability factor was 71.4 compared to 80.0 per cent for the same quarter in 2015.  For the six months ended June 30, 2016, the unit capability factor at the Pickering GS was 72.1 per cent compared to 76.5 per cent for the same period in 2015.  The lower unit capability factor at the Darlington GS reflected the timing of planned outage activities at the station during the year compared to 2015.  The decrease in the unit capability factor at the Pickering GS was mainly due to an increase in the number of planned outage days during the three and six month periods ended June 30, 2016. 

The availability of OPG's regulated hydroelectric generating stations for the three and six month periods ended June 30, 2016 remained above 90 per cent.  For the contracted hydroelectric plants, availability decreased from 95.3 per cent in the second quarter of 2015 to 87.0 per cent in the second quarter of 2016, and from 96.5 per cent for the first half of 2015 to 85.5 per cent for the same period in 2016.  The lower hydroelectric availability at the contracted plants was primarily due to an increase in planned outage days.

The thermal Equivalent Forced Outage Rate improved during the three and six month periods ended June 30, 2016 compared to the same periods ended June 30, 2015, primarily due to the outage taken in 2015 to perform repair work at the Lennox GS.

Generation Development

OPG is undertaking a number of generation development and life extension projects.  Significant developments during the second quarter of 2016 were as follows:

Darlington Refurbishment

The project to refurbish the four units at the Darlington station is in the execution phase.  The approved project budget for the four-unit refurbishment is $12.8 billion, including capitalized interest and escalation.  Preparation activities and pre-requisite project work continued during the quarter.  The refurbishment of the first unit, Unit 2, is on track to commence in the fourth quarter of 2016, with the last unit scheduled to be completed by 2026.  Unit 2 is scheduled to be returned to service in the first quarter of 2020, at which time, capital expenditures of approximately $4.8 billion are planned to be placed in service.  The planned in-service amount includes expenditures incurred during the definition and planning phase of the project. 

Life-to-date capital expenditures on the project were $2,612 million as at June 30, 2016. 

Peter Sutherland Sr. GS

Construction work on the new 28 MW hydroelectric generating station on the New Post Creek continued as scheduled during the second quarter of 2016.  The project has a planned in-service date in the first half of 2018 and an approved budget of $300 million.  Life-to-date capital expenditures were $162 million as at June 30, 2016.

FINANCIAL AND OPERATIONAL HIGHLIGHTS
		Three Months Ended				Six Months Ended
		June 30				June 30
(millions of dollars – except where noted)		2016		2015		2016		2015
	Revenue	1,387		1,383		2,865		2,738
	Fuel expense	182		180		354		337
	Gross margin	1,205		1,203		2,511		2,401
	Operations, maintenance and administration	709		650		1,395		1,315
	Depreciation and amortization	316		200		628		396
	Accretion on fixed asset removal and nuclear waste management liabilities	232		224		464		448
	Earnings on nuclear funds - (a reduction to expenses)	(225)		(141)		(372)		(372)
	Income from investments subject to significant influence	(9)		(11)		(17)		(22)
	Other net expenses (gains)	10		13		(1)		26
	Income before interest and income taxes	172		268		414		610
	Net interest expense	31		47		64		94
	Income tax expense	6		28		87		84
	Net income	135		193		263		432
	Net income attributable to the Shareholder	132		189		255		423
	Net income attributable to non-controlling interest ^1	3		4		8		9
Income (loss) before interest and income taxes
	Electricity generation business segments	178		358		498		695
	Regulated – Nuclear Waste Management	(5)		(81)		(88)		(72)
	Services, Trading, and Other Non-Generation	(1)		(9)		4		(13)
	Total income before interest and income taxes	172		268		414		610
Cash flow
	Cash flow provided by operating activities	348		450		714		905
Electricity generation (TWh)
	Regulated – Nuclear Generation	10.6		12.3		22.9		24.5
	Regulated – Hydroelectric	8.0		7.6		15.9		15.8
	Contracted Generation Portfolio ^2	0.8		0.9		1.6		1.8
	Total electricity generation	19.4		20.8		40.4		42.1
Nuclear unit capability factor (per cent)
	Darlington GS	75.9		91.5		86.6		94.7
	Pickering GS	71.4		80.0		72.1		76.5
Availability (per cent)
	Regulated – Hydroelectric	90.4		92.1		92.6		91.8
	Contracted Generation Portfolio – Hydroelectric	87.0		95.3		85.5		96.5
Equivalent forced outage rate
	Contracted Generation Portfolio – Thermal	1.0		10.3		1.0		17.5
Return on Equity Excluding Accumulated Other Comprehensive Income
	(ROE Excluding AOCI) for the twelve months ended June 30, 2016 and
	December 31, 2015 (%) ^3					2.3		4.0
Funds from operations (FFO) Adjusted Interest Coverage for the twelve
	months ended June 30, 2016 and December 31, 2015 (times) ^3					4.8		5.0

^1	^Relates to the 25 per cent interest of a corporation wholly owned by the Moose Cree First Nation in the Lower Mattagami Limited Partnership.
^2	^Includes OPG's share of generation volume from its 50 per cent ownership interests in the Portlands Energy Centre and Brighton Beach GS.
^3	^ROE Excluding AOCI and FFO Adjusted Interest Coverage 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 three and six month periods ended June 30, 2016, under the sections Highlights – ROE Excluding AOCI and Highlights – FFO Adjusted Interest Coverage, as well as 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 providing low cost power in a safe, clean, reliable and sustainable manner for the benefit of our customers and shareholder.

Ontario Power Generation Inc.'s unaudited interim consolidated financial statements and Management's Discussion and Analysis as at and for the three and six month periods ended June 30, 2016 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.

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