OPG reports strong 2015 second quarter financial results

New regulated prices, higher nuclear production, and newly online generating assets contribute to quarterly income of $189 million, an increase of 64 per cent over 2014

TORONTO, Aug. 21, 2015 /CNW/ - Ontario Power Generation Inc. (OPG or Company) today reported its financial and operating results for the three and six months ended June 30, 2015.  Net income attributable to the Shareholder for the second quarter of 2015 was $189 million compared to $115 million for the same quarter in 2014.  Net income attributable to the Shareholder for the six months ended June 30, 2015 was $423 million compared to $357 million for the same period in 2014. 

Tom Mitchell, OPG's President and CEO said, "In the first half of the year, the higher production by the Darlington nuclear station made an essential contribution to the people and businesses of Ontario by providing reliable, moderately-priced power.

"Darlington operates safely and replaces power sources that would contribute to climate change.  Refurbishing the station will allow it to continue to operate for another 30 years and will create thousands of jobs at the plant and at companies across Ontario."

Mr. Mitchell added, "I'm also pleased with the solid performance of the Pickering nuclear station. In recent years, the six operating units have undergone extensive maintenance. We will need them to operate reliably while other nuclear units are being refurbished."

Overall, OPG received an average of 6.1 cents per kilowatt hour for its power in the second quarter of 2015, which is significantly lower than the average of all other electricity generators.

Business Segment, Generating, and Operating Performance

OPG's income before interest and income taxes from the electricity generation business segments was $358 million in the second quarter of 2015 compared to $100 million in the same quarter of 2014.  Income before interest and income taxes from the electricity generation business segments was
$695 million for the six months ended June 30, 2015, compared to $446 million for the same period of 2014.  The increase for the three and six months ended June 30, 2015 was primarily due to new regulated prices effective November 2014, higher nuclear production, and an increase in income from the Contracted Generation Portfolio segment due to the early in-service of the new units on the Lower Mattagami River and the Atikokan and Thunder Bay generating stations that have been converted to biomass.

The nuclear waste management business segment recorded a loss before interest and income taxes of $81 million in the second quarter of 2015, compared to earnings of $24 million in the same quarter of 2014.  For the six months ended June 30, 2015, the nuclear waste management business segment recorded a loss before interest and income taxes of $72 million, compared to a loss of $10 million for the same period in 2014.  The decrease in earnings for the three and six months ended June 30, 2015 was primarily a result of lower earnings on the nuclear funds due to unfavourable market conditions, and a lower Ontario Consumer Price Index which unfavourably affected OPG's rate of return on the Used Fuel Segregated Fund.

Total electricity generated during the three months ended June 30, 2015 was 20.8 terawatt hours (TWh) compared to 19.8 TWh for the same quarter in 2014.  The increase was mainly due to higher nuclear generation of 1.3 TWh largely as a result of fewer planned outage days. In 2015, much of the planned outage work at the Darlington generating station (GS) is scheduled to coincide with the Vacuum Building Outage (VBO), which is planned to commence in September 2015.  In 2014, the planned outage work occurred in the spring. The VBO, which occurs every 12 years, will require the shutdown of all four units for the duration of the outage.  This is the last VBO prior to the execution of the Darlington Refurbishment project and, therefore, its execution is a critical step in ensuring the project's success.

Total electricity generated during the six months ended June 30, 2015 was 42.1 TWh, compared to 40.3 TWh for the same period in 2014.  The increase was mainly due to higher generation from the Regulated – Nuclear Generation segment due to the timing of planned outage work, and the new hydroelectric units on the Lower Mattagami River.

For the three months ended June 30, 2015, the capability factor at the Darlington GS was 91.5 per cent compared to 77.6 per cent for the same quarter in 2014.  For the six months ended June 30, 2015, the capability factor was 94.7 per cent compared to 86.7 per cent for the same period in 2014.  The improvements in reliability during the three and six month periods were primarily due to the timing of planned outage work scheduled to coincide with the VBO. 

At the Pickering GS, the capability factor improved to 80.0 per cent for the three months ended June 30, 2015, compared to 77.4 per cent in the same quarter of 2014.  The capability factor of 76.5 per cent for the six months ended June 30, 2015 was an improvement from the 72.0 per cent for the same period in 2014.  The increased capability factors during the three and six month periods were primarily due to a decrease in the number of unplanned outage days, reflecting continued investments made to improve the performance of the station.

The availability of OPG's regulated and contracted hydroelectric generating stations for the three and six month periods ended June 30, 2015 remained above 90 per cent due to a combination of fewer planned and unplanned outage days. The thermal Equivalent Forced Outage Rate increased for the three and six month periods ended June 30, 2015, compared to the same periods in 2014, primarily due to an outage to perform repair work at the Lennox GS.  The extended duration of the outage reflected market conditions that made it more cost effective to carry out the repair work over a longer period.

Generation Development

OPG is undertaking a number of generation development and refurbishment projects to support Ontario's long-term electricity supply requirements and operate a generation portfolio that is essentially free of greenhouse gases and smog-causing emissions.  Significant developments to June 30, 2015 were as follows:

Darlington Refurbishment project

• The Darlington Refurbishment project is currently in the definition phase, with a number of pre-requisite projects underway that are required to be completed in advance of the project's execution phase commencing in 2016.  The definition phase is scheduled to be completed in 2015, and the pre-requisite projects are tracking to be completed to support the execution of the first unit's refurbishment commencing in 2016.
• The final budget and schedule for the refurbishment of the four units at the Darlington GS are on track to be completed in 2015.  Life-to-date capital expenditures were $1,791 million as at June 30, 2015. 

Peter Sutherland Sr. GS

• In March 2015, OPG's Board of Directors approved a project to construct a new 28 MW generating station – Peter Sutherland Sr. GS on the New Post Creek near its outlet to the Abitibi River, with a planned in-service date in the first half of 2018 and an approved budget of $300 million.  Life-to-date capital expenditures were $39 million as at June 30, 2015.
• In the second quarter of 2015, a hydroelectric energy supply agreement for the station was executed with the Independent Electricity System Operator.
• Construction work commenced during the second quarter of 2015. The station will be completed through a partnership between OPG and Coral Rapids L.P., a wholly owned subsidiary of the Taykwa Tagamou Nation.   

FINANCIAL AND OPERATIONAL HIGHLIGHTS
		Three Months Ended				Six Months Ended
		June 30				June 30
(millions of dollars – except where noted)		2015		2014		2015		2014
	Revenue	1,383		1,098		2,738		2,485
	Fuel expense	180		154		337		303
	Gross margin	1,203		944		2,401		2,182
	Operations, maintenance and administration	650		666		1,315		1,336
	Depreciation and amortization	200		181		396		362
	Accretion on fixed asset removal and nuclear waste management liabilities	224		195		448		391
	Earnings on nuclear funds - (a reduction to expenses)	(141)		(217)		(372)		(377)
	Income from investments subject to significant influence	(11)		(10)		(22)		(23)
	Other net expenses	13		10		26		24
	Income before interest and income taxes	268		119		610		469
	Net interest expense	47		11		94		23
	Income tax expense	28		(8)		84		87
	Net income	193		116		432		359
	Net income attributable to the Shareholder	189		115		423		357
	Net income attributable to non-controlling interest ^1	4		1		9		2
Income (loss) before interest and income taxes
	Electricity generation business segments	358		100		695		446
	Regulated – Nuclear Waste Management	(81)		24		(72)		(10)
	Services, Trading, and Other Non-Generation	(9)		(5)		(13)		33
	Total income before interest and income taxes	268		119		610		469
Cash flow
	Cash flow provided by operating activities	450		205		905		633
Electricity generation (TWh)
	Regulated – Nuclear Generation	12.3		11.0		24.5		22.6
	Regulated – Hydroelectric
	Existing regulated hydroelectric stations	4.6		4.7		9.3		9.5
	Hydroelectric stations prescribed for rate regulation beginning in 2014	3.0		3.3		6.5		6.6
	Contracted Generation Portfolio ^2	0.9		0.8		1.8		1.6
	Total electricity generation	20.8		19.8		42.1		40.3
Average revenue (¢/kWh)
	Average revenue for OPG ^3	6.1		5.1		6.2		5.7
	Average revenue for all electricity generators, excluding OPG ^4	13.4		10.7		11.1		10.4
Nuclear unit capability factor (per cent)
	Darlington GS	91.5		77.6		94.7		86.7
	Pickering GS	80.0		77.4		76.5		72.0
Availability (per cent)
	Regulated – Hydroelectric	92.1		91.2		91.8		91.8
	Contracted Generation Portfolio – hydroelectric stations	95.3		87.0		96.5		91.4
Equivalent forced outage rate
	Contracted Generation Portfolio – thermal stations	10.3		3.7		17.5		3.3
Return on common equity for the twelve months ended June 30, 2015						8.9		8.5
	and December 31, 2014 (per cent) ^5
Return on common equity, excluding extraordinary gain, for the twelve						6.5		6.0
	months ended June 30, 2015 and December 31, 2014 (per cent) ^5
Funds from operations interest coverage for the twelve months						3.8		2.8
	ended June 30, 2015 and December 31, 2014 (times) ^5

^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 (PEC) and Brighton Beach.
^3	Average revenue for OPG is comprised of revenues from regulated prices established by the OEB, market based revenues, and revenues from energy supply agreements.  Average revenue for OPG excludes OPG's share of revenues and generation from PEC and Brighton Beach.  The 2014 average revenue for OPG also excludes the revenue from the cost recovery agreement for costs related to the Nanticoke GS and Lambton GS which were shut down in 2013.
^4	Average revenue for other electricity generators is comprised 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.
^5	"Return on common equity" and "Funds from operations 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 period ended June 30, 2015, 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 that is 99.7 per cent free of greenhouse gas and smog-causing emissions.  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 and six month periods ended June 30, 2015, 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, Media Relations, 416-592-4008 or 1-877-592-4008, Follow us @ontariopowergen