Ontario Power Generation Reports 2013 Second Quarter Financial Results

TORONTO, Aug. 15, 2013 /CNW/ - Ontario Power Generation Inc. (OPG or Company) today reported its financial and operating results for the three and six months ended June 30, 2013.  Net income for the second quarter of 2013 was $73 million compared to $43 million for the same quarter in 2012.  Net income for the six months ended June 30, 2013 was $101 million compared to $197 million for the same period in 2012.

"OPG continues its commitment to deliver value to the people of Ontario.  In the first half of 2013, we provided about 60 per cent of the electricity used in this province through nuclear, hydro and thermal generation," said President and Chief Executive Officer Tom Mitchell. "And the price we received is approximately 45 per cent below the average price received by all other Ontario electricity generators."

Mr. Mitchell noted, "The Government of Ontario recently directed the Ontario Power Authority to allow OPG to compete for other forms of renewable generation in addition to hydroelectric. This is a new direction for us as a company and one where we believe we can add value.

"We will apply the same principles for these potential projects as those applied in our current projects and operations.  We will work with communities to ensure they understand and support our efforts before, during and after construction and operation."

He added, "We will continue to seek out partnerships with Aboriginal communities such as our current hydroelectric projects with the Moose Cree First Nation on the Lower Mattagami River and the Taykwa Tagamou Nation at New Post Creek along the Abitibi River.

"And, as we do today, we will work in partnership with private sector contractors and suppliers best suited to help us build the infrastructure that will keep Ontario's electricity generating system strong for today and for future generations."

In August 2013, OPG received a five-year operating licence which combines the Pickering A and B generating stations' licences into a single-site licence.  The licence is subject to a number of conditions outlined by the CNSC.

Highlights

Net income for the second quarter of 2013 increased by $30 million compared to the same quarter in 2012.  This increase was primarily due to higher earnings from the nuclear fixed asset removal and nuclear waste management funds (Nuclear Funds), and higher revenue from the unregulated hydroelectric stations.  These increases were partially offset by lower nuclear generation in 2013 and the recognition of a Nuclear Liability Deferral Account regulatory asset that reduced expenses during the second quarter of 2012.

Net income for the six months ended June 30, 2013 decreased by $96 million, compared to the same period in 2012. This decrease was primarily due to lower nuclear generation, partially offset by higher revenue from the unregulated hydroelectric stations.

OPG's income before interest and income taxes from the electricity generation business segments was $110 million in the second quarter of 2013, compared to $128 million in the same period of 2012. Income before interest and income taxes from the electricity generation business segments was $212 million in the first half of 2013, compared to $285 million in the same period of 2012.  These decreases were primarily due to lower nuclear generation, partially offset by higher revenue from the Unregulated - Hydroelectric segment due to higher electricity spot market prices and generation volumes.

The Regulated - Nuclear Waste Management business segment recorded a second quarter loss before interest and income taxes of $15 million in 2013, compared to a loss of $64 million in 2012.  This improvement was primarily a result of a decrease in the valuation level of global equity markets which reduced earnings from the Nuclear Funds during the second quarter of 2012.

For the six months ended June 30, 2013, the Regulated - Nuclear Waste Management business segment recorded a loss before interest and income taxes of $78 million, compared to a loss before interest and income taxes of $40 million for the same period in 2012.  This decrease in income was primarily as a result of the Decommissioning Segregated Fund's overfunded position. When this fund is overfunded, OPG limits the earnings it recognizes by recording a payable to the Province. The overfunded status is a reflection of the strong fund position.

Total electricity generated during the three months ended June 30, 2013 was 19.9 terawatt hours (TWh), compared to 20.5 TWh for the same quarter in 2012.  This decrease was mainly due to lower generation at the Pickering station.  Total electricity generated during the six months ended June 30, 2013 was 41.0 TWh, compared to 42.5 TWh for the same period in 2012.  This decrease was primarily due to lower generation from OPG's regulated nuclear and hydroelectric segments, partially offset by higher generation from the Unregulated - Hydroelectric segment.

For the three and six month periods in 2013, the capability factor for the Pickering station decreased, compared to the same periods in 2012.  The decrease in the capability factor for the three months ended June 30, 2013 to 65.9 per cent from 79.3 per cent for the same period in 2012, was primarily due to an increase in outage days.  For the six months ended June 30, 2013, the capability factor decreased to 72.4 per cent from 78.1 per cent for the same period in 2012, primarily due to an extension to an outage in the first quarter.  For the three months ended June 30, 2013, Darlington's capability factor of 85.9 per cent was a slight increase from 85.6 per cent in 2012.  For the six months ended June 30, 2013, the capability factor for the Darlington station was 85.0 per cent compared to 90.6 per cent for the same period in 2012, reflecting an increase in outage days.

The availability of OPG's hydroelectric generating stations remained at high levels during the first half of 2013.  The thermal generating stations continued to maintain high Start Guarantee rates reflecting their ability to respond to market requirements.

Generation Development

OPG is undertaking several generation development projects to support Ontario's long-term electricity supply requirements.  Significant achievements during the second quarter of 2013 are as follows:

Darlington Refurbishment

  • In July 2013, OPG received the Canadian Nuclear Safety Commission's final assessment of the Integrated Safety Review (ISR) which confirmed that the ISR meets applicable regulatory requirements.

Lower Mattagami

  • The Lower Mattagami River project is expected to be completed on plan by June 2015 within the approved budget of $2.6 billion.  OPG has finalized and executed a remediation plan regarding a cofferdam breach at the Kipling site, and construction activity resumed at the Kipling site in May 2013.  Construction activity at the Little Long site is currently ahead of schedule, with the station expected to be in-service in the fourth quarter of 2013.

New Post Creek

  • In June 2013, the Minister of Energy directed the Ontario Power Authority to negotiate a power purchase agreement for the proposed 25 megawatt New Post Creek hydroelectric generating station. The station is expected to be constructed through a partnership between OPG and Coral Rapids Power L.P., a wholly owned subsidiary of Taykwa Tagamou Nation.  The Environmental Assessment for the project is expected to be completed by the end of 2013.

FINANCIAL AND OPERATIONAL HIGHLIGHTS
    Three Months Ended
June 30
Six Months Ended
June 30
(millions of dollars - except where noted)   2013 2012 2013 2012
Earnings          
  Revenue   1,190 1,125 2,445 2,324
  Fuel expense   172 165 355 357
  Gross margin   1,018 960 2,090 1,967
  Operations, maintenance and administration   643 669 1,343 1,304
  Depreciation and amortization   242 142 484 331
  Accretion on fixed asset removal and nuclear waste management liabilities   190 176 379 363
  Earnings on Nuclear Funds   (173) (110) (297) (320)
  Other net expenses   1 17 9 24
  Income before interest and income taxes   115 66 172 265
  Net interest expense   20 31 45 63
  Income tax expense (recovery)   22 (8) 26 5
  Net income   73 43 101 197
Income (loss) before interest and income taxes          
  Generating segments   110 128 212 285
  Nuclear Waste Management segment   (15) (64) (78) (40)
  Other segment   20 2 38 20
Total income before interest and income taxes   115 66 172 265
Cash flow          
  Cash flow provided by operating activities   347 101 592 212
Electricity generation (TWh)          
  Regulated - Nuclear Generation   10.9 11.7 22.5 24.2
  Regulated - Hydroelectric   4.5 4.8 9.2 9.7
  Unregulated - Hydroelectric   4.1 3.3 7.7 6.9
  Unregulated - Thermal   0.4 0.7 1.6 1.7
  Total electricity generation   19.9 20.5 41.0 42.5
Average sales prices and average revenue (¢/kWh)          
  Regulated - Nuclear Generation 1   5.7 5.5 5.7 5.5
  Regulated - Hydroelectric 1   4.0 3.5 3.9 3.5
  Unregulated - Hydroelectric 1   2.6 2.0 2.8 2.1
  Unregulated - Thermal 1   1.7 2.0 2.6 2.0
  Average revenue for OPG 2   5.6 5.1 5.6 5.1
  Average revenue for all electricity generators, excluding OPG 3   11.1 9.2 10.1 9.0
Nuclear unit capability factor (per cent)          
  Darlington GS   85.9 85.6 85.0 90.6
  Pickering GS   65.9 79.3 72.4 78.1
Availability (per cent)          
  Regulated - Hydroelectric   91.1 90.0 90.5 91.1
  Unregulated - Hydroelectric   92.7 94.0 93.6 93.0
Start Guarantee rate (per cent)          
  Unregulated - Thermal   96.8 97.6 97.5 97.8
Return on equity for the twelve months ended June 30, 2013 and December 31, 2012 (per cent) 4       3.0 4.2
Funds from operations interest coverage for the twelve months ended June 30, 2013 and December 31, 2012 (times) 4       2.9 2.2
Average sales prices are computed as net market generation revenue divided by net generation volume.
2 Average revenue for OPG is comprised of regulated revenues, market based revenues, and other energy revenues primarily from cost recovery agreements, and revenue from hydroelectric Energy Supply Agreements.
3 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.
4 "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 June 30, 2013, 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 and six months ended June 30, 2013, 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.

For further information:

Ontario Power Generation
Media Relations
416-592-4008 or 1-877-592-4008
Follow us @ontariopowergen