TORONTO, Feb. 16 /CNW/ - Ontario Power Generation Inc. ("OPG" or the
"Company") today reported its financial and operating results for the year
ended December 31, 2006. Net income for the year was $490 million compared to
net income of $366 million for the year ended December 31, 2005.
"OPG's 2006 financial results reflect increased nuclear and hydroelectric
production. Although the reliability of our fossil stations continued to
improve in 2006, fossil production declined due to significantly lower Ontario
electricity demand. In 2007, we expect a continuation of low market prices and
slow growth in Ontario electricity demand. These factors, combined with
constrained revenues, cost pressures, and an increasing requirement to
undertake new generation projects, are expected to result in increased
financial pressures. In 2007, OPG will continue to focus on improving
operational performance and strengthening safety initiatives while continuing
to meet the expectations of our shareholder with respect to new generation
projects," said President and CEO Jim Hankinson.
Electricity generated in 2006 of 105.2 terawatt hours (TWh) was lower
than 2005 production of 108.5 TWh. Electricity production from OPG's nuclear
stations of 46.9 TWh in 2006 increased over 2005 nuclear production of
45.0 TWh. The increase was primarily a result of a full year's production from
Unit 1 at the Pickering A nuclear station which returned to service in
November 2005. Hydroelectric production of 33.3 TWh was marginally higher than
production of 32.6 TWh in 2005. Electricity production from OPG's fossil
stations declined to 25.0 TWh in 2006 compared to 30.9 TWh in 2005 mainly as a
result of significantly lower Ontario electricity demand.
OPG received an average price of 4.6cents/kilowatt hour (kWh) from the
output of all of its generating stations compared to an average price of
4.9cents/kWh in 2005. These average prices reflect regulated prices that OPG
receives for production from its nuclear and baseload hydroelectric generating
assets as well as spot market prices, subject to a revenue limit, for the
majority of its remaining production. The average electricity spot price in
Ontario of 4.9cents/kWh in 2006 was affected by lower demand and was
significantly lower than the average price in 2005 of 7.2cents/kWh.
Earnings in 2006 were significantly affected by a reduction in gross
margin from electricity sales due primarily to lower average sales prices and
lower electricity generation compared to 2005, and an increase in pension and
other post employment benefit costs mainly as a result of changes in economic
assumptions used to measure the costs.
Earnings in 2006 were favourably affected by a decrease in depreciation
expense of $89 million compared to 2005. The decrease in depreciation expense
was primarily due to an extension of the service lives, for accounting
purposes, of all of the coal-fired generating stations as a result of proposed
delays in the plan to replace coal-fired generation. In addition, OPG extended
the remaining service lives of the Pickering A and B nuclear generating
stations.
In 2005, OPG recorded impairment charges of $202 million related to its
Lennox generating station, and $63 million related to Units 2 and 3 at the
Pickering A nuclear station which contributed to higher earnings in 2006
relative to 2005.
In 2006, OPG initiated and made progress on a number of electricity
generation projects aimed at significantly contributing to Ontario's long-term
electricity supply requirements. These projects include the following:- Excavation of a new water diversion tunnel to increase the amount of
water flowing to existing turbines at the Sir Adam Beck generating
stations in Niagara began in early September;
- Construction of a new 12.5 megawatt (MW) Lac Seul hydroelectric
generating station on the English River began during the first quarter
of 2006 and is expected to be completed in the fourth quarter of 2007;
- In September, Portlands Energy Centre ("PEC"), a 550 MW gas-fired,
combined cycle station that is under construction near downtown
Toronto, signed a 20-year Accelerated Clean Energy Supply contract
with the Ontario Power Authority. PEC is a limited partnership between
OPG and TransCanada Energy Ltd.;
- OPG began an Environmental Assessment ("EA") process as part of its
business case study for the potential refurbishment and life extension
of its Pickering B nuclear generating station;
- OPG initiated a federal approval process with the Canadian Nuclear
Safety Commission in September by filing an Application for a Site
Preparation Licence for new nuclear generating units at OPG's
Darlington nuclear generating site;
- The definition phase for a 450 MW hydroelectric development, which
includes the replacement and expansion of certain hydroelectric
generating stations located on the Lower Mattagami River, is
proceeding. OPG is engaged in consultations with First Nations
stakeholders, and is currently addressing EA requirements and
detailing technical project specifications; and
- OPG is exploring the potential development of a gas-fuelled
electricity generation station at its Lakeview site and is continuing
with the decommissioning and demolition of the Lakeview coal-fired
generating station."The list of new generation projects that OPG is currently undertaking is
extensive. Our Shareholder has asked us to develop these much-needed new
sources of electricity supply to help meet Ontario's future electricity needs.
Our objective is to effectively manage and deliver these small, medium, and
large projects on schedule and within budget," said President and CEO Jim
Hankinson.FINANCIAL AND OPERATIONAL HIGHLIGHTS
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(millions of dollars - except where noted) 2006 2005
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Earnings
Revenue after revenue limit and Market
Power Mitigation Agreement rebates 5,564 5,798
Fuel expense 1,098 1,297
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Gross margin 4,466 4,501
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Operations, maintenance and administration 2,777 2,516
Other expenses 1,091 1,162
Impairment of long-lived assets 22 265
Income tax expenses 86 118
Extraordinary item - 74
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Net income 490 366
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Cash flow
Cash flow provided by operating activities 397 1,201
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Electricity Generation (TWh)
Regulated - Nuclear 46.9 45.0
Regulated - Hydroelectric 18.3 18.5
Unregulated - Hydroelectric 15.0 14.1
Unregulated - Fossil-Fuelled 25.0 30.9
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Total electricity generation 105.2 108.5
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Average electricity sales price(1) (cents/kWh)
Regulated - Nuclear(2) 4.9 4.7
Regulated - Hydroelectric(2) 3.5 4.1
Unregulated - Hydroelectric(3) 4.6 5.2
Unregulated - Fossil-Fuelled(3) 4.8 5.5
OPG's average sales price 4.6 4.9
Nuclear unit capability factor (per cent)
Darlington 88.7 90.6
Pickering A 72.0 69.9
Pickering B 75.2 77.7
Equivalent forced outage rate (per cent)
Unregulated - Fossil-Fuelled 14.1 15.9
Availability (per cent)
Regulated - Hydroelectric 94.2 92.7
Unregulated - Hydroelectric 92.4 92.2
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(1) Prior to the inception of rate regulation on April 1, 2005, OPG's
electricity generation received the Ontario spot electricity market
price net of the Market Power Mitigation Agreement rebate.
(2) After April 1, 2005, electricity generation from stations in the
Regulated - Nuclear segment received a fixed price of 4.95 cents/kWh.
During the same period, electricity generation from stations in the
Regulated - Hydroelectric segment received a fixed price of
3.3 cents/kWh for the first 1,900 MWh of generation in any hour, and
the Ontario spot electricity market price for generation above this
level.
(3) During the period from April 1, 2005 to April 30, 2006, 85 per cent
of the electricity generation from unregulated stations, excluding
the Lennox generating station and other contract volumes, was subject
to a revenue limit based on an average price of 4.7 cents/kWh.
Starting May 1, 2006, the revenue limit decreased to 4.6 cents/kWh.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 audited consolidated financial statements
and Management's Discussion and Analysis as at and for the year ended
December 31, 2006, 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.
For further information: Investor Relations: (416) 592-6700,
1-866-592-6700, investor.relations@opg.com; Media Relations: (416) 592-4008,
1-877-592-4008
