OPG Reports on New Generation Plans in First Quarter Financial Results

Solar Energy to Complement Existing Clean Renewable Generation Fleet

TORONTO, May 13, 2016 /CNW/ - Ontario Power Generation Inc. (OPG or Company) today reported that earnings from its electricity generation business segments were $320 million for the first quarter of 2016.  The decrease in earnings of $17 million compared to the first quarter of 2015 was mainly due to increased planned outage expenditures at the nuclear generating stations during the first quarter of 2016.  Total generation of 21.0 terawatt hours for the three months ended March 31, 2016 was comparable to the same quarter in 2015.

The latest quarter saw OPG win a competitive process to embark on a solar energy project. The project at OPG's Nanticoke generating station (GS) site and adjacent lands is expected to have a capacity of 44 megawatts (MW).  During the quarter, the Company also continued construction on the Peter Sutherland Sr. 28 MW hydroelectric station on the New Post Creek in northeastern Ontario.

"Both of these endeavours feature partnerships with local First Nations," said Jeff Lyash, President and CEO. "This makes for a total of four such partnerships for OPG, all of them to build clean generation that is free of GHG emissions. The projects also provide commercial and social benefits to the participating First Nations."

Mr. Lyash added, "During the quarter, a major step was taken toward refurbishment of the four units at the Darlington Nuclear Station when we moved from the planning stage to the execution stage. The first reactor to be refurbished will be taken off line in the fourth quarter."

Generating and Operating Performance

Electricity generated during the three months ended March 31, 2016 was 21.0 terawatt hours (TWh), compared to 21.3 TWh for the same quarter in 2015. The marginal decrease was mainly due to lower hydroelectric generation, resulting from lower electricity demand which increased the requirement to spill water.  

With respect to electricity generated, Mr. Lyash said, "The excellent performance at the Darlington station reinforces our conviction that we'll be able to operate it safely and efficiently for at least 30 more years after refurbishment. The capability factor at Darlington was 97.2 per cent in the first quarter, compared to 97.8 per cent for the same quarter in 2015."

At the Pickering Nuclear Station, the capability factor was 72.8 per cent compared to 72.9 per cent in the first quarter of 2015.  The decreases in the capability factor at the Darlington and Pickering stations were mainly due to a slight increase in the number of planned outage days.  The availability of OPG's hydroelectric generating stations remained at high levels, including availability of over 90 per cent at the regulated hydroelectric plants.  For the contracted hydroelectric stations, availability decreased from 97.8 per cent in the first quarter of 2015 to 83.9 per cent in the first quarter of 2016, primarily due to a higher number of planned outage days at certain Lower Mattagami River stations. 

Net income attributable to the Shareholder for the first quarter of 2016 was $123 million, compared to $234 million for the same quarter of 2015. The decrease in net income was mainly due to lower earnings from the Regulated – Nuclear Waste Management segment caused by lower earnings from the Decommissioning Segregated Fund.    

For the electricity generation business segments, the slight decrease in income before interest and income taxes of $17 million compared to the first quarter of 2015 was mainly due to an increase in OM&A expenses, partly offset by a gain of $22 million stemming from the Ontario Energy Board's January 2016 decision to reverse a portion of the Niagara Tunnel capital expenditures that had been disallowed in 2014. OPG also saw higher earnings from its contracted assets during the first quarter of 2016.

Generation Development

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

Darlington Refurbishment

Life-to-date capital expenditures were $2,369 million as at March 31, 2016. The approved project budget for the four-unit refurbishment is $12.8 billion, including capitalized interest and escalation. The first unit refurbishment is scheduled to commence in the fourth quarter of 2016, with the last unit completed by 2026. Project work including construction of facilities, infrastructure upgrades and installation of safety enhancements is being completed in support of the execution phase of the project. Certain of these projects have been completed and the remaining projects are on-track to be completed in line with the execution schedule.  

Peter Sutherland Sr. GS

Construction work on the new 28 MW hydroelectric generating station on the New Post Creek continued as scheduled during the first 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 $125 million as at March 31, 2016.

Nanticoke Solar Facility

In March 2016, Nanticoke Solar LP, a partnership between OPG, SunEdison Canadian Construction LP and the Six Nations Development Corporation, was selected to develop a 44 MW solar facility at OPG's Nanticoke GS site and adjacent lands in Haldimand County, Ontario. In March 2016, the partnership and the Independent Electricity System Operator executed a 20-year contract for the development and operation of the facility. This project is OPG's fourth generation development partnership with First Nations. The Company is working with its partners to obtain the required approvals and permits to enable the start of construction planned for late-2017 or early-2018.  



FINANCIAL AND OPERATIONAL HIGHLIGHTS



















Three Months Ended



March 31

(millions of dollars – except where noted) (unaudited)

2016


2015



Revenue

1,478


1,355



Fuel expense

172


157



Gross margin

1,306


1,198



Operations, maintenance and administration

686


665



Depreciation and amortization

312


196



Accretion on fixed asset removal and nuclear waste management liabilities

232


224



Earnings on nuclear funds - (a reduction to expenses)

(147)


(231)



Income from investments subject to significant influence

(8)


(11)



Other net expenses

(11)


13



Income before interest and income taxes

242


342



Net interest expense

33


47



Income tax expense

81


56



Net income

128


239



Net income attributable to the Shareholder

123


234



Net income attributable to non-controlling interest 1

5


5


Income (loss) before interest and income taxes






Electricity generation business segments

320


337



Regulated – Nuclear Waste Management

(83)


9



Services, Trading, and Other Non-Generation

5


(4)



Total income before interest and income taxes

242


342


Cash flow






Cash flow provided by operating activities

366


455


Electricity generation (TWh)






Regulated – Nuclear Generation

12.3


12.2



Regulated – Hydroelectric

7.9


8.2



Contracted Generation Portfolio 2

0.8


0.9



Total electricity generation

21.0


21.3


Nuclear unit capability factor (per cent)






Darlington GS

97.2


97.8



Pickering GS

72.8


72.9


Availability (per cent)






Regulated – Hydroelectric

94.8


91.5



Contracted Generation Portfolio – Hydroelectric

83.9


97.8


Equivalent forced outage rate






Contracted Generation Portfolio – Thermal

0.9


22.9


Return on Equity Excluding Accumulated Other Comprehensive Income (ROE Excluding AOCI) for






the twelve months ended March 31, 2016 and December 31, 2015 (%) 3

2.9


4.0


Funds from Operations (FFO) Adjusted Interest Coverage for the twelve months ended






March 31, 2016 and December 31, 2015 (times) 3

5.2


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 months ended March 31, 2016, under the section 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, environmentally responsible, and commercially sound manner.

Ontario Power Generation Inc.'s unaudited interim consolidated financial statements and Management's Discussion and Analysis as at and for the three months ended March 31, 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.

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

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