Ontario Power Generation reports 2007 financial results

    TORONTO, Feb. 29 /CNW/ - Ontario Power Generation Inc. ("OPG" or the
"Company") today reported its financial and operating results for the year
ended December 31, 2007. Net income for the year was $528 million compared to
net income of $490 million for the year ended December 31, 2006.
    "In 2007, safety performance was the best since the Company's inception
in 1999, and the performance of our generating stations improved
significantly. Ensuring employee and public safety, and improving the
performance of our existing assets are two important priorities. The
reliability of our generating stations improved over the previous year with
the exception of the Pickering A and B nuclear stations, where one-time events
unfavourably affected production in 2007," said President and CEO Jim
    Electricity generated in 2007 of 105.1 terawatt hours ("TWh") was
essentially equal to production of 105.2 TWh in 2006. Electricity production
from OPG's nuclear stations of 44.2 TWh in 2007 decreased from 2006 production
of 46.9 TWh. Production at the Pickering A station decreased primarily as a
result of a requirement to perform modifications to a backup electrical
system, and repair work required due to a component failure during inspection.
In addition, production at the Pickering B station during the first quarter of
2007 was affected by an inadvertent release of resin by a third party
contractor from the water treatment plant into the demineralized water system.
Hydroelectric production of 31.9 TWh was slightly lower than production of
33.3 TWh in 2006 due to lower water levels. Fossil production increased to
29.0 TWh in 2007 compared to 25.0 TWh in 2006, mainly as a result of lower
generation from OPG's nuclear and hydroelectric generating stations.
    OPG received an average price of 4.6 cents/kilowatt hour ("kWh") for the
output from all of its generating stations in 2007. This average price
equalled that of 2006. These average prices received by OPG reflect regulated
prices for production from its nuclear and baseload hydroelectric generating
assets, and spot market prices, subject to a revenue limit, for the majority
of its remaining production. The average Ontario electricity spot market price
in 2007 increased to 5.1 cents/kWh from 4.9 cents/kWh in 2006.
    Earnings in 2007 were favourably affected by an increase in earnings from
the Nuclear Funds, an increase in non-electricity generation revenue, higher
fossil generation, a decrease in income tax expense largely due to an
additional contribution to the Nuclear Funds that is deductible for tax
purposes, and lower depreciation expense primarily due to the extension in
2006 of the service lives of the coal-fired generating stations for accounting
purposes. These favourable impacts were partly offset by lower generation from
OPG's Pickering nuclear stations, and higher nuclear and fossil maintenance
    OPG continues to pursue a number of hydroelectric generation projects,
and, in consultation with its shareholder, plans to explore and develop, where
feasible, nuclear and natural gas generation projects. The following projects
will significantly contribute to meeting Ontario's long-term electricity
supply requirements.

    -   Excavation of a new 10.4 km water diversion tunnel to increase the
        amount of water flowing to existing turbines at the Sir Adam Beck
        generating stations in Niagara began in September 2006. At
        December 31, 2007, the tunnel boring machine had advanced
        1,609 metres. The progress of the tunnel boring machine through a
        fractured rock formation has been slower than expected. Considerable
        uncertainty remains with respect to the schedule until the tunnel
        boring machine advances to approximately 2,300 metres, and
        establishes consistent tunneling performance. The contractor has
        advised that the in-service date of the tunnel will be delayed, and
        is investigating alternatives, including the realignment of the
        tunnel, to mitigate the impact of the delay. The estimated in-service
        date will be dependent on the alternative selected by the contractor.
        There is a potential risk that the schedule delay could impact the
        project cost.

    -   Construction of the new 12.5 megawatt ("MW") Lac Seul hydroelectric
        generating station on the English River began during the first
        quarter of 2006. The design-build contractor indicated that the
        project is expected to be in-service in the third quarter of 2008.
        There have been project delays due to various difficulties, including
        the replacement of the major subcontractor on two occasions.

    -   OPG plans to redevelop four existing hydroelectric stations that are
        nearing the end of their useful lives. Three stations are on the
        Upper Mattagami River and one is located on the Montreal River. The
        total installed capacity of the four stations will increase from
        23 MW to 44 MW. Project completion is planned for the second quarter
        of 2011.

    -   OPG is expanding the Healey Falls generating station by 6.4 MW on the
        Trent-Severn Waterway. Project completion is planned for mid-2010.

    -   OPG plans to increase the generating capacity of four hydroelectric
        generating stations on the Lower Mattagami River. The incremental
        capacity associated with these stations totals 450 MW. Following
        discussions with the Canadian Environmental Assessment Agency
        ("CEAA"), a scoping document for a comprehensive study process has
        been posted on the CEAA website for public comment. OPG is engaged in
        consultations with First Nation stakeholders regarding an agreement
        to address past issues and establish a new commercial relationship.

    -   The Portlands Energy Centre ("PEC") is a 550 MW gas-fired, combined
        cycle generating station that is under construction near downtown
        Toronto. PEC is a limited partnership between OPG and TransCanada
        Energy Ltd. Construction of the station started in 2006 and is
        expected to be operational in a simple cycle mode, with a capacity of
        up to 340 MW, by June 1, 2008. The generating station is expected to
        be completed in a combined cycle mode in the second quarter of 2009,
        providing up to 550 MW of power.

    -   OPG is exploring the potential development of a gas-fuelled
        electricity generating station at its Lakeview site. Construction of
        a new plant would proceed only after required approvals and a clean
        energy supply agreement are obtained.

    -   OPG is proceeding with a feasibility study on the refurbishment and
        life extension of the Pickering B nuclear generating station. This
        work includes an assessment of the plant condition, an Environmental
        Assessment ("EA"), and an Integrated Safety Review. The requirements
        of the EA and the Integrated Safety Review have extended the
        timeframe required to define the scope of the refurbishment project
        and complete a comprehensive assessment. As a result, OPG plans to
        make a recommendation on this project to its Board of Directors in
        early 2009. OPG plans to begin a feasibility study on the
        refurbishment of the Darlington nuclear generating station in 2008.

    -   In September 2006, OPG initiated a federal approvals process for new
        nuclear generating units at the Darlington nuclear generating site.
        An Application for a Site Preparation licence was filed with the
        Canadian Nuclear Safety Commission ("CNSC"). In 2007, OPG implemented
        initiatives in support of an EA for new nuclear units at the
        Darlington site and filed a project description with the CNSC to
        determine the type of EA required. In January 2008, the CNSC
        recommended to the Federal government that the project proceed
        directly to a panel review, which is the highest level of review
        under current legislation. The panel review decision is pending.

    Ontario's Minister of Energy has directed the Ontario Power Authority
("OPA") to negotiate Hydroelectric Energy Supply Agreement's with OPG for the
following hydroelectric development projects: Lac Seul, Upper Mattagami ,
Hound Chute, Healey Falls, and Lower Mattagami. The directive indicated that
the negotiation and execution of these agreements should be completed in the
first half of 2008.
    "The list of new generation projects that OPG is undertaking is
unprecedented. In consultation with our Shareholder, we will develop these
much-needed new sources of electricity supply to help meet Ontario's future
electricity needs. Our objective is to efficiently manage and complete these
small, medium, and large scale projects in a timely and cost effective
manner," said Hankinson.
    Hankinson added, "In 2008, the OEB will review OPG's application for new
payment amounts for our regulated facilities. We look forward to presenting
our case for receiving a fair return on equity for our regulated assets as a
transition to a financially sustainable company."


    (millions of dollars - except where noted)                2007      2006
    Revenue after revenue limit rebate                       5,660     5,564
    Fuel expense                                             1,270     1,098
    Gross margin                                             4,390     4,466
    Operations, maintenance and  administration              2,974     2,752
    Other expenses                                             939     1,138
    Income tax (recoveries) expenses                           (51)       86
    Net income                                                 528       490
    Cash flow
    Cash flow provided by operating activities                 407       397
    Electricity Generation (TWh)
    Regulated - Nuclear                                       44.2      46.9
    Regulated - Hydroelectric                                 18.1      18.3
    Unregulated - Hydroelectric                               13.8      15.0
    Unregulated - Fossil-Fuelled                              29.0      25.0
    Total electricity generation                             105.1     105.2
    Average electricity sales price(1) (cents/kWh)
    Regulated - Nuclear(1)                                     4.9       4.9
    Regulated - Hydroelectric(1)                               3.5       3.5
    Unregulated - Hydroelectric(2)                             4.7       4.6
    Unregulated - Fossil-Fuelled(2)                            4.8       4.8
    OPG's average sales price                                  4.6       4.6

    Nuclear unit capability factor (per cent)
    Darlington                                                89.5      88.7
    Pickering A                                               41.3      72.0
    Pickering B                                               75.0      75.2

    Equivalent forced outage rate (per cent)
    Unregulated - Fossil-Fuelled                              11.5      14.1

    Availability (per cent)
    Regulated - Hydroelectric                                 94.1      94.2
    Unregulated - Hydroelectric                               93.9      92.4
    (1) After April 1, 2005, electricity generation from stations in the
        Regulated - Nuclear segment receives a fixed price of 4.95 cents/kWh
        and electricity generation from stations in the Regulated -
        Hydroelectric segment receives 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.
    (2) Eighty-five per cent of the electricity generation from unregulated
        stations, excluding the Lennox generating station and other contract
        volumes, is subject to a revenue limit. During the period from
        April 1, 2005 to April 30, 2006, the revenue limit was set at
        4.7 cents/kWh. Starting May 1, 2006, the revenue limit decreased to
        4.6 cents/kWh and increased to 4.7 cents/kWh effective May 1, 2007.

    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, 2007, 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:

For further information: Investor Relations, (416) 592-6700,
1-866-592-6700, investor.relations@opg.com; Media Relations, (416) 592-4008,

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