Ontario Power Generation reports 2007 second quarter financial results

    TORONTO, Aug. 17 /CNW/ - Ontario Power Generation Inc. ("OPG" or the
"Company") today reported its financial and operating results for the second
quarter and six months ended June 30, 2007. Net income for the three months
ended June 30, 2007 was $125 million compared to net income of $143 million
for the same period in 2006. For the six months ended June 30, 2007, net
income was $296 million compared to $342 million for the same period last
    "Over the first half of 2007, the reliability of OPG's fossil and
hydroelectric stations as well as the Darlington nuclear station continued to
improve as a result of targeted performance improvement programs. Increased
production at our fossil stations was largely offset by lower production at
both Pickering nuclear stations due to a number of unplanned outages, and
lower hydroelectric production," said President and CEO Jim Hankinson.
    Electricity generated in the second quarter of 2007 was 26.0 terawatt
hours ("TWh"), which exceeded second quarter 2006 production of 25.5 TWh.
Nuclear production was essentially equal to the second quarter of 2006.
Hydroelectric production of 8.6 TWh was marginally lower than production of
9.0 TWh in 2006, due to lower water levels in northern Ontario. Electricity
production from OPG's fossil stations increased to 6.3 TWh in the second
quarter of 2007 compared to 5.3 TWh in 2006. For the six months ended June 30,
2007, total production from OPG's generating stations was 54.2 TWh compared to
53.9 TWh for the same period in 2006.
    The availability of OPG's fossil and hydroelectric stations, as well as
the Darlington nuclear station continued to improve during the second quarter
and on a year-to-date basis. Availability at OPG's fossil stations has
improved considerably over the past four years while availability at the
Company's hydroelectric stations and Darlington nuclear station is near
historically high levels. As a result of unplanned outages at the Pickering A
and B nuclear stations, availability for the six months ended June 30, 2007
was lower than 2006.
    During the second quarter of 2007, OPG received an average price of
4.6 cents/kilowatt hour ("kWh") for the output from all of its generating
stations, which was the same as the weighted average Ontario spot market
electricity price. In comparison, during the second quarter of 2006, OPG
received an average price of 4.6 cents/kWh compared to the weighted average
Ontario spot market electricity price of 4.8 cents/kWh. OPG's average price
reflects regulated prices 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.
    Earnings during the three and six months ended June 30, 2007 were
unfavourably affected by a decrease in gross margin primarily due to lower
generation from OPG's Pickering nuclear stations and its unregulated
hydroelectric generating stations, and higher fuel costs. This effect was
partly offset by an increase in generation from higher marginal cost
fossil-fuelled generating stations. In addition, earnings were unfavourably
affected by higher nuclear and fossil maintenance expenses compared to the
same periods in 2006. Second quarter 2007 earnings were favourably affected by
higher earnings from the nuclear fixed asset removal and nuclear waste
management funds, and a decrease in depreciation expense primarily due to the
extension of the service lives of the coal-fired generating stations.
    During the second quarter of 2007, OPG continued to progress on the
following electricity generation projects aimed at increasing Ontario's
long-term electricity supply:

    -   The Niagara tunnel will increase the amount of water flowing to
        existing turbines at the Sir Adam Beck generating stations in Niagara
        Falls. Initial progress of the tunnel boring machine by the
        design-build contractor through a fractured rock formation has been
        slower than expected. As a result, the contractor's forecast
        completion date has been delayed from late 2009. Overall project
        completion is expected by mid-2010, within the original schedule
        approved by OPG's Board of Directors. The project is still expected
        to be completed within the budgeted cost estimate;
    -   Construction of a new 12.5 megawatt ("MW") Lac Seul hydroelectric
        generating station on the English River has been delayed as a result
        of the replacement of a major sub-contractor. The project is now
        expected to be in-service in the first quarter of 2008, rather than
        the end of 2007. Total project costs are still expected to be
        $47 million;
    -   Construction of the Portlands Energy Centre ("PEC"), a limited
        partnership between OPG and TransCanada Energy Ltd., is progressing
        well. The project remains on schedule and the station is expected to
        be operating in a simple cycle mode with a capacity of up to 340 MW
        beginning June 1, 2008, and providing up to 550 MW of power in a
        combined cycle mode in the second quarter of 2009;
    -   OPG is undertaking a business case examination for the potential
        refurbishment and life extension of its Pickering B nuclear
        generating station. The Canadian Nuclear Safety Commission ("CNSC")
        has notified OPG that a screening level environmental assessment will
        be required, and has issued environmental assessment requirements for
        the proposed refurbishment of the Pickering B nuclear station; and
    -   OPG initiated a federal approval process with the CNSC during 2006
        for new nuclear generating units on the site of its Darlington
        nuclear generating station. A project description has been submitted
        to the CNSC as part of determining environmental assessment
        requirements for the project.

                                                Three Months     Six Months
                                                    Ended           Ended
                                                   June 30         June 30
    (millions of dollars - except where noted)  2007    2006    2007    2006
    Revenue after revenue limit rebate         1,373   1,345   2,897   2,853
    Fuel expense                                 298     243     626     521
    Gross margin                               1,075   1,102   2,271   2,332
    Operations, maintenance and administration   776     678   1,470   1,318
    Other expenses                               145     278     419     574
    Income tax expenses (recoveries)              29       3      86      98
    Net income                                   125     143     296     342
    Cash flow
    Cash flow (used in) provided by
     operating activities                        312    (435)    475      (1)
    Electricity Generation (TWh)
    Regulated - Nuclear                         11.1    11.2    22.7    23.9
    Regulated - Hydroelectric                    4.7     4.4     9.3     8.9
    Unregulated - Hydroelectric                  3.9     4.6     7.8     8.8
    Unregulated - Fossil-Fuelled                 6.3     5.3    14.4    12.3
    Total electricity generation                26.0    25.5    54.2    53.9
    Average electricity sales price(1)
    Regulated - Nuclear(1)                       4.9     4.9     4.9     4.9
    Regulated - Hydroelectric(1)                 3.5     3.4     3.6     3.5
    Unregulated - Hydroelectric(2)               4.6     4.6     4.7     4.7
    Unregulated - Fossil-Fuelled(2)              4.7     4.7     4.8     4.8
    OPG average sales price                      4.6     4.6     4.6     4.6

    Nuclear unit capability factor (per cent)
    Darlington                                  84.4    80.2    88.9    87.4
    Pickering A                                 61.6    84.3    62.5    87.8
    Pickering B                                 72.2    71.6    70.9    75.1

    Equivalent forced outage rate (per cent)
    Unregulated - Fossil-Fuelled                11.6    15.7    11.7    12.9

    Availability (per cent)
    Regulated - Hydroelectric                   93.2    90.5    92.6    91.6
    Unregulated - Hydroelectric                 95.4    95.4    95.2    94.8
    (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 unaudited interim consolidated financial
statements and Management's Discussion and Analysis as at and for the three
and six months ended June 30, 2007, can be accessed on OPG's website
(www.opg.com), the Canadian Securities Administrators' website
(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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