Ontario Power Generation reports 2009 first
quarter financial results
TORONTO, May 22 / Ontario Power Generation Inc. ("OPG" or the
"Company") today reported its financial and operating results for the three
months ended March 31, 2009. Net loss for the first quarter of 2009 was $9
million compared to net income of $162 million for the same period in 2008.
"OPG's results were significantly affected by a reduction in electricity
generation, higher fuel prices, and an increase in expenses related to planned
maintenance outages at our nuclear generating stations," said President and
CEO Jim Hankinson.
Total electricity generated in the first quarter of 2009 of 25.6 terawatt
hours ("TWh") was 13 percent lower than the first quarter 2008 production of
29.4 TWh. Nuclear production decreased by 1.0 TWh primarily as a result of
planned maintenance outages. Hydroelectric production of 9.0 TWh was
marginally lower than production of 9.1 TWh during the first quarter 2008.
Electricity production from OPG's fossil stations decreased to 4.3 TWh
compared to 7.0 TWh in the first quarter of 2008, primarily due to lower
electricity demand as a result of Ontario's contracting economy, an increase
in electricity production from other Ontario generators, and a significant
reduction in natural gas prices compared to the cost of coal, which resulted
in a displacement of coal-fired production.
OPG's Darlington nuclear generating station continued to achieve
exceptional reliability with a unit capability factor of 99.9 percent in the
first quarter of 2009. The Pickering A nuclear generating station had a unit
capability factor of 42.4 percent primarily due to planned outage maintenance
work. The unit capability factor of 84.9 percent for the Pickering B nuclear
station was marginally lower than in the first quarter of 2008. The
availability of OPG's regulated and unregulated hydroelectric generating
stations remained at historically high levels. As a result of CO(2) emission
limits, the operating profile of the coal-fired generating stations has
changed. The reliability of OPG's fossil stations, now measured during the
peak demand periods of January and February, and July and August, improved
over the first quarter of 2008.
Income before interest and income taxes from OPG's electricity generating
segments of $243 million in the first quarter of 2009 decreased from $381
million for the three months ended March 31, 2008. Gross margin decreased as a
result of lower fossil and nuclear generation, higher fuel costs, and lower
non-electricity generation revenue. The unfavourable impact of these factors
was partially offset by higher electricity sales prices reflecting the Ontario
Energy Board's ("OEB") rate decision for OPG's regulated hydroelectric and
nuclear facilities, and revenues related to the contingency support agreement
for the Nanticoke and Lambton generating stations.
Operations, Maintenance and Administration expenses increased by $51
million in the first quarter of 2009, compared to the same quarter in 2008.
The increase was primarily due to an increase in planned outage and
maintenance activities at OPG's nuclear generating stations.
A loss before interest and income taxes of $164 million in the Regulated
- Nuclear Waste Management segment for the three months ended March 31, 2009
was an improvement over the $185 million loss before interest and income taxes
in the first quarter of 2008. The loss before interest and income taxes in the
first quarter of 2009 primarily resulted from reductions in the Ontario
Consumer Price Index, which negatively affected the guaranteed return on the
Used Fuel Fund, and lower returns on the Decommissioning Fund. This loss was
partially mitigated by the establishment by the OEB of a regulatory variance
account associated with the stations leased to Bruce Power, since a portion of
the losses from the Used Fuel and Decommissioning Segregated Funds are related
to these stations.
During the first quarter of 2009, OPG advanced on a number of new
generation projects aimed at significantly contributing to Ontario's long-term
electricity supply requirements:
Nuclear
- The Province has announced that OPG will operate a new two-unit
nuclear power plant at the Darlington site. Proposal submissions from
all three respondents were received by Infrastructure Ontario at the
end of February. It is expected that a preferred vendor will be
selected by Infrastructure Ontario in the late spring of 2009. OPG
has initiated activities related to an environmental assessment and
licensing requirements.
Hydroelectric
- With respect to the Niagara tunnel project, at March 31, 2009, the
tunnel boring machine had advanced to 3,794 metres, which represents
37 percent of the tunnel length. It is now operating on a revised
alignment that will minimize remaining excavation in the Queenston
shale formation. OPG and the contractor are renegotiating the design
build contract with a revised target cost and schedule. The contract
includes incentives related to achieving the target cost and
schedule. The original project cost was estimated at $985 million
with a scheduled completion of June 2010, as approved by OPG's Board
of Directors. The revised project cost is estimated at $1.6 billion
and the revised schedule targets completion by December 2013. This
contract is expected to be finalized during the second quarter of
2009.
- The Lac Seul generating station was declared in-service in February
2009 and has a capacity of 12.5 MW. OPG entered into a partnership
agreement with the Lac Seul First Nations ("LSFN") regarding this
facility. OPG will have a 75 percent interest in the station, while
the LSFN will have a 25 percent interest.
- Project financing was completed for the Upper Mattagami and Hound
Chute development projects in May 2009. Senior Notes totaling
$200 million were issued by the UMH Energy Partnership, a general
partnership between OPG and UMH Energy Inc., a wholly-owned
subsidiary of OPG.
Natural Gas
- The Portlands Energy Centre ("PEC") is a 550 MW high-efficiency,
combined cycle, natural gas generation plant designed to meet
downtown Toronto's need for electricity. PEC is a limited partnership
between OPG and TransCanada Energy Ltd. PEC was declared in-service
in a combined cycle mode in April 2009, earlier than the contractual
in-service date of June 2009.
FINANCIAL AND OPERATIONAL HIGHLIGHTS
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Three Months Ended
March 31
(millions of dollars - except where noted) 2009 2008
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Earnings
Revenue after revenue limit rebate 1,481 1,563
Fuel expense 261 304
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Gross margin 1,220 1,259
Operations, maintenance and administration expense 742 691
Depreciation and amortization 178 175
Accretion on fixed asset removal and nuclear
waste management liabilities
159 135
Losses on nuclear fixed asset removal and
nuclear waste management funds 6 51
Other net expenses 26 13
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Income before interest and income taxes 109 194
Net interest expense 39 40
Income tax expenses (recoveries) 79 (8)
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Net (loss) income (9) 162
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Cash flow
Cash flow provided by operating activities 41 245
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Income (loss) before interest and income taxes
Generating segments 243 381
Nuclear Waste Management segment (164) (185)
Other segment 30 (2)
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Total income before interest and income taxes 109 194
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Electricity generation (TWh)
Regulated - Nuclear 12.3 13.3
Regulated - Hydroelectric 4.7 4.6
Unregulated - Hydroelectric 4.3 4.5
Unregulated - Fossil-Fuelled 4.3 7.0
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Total electricity generation 25.6 29.4
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Average electricity sales price (cents/kWh)
Regulated - Nuclear 5.5 4.9
Regulated - Hydroelectric 3.6 3.6
Unregulated - Hydroelectric 4.4 4.7
Unregulated - Fossil-Fuelled 4.8 4.8
OPG average sales price 4.8 4.7
Nuclear unit capability factor (percent)
Darlington 99.9 98.9
Pickering A 42.4 77.6
Pickering B 84.9 86.5
Equivalent forced outage rate - Peak (percent)
Unregulated- Fossil-Fuelled 15.8 18.6
Availability (percent)
Regulated - Hydroelectric 94.2 93.4
Unregulated- Hydroelectric 95.5 95.7
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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
months ended March 31, 2009, 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.
