Ontario Power Generation Reports 2014 First Quarter Financial Results

TORONTO, May 15, 2014 – Ontario Power Generation Inc. (OPG or Company) today reported its financial and operating results for the three months ended Mar. 31, 2014. Net income attributable to the Province for the first quarter of 2014 was $242 million compared to $28 million for the same quarter in 2013.

Tom Mitchell, President and CEO said, “The long, cold winter put an unusually high demand on Ontario’s electricity system. Our increased income, in part, resulted from OPG’s ability to meet the demand for electricity when people needed it. The price paid to OPG continues to lower the overall price paid by Ontarians for electricity.”

Mr. Mitchell added, “I am especially pleased by the continued positive performance of our Darlington Nuclear Generating Station. In fact, in April, the station received its second consecutive excellent safety and performance evaluation from the World Association of Nuclear Operators. Last year Pickering Nuclear received a strong performance review, the best in that station’s history.”

Mr. Mitchell said Ontario will continue to get value out of the Darlington station for many years to come. “We are deep into the preparations for the refurbishment that would keep the four units in operation until the middle of this century. It is a very valuable asset for the province as it provides about 20 per cent of Ontario’s power every year.”

Net income attributable to the Province for the first quarter of 2014 increased by $214 million compared to the same quarter in 2013. This increase was primarily due to the favourable impact of higher market prices resulting in higher revenue from electricity sales in the inter-jurisdictional market. This was caused by unseasonably cold temperatures during the first quarter of 2014. These increases were partially offset by lower earnings from the Nanticoke generating station (GS) and the Lambton GS, which ended coal-fired generation in 2013.

The end of coal-fired operations at the Nanticoke GS and the Lambton GS also resulted in a 90 per cent reduction in carbon dioxide and acid gas emissions during the first quarter of 2014, compared to the same quarter in 2013.

Business Segment, Generating, and Operating Performance

OPG’s income before interest and income taxes from the electricity generation business segments was $346 million in the first quarter of 2014. This compared to $109 million in the same quarter of 2013. The increase was due primarily to the favourable impact of higher market prices received for the generation produced by hydroelectric generating stations that are subject to market price volatility. The increase was partially offset by the impact of ending coal-fired operations at the Nanticoke GS and Lambton GS.

The nuclear waste management business segment recorded a loss before interest and income taxes of $34 million in the first quarter of 2014, compared to a loss before interest and income taxes of $63 million in the same quarter of 2013. The improvement was primarily due to higher earnings on the Used Fuel Segregated Fund, partially offset by higher accretion expense which reflected the increase in asset retirement obligations due to the passage of time.

The increase in income before interest and income taxes of $27 million for the Services, Trading, and other Non-Generation business segment was primarily a result of higher trading margin for electricity sold to neighbouring energy markets.

Total electricity generated during the three months ended March 31, 2014 was 20.5 terawatt hours (TWh) compared to 21.3 TWh for the same quarter in 2013. This decrease was mainly due to ending coal-fired operations at the Nanticoke GS and the Lambton GS in 2013.

The capability factor at the Darlington nuclear station was 96.0 per cent in the first quarter of 2014 compared to 84.1 per cent for the same quarter in 2013, and reflected a decrease in planned outage days. The Pickering stations had a 66.6 per cent capability factor compared to 79.0 per cent in the first quarter of 2013, primarily as a result of an increase in outage days. The availability of OPG’s hydroelectric generating stations remained at high levels.

Generation Development

OPG is undertaking a number of generation development and life extension projects to support Ontario’s long-term electricity supply requirements. Significant developments during the year are as follows:

Darlington Refurbishment

The Darlington Refurbishment project is currently in the definition phase. Refurbishment of the four Darlington units is currently estimated to cost less than $10 billion in 2013 dollars, excluding capitalized interest and escalation. The project is currently estimated to be completed by 2025. A detailed cost and schedule estimate for the refurbishment of the four units is expected to be completed in 2015.
The full-scale reactor mock-up facility to be used for tool testing and training for the refurbishment project was made available for service in the first quarter of 2014, ahead of schedule. OPG is progressing with the design and construction of facilities and infrastructure and safety improvement projects required at the Darlington site for the refurbishment and continued operation of the station.
In April 2014, the Canadian Nuclear Safety Commission (CNSC) accepted the Global Assessment Report as meeting all regulatory requirements set out in the Life Extension of Nuclear Power Plants and provided feedback on the Integrated Implementation Plan. OPG expects the CNSC’s final review and approval by the end of 2014 as part of the renewal of the Darlington GS Power Reactor Operating Licence.

Lower Mattagami

The Lower Mattagami River project is expected to be completed on schedule by June 2015 and within the approved budget of $2.6 billion. The 78 MW incremental unit at Harmon GS is expected to be declared in-service during the second quarter of 2014, ahead of its original target completion date of September 2014. The Little Long GS was declared in-service in January 2014, also ahead of schedule. As incremental units are placed in-service, the Amisk-oo-Skow Finance Corporation, a corporation wholly owned by the Moose Cree First Nation, may acquire up to a 25 per cent interest in the assets through its investment in the Lower Mattagami Limited Partnership. The life-to-date capital expenditures were $2,107 million as of Mar. 31, 2014.

Atikokan Conversion to Biomass

Construction had been completed on the boiler and construction continues on the ancillary systems to support biomass operations. During the first quarter of 2014, a significant milestone was achieved by successfully test firing the main unit on natural gas. Life-to-date capital expenditures were $153 million as of Mar. 31, 2014. The project is expected to be completed on schedule by August 2014 within the approved budget of $170 million.

Thunder Bay Conversion to Advanced Biomass

On May 1, 2014, the Minister of Energy issued a Shareholder Resolution which clarifies certain parameters to be included in the electricity supply contract for the conversion of one unit at the Thunder Bay GS to advanced biomass fuel, which is currently being negotiated with the Ontario Power Authority. Upon completion, the converted station is expected to have an in-service capacity of approximately 150 MW. The Thunder Bay GS ended coal-fired operations in April 2014.

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