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Ontario Power Generation Issues Financials for First Quarter of 2019

Source: 
Targeted News Service (Press Releases)

TORONTO, Ontario, May 14 -- Ontario Power Generation issued the following news release:

Ontario Power Generation Inc. (OPG or Company) today reported net income attributable to the Shareholder of $213 million for the first quarter of 2019.

"OPG is pleased to report that our first quarter results have once again provided a strong financial return for our shareholder, the Province of Ontario, while continuing to generate at a price approximately 40 per cent less than the average of other generators in the province," said Ken Hartwick, President and CEO of OPG. "Our core generating business remains strong and we continue to drive value from our assets."

Hartwick continued, "In late 2016, OPG began one of the largest and most complex infrastructure projects in Canada, the Darlington Refurbishment Project. The recent completion of the fuel channel installation on our Unit 2 reactor is a historic moment for OPG and Ontario's nuclear industry. Together with our project partners, we are rebuilding second generation CANDU technology, which will generate more than

30 years of safe, low-cost and clean energy for Ontarians."

In March 2019, OPG completed the 44-megawatt Nanticoke solar facility in Haldimand County, Ontario. "Replacing coal with solar generation is fundamental to a healthy environment and a strong, low-carbon economy," commented Hartwick. "In partnership with the Six Nations of the Grand River Development Corporation and the Mississaugas of the Credit First Nation, Nanticoke Solar is a continuation of OPG's rich legacy of generating electricity in this community." The project was completed on schedule and is expected to close under the $107 million approved budget.

Through its wholly-owned subsidiary in the United States, Eagle Creek Renewable Energy, LLC (Eagle Creek), OPG also completed the acquisition of the 9-megawatt Little Quinnesec hydroelectric generating station (GS) located in Niagara, Wisconsin in March 2019. The purchase price was US$16 million, subject to working capital and other customary adjustments. With the completion of the Nanticoke Solar Project and the acquisition of the Little Quinnesec hydroelectric GS, the Company continues to invest in carbon-free generation, aligned with OPG's strategic imperatives.

Net income attributable to the Shareholder was $213 million for the first quarter of 2019 compared to $535 million for the same period in 2018. The decrease in net income is primarily attributable to the one-time after-tax gain on sale of the former Lakeview GS site of $205 million and the reduction in income tax expense due to a refundable tax credit of $86 million upon payment of a dividend to the Shareholder, both recognized in the first quarter of 2018. The decrease was also partially due to the impact of lower generation from the Regulated - Nuclear Generation segment in 2019, in line with the cyclical maintenance schedule of the Darlington GS.

In April 2019, the mediation/arbitration process between OPG and the Power Workers' Union (PWU) concluded with the issuance of the arbitrator's decision. The arbitrator ordered the parties to implement the previously reached tentative renewal agreement that was not ratified by the PWU membership, without any changes. The renewed collective agreement will expire in March 2021.

OPG continues to provide electricity at a price that is approximately 40 per cent less than the average of other generators in Ontario. OPG is the only electricity generator in Ontario that has its prices set through a public hearing process by the Ontario Energy Board.

Generating and Operating Performance

Electricity generated in the first quarter of 2019 was 19.1 terawatt hours (TWh) compared to 18.8 TWh in the same quarter in 2018.

Regulated - Nuclear Generation Segment

Lower nuclear generation of 0.6 TWh in the first quarter of 2019 compared to the same quarter in 2018 was primarily due to a higher number of planned outage days at the Darlington GS, partially offset by fewer planned outage days at the Pickering GS.

At the Darlington GS, the unit capability factor decreased to 72.6 per cent in the first quarter of 2019, compared to 96.5 per cent for the same quarter in 2018. The decrease primarily reflected an increase in planned outage days for the three generating units from five planned outage days in the first quarter of 2018 to 74 in the first quarter of 2019, in line with the station's 36-month cyclical maintenance schedule.

At the Pickering GS, the unit capability factor increased to 86.7 per cent for the first quarter of 2019 compared to 74.5 per cent for first quarter of 2018, primarily reflecting a decrease in planned outage days for the six units from 116 in the first quarter of 2018 to 63 in the first quarter in 2019, in line with the station's 30-month cyclical maintenance schedule.

Regulated - Hydroelectric Segment

Higher generation from the regulated hydroelectric stations of 0.5 TWh during the first quarter of 2019 compared to the same quarter in 2018 was primarily due to lower forgone hydroelectric generation as a result of higher demand for electricity in Ontario.

The availability of 90.1 per cent at these stations in the first quarter of 2019 was higher than 87.3 per cent for the same quarter in 2018. The increase in the availability was primarily due to fewer unplanned outage days at the regulated hydroelectric stations in the eastern and northwestern Ontario regions.

Contracted and Other Generation Segment

Higher generation from the Contracted and Other Generation segment of 0.4 TWh during the first quarter of 2019 compared to the same quarter in 2018 was primarily due to electricity generation from the Eagle Creek facilities acquired in the fourth quarter of 2018.

The availability of the Ontario-based hydroelectric stations within the segment for the first quarter of 2019 was 86.5 per cent, compared to 80.1 per cent for the same quarter in 2018. The increase in the availability was primarily due to decreased planned outage days at the contracted hydroelectric stations in the northeastern Ontario region.

Total Generating Cost

The Enterprise TGC per megawatt-hour (MWh) was $52.12 for the three months ended March 31, 2019, compared to $49.84 for the same quarter in 2018. The increase in Enterprise TGC per MWh was primarily due to higher sustaining capital expenditures, higher outage-related OM&A expenses primarily due to a higher number of planned outage days at the Darlington GS and associated lower electricity generation from the nuclear facilities.

Generation Development

OPG is undertaking a number of generation development and life extension projects in support of Ontario's electricity planning initiatives. Significant developments during the first quarter of 2019 were as follows:

Darlington Refurbishment

The Darlington Refurbishment project is expected to extend the operating life of the four-unit Darlington GS by at least 30 years. In April 2019, OPG completed the fuel channel installation series and re-filled the Unit 2 moderator with heavy water which is used for the creation of nuclear energy, readying the unit for restart following refurbishment. The upper and middle feeder installation series has commenced and is expected to be completed in the second quarter of 2019. The lower feeder installation is also underway.

In addition to the execution of refurbishment activities on Unit 2, OPG continues to progress in accordance with the overall project schedule, incorporating experience learned to date from the Unit 2 refurbishment. The Unit 3 refurbishment execution is expected to commence upon the return to service of Unit 2. As of March 31, 2019, $305 million has been invested in planning and prerequisite activities related to the refurbishment of Unit 3, including acquisition of long lead materials and components.

Total life-to-date capital expenditures on the project were approximately $5.8 billion as at March 31, 2019.

The Darlington Refurbishment project, the execution of which began in 2016, continues to track on schedule and to the $12.8 billion budget.

Ranney Falls Hydroelectric GS

OPG continues construction work on a 10 MW single-unit powerhouse on the existing Ranney Falls GS site. The new unit will replace an existing unit that reached its end of life in 2014. Primary concrete placement for the new powerhouse, spillway and forebay wall was completed during 2018. In the first quarter of 2019, gate hydraulic systems were commissioned successfully. Turbine and generator unit fabrication has been completed, and installation commenced in the first quarter of 2019. The project's expected in-service date is in the fourth quarter of 2019, with a budget of $77 million. The project is tracking on schedule and on budget. The Ranney Falls GS is included in the Regulated - Hydroelectric segment.

Changes to the Board of Directors

In keeping with the Board of Directors (Board) succession plan, effective March 31, 2019, there were four planned departures from the Board, namely, directors, William Coley, Lisa DeMarco, George Lewis and Peggy Mulligan. Jeff Lyash also left the organization as President and CEO, to take on another role, as previously announced by the Company in February 2019.

Effective April 1, 2019, Ken Hartwick began his tenure as President and CEO. Ani Hotoyan-Joly was appointed Chair of the Audit and Risk Committee of the Board and Wendy Kei was appointed Chair of the Compensation, Leadership and Governance Committee of the Board. Consistent with leading corporate governance practices, the Board has taken a decision to reduce the Board size to ten independent directors from 13, not including the OPG President and CEO.

Table omitted. To view table click here: (https://www.opg.com/media_release/opg-reports-2019-first-quarter-financial-results/)

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