OPG Reports 2018 First Quarter Financial Results

Strong results attributable to former Lakeview generating station land sale and continued strong nuclear generation performance

TORONTO, May 15, 2018 /CNW/ - Ontario Power Generation Inc. (OPG or Company) today reported net income attributable to the Shareholder of $535 million for the first quarter of 2018, inclusive of a one-time after-tax gain of $205 million related to the sale of the former Lakeview generating station (GS) property, compared to $64 million for the same period in 2017. 

"As Ontario's publicly-owned electricity generator, we are pleased to report our strong first quarter results that have resulted in significant net income to our shareholder, the Province of Ontario.  We remain focused on continuing to supply Ontario with safe, reliable, and low-cost power that is more than 99 per cent free of greenhouse gas emissions to help moderate customer's electricity bills, and are investing in our assets for the benefit of Ontarians for years to come," said Jeff Lyash, OPG President and CEO.  "Canada's single largest investment in low-cost, clean energy, the refurbishment of the Darlington Nuclear Station, remains on time and on budget due to the hard work and dedication of our employees and partners.  Refurbishing this public asset will ensure OPG remains Ontario's largest provider of low-cost electricity for another 30 years, generating clean power that is virtually free of carbon emissions."

Lyash continued, "In addition to investing in the Darlington Nuclear Station, OPG has begun the relicensing process to keep the Pickering Nuclear Station operating until 2024.  Running Pickering until 2024 will save electricity customers up to $600 million and benefit Ontario by contributing over $12 billion to the economy.  Pickering remains a safe, efficient and reliable public asset that can continue to supply low-cost electricity for up to 1.5 million homes each day, with almost no carbon emissions."

"Major contributors to the strong financial results for the quarter include the one-time gain on the sale of OPG's former Lakeview generating station lands in Mississauga, Ontario in March, the net proceeds of which will be transferred to our shareholder, and the continued strong nuclear generation performance," added Lyash.  "In the same month as the Lakeview sale, a special dividend of $283 million from last year's sale of our head office premises was transferred to the Province."

The increase in net income in the first quarter of 2018 is also attributable to the impact of the new regulated prices for OPG's nuclear and most of its hydroelectric generation, resulting from the Ontario Energy Board's (OEB) decision on OPG's application for new regulated prices for the 2017-2021 period issued in December 2017.   

The OEB issued the final payment amounts order on the application in March 2018, allowing OPG to begin collecting revenues based on the new regulated prices.  Taking into account the impact of the OEB's decision, OPG continues to provide electricity at a price that is approximately 40 per cent less than the average of other generators.  OPG is the only electricity generator in Ontario that has its prices set through a public hearing process by the OEB.

Generating and Operating Performance

Electricity generated during the three months ended March 31, 2018 increased to
18.8 terawatt hours (TWh) from 18.6 TWh for the same quarter in 2017. 

Regulated – Nuclear Generation Segment

Higher nuclear generation of 0.4 TWh during the three months ended March 31, 2018 was primarily due to fewer planned outage days at the Darlington GS. 

For the three months ended March 31, 2018, the unit capability factor for the operating units at the Darlington GS was 96.5 per cent, compared to 85.3 per cent for the same quarter in 2017.  The increase was primarily due to a lower number of planned outage days at the station.  

At the Pickering GS, the unit capability factor decreased to 74.5 per cent for 2018, compared to 78.5 per cent for the same quarter in 2017, primarily due to a higher number of planned outage days in the cyclical maintenance schedule at the station in the first quarter of 2018. 

Regulated – Hydroelectric Segment

Lower generation from the regulated hydroelectric stations of 0.3 TWh during the three months ended March 31, 2018, compared to the same quarter in 2017, was primarily due to lower water flows on the northwestern and eastern Ontario river systems. 

The availability of 87.3 per cent at these stations in 2018 was lower than
89.5 per cent for the same quarter in 2017.  The decrease in the availability was primarily due to a higher number of unplanned outage days at the eastern and northeastern Ontario regions' regulated hydroelectric stations. 

Contracted Generation Portfolio Segment

Generation from the Contracted Generation Portfolio during the three months ended March 31, 2018 increased by 0.1 TWh compared to the same quarter in 2017.

The availability of these hydroelectric stations for the three months ended March 31, 2018 was 80.1 per cent, compared to 83.6 per cent for the same quarter in 2017.  The decrease in the availability was primarily due to a higher number of planned outage days at the Little Long GS on the Lower Mattagami River.

Total Generating Cost

The Enterprise Total Generating Cost per megawatt hour (MWh) was $49.84 for the three months ended March 31, 2018, compared to $47.86 for the same quarter in 2017.  The increase was mainly a result of higher operations, maintenance and administration expenses and higher sustaining capital expenditures, partially offset by higher nuclear electricity generation.

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 2018 were as follows:

Darlington Refurbishment

The Darlington Refurbishment project is expected to extend the operating life of the four-unit Darlington GS by approximately 30 years.  In early May 2018, OPG completed the removal of the existing reactor components, signifying the completion of the second major segment of the Unit 2 refurbishment.  The refurbishment of Unit 2 has now transitioned into the third major segment, the installation and reassembly of reactor components.  The Darlington Refurbishment project continues to track on schedule and to the $12.8 billion budget.

In addition to the execution of refurbishment activities on Unit 2, OPG is progressing with planning activities on the refurbishment of Unit 3 and ensuring that lessons learned from the Unit 2 refurbishment are being incorporated.  OPG is also entering into commitments to procure major components that require long lead times.  Execution of the prerequisite activities for the Unit 3 refurbishment have commenced.  The Unit 3 refurbishment is expected to commence upon the return to service of Unit 2.  As of March 31, 2018, $137 million has been invested in planning and prerequisite activities related to the refurbishment of Unit 3.  In February 2018, the Government of Ontario confirmed its commitment to proceed with the refurbishment of Unit 3.

Total life-to-date capital expenditures on the project were approximately $4.7 billion as at March 31, 2018.

Ranney Falls Hydroelectric GS

In 2017, OPG began 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.  Construction continues in the expanded forebay, powerhouse and spillway area.  Fabrication of the sectional gates and two head gates has been completed, with assembly and site delivery in progress.  Turbine and generator unit fabrication is also in progress.  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.

Nanticoke Solar Facility

The project encompasses the construction of a 44 MW solar facility at OPG's Nanticoke GS site and adjacent lands under a contract with the Independent Electricity System Operator, through Nanticoke Solar LP, a partnership between OPG and a subsidiary of the Six Nations of Grand River Development Corporation.  Significant contracts for equipment and engineering construction services were executed and site preparation commenced in the first quarter of 2018.  The facility is expected to be completed in the first quarter of 2019, with a budget of $107 million.  The project is included in the Contracted Generation Portfolio segment.

Ontario Power Generation Inc. is an Ontario-based electricity generation company whose principal business is the generation and sale of electricity in Ontario.  Our mission is providing low cost power in a safe, clean, reliable and sustainable manner for the benefit of our customers and shareholder.

Ontario Power Generation Inc.'s unaudited interim financial statements and Management's Discussion and Analysis as at and for the three months ended March 31, 2018 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.

SOURCE Ontario Power Generation Inc.