Fortis Earns $36 Million in Third Quarter of 2009

11/05/2009 07:00 EST

 

St. John’s, NL (November 5, 2009):

Fortis Earns $36 Million in Third Quarter of 2009

Fortis Inc. (“Fortis” or the “Corporation”) (TSX:FTS) recorded third quarter net earnings applicable to common shares of $36 million, or $0.21 per common share, compared to earnings of $49 million, or $0.31 per common share, for the third quarter of 2008.  Earnings were $1 million lower quarter over quarter, excluding one‑time tax reductions of $12 million at Terasen and FortisAlberta in the third quarter last year.  Year‑to‑date earnings applicable to common shares were $181 million, or $1.06 per common share, compared to earnings of $169 million, or $1.08 per common share, for the same period last year. 

The Terasen Gas companies incurred a loss of $3 million for the third quarter of 2009 compared to earnings of $1 million for the same period last year.  Excluding a $5.5 million tax reduction in the third quarter of 2008 associated with the settlement of historical corporate tax matters, results were $1.5 million higher quarter over quarter.  The increase was mainly due to lower effective corporate income taxes.

Canadian Regulated Electric Utilities contributed $36 million to earnings for the third quarter compared to $38 million for the same period last year.  Excluding a $4.5 million recovery of future income taxes at FortisAlberta during the third quarter of 2008, earnings were $2.5 million higher quarter over quarter.  Improved performance at FortisAlberta, due to growth in electrical infrastructure investment and higher net transmission revenue, was partially offset by lower earnings at Newfoundland Power largely associated with higher operating expenses and amortization costs.  

During the second quarter of 2009, Terasen Gas, Terasen Gas (Vancouver Island) and FortisAlberta filed applications with their respective regulators to set 2010 and 2011 customer rates and Newfoundland Power filed an application with its regulator to set 2010 customer rates.  Each of these utilities has requested, or is currently engaged in, a cost of capital review, the outcome of which could result in a change in the allowed rate of return on common shareholder’s equity.

In October 2009, FortisOntario acquired Great Lakes Power Distribution Inc., subsequently renamed Algoma Power Inc. (“Algoma Power”), for an aggregate purchase price of $75 million, including cash acquired, subject to adjustment.  Algoma Power is a regulated electric distribution utility serving approximately 12,000 customers in the district of Algoma in northern Ontario.

Caribbean Regulated Electric Utilities contributed $7 million to earnings, comparable to the third quarter of 2008.  Results for the quarter were impacted by slower electricity sales growth as a result of the global economic downturn.

Non-Regulated Fortis Generation contributed $4 million to earnings compared to $9 million for the third quarter of 2008.  As expected, results for the quarter were unfavourably impacted by the loss of earnings subsequent to the expiration, on April 30, 2009, of the power-for-water exchange agreement related to the Rankine hydroelectric generating facility in Ontario.   Lower average wholesale market energy prices in Upper New York State and lower production in Belize also contributed to the decrease in earnings.

Fortis Properties contributed $9 million to earnings, comparable to the third quarter of 2008.  Contributions from recently acquired hotels and the Real Estate Division were offset by the impact of generally lower occupancies at the remainder of the Company’s hotels.

Corporate and other expenses were $17 million compared to $15 million for the same quarter in 2008.  Excluding a $1 million favourable tax adjustment in the third quarter of 2009 and a $2 million tax reduction associated with the settlement of historical corporate tax matters at Terasen in the third quarter of 2008, corporate and other expenses were $1 million higher quarter over quarter.  The increase was driven by higher finance charges associated with the $200 million debentures issued in July 2009.  In December 2008, Fortis completed a $300 million common share issue, the net proceeds of which were primarily used to repay short-term debt incurred to repay maturing long‑term debt.

 

Cash flow from operating activities was $567 million year to date compared to $452 million for the same period last year.  The increase in cash from operating activities was largely attributable to FortisAlberta and the Terasen Gas companies.

Consolidated capital expenditures, before customer contributions, were $763 million year to date.  Some of the larger projects in progress include construction of the liquefied natural gas storage facility at Terasen Gas (Vancouver Island), the installation of automated customer meters at FortisAlberta, the Okanagan Transmission Reinforcement Project at FortisBC and BECOL’s 19-megawatt Vaca hydroelectric generating facility in Belize.

Year to date, Fortis and its utilities have raised more than $700 million of long-term debt, including 30-year $200 million 6.51% unsecured debentures at Fortis, 30-year $105 million 6.10% unsecured debentures at FortisBC, 15‑year US$40 million 7.50% unsecured notes at Caribbean Utilities, 30-year $65 million 6.606% first mortgage bonds at Newfoundland Power, 30-year $100 million 6.55% unsecured debentures at Terasen Gas, 30-year $100 million 7.06% unsecured debentures at FortisAlberta and an additional 30-year $125 million 5.37% unsecured debentures at FortisAlberta issued subsequent to the quarter end.

As at September 30, 2009, Fortis had consolidated credit facilities of approximately $2.2 billion, $1.6 billion of which was unused.  Over the next five years, average consolidated annual long-term debt maturities and repayments are expected to be approximately $157 million.

In September 2009, Standard & Poor’s confirmed its credit rating for Fortis at A- (stable outlook), reflecting the diversity of the Corporation’s regulated utility operations, stability and predictability of the utilities’ cash flows and the Corporation’s focused, well-executed growth strategy.

“Our equity issue last December strengthened the consolidated balance sheet of Fortis and improved liquidity,” explains Stan Marshall, President and Chief Executive Officer, Fortis Inc. “Notwithstanding ongoing global economic challenges, Fortis anticipates that its capital program will surpass $1 billion this year.  Our five‑year $5 billion capital program, which is being driven by investment in infrastructure at our Regulated Utilities in western Canada, should allow rate base to grow, on average, approximately 6 to 7 per cent annually.  This capital investment should drive growth in earnings and dividends,” concludes Marshall.

Fortis Inc. Barry V. Perry Vice President Finance and Chief Financial Officer 709-737-2800

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