Fortis Earns $53 Million in Second Quarter of 2009

08/05/2009 07:00 EST

St. John’s, NL (August 5, 2009):

Fortis Earns $53 Million in Second Quarter of 2009

Fortis Inc. (“Fortis” or the “Corporation”) (TSX:FTS) recorded second quarter net earnings applicable to common shares of $53 million, or $0.31 per common share, compared to earnings of $29 million, or $0.19 per common share, for the second quarter of 2008.  Year-to-date earnings applicable to common shares were $145 million, or $0.85 per common share, compared to earnings of $120 million, or $0.77 per common share, for the same period last year. 

“Fortis delivered positive results for the quarter, led by our Canadian Regulated Utilities, despite challenging economic conditions,” explains Stan Marshall, President and Chief Executive Officer, Fortis Inc. 

Results for the second quarter last year included one-time charges of approximately $15 million pertaining to Belize Electricity and FortisOntario.  Excluding these one-time charges, earnings increased $9 million quarter over quarter driven by contributions from FortisAlberta and the Terasen Gas companies, partially offset by lower earnings from non‑regulated hydroelectric generation.

The Terasen Gas companies contributed earnings of $14 million for the second quarter of 2009, up $2 million from the same quarter last year.  The increase was mainly due to lower corporate income taxes and finance charges.

Canadian Regulated Electric Utilities contributed $39 million to earnings for the second quarter, up $13 million from the same quarter last year.  Excluding the $2 million one-time charge at FortisOntario associated with the repayment of an interconnection agreement‑related refund during the second quarter of 2008, earnings from Canadian Regulated Electric Utilities were $11 million higher quarter over quarter.  The increase was driven by lower corporate income taxes and growth in electrical infrastructure investment at FortisAlberta. 

In June 2009, FortisOntario entered into an agreement to acquire Great Lakes Power Distribution Inc., an electric distribution utility serving approximately 12,000 customers in the district of Algoma in northern Ontario, for approximately $68 million, subject to adjustment and customary regulatory approvals.

During the second quarter of 2009, Terasen Gas, Terasen Gas (Vancouver Island) and FortisAlberta each 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.  All of these utilities have requested or are currently engaged in a cost of capital review, the outcome of which could result in a change in their allowed rates of return on common shareholder’s equity.

Caribbean Regulated Electric Utilities contributed $7 million to earnings compared to a $5 million loss incurred in the second quarter of 2008.  Excluding the $13 million loss in 2008 associated with the June 2008 regulatory rate decision at Belize Electricity, earnings at Caribbean Regulated Electric Utilities were $1 million lower quarter over quarter.  Results for the quarter reflected a lower allowed rate of return on rate base assets at Belize Electricity, effective July 1, 2008.

Non-Regulated Fortis Generation contributed $3 million to earnings compared to $7 million for the second 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.  Earnings also decreased due to lower average wholesale market energy prices in Upper New York State and Ontario quarter over quarter.

Fortis Properties contributed earnings of $8 million, up $1 million from the second quarter of 2008, mainly due to increased contribution from the Real Estate Division combined with lower corporate operating expenses, partially offset by lower contribution from the Hospitality Division, mainly caused by lower hotel occupancies.  In April 2009, Fortis Properties acquired the 214-room Holiday Inn Select in Windsor, Ontario for approximately $7 million.  Fortis Properties now owns 21 hotels with more than 4,000 rooms in eight Canadian provinces.

Corporate and other expenses were $18 million, comparable to the same quarter in 2008.  Lower finance charges primarily due to decreased borrowing levels quarter over quarter, were largely offset by higher preference share dividends related to the issuance of First Preference Shares, Series G during the second quarter of 2008.  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 $275 million in the second quarter, up from $232 million in the same quarter last year.  Cash flow from operating activities was $504 million year to date, up from $425 million in the same period last year.  The increases were driven by higher earnings and favourable working capital changes at FortisAlberta and the Terasen Gas companies.

“Fortis and its subsidiaries successfully raised long-term debt at attractive rates during a period of global economic uncertainty and capital market volatility, demonstrating the strength of our core utility business,” says Marshall.

Fortis and its utilities have raised over $600 million of long-term debt year to date, 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 7.06% unsecured debentures at FortisAlberta, and 30-year $100 million 6.55% unsecured debentures at Terasen Gas.

“Our subsidiaries are focused on completing their capital projects for 2009, estimated to total more than $1 billion this year,” says Marshall.  “Much of this investment is occurring at our utilities in western Canada and the Caribbean.  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 meters at FortisAlberta, the Okanagan Transmission Reinforcement Project at FortisBC and the 19-megawatt hydroelectric generating facility in Belize,” he explains.

“Over the five years 2009 through 2013, our consolidated capital program is expected to total approximately $5 billion, substantially all of which will be funded at the subsidiary level,” says Marshall.  “This capital investment will add value for customers and shareholders and fortify the position of Fortis as a leading owner of energy infrastructure in Canada,” concludes Marshall.

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

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