OPG Reports 2019 Third Quarter Financial Results

by ahnationtalk on November 12, 201952 Views

Toronto: – Ontario Power Generation Inc. (OPG or Company) today reported net income attributable to the Shareholder of $319 million for the third quarter of 2019, compared to $279 million for the same quarter of 2018.

“Our strong financial results for the quarter once again demonstrate the high quality performance across our fleet,” said Ken Hartwick, OPG President and CEO. “Within our nuclear fleet, we have seen unprecedented levels of uninterrupted generation, continuing to provide the people of Ontario with clean, reliable energy every day.”

The Darlington Refurbishment project reached its third anniversary in October 2019. “As we mark this important milestone on the 10-year Darlington Refurbishment project, we remain focused on delivering Canada’s largest clean energy project on time, and on budget,” said Hartwick. “The refurbishment of Unit 2 is 90 per cent complete, including the completion of lower feeders and the commencement of reloading fuel into the reactor in preparation for the return to service.”

OPG also confirmed that it had completed the previously announced acquisitions of Cube Hydro, a hydropower platform in the United States, and the remaining 50 per cent interest in the combined-cycle natural gas-fired Brighton Beach generating station (GS) in Windsor, Ontario. “The acquisition of Cube Hydro provides additional high quality, clean generation assets to OPG’s existing U.S. hydroelectric portfolio,” commented Hartwick. “Natural gas is an enabler of renewable energy and the acquisition of the remaining interest in Brighton Beach will ensure that this facility continues to provide additional generation flexibility to Ontario. These acquisitions contribute to our strategic goals of building our business.”

The Company’s net income for the third quarter of 2019 was favourably impacted by a decrease in overall outage days at the Pickering and Darlington nuclear generating stations, compared to the same quarter in 2018. This resulted in higher electricity generation and higher revenue from the Regulated ­– Nuclear Generation segment compared to the same quarter in 2018.

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.

Generation and Operating Performance

Electricity generated during the third quarter of 2019 was 19.1 terawatt hours (TWh), compared to 18.3 TWh for the same quarter in 2018. Total electricity generated during the nine month period ended September 30, 2019 increased to 58.4 TWh from 54.3 TWh for the same period in 2018.

Regulated – Nuclear Generation Segment

Higher nuclear electricity generation of 1.0 TWh and 3.1 TWh during the three and nine month periods ended September 30, 2019, respectively, compared to the same periods in 2018, was primarily due to fewer outage days at the Pickering and Darlington generating stations.

For the third quarter of 2019, the unit capability factor for the operating units at the Darlington GS was 91.1 per cent, compared to 91.7 per cent for the same quarter in 2018. For the nine month period ended September 30, 2019, the unit capability factor for the operating units at the Darlington GS was 86.5 per cent, compared to 85.2 per cent for the same period in 2018. The factors were comparable in both the three and nine month periods, in line with the similar number of overall outage days at the station in both periods. For the third quarter of 2019, overall outage days for the units decreased to 28 days from 30 days for the same quarter in 2018. For the nine month period ended September 30, 2019, overall outage days decreased to 114 days from 129 days for the same period in 2018.

At the Pickering GS, the unit capability factor increased to 94.3 per cent and 89.1 per cent for the three and nine month periods ended September 30, 2019, respectively, compared to 87.9 per cent and 77.9 per cent for the same periods in 2018. The increase in both periods was due to fewer overall outage days at the station. For the third quarter of 2019, overall outage days for the six units decreased to 35 days from 98 days for the same quarter in 2018. For the nine month period ended September 30, 2019, overall outage days decreased to 182 days from 393 days for the same period in 2018.

Regulated – Hydroelectric Segment

Electricity generation from the regulated hydroelectric stations decreased by 0.2 TWh and increased by 0.8 TWh during the three and nine month periods ended September 30, 2019, respectively, compared to the same periods in 2018. The decrease in the third quarter of 2019 was primarily due to higher forgone hydroelectric generation as a result of lower demand for electricity in Ontario, partially offset by higher water flows in various regions of the province. The increase in the nine month period ended September 30, 2019 was primarily due to higher water flows across most of the province, particularly in the spring of 2019.

The availability of 82.0 per cent at these stations in the third quarter of 2019 was lower than 82.6 per cent for the same quarter in 2018. For the nine month period ended September 30, 2019, the availability of the stations increased to 87.7 per cent, from 86.1 per cent for the same period in 2018. The decrease in the availability in the third quarter of 2019 was primarily due to higher unplanned outages, mainly at the stations in the Niagara and eastern Ontario regions. The increase in the availability in the nine month period ended September 30, 2019 was primarily due to fewer planned outage days at the eastern Ontario and Niagara regions’ stations.

Contracted and Other Generation Segment

Electricity generation from the Contracted and Other Generation segment in the third quarter of 2019 was comparable to the same quarter in 2018. The higher generation from the Contracted and Other Generation segment of 0.2 TWh during the nine month period ended September 30, 2019, compared to the same period in 2018, was primarily due to electricity generation from the Eagle Creek facilities in the United States, partially offset by higher electricity generation forgone as a result of lower demand for generation from contracted facilities in Ontario.

The availability of the Ontario-based hydroelectric stations of the Contracted and Other Generation segment for the third quarter of 2019 was 69.1 per cent, compared to 67.7 per cent for the same quarter in 2018. The stations’ availability for the nine month period ended September 30, 2019 was 77.9 per cent, compared to 78.1 per cent for the same period in 2018. The increase in the third quarter was primarily due to fewer planned outage days at the Kipling GS. The availability in the nine month period ended September 30, 2019 was comparable to the same period in 2018.

Total Generating Cost

The Enterprise Total Generating Cost per megawatt hour (MWh) for the third quarter of 2019 was $50.41, compared to $53.64 for the same quarter in 2018. The Enterprise Total Generating Cost per MWh for the nine month period ended September 30, 2019 was $48.89, compared to $53.02 for the same period in 2018. The decrease in Enterprise TGC per MWh was primarily due to higher nuclear electricity generation and lower OM&A expenses before the impact of OEB-authorized regulatory variance and deferral accounts at the nuclear facilities, partially offset by higher sustaining capital expenditures.

Generation Development

OPG undertakes generation development and life extension projects in support of Ontario’s electricity planning initiatives and expected to provide incremental value in the future. Significant developments during the third quarter of 2019 included the following:

Darlington Refurbishment

The Darlington Refurbishment project is expected to extend the operating life of the four-unit Darlington GS by at least 30 years.

The Unit 2 refurbishment has substantially completed the third major segment, the installation and reassembly of reactor components, which included the installation of fuel channel assemblies and installation of new feeder tubes. During the third quarter, work progressed on the Lower Feeder installation series and was completed in October 2019. The Lower Body Tubing installation series is expected to commence in the fourth quarter of 2019, and its completion will represent the end of the third major segment of the Unit 2 refurbishment. The fourth major segment, the return to service of the unit, began in November 2019 with the commencement of fuel loading into the reactor.

Unit 2 is expected to return to service in the second quarter of 2020, following the safe completion of commissioning activities. The Darlington Refurbishment project, the execution of which began in 2016, continues to track on schedule overall and to the $12.8 billion budget.

In addition to the execution of refurbishment activities on Unit 2, OPG continues to progress with the planning and prerequisite activities for the refurbishment of Unit 3, incorporating the experience learned to date on Unit 2’s execution. After considering the optimization of resources being engaged in returning Unit 2 to service, the Unit 3 refurbishment is now targeted to commence in the second quarter of 2020, reflecting a coordinated effort between the project and operations teams. As of September 30, 2019, $437 million has been invested in planning and prerequisite activities related to the refurbishment of Unit 3.

Total life-to-date expenditures on the project were approximately $6.4 billion as at September 30, 2019.

Ranney Falls Hydroelectric GS

OPG continues construction work for 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. During the quarter, testing and commissioning of the turbine and generator of the new unit continued. The unit is housed in a new powerhouse and the total station capacity will double from 10 MW to 20 MW, generating clean, renewable power. 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.

FINANCIAL AND OPERATIONAL HIGHLIGHTS

FINANCIAL AND OPERATIONAL HIGHLIGHTS
Three Months Ended Nine Months Ended
September 30 September 30
(millions of dollars – except where noted) 2019 2018 2019 2018
Revenue 1,508 1,373 4,500 4,062
Fuel expense 172 175 495 496
Operations, maintenance and administration 661 638 2,091 2,103
Depreciation and amortization 268 200 798 584
Other net expenses (gains) 1 17 27 50 (169)
Income before interest and income taxes 390 333 1,066 1,048
Net interest expense 5 19 35 56
Income tax expense 62 31 135 44
Net income 323 283 896 948
Net income attributable to the Shareholder 319 279 883 935
Net income attributable to non-controlling interest 2 4 4 13 13
Income before interest and income taxes
Electricity generating business segments 419 370 1,134 866
Regulated – Nuclear Waste Management (26) (26) (87) (91)
Other (3) (11) 19 273
Total income before interest and income taxes 390 333 1,066 1,048
Cash flow
Cash flow provided by operating activities 743 524 1,928 1,163
Electricity generation (TWh)
Regulated – Nuclear Generation 11.6 10.6 32.7 29.6
Regulated – Hydroelectric 6.8 7.0 23.1 22.3
Contracted and Other Generation 3 0.7 0.7 2.6 2.4
Total electricity generation 19.1 18.3 58.4 54.3
Nuclear unit capability factor (per cent) 4
Darlington Nuclear GS 91.1 91.7 86.5 85.2
Pickering Nuclear GS 94.3 87.9 89.1 77.9
Availability (per cent)
Regulated – Hydroelectric 82.0 82.6 87.7 86.1
Contracted and Other Generation – hydroelectric stations 5 69.1 67.7 77.9 78.1
Equivalent forced outage rate 6
Contracted and Other Generation – thermal stations 0.5 6.4 5.2 2.8
Enterprise Total Generating Cost (TGC) per MWh ($/MWh) for the three and 50.41 53.64 48.89 53.02
nine months ended September 30, 2019 and September 30, 2018 ($/MWh) 7
Return on Equity Excluding Accumulated Other Comprehensive Income
(ROE Excluding AOCI) for the twelve months ended September 30, 2019
and December 31, 2018 (%) 7 8.4 9.5

1 For the nine month period ended September 30, 2018, includes the pre-tax gain on the sale of the former Lakeview GS site.

2 Relates to the 25 per cent interest of the Amisk-oo-Skow Finance Corporation, a corporation wholly owned by the Moose Cree First Nation in Lower Mattagami Limited Partnership, the 33 per cent interest of Coral Rapids Power Corporation, a corporation wholly owned by the Taykwa Tagamou Nation, in PSS Generating Station Limited Partnership, and the 15 per cent and 5 per cent interest of corporations wholly owned by the Six Nations of Grand River Development Corporation and by the Mississaugas of the Credit First Nation, respectively, in Nanticoke Solar LP.

3 Includes OPG’s proportionate share of electricity generation from co-owned and minority shareholdings in electricity generating facilities. For the three and nine month periods ended September 30, 2019, includes generation from the Eagle Creek facilities, including the proportionate share of electricity generation from co-owned and minority shareholdings.

4 Nuclear unit capability factor excludes unit(s) during the period in which they are undergoing refurbishment. Unit 2 of the Darlington GS is excluded from the measure effective October 15, 2016, when the unit was taken offline for refurbishment.

5 Reflects the availability of contracted hydroelectric generating stations in Ontario.

6 Reflects the reliability of wholly-owned thermal stations. For the three and nine month periods ended September 30, 2018, includes unplanned outage days at the Thunder Bay GS prior to cessation of operations in July 2018. Excludes the Brighton Beach GS, the remaining 50 per cent of which was acquired on August 30, 2019.

7 Enterprise TGC per MWh and ROE Excluding AOCI are non-GAAP financial measures and do not have any standardized meaning prescribed by US GAAP. Additional information about the non-GAAP measures is provided in OPG’s Management’s Discussion and Analysis for the three and nine month periods ended September 30, 2019, in the sections Highlights – Return on Equity Excluding Accumulated Other Comprehensive Income, Highlights – Enterprise Total Generating Cost per MWh, and Supplementary Non-GAAP Financial Measures.

OPG is the largest electricity generator in the province, providing almost half the power Ontarians rely on every day. It is also one of the most diverse generators in North America with expertise in nuclear, hydro, biomass, solar and gas.

Ontario Power Generation Inc.’s unaudited interim consolidated financial statements and Management’s Discussion and Analysis as at and for the three and nine month periods ended September 30, 2019 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.

– 30 –

For further information, please contact:

Investor Relations
416-592-6700
investor.relations@opg.com

NT5

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