Fortis Earns $92 Million in First Quarter of 2009

St. John’s, NL (April 30, 2009):

Fortis Earns $92 Million in First Quarter of 2009

Fortis Inc. (“Fortis” or the “Corporation”) (TSX:FTS) achieved first quarter net earnings applicable to common shares of $92 million, or $0.54 per common share, compared to earnings of $91 million, or $0.58 per common share, for the first quarter of 2008. 

“An increase in earnings at Regulated Electric Utilities in western Canada was partially offset by lower earnings at Caribbean Regulated Utilities and Fortis Properties,” explains Stan Marshall, President and Chief Executive Officer, Fortis Inc.

The Terasen Gas companies contributed earnings of $58 million, comparable to the first quarter of 2008.  Due to the seasonality of the business, virtually all of the earnings of the Terasen Gas companies are generated in the first and fourth quarters. 

Canadian Regulated Electric Utilities contributed earnings of $37 million, up $4 million from the first quarter of 2008, driven by growth in electrical infrastructure investment and customers at the utilities in western Canada. 

The allowed rate of return on common shareholders’ equity (“ROE”) for 2009 has been set for Terasen Gas Inc., Terasen Gas (Vancouver Island) Inc., FortisBC and Maritime Electric, decreasing slightly to 8.47 per cent, 9.17 per cent, 8.87 per cent and 9.75 per cent, respectively.  The allowed ROE at Newfoundland Power remains unchanged at 8.95 per cent.  Interim customer rates for 2009 at FortisAlberta have been set using the utility’s 2007 allowed ROE of 8.51 per cent, pending the outcome of the Generic Cost of Capital Proceeding underway in Alberta.

Caribbean Regulated Electric Utilities contributed $6 million to earnings compared to $7 million in the first quarter of 2008.  Excluding one-time gains of approximately $2 million at Fortis Turks and Caicos, earnings were $3 million lower quarter over quarter.  The decrease resulted from reduced electricity sales attributable to cooler weather and the impact of the global economic downturn on energy demand combined with the lower allowed rate of return on rate base assets at Caribbean Utilities and Belize Electricity.  The decrease was partially mitigated by the favourable impact of foreign exchange rates associated with the strengthening US dollar quarter over quarter.

Non-Regulated Fortis Generation contributed $6 million to earnings, comparable to the first quarter of 2008.  The favourable impact of foreign exchange rates and increased hydroelectric production in Belize were offset by lower production and lower average wholesale market energy prices in Upper New York State and Ontario quarter over quarter.

Fortis Properties contributed earnings of $2 million compared to $3 million in the first quarter of 2008.  Results were reduced by one-time transitional operating costs associated with the Sheraton Hotel Newfoundland, acquired in November 2008, and the impact of lower hotel occupancies. 

Corporate and other expenses were $17 million compared to $16 million for the same quarter in 2008.  The increase in corporate and other costs was mainly due to higher preference share dividends related to the issuance of First Preference Shares, Series G during the second quarter of 2008.

Consolidated capital expenditures, before customer contributions, were approximately $219 million in the first quarter of 2009.  Much of the Corporation’s consolidated capital expenditure program is being driven by Regulated Utilities in western Canada and the Caribbean.

In February, FortisAlberta and Terasen Gas Inc. each raised $100 million of 30-year unsecured debentures at 7.06 per cent and 6.55 per cent, respectively.

Common shareholders of Fortis received a dividend of 26 cents per common share in the first quarter of 2009, up from 25 cents in the fourth quarter of 2008.  The 4 per cent increase in the quarterly common share dividend translates into an annualized dividend of $1.04 and extends the Corporation’s record of annual common share dividend increases to 36 consecutive years, the longest record of any public corporation in Canada.  Effective March 1, 2009, the Corporation’s Dividend Reinvestment and Share Purchase Plan provides a 2 per cent discount on the purchase of common shares, issued from treasury, with reinvested dividends.

Cash flow from operating activities was $229 million for the quarter, up $36 million from the same quarter last year, driven by increased cash flows at FortisAlberta. 

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 debt at Terasen.

“The equity issue has strengthened the consolidated balance sheet of Fortis and improved liquidity,” says Marshall.

As at March 31, 2009, Fortis had consolidated credit facilities of $2.2 billion, of which approximately $1.6 billion was unused, including $544 million unused under the Corporation’s $600 million committed revolving credit facility.  Approximately $2 billion of the total credit facilities are committed facilities, the majority of which have maturities between 2011 and 2013. 

“Notwithstanding the current economic recession, Fortis anticipates strong organic growth.  The Corporation is focused on executing its 2009 consolidated capital expenditure program, estimated at $1 billion.  Major capital projects underway include the approximate $200 million liquefied natural gas storage facility at Terasen Gas (Vancouver Island), the $161 million four‑year Automated Meter Infrastructure Project at FortisAlberta, the $139 million Okanagan Transmission Reinforcement Project at FortisBC and the US$53 million 19-megawatt hydroelectric generating facility in Belize,” concludes Marshall.