Fortis Earns Record First Quarter Earnings of $91 Million

St. John’s, NL (May 1, 2008):

Fortis Earns Record First Quarter Earnings of $91 Million

Terasen Acquisition Drives 53 Per Cent Growth in First Quarter EPS

Fortis Inc. (“Fortis” or the “Corporation”) (TSX:FTS) achieved record first quarter net earnings applicable to common shares of $91 million, or $0.58 per common share, up $49 million from earnings of $42 million, or $0.38 per common share, for the first quarter of 2007. 

Growth in earnings was primarily attributable to the contribution from the Terasen Gas companies and also reflected improved performance at Caribbean Utilities.  The growth was partially offset by higher corporate costs associated with the Terasen acquisition and lower earnings at Newfoundland Power associated with a shift in the quarterly distribution of annual purchased power expense.  Newfoundland Power’s annual earnings are not expected to be impacted by the shift in quarterly earnings distribution; however, earnings are expected to be lower in the first and fourth quarters and higher in the second and third quarters compared to the same periods last year. 

“The Terasen acquisition became accretive to earnings per common share of Fortis in the first quarter,” says Stan Marshall, President and Chief Executive Officer, Fortis.  “The integration is progressing well,” he adds.

The Terasen Gas companies contributed $58 million to earnings in the first quarter.  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.  Fortis acquired Terasen for $3.7 billion on May 17, 2007.  

Canadian Regulated Electric Utilities contributed earnings of $33 million for the first quarter compared to $39 million for the first quarter last year.  The decrease reflected a shift in the quarterly distribution of annual purchased power expense at Newfoundland Power, which reduced earnings during the first quarter of 2008 by $6 million.

The 2008 allowed rates of return on common shareholders’ equity for Terasen Gas Inc., FortisAlberta, FortisBC and Newfoundland Power have been set at 8.62 per cent, 8.75 per cent, 9.02 per cent and 8.95 per cent, respectively.  In February 2008, FortisAlberta received regulatory approval of a Negotiated Settlement Agreement for its 2008 and 2009 electricity rates.

Caribbean Regulated Electric Utilities contributed $7 million to earnings in the first quarter compared to $4 million in the first quarter of 2007.  Excluding a one-time loss of approximately $2 million, associated with the disposal of steam-turbine assets at Caribbean Utilities in the first quarter of 2007, earnings were $1 million higher than the first quarter last year.  The higher earnings were driven by electricity sales growth, partially offset by the impact of unfavourable foreign exchange rates associated with the strengthening Canadian dollar compared to the same period last year.

In April 2008, the Government of the Cayman Islands granted a new exclusive 20-year transmission and distribution licence and a new non‑exclusive 21.5‑year generation licence to Caribbean Utilities.  “With new licences and a new regulatory regime in place, Caribbean Utilities can focus on meeting its obligation to serve customers,” adds Marshall.

In March 2008, the newly elected Government of Belize repealed regulations that had previously settled outstanding matters relating to the regulator’s decision on customer rates, effective July 1, 2007.  “The recovery of costs in rates is critical to ensuring the current and future energy needs of customers are met.  Belize Electricity is working to resolve this issue,” says Marshall.

Non-Regulated Fortis Generation contributed earnings of $6 million in the first quarter compared to $7 million in the same quarter last year.  Results reflected decreased hydroelectric production due to lower rainfall in Belize.

Fortis Properties contributed earnings of $3 million in the first quarter compared to $2 million in the first quarter of 2007.  Results reflected contributions from the Delta Regina in Saskatchewan acquired on August 1, 2007.

Corporate and other expenses were $16 million in the first quarter compared to $10 million in the same quarter last year.  The increase in corporate and other expenses was primarily driven by Terasen acquisition‑related finance charges.

“Our utilities have raised more than $400 million in the debt capital markets so far this year, providing long-term funding for capital programs that enhance reliability of gas and electricity service and meet customer growth,” explains Marshall. The debt issues included $250 million 6.05% 30-year debentures by Terasen Gas (Vancouver Island) Inc., $100 million 5.85% 30‑year debentures by FortisAlberta and $60 million 6.05% 30-year bonds by Maritime Electric. 

Shareholders of Fortis received a dividend of 25 cents per common share in the first quarter of 2008, up from 21 cents in the fourth quarter of 2007.  The increase extends the Corporation’s record of annual common share dividend increases to 35 consecutive years, the longest record of any public corporation in Canada.

Utility capital expenditures, before customer contributions, were approximately $162 million in the first quarter of 2008 and are expected to be approximately $900 million for the year.  Much of the Corporation’s consolidated capital program is being driven by the Terasen Gas companies, FortisAlberta, FortisBC, and regulated and non‑regulated electric utility operations in the Caribbean.

“The significant consolidated capital expenditure program, planned at more than $4 billion over the next five years, is expected to drive earnings growth going forward,” says Marshall.

“With Terasen delivering as expected, Fortis is well positioned going forward,” concludes Marshall.