OPG Reports 2015 Financial Results

Strong operating and financial results position OPG well for the refurbishment of the Darlington station

Toronto - Ontario Power Generation Inc. (OPG or Company) reported net income attributable to the Shareholder of $402 million for 2015, down from $561 million excluding extraordinary gain in 2014. The decreased earnings were mainly a result of the planned four-unit Vacuum Building Outage (VBO) at the Darlington Nuclear Generating Station (GS) in 2015, which reduced nuclear generation and increased operations, maintenance and administration (OM&A) expenses. The decrease in earnings in 2015 was partially offset by the new base regulated prices effective November 2014 and the newly in-serviced hydroelectric units.

"OPG's strong operating and financial performance over the last few years allows us to proceed with confidence in refurbishing our nuclear plant at Darlington," said Jeff Lyash, OPG President and CEO. "Over its additional 30-plus years of operating life, Darlington will provide a reliable supply of clean electricity and is expected to contribute approximately $50 billion in additional economic benefits to Ontario." Mr. Lyash also noted, "We currently produce about half of Ontario's electricity and our power costs customers approximately 40 per cent less than the rest of the market. Undertaking the Darlington Refurbishment project will allow us to keep moderating overall electricity prices for customers for decades to come and contributes to the Province's climate change goals."

"I am also pleased to continue our record of partnering with Indigenous communities in 2015 as the construction of the Peter Sutherland Sr. GS is being undertaken in partnership with the Taykwa Tagamou Nation."

Mr. Lyash added, "In 2015, OPG again achieved a strong safety performance. As one of the company's fundamental core values, safety is embedded in all that we do. Our goal is zero injuries."

In January 2016, OPG announced that it is ready to deliver on the Government of Ontario's decision to proceed with the refurbishment of the first of four units at Darlington and to pursue continued operations at the Pickering Nuclear GS to 2024, pending necessary approvals. Operating Pickering to 2024 will help provide a reliable supply of baseload electricity while the Darlington units and the units operated by Bruce Power L.P. undergo refurbishment.

Since 2010, OPG has invested more than $200 million in Pickering to ensure its safe and reliable operation. In 2015, the Pickering Station provided about 14 per cent of Ontario's power and achieved its highest ever level of reliability. Operating Pickering to 2024 will save electricity customers up to $600 million, avoid eight million tonnes of greenhouse gas emissions and maintain approximately 4,500 jobs across Durham Region.

Generating and Operating Performance

OPG operates a diverse generation portfolio of nuclear, hydroelectric, and thermal plants that is virtually free of greenhouse gases and smog-causing emissions.

In addition to the impact of the Darlington VBO on generation and OM&A expenses, OPG's net income was lower in 2015 due to higher interest expense, lower electricity trading margins, and higher accretion expense related to fixed asset removal and nuclear waste management liabilities. These were partially offset by higher earnings in 2015 from the new hydroelectric units on the Lower Mattagami River and a write-off of $77 million in 2014 reflecting a regulatory disallowance of capital costs by the Ontario Energy Board.

Total electricity generated decreased in 2015 to 78.0 terawatt hours (TWh) from 82.2 TWh in 2014. Nuclear production of 44.5 TWh in 2015 represented a decrease of 3.6 TWh compared to 2014, primarily due to the VBO at the Darlington GS, which required the shutdown of all four units from Sep. 14, 2015 to Oct. 30, 2015.

Generation of 30.4 TWh in 2015 from the Regulated – Hydroelectric segment was lower than the 31.3 TWh generated in 2014, mainly due to lower water flows in eastern Ontario. Generation from the Contracted Generation Portfolio increased by 0.3 TWh as a result of higher production from the hydroelectric units on the Lower Mattagami River.

The Darlington Nuclear GS capability factor of 76.9 per cent in 2015 reflected the planned VBO in 2015. The capability factor at the Pickering Nuclear GS increased to 79.4 per cent in 2015 from 75.3 per cent in 2014 mainly due to improved station performance. The Pickering Nuclear GS achieved the best ever reliability performance in the station's history.

OPG's regulated hydroelectric stations achieved an availability factor of 91.2 per cent in 2015 which was comparable to 91.4 per cent in 2014. OPG's contracted hydroelectric stations achieved an availability of 88.6 per cent in 2015 compared to 90.2 per cent in 2014. The reduction mainly reflected a higher number of planned outage days at certain Lower Mattagami River stations. OPG's contracted thermal stations achieved an equivalent forced outage rate of 11.2 per cent in 2015 compared to 8.9 per cent in 2014, mainly due to an outage to perform repair work at the Lennox GS.

Generation Development

OPG is undertaking a number of generation development and life extension projects in support of Ontario's electricity planning initiatives. Significant developments during 2015 were as follows:

Darlington Refurbishment

The Darlington Refurbishment project is expected to extend the operating life of the station by approximately 30 years. The approved project budget for the four-unit refurbishment is $12.8 billion including capitalized interest and escalation. Refurbishment work on the first unit is scheduled to commence in October 2016, with the last unit completed by 2026. Life-to-date capital expenditures were
$2,166 million as at Dec. 31, 2015.

In December 2015, OPG received a ten-year operating licence for the Darlington GS from the Canadian Nuclear Safety Commission (CNSC) – the longest licence ever granted by the CNSC to a Canadian nuclear power plant. The new licence, which will span most of the refurbishment period, is effective from Jan. 1, 2016 to Nov. 30, 2025.

Peter Sutherland Sr. GS

In March 2015, OPG's Board of Directors approved the construction of a new
28 MW generating station, the Peter Sutherland Sr. GS, on the Abitibi River, with a planned in-service date in the first half of 2018 and a budget of $300 million. Life-to-date capital expenditures were $95 million as at Dec. 31, 2015.

During 2015, OPG executed a hydroelectric energy supply agreement for the station with the Independent Electricity System Operator, and completed financing for the project.

The station will be constructed through a partnership between OPG and Coral Rapids L.P., a wholly owned subsidiary of the Taykwa Tagamou Nation. This project is OPG's latest partnership with a First Nation community. Past successful partnerships included those with the Moose Cree First Nation for the Lower Mattagami River project and the Lac Seul First Nation for the Lac Seul GS.

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