“EPCOR reported solid first quarter operating results in both our power and water operations,” said EPCOR President & CEO Don Lowry. “The availability and performance of our Genesee power plants was above target and higher than last year, and we continue to execute our capital plan, including construction of power generation at Keephills 3 and Clover Bar Energy Centre, and water and wastewater treatment facilities at the Suncor Voyageur site. A major step in building our water and wastewater treatment expertise was completed this quarter with the transfer of the Edmonton Gold Bar Wastewater Treatment Plant to EPCOR. As a result, we are now better able to develop opportunities inside and outside of Edmonton.”
Highlights of EPCOR’s financial performance:
Cash flow from operating activities for the three months ended March 31, 2009 was CAD147 million compared with CAD99 million for the corresponding period in the previous year.
Other comprehensive income was CAD22 million for the three months ended March 31, 2009 compared with CAD23 million for the corresponding period in the previous year.
Investment in capital projects for the three months ended March 31, 2009 was CAD136 million compared with CAD108 million for the corresponding period in the previous year.
OVERVIEW
EPCOR is wholly-owned by The City of Edmonton (the City). EPCOR’s results from operating activities for the first quarter were on plan as our power and water operations across the regions delivered good results. The availability of our Genesee plants was above target and higher than last year as they did not experience any major outages in the current quarter. The higher availability at Genesee 1 and 2 resulted in net availability incentive income for those units under the terms of the Genesee Power Purchase Arrangement (PPA). In January 2009, we sold another 10% interest in the Battle River PPA. The decrease in generation from the Battle River PPA and lower average Alberta spot power prices resulted in lower margins from Energy Services’ Alberta electricity portfolio in the quarter compared with the first quarter of 2008. The impact was reduced by effective management of the trading portfolio. Our water and electric distribution and transmission businesses performed well without any significant operating issues arising during the quarter.
EPCOR Power L.P. (Power LP), a 30.6% subsidiary of EPCOR, contributed a net loss in the quarter primarily due to changes in the fair value of natural gas supply and foreign exchange contracts. Fair value changes can cause volatility in Power LP’s earnings but are not representative of the underlying economic performance of Power LP’s business. Operating income, excluding fair value changes, from Power LP’s plants was CAD3 million lower in the first quarter of 2009 compared with the first quarter of 2008.
The economic and credit crises continued through the first quarter of 2009. This contributed to a CAD4 million fair value write-down of the notes which EPCOR received in exchange for its Canadian non-bank sponsored asset-backed commercial paper (ABCP). In addition, during this period of credit uncertainty we relied on our existing credit facilities and ability to issue commercial paper to fund our capital expenditures. Similarly, Power LP relied upon its credit facilities to finance capital expenditures during the period. Power LP’s cash distribution for the first quarter of 2009 of CAD0.63 per unit did not change from recent quarters.
Progress continued on our capital expenditure program, particularly the Keephills 3 generation plant, two units at Clover Bar Energy Centre and Power LP’s Southport, Roxboro and North Island plant enhancements. The Gold Bar Wastewater Treatment Plant (Gold Bar) assets and wastewater treatment professionals on staff were officially transferred from the City to EPCOR on March 31, 2009. EPCOR will not only benefit from future earnings from the facility, but is now better able to develop opportunities outside Edmonton with its combined water and wastewater treatment expertise. In addition, EPCOR signed an agreement with the Town of Banff to provide operation services for the town’s wastewater treatment plant for the period from March 24, 2009 to June 30, 2011.
On March 26, 2009, the Government of Canada, under Natural Resources Canada, selected EPCOR, Enbridge Inc. and the Alberta Saline Aquifer Project (ASAP), acting in partnership, to receive funding under the ecoENERGY Technology Initiative for the Genesee post-combustion demonstration plant project. The project focuses on the development of amine scrubbing technology to remove carbon dioxide from the flue-gas leaving the stack of a coal-fired generation plant. The amount of funding that the EPCOR-Enbridge-ASAP partnership will receive will be finalized during the contribution agreement stage. EPCOR and Enbridge also submitted this project to the Alberta Government under the CAD2 billion Carbon Capture Storage funding program.
