Nalcor Energy releases 2015 Business and Financial Report

March 22nd, 2016

Nalcor Energy today released its Business and Financial Report for the year ending December 31st, 2015 including consolidated financial statements.

Nalcor’s focus continues to be firmly on providing reliable electricity service to customers, as well as developing growth opportunities in Oil and Gas, Energy Marketing, Bull Arm Fabrication and the development of Muskrat Falls. During 2015, Nalcor continued to make strategic capital investments and its asset base grew from $10.6 billion in 2014 to $12.3 billion in 2015. Over the past 10 years, the company’s asset base has grown from $2.2 billion to $12.3 billion and the capital structure has improved. In 2015, Nalcor’s operating profit was $42.5 million. In just a few short years, income producing assets are projected to produce net income in the range of $400-$500 million annually.

While the business continues to grow, certain factors adversely impacted 2015 financial results. Two notable impacts are lower global oil prices and the outstanding final decision on Newfoundland and Labrador Hydro’s (Hydro) general rate application which is still before the Board of Commissioners of Public Utilities (PUB). However, the company’s solid financial foundation positions it to manage these challenges and it remains well positioned for the future.

“In a year when oil prices fell by almost 50 per cent, many oil and gas companies locally, nationally and internationally have been responding to the low oil price environment by taking a non-cash write down which is referred to as an impairment charge,” said Martin. “We have made an accounting adjustment to reduce the current book value of the White Rose asset to respond to today’s market conditions; however, it remains a robust asset that has already realized a return on investment. Nalcor has already recovered more than its investment in the White Rose asset and it continues to project strong returns in the future. ”
The accounting impact of this impairment results in a $61.7 million adjustment against Nalcor’s $1 billion oil and gas assets and is reflected as an adjustment to 2015 earnings.

“Nalcor’s operating profit for 2015 is $42.5 million. Accounting for the impairment adjustment, Nalcor reported a loss of $19.2 million” added Martin. “Despite the challenges in 2015, Nalcor’s financial position is stable with a strong balance-sheet and debt-to-equity position. The company continues to be well positioned to provide long-term returns to the province as our full suite of income producing assets come on stream.”

Hydro continues to invest in aging electricity assets to deliver increased reliability to customers while balancing the need for cost control. The company continued to execute its robust asset management strategy with $125 million in capital improvements made across the system in 2015. In the past five years alone, over $500 million has been invested towards reliability improvements. In 2015, Hydro experienced increased costs for fuel and operating to meet the reliability needs of its customers. These continued investments are critical in order to reliably

serve our customers today and tomorrow. However, the increased costs combined with delay in rates approval from the PUB have impacted Hydro’s financial position in 2015.
Significant progress continued in 2015 on construction of the Muskrat Falls Project. Once the hydroelectric and transmission projects are complete, the Island of Newfoundland will be connected to the North American grid for the first time in our history, ensuring residents benefit from clean, renewable electricity, while improving system reliability. The project will help meet our province’s energy needs. It provides Newfoundland and Labrador with energy independence and return on investment over the next 50 years and beyond to the people of the province.

Offshore Newfoundland and Labrador remains poised for longer-term growth. In Nalcor’s oil and gas business, our skilled exploration team of geologists and geophysicists are driving one of the largest ongoing seismic programs in the world, with over 110,000 line kilometres of 2D seismic acquired since 2011, supplemented by 3D seismic, 3D electromagnetics, satellite slick collection and analysis, and a comprehensive Metocean study. The results of the province’s first-ever scheduled land sale in November 2015 were reflective of this promising potential, with bids totalling $1.2 billion for parcels around the Flemish Pass.

Nalcor will provide an overview of the 2015 Business and Financial Report at its Annual General Meeting which will take place on Thursday, March 24th from 1:00 pm to 4:00 p.m. at the Holiday Inn in St. John’s. To register, please visit nalcorenergy.com or e-mail info@nalcorenergy.com.

The full report is available at online at nalcorenergy.com.