News Release: Nalcor Energy releases second quarter financial results

August 20th, 2020

August 20, 2020 St. John’s, NL – Nalcor Energy reported its financial results for the second quarter of 2020.

“During the COVID-19 pandemic, Nalcor companies have continued to provide essential services without interruption while keeping our employees, contractors and the public safe. This will continue to be our first priority.” – Stan Marshall, President and CEO

Second Quarter Financial Highlights

  • Nalcor recorded a loss for the six months ended June 30, 2020 of $137 million compared to a profit of $119 million for the same period in 2019, a decrease of $256 million. The key drivers of the decrease relates to a non-cash impairment of oil and gas assets of $225 million and a lower profit in Hydro Regulated as a result of timing differences associated with the implementation of the 2017 GRA, the expensing of borrowing and operating costs in LCP Transmission as a result of the Labrador Transmission Assets being substantially complete and lower realized oil prices and higher depletion in Oil and Gas. These decreases have been partially offset by higher production volumes, lower exploration and evaluation expenses and a decrease in royalties paid to the Province in Oil and Gas. The decrease in profit associated with Hydro Regulated is temporary and anticipated to reverse later in 2020.
  • The non-cash impairment of White Rose and Hibernia South Extension assets in Oil and Gas recorded in the first quarter is a result of the significant decrease in oil price due to global events that caused increased supply and decreased demand amid the current COVID-19 pandemic. The oil and gas industry as a whole is dealing with a decline in global oil prices and the recognition of an impairment charge is consistent with other industry participants. Oil and Gas assets generate significant cash flows for the Province through oil sales and royalty payments.
  • Capital expenditures for the six months ended June 30, 2020, were $328 million compared to $608 million in 2019, a decrease of $280 million. The primary driver of the decrease was lower capital incurred in LCP Transmission and Muskrat Falls due to the wind down of construction, in addition to delayed project spending for LCP Transmission, Muskrat Falls, Hydro Regulated and Oil and Gas due to the impact of the COVID-19 pandemic.

Other Recent Developments

After almost three months in care and maintenance mode, construction and commissioning on the Muskrat Falls Project resumed at the end of May with new protocols and guidelines in place to protect workers.

Software development work for the Labrador-Island Link (LIL) progressed through the second quarter at GE Grid’s facility in Stafford, UK. Factory Acceptance Testing (FAT) was completed and an interim version of software delivered in late July. Low-load testing of the LIL will continue over the next couple of months. During commissioning Nalcor will utilize LIL at varying levels to bring power from Labrador to the island.

At Muskrat Falls in Labrador, contractors mobilized to site through the end of the second quarter. Commissioning work is underway on generating unit one. It is expected that the first generating unit will be producing power within the month, with the second unit online before the end of 2020.

As a result of the time lost when work was suspended in March, and the requirement to resume work slowly with a reduced workforce, the project has been delayed by at least four months. Depending on the number of workers and the level of productivity we are able to achieve through the fall under the new health guidelines, we are facing an additional two to six month delay on its final completion.

A revised estimate of cost and schedule for the project reflecting the impact of the COVID-19 pandemic will be provided before the end of September.

The COVID-19 pandemic has not prevented Hydro from continuing to provide reliable service to its customers. Critical capital and operating maintenance work has continued to ensure reliable service is maintained.

Hydro continues to provide information to the Board of Commissioners of Public Utilities with respect to the Network Additions Policy and the Resource Adequacy and Reliability Study. Technical conferences were held during the second quarter for each of these matters and Hydro has been answering Requests for Information from intervenors.

In our Oil and Gas division, Husky announced in March the suspension of major construction activities on the West White Rose Project due to impacts related to the COVID-19 pandemic. Engineering, preservation and maintenance, and some procurement activities have continued while the project is being reviewed. As of the suspension date, the project was approximately 58 per cent complete.

Production remains steady at White Rose, as well as at the Hebron and Hibernia fields and all facilities are operating with enhanced screening provisions and physical distancing measures for site workers.

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Media Contact:

Deanne Fisher

Director, Corporate Affairs and Corporate Planning

t: 709.733.5299 c: 709.697.3418 e: deannefisher@nalcorenergy.com