Nalcor Energy third quarter sees significant milestones

November 8th, 2017

November 8, 2017, St. John’s, NL – Nalcor Energy reported its financial results for the third quarter of 2017 today.

“Nalcor Energy’s financial results up to the end of the third quarter continue to be sound. Our dedicated team continues to advance our work across all of our lines of business, as we safely and responsibly develop and manage our natural resources on behalf of the people of our province.”

“While we have experienced some challenges over the past year, we continue to make significant progress and achieve important milestones. Every day, our focus and our commitment is to ensuring we are making the right decisions for Newfoundlanders and Labradorians.”

Stan Marshall, President and CEO

Third Quarter Financial Highlights

  • Profit for the quarter of $22 million, a decrease of $15 million over the same period in 2016. Year-to-date profit of $157 million, an increase of $83 million over the same period in 2016.
  • Funds from operations for the quarter of $63 million, a decrease of $12 million over the same period in 2016. Year-to-date funds from operations of $284 million, an increase of $107 million compared to the same period in 2016.
  • Earnings before interest, taxes, depreciation, depletion, amortization and accretion (EBITDA) for the period of $76 million, a decrease of $15 million compared to the same period in 2016. Year-to-date EBITDA of $329 million, an increase of $102 million compared to the same period in 2016.
  • Capital expenditures (excluding Maritime Link) for the quarter of $820 million, a decrease of $43 million over the same period in 2016. Year-to-date capital expenditures (excluding Maritime Link) of $2,163 million, an increase of $123 million compared to the same period in 2016.
  • Total assets as at September 30, 2017 of $17.7 billion, compared to $14.1 billion as at December 31, 2016.
  • Debt to capital as at September 30, 2017 was 68% compared to 61% at December 31, 2016.

Third Quarter Earnings and Capital Expenditures

Profit for the three months ending September 30, 2017 was $22 million, compared to $37 million for the same period in 2016. The primary factors contributing to the $15 million decrease included:

  • lower revenue in Hydro Regulated;
  • reduced revenue in Energy Trading as a result of lower average export electricity prices;
  • the write-down of assets resulting from the settlement agreement in Hydro Regulated;
  • increased operating expenses;
  • higher depreciation and amortization in Hydro Regulated and Oil and Gas;
  • higher depletion associated with increased production in Oil and Gas; and
  • losses on disposal in Oil and Gas associated with the conclusion of the construction of
    the Hebron Project.

The decreases in profit were partially offset by higher oil revenue as a result of increased production and higher oil prices and decreased RSP interest in Hydro Regulated.

Capital expenditures (excluding Maritime Link) for the three months ended of $820 million were in-line with budget and $43 million lower than the same period in 2016. The decrease was primarily due to decreases in capital incurred related to the ongoing construction of LCP Transmission assets. Total capital expenditures for 2017, excluding Maritime Link, are forecast to be approximately $3.0 billion.

Nalcor’s debt to capital as at September 30, 2017 was 68%, compared to 61% at December 31, 2016. The increase was primarily due to the issuance of $2.9 billion additional debt in Muskrat Falls and LCP Transmission.

Other Recent Developments

Construction on all components of the Lower Churchill Project is well advanced with overall construction reaching 85% at the end of September 2017. Through 2017, significant work has been completed on the transmission and generation components with many milestones achieved.
The transmission component of the project is nearing completion. Construction of the transmission lines from Churchill Falls to Soldiers Pond is completed and all major electrical equipment is in place. The Churchill Falls AC switchyard extension and Soldiers Pond AC switchyard have been energized. Following construction of the transmission project in mid-2018 power from Churchill Falls will be delivered to the island for the first time in history.

The Muskrat Falls generation project also advanced this year. Construction of the North Spur and South dam was recently completed and work on the construction of the North dam progressed significantly this year. The safety boom across the river has also been completed. The spillway is operational, the powerhouse is now enclosed and primary concrete in the powerhouse and intake is nearing completion. With significant completion of concrete work in the powerhouse, work is currently ongoing on the installation of the turbines and generators in the powerhouse.

On July 28, Hydro filed a General Rate Application with the Newfoundland and Labrador Board of Commissioners of Public Utilities (PUB) proposing new electricity rates for 2018 and 2019.

In the continued effort to ensure reliability for customers by strengthening the province’s electricity system, Hydro submitted its 2018 Capital Investment Plan at the end of July. In 2018, Hydro plans to invest over $200 million in reliability of the electricity system.

In mid-September Hydro completed significant work to transform the electricity grid on the West Coast to tie in with Emera’s Bottom Brook and Granite Canal AC stations and their new transmission line that runs between both stations.

Oil and gas exploration activity continued offshore this quarter with seismic survey investments for this season totaling approximately 9,100 square kilometres of 3D and 20,000 2D line kilometres of data. In addition, Oil and Gas, in partnership with Fugro and Amplified Geochemical Imaging (AGI), is acquiring approximately 10,000 square kilometres of multibeam bathymetry and over 150 seabed cores targeting upcoming license rounds areas.

In recognition of Oil and Gas’s exploration strategy, the Petroleum Economist Awards 2017 announced the line of business has been shortlisted in the annual awards category of Exploration Company of the Year. The award winners will be announced later in November.

Bull Arm Fabrication has issued a Request for Proposals to identify the next potential tenant(s) to lease the Site. The RFP is the next step in a process that was initiated in March of this year when an Expression of Interest was issued. Bull Arm Fabrication is seeking a tenant that will maximize the site and attract sustainable business opportunities that will allow the Site to continue to play an important role in the growth of the province’s industrial sector.

A copy of the quarterly report and a recording of the webcast will be available at www.nalcorenergy.com.

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Media Contact:
Deanne Fisher
Corporate Communications and Stakeholder Engagement
t: 709.733.5299 c: 709.697.3418 e: deannefisher@nalcorenergy.com