ST.JOHN'S, NEWFOUNDLAND--(CCNMatthews - July 27, 2006) - Newfoundland Power Inc. (TSX:FTS) today released its 2006 second quarter results announcing decreased earnings, lower operating expenses and a strong customer satisfaction rating.
Earnings for the second quarter of 2006 were $8.0 million compared to $11.5 million for the same quarter in 2005. The earnings decrease was due primarily to a change in revenue recognition policy. Effective January 1, 2006, the Newfoundland and Labrador Board of Commissioners of Public Utilities ("the PUB") approved a change in revenue recognition policy from a billed basis to an accrual basis. The change provides better matching of revenue to purchased power cost but affects the comparability of 2006 quarterly earnings. Had revenue continued to be recognized on a billed basis in 2006, earnings for the second quarter would have been $11.2 million compared to earnings of $11.5 million in the same quarter last year. Annual earnings for 2006 are not expected to be materially different from 2005 as a result of the change in revenue recognition policy.
Lower operating expenses and a reduced effective income tax rate, along with adjustments approved by the PUB as a result of the Company's 2006 Accounting Policy Application, had a positive impact on second quarter earnings. These positive impacts were partially offset by higher finance charges for the quarter compared to last year.
The Company continues to maintain a strong customer satisfaction rating, achieving 87% in the second quarter of 2006. "Customer care is central to who we are and what we do," said Karl Smith, President and Chief Executive Officer, Newfoundland Power Inc. "We work hard to ensure that our customers receive excellent service each and every day of the year, and we are proud of our consistent ability to deliver on our service commitments."
On July 1, 2006, there was an average increase in electricity rates of approximately 4.8% as a result of the annual operation of the Rate Stabilization Account. This rate increase was required to recover increasing fuel costs incurred by Newfoundland and Labrador Hydro in generating electricity at its Holyrood generating facility. Newfoundland Power will not derive any financial benefit from this rate increase.
"We recognize that this is a significant increase for our customers and are committed to helping customers better manage their energy use and get the most out of their energy dollar," added Smith. "In addition to our ongoing Bright Ideas campaign, which focuses on providing practical energy efficiency tips, we are offering customers double rebates and financing for insulation upgrades until September 30, 2006 through our Wrap Up for Savings Program."
The Company continues to undertake capital projects across the island, investing nearly $26 million in the first two quarters this year. "Some of the investments we've made over the past few months include approximately $2 million in Central Newfoundland to upgrade lines in the Lewisporte and Botwood areas," added Smith.
"In addition, our largest substation expenditures this year are focused on upgrades and improvements on the Burin Peninsula. We are completing capital and maintenance work in four substations in the area, which will cost approximately $0.9 million. We will also be spending approximately $0.8 million on our distribution system on the Burin Peninsula for a total investment of nearly $1.7 million this year."
Overall, in 2006 the Company will invest approximately $52 million in capital programs throughout the island to maintain and enhance its electricity system.
During the second quarter, the employees of Newfoundland Power received the 2006 Newfoundland and Labrador Environment Award in the business category. The award recognized the Company's comprehensive Environmental Management System and employee-driven community environmental programs.
Through the Company's corporate charity, The Power of Life Project, and the generous support of employees and customers across the province, over $18,000 was donated to the Dr. H. Bliss Murphy Cancer Care Foundation in Gander in June.
"We are proud to make this contribution on behalf of our customers, employees and partners to further enhance cancer treatment facilities for patients in Gander and surrounding areas," concluded Smith. "Our gift of over $18,000 for the purchase of chemotherapy chairs and televisions is one of the many contributions our employees and customers have made in the fight against cancer in this province. Our commitment to The Power of Life Project is as strong today as it was when we launched the campaign nearly four years ago."
With a customer base of over 227,000 accounts, Newfoundland Power is dedicated to providing the highest level of customer service and reliability of electricity in the most cost-efficient manner possible. For more information on Newfoundland Power's programs, services and community partnerships, please visit www.newfoundlandpower.com.
All the common shares of Newfoundland Power are owned by Fortis Inc., a diversified, international electric utility holding company with assets exceeding $4.3 billion and annual revenues of more than $1.4 billion. The Common Shares, Series C First Preference Shares and Series E First Preference Shares of Fortis Inc. are traded on the Toronto Stock Exchange under the symbols FTS, FTS.PR.C and FTS.PR.E, respectively. Fortis Inc. information can be accessed at www.fortisinc.com.
Newfoundland Power may include forward-looking statements in this release. By their very nature, forward-looking statements are based on underlying assumptions and are subject to inherent risks and uncertainties surrounding future expectations generally. Such events include, but are not limited to, general economic, market and business conditions, regulatory developments, weather and competition. Newfoundland Power cautions readers that should certain events or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary significantly from those expected.
FOR FURTHER INFORMATION PLEASE CONTACT:
Newfoundland Power Inc.
Director, Corporate Communications
(709) 737-2821 or (709) 682-1470 (Cellular)