ST. JOHN'S, NEWFOUNDLAND and LABRADOR--(CCNMatthews - Jan. 31, 2007) - Newfoundland Power Inc. (TSX:FTS) today announced its 2006 financial and operational results.
Earnings applicable to common shares were $30.1 million for 2006 compared to $30.7 million in 2005. Electricity sales in 2006 were down slightly compared to 2005, interest revenue was lower in 2006 and the Company experienced cost increases associated with purchased power, pension plans, amortization of capital assets and finance charges. Strict control of operating expenses and lower income taxes mitigated the impact of these cost increases.
"In 2006, Newfoundland Power once again delivered strong results in the areas of customer service, reliability, safety and operational efficiency," said Karl Smith, President and Chief Executive Officer, Newfoundland Power Inc. "A dedicated focus on continually improving our business has enabled us to further reduce operating costs for the benefit of customers. Our operating cost per customer was $212 in 2006 compared to $218 in 2005. We have successfully reduced our operating cost per customer by approximately 32% over the past 10 years on an inflation adjusted basis."
An annual customer satisfaction rating of 89% reflects the Company's success in meeting customers' expectations in 2006. "Customers are expecting better service from us overall," added Smith. "We have responded by focusing on maximizing the quality of service we deliver while reducing cost."
A key component of customer service is keeping the power on for customers 24 hours a day, 365 days a year. In 2006, the Company was successful in decreasing the length of outages by 12%, its best result on record, compared to 2005. These results are attributable to the improved condition of the Company's assets, which is being achieved through targeted capital investment and preventative maintenance throughout its service territory.
"In 2006, we invested approximately $58.6 million in our electricity system," added Smith. "Our primary focus remained on upgrading distribution lines in our electricity system that were experiencing the poorest reliability. We also rebuilt three major transmission lines and completed an overhaul of our oldest hydroelectric plant. At the same time, we successfully completed more customer-driven work than planned."
Newfoundland Power's electricity rates reflect both the supply costs of Newfoundland and Labrador Hydro ("Hydro") and Newfoundland Power's costs.
In July 2006, customer electricity rates increased by 4.8%, primarily due to projected higher oil costs required by Hydro's oil-fired facility at Holyrood. In addition, in January 2007, the Newfoundland and Labrador Board of Commissioners of Public Utilities (the "PUB") approved a further increase in electricity rates of approximately 0.07% on an interim basis. The January 2007 increase reflects a combination of higher Hydro costs and a lower return on equity for Newfoundland Power for 2007.
Newfoundland Power's ratemaking return on equity was reduced from 9.24% in 2006 to 8.60% in 2007 as a result of operation of the PUB approved annual automatic adjustment formula.
"Customer electricity rates have been increasing largely as a result of rising oil prices" observed Smith. "However, the net contribution of Newfoundland Power's costs to customer electricity rates has declined by approximately 2% over the past 10 years. This reflects the Company's continued focus on effective cost management."
"We recognize any rate increase is significant to our customers and continue to help our customers manage their energy usage," added Smith. "We focus on sharing easy, practical tips on how to save energy throughout homes and businesses through our Bright Ideas campaign, joint initiatives with Hydro and many community events. Throughout the year we promoted energy efficiency to thousands of customers at more than 50 trade shows and public events."
"Our main corporate charity for the past four years has been The Power of Life Project, which supports cancer treatment, patient support, education, awareness and prevention in Newfoundland and Labrador," concluded Smith. "A key highlight in 2006 was a $53,000 donation by the Project to furnish the cancer treatment areas in the Gander and Grand Falls-Windsor cancer clinics in Central Newfoundland."
With a customer base of over 229,000 accounts, Newfoundland Power is dedicated to providing the highest level of customer service and reliability in the most cost-efficient manner possible. All the common shares of Newfoundland Power are owned by Fortis Inc., a diversified, international electric utility holding company with assets of approximately $5.0 billion and annual revenues of more than $1.4 billion. The Common Shares, First Preference Shares, Series C; First Preference Shares, Series E and First Preference Shares, Series F of Fortis are traded on the Toronto Stock Exchange under the symbols FTS, FTS.PR.C, FTS.PR.E and FTS.PR.F, respectively. Fortis information can be accessed at www.fortisinc.com. For more information on Newfoundland Power's programs and services, visit www.newfoundlandpower.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