Annual Report 2014 Overview

2014 ANNUAL REPORT 2014 OVERVIEW Financial Highlights (millions of dollars except where noted) 2014 2013 REVENUE Revenue 4,963 4,863 Fuel expense 641 708 Gross margin 4,322 4,155 EXPENSES Operations, maintenance and 2,615 2,747 administration Depreciation and amortization 754 963 Accretion on fixed asset removal and 797 756 nuclear waste management liabilities Earnings on nuclear fixed asset (714) (628) removal and nuclear waste funds Property Taxes 32 53 Restructuring 18 50 Other 36 (35) 3,538 3,906 Income before other income, interest, 784 249 income taxes, and extraordinary item Other income (3) (3) Net interest expense 80 86 Income tax expense 139 31 Electricity Terms Income before extraordinary item 568 135 . One megawatt (MW) is one million watts. Megawatts are a measure of electricity supply capacity at a point in time. Extraordinary item 243 - . One kilowatt (kW) is 1,000 watts; one gigawatt (GW) is one billion watts; and one terawatt (TW) is one trillion watts. Net Income 811 135 . One kilowatt hour (kWh) is a measure of electricity demand or supply per hour. One kilowatt hour is the energy expended ELECTRICITY PRODUCTION (TWh) 82.2 80.8 by fifty 20-watt compact fluorescent lights burning for one hour. The typical residential customer uses approximately CASH FLOW 800 kWh per month. Cash flow provided by operating 1,433 1,174 . One megawatt hour (MWh) is 1,000 kWh; one gigawatt hour activities (GWh) is one million kWh; and one terawatt hour (TWh) is one billion kWh. Revenue & Operating Highlights Legend Electricity Generation Revenue In-Service Generating Capacity p Contracted (TWh) (millions of dollars) (MW) Dec. 31, 2014 Generation Portfolio* 4,963 p Regulated 82.2 80.8 4,863 2 MW Hydroelectric 2.8 329 4.7 657 2,617 MWp 4,027 MW Regulated Nuclear Waste 1,417 6,606 MW 31.3 Management 31.4 1,236 6,606 MW 16,229 p 121 17,059 RegulatedMW Nuclear 113 MW 3,683 MW Generation p Other 3,015 6,426 MW 48.1 44.7 2,889 * Includes3,32 1OPG’s MW thermal and hydroelectric generating stations that are under contracts, wind turbines, 81 and OPG’s share of the Portlands (32) Energy Centre and Brighton Beach 2014 2013 2014 2013 Generating Station. Corporate Profile 1 Joint Message: Board Chair & President 2 Achievement Highlights 6 Management’s Discussion and Analysis 9 CORPORATE PROFILE Consolidated Financial Statements 106 Notes to the Consolidated Financial Statements 115 Officers 170 Ontario Power Generation Facilities 171 Lower Mattagami, Kipling GS construction OPG is Ontario’s largest clean electricity generator. At Dec. 31, 2014, Ontario Power Generation’s generating OPG’s focus is on the efficient and reliable generation portfolio had an in-service capacity of 17,059 megawatts (MW). and sale of electricity from its generating assets, while OPG operates: operating in a safe, open and environmentally-responsible manner. OPG was established under the Business Corporations Act (Ontario) and is wholly owned by the Province of Ontario. The company’s diversified generating portfolio consists 2 3 of two nuclear generating stations, 65 hydroelectric Nuclear Thermal generating stations, and three operating thermal generating stations generating stations generating stations, one of which is the largest capacity 100 per cent biomass-fuelled plant in North America. OPG also owns two other nuclear generating stations, which are leased on a long-term basis to Bruce Power 65 2 L.P. In addition, the company co-owns both the Brighton Beach gas-fired generating station with ATCO Power Wind Power Hydroelectric Canada Ltd., and the gas-fired Portlands Energy Centre generating stations turbines with TransCanada Energy Ltd. 2014 ANNUAL REPORT | 1 A MESSAGE FROM THE BOARD CHAIR AND PRESIDENT Ontario Power Generation (OPG) produces more than half of the electricity Ontarians rely on each day. Our operations touch all corners of the province and many places in between. We power the province – 24 hours a day, seven days a week – and we do so with a clean, efficient and Bernard Lord Tom Mitchell Board Chair President and CEO reliable generating fleet, all at a significantly lower price than the average of all other generators. In 2014, OPG successfully completed Project Management its phase-out of coal-fired generation. Advancements This is considered to be North By the close of 2014, we successfully America’s single largest climate completed the $2.6 billion Lower change initiative. With the closure of Mattagami hydroelectric project, more these units, the electricity we produce than six months ahead of schedule. is now 99.7 per cent free of greenhouse gas and smog-causing This unique commercial partnership emissions. with the Moose Cree First Nation has added 438 megawatts (MW) of clean, Operating Highlights renewable electricity to the province. It Operationally, 2014 was a strong year also created jobs and local economic for OPG. Net income was $811 million, benefits through employment and the an increase of $676 million, compared involvement of local businesses. At the to 2013. We continued to gain traction peak of construction about 1,600 with our business transformation, people were employed, including realizing additional savings through about 250 First Nation and Métis business efficiencies, streamlined people. operations and a further reduction in OPG was honoured to receive the staff numbers. These efforts have Ontario Waterpower Association’s saved over $500 million since 2011. Stewardship Award for its work on the OPG’s total generation also saw an Lower Mattagami project, including increase over the previous year as a efforts relating to sustainable result of our continued strong development, environmental generation asset reliability. preservation, and community capacity development. We’re extremely proud of this one-of- a-kind success story. The Lower Mattagami redevelopment illustrates the power of partnership, a shared vision, and solid project management. 2 | ONTARIO POWER GENERATION We also successfully converted the management insights we have Improving Efficiency and Atikokan Generating Station (GS) to acquired through this initiative will be Reducing Costs biomass fuel. This conversion project is used on other development projects Three years ago, OPG launched a the first of its kind in Ontario and has and shared globally. company-wide business transformation placed OPG at the forefront of this to drive efficiencies and reduce innovative technology. These development projects have not only provided more clean power to the operating costs. The aim is to increase With over 200 MW of generating province, they also have created new business efficiencies to ensure the capacity, Atikokan GS is the largest 100 economic opportunities and company continues to moderate per cent biomass-fuelled power plant sustainable jobs for Northern Ontario electricity pricing for the people of in North America, generating in the green energy and forestry Ontario while remaining a safe, reliable, renewable, dispatchable, peak-capacity industries. generator. power. The expertise and project 2014 ANNUAL REPORT | 3 To date, we’ve implemented a new In 2014, we continued to make years of employment on the project. organization model with fewer staff, progress on preparations for the These positive economic benefits will streamlined our service delivery and refurbishment with the opening of the be shared across the province. improved our internal processes. Since Darlington Energy Complex. Energy 2011, efforts have enabled us to reduce Minister Bob Chiarelli joined OPG staff Nuclear Operational our headcount by approximately 2,200 to officially open this state-of-the-art Excellence or 20 per cent – largely through training facility in Durham Region. This attrition – for a savings of over $500 project was completed ahead of During 2014, OPG’s nuclear facilities million. By the end of 2016, we expect schedule and is part of our extensive demonstrated strong performance to have saved over $1 billion. planning and preparation to ensure and continuous improvement against everyone working on the industry benchmarks. In April, By achieving these reductions in a refurbishment will be trained and Darlington Nuclear received its second careful, measured way, we’ve ensured ready to complete their tasks safely, consecutive excellent safety and our focus on safety and performance precisely and efficiently. performance peer evaluation. remains strong. Darlington’s refurbishment is a The station also received the highest Focus on Refurbishment milestone project for OPG. It reinforces possible safety and control rating our role in the province by providing – its fifth consecutive excellent Looking ahead, the Darlington an additional 30 years of clean, performance evaluation – from the refurbishment is OPG’s most significant affordable electricity, while at the same Canadian Nuclear Safety Commission undertaking. time producing over 100,000 person (CNSC). 4 | ONTARIO POWER GENERATION Pickering Nuclear also received positive safety and control Sustaining Success ratings from CNSC staff, with improved performance The solid results we were able to achieve in 2014 are a direct recognized in the areas of radiation protection and security. result of the tireless efforts of the women and men who work These achievements demonstrate OPG’s strong focus on for OPG. Our employees are dedicated, highly skilled, and safety and operational excellence. We continue to make committed to providing the province the power it needs, investments and improve the performance of the Pickering when it’s needed. Nuclear facility, which will provide a reliable electricity supply We thank our employees for their continued contributions. for Ontario while Darlington undergoes its refurbishment. Looking to the future, OPG will continue to focus on Safety Excellence providing maximum value to our shareholder and to the OPG’s employee safety performance for 2014 continued to people of Ontario. show strong results – achieving the best workplace safety This means ensuring our energy production is reliable, safe record in our company’s history. And, for the third straight and environmentally sustainable for Ontarians today and in year, the Canadian Electricity Association recognized OPG’s the future.

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