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Detailed Financial Forecasts

Overview

Revenues

Fuel and Purchased Power Costs

Operations, Maintenance and Administration (OMA)

Finance Charges

Borrowing Requirements

Accounting Policies

Changes from Previous Forecast


Overview

The detailed financial forecasts were prepared in February 1996 and incorporate the financial impact of the various activities outlined in the Business Plan. The tables included at the conclusion of this document contain forecast summary income statements, balance sheets and statements of changes in financial position for each of the five fiscal years 1996/97 through 2000/01, as well as actual results for the fiscal year ended March 31, 1995 and the estimated results for the fiscal year ending March 31, 1996. The assumptions used reflect the Corporation's planned courses of action for the period covered, based on management's judgement as to the most probable set of economic conditions.

Since these financial forecasts are based on assumptions regarding future events, actual results will vary from the information presented and the variations may be significant. The Corporation intends to update the forecasts annually in conjunction with the preparation of its annual Business Plan.


Revenues

In-province

The five year financial forecast is based on the 1995 Load Forecast. Revenue estimates assume that new large industrial loads will be charged the incentive rate approved by the PUB in 1993. This rate is projected to expire in 2001.

For financial forecasting purposes, an average rate increase of 2.9% has been incorporated in the first three fiscal years of this Business Plan followed by two years of no rate increases.

Out-of-province

The forecast includes participation sales to MECL from Dalhousie (20 MW) and Point Lepreau (25 MW - 30 MW) throughout the five year period. Contracts for these sales were signed in January 1995. During scheduled outages, MECL will be provided with equivalent energy and capacity from the NB Power system, but will continue to pay based on replacement energy and capital costs of the station.

The Hydro-Québec Millbank contract is included in the forecast at 400 MW to the end of October 1998 and 300 MW for the remainder of the planning period. A small amount of energy is included in addition to the capacity charges. Other sales to Hydro-Québec are uncertain since they are dependent on water conditions on their system. Therefore, no additional sales to Hydro-Québec have been included in the plan.

Remaining out-of-province sales are included in the forecast based on existing contracts as described in the Facilities Management section of the Focused Business Plans. Economy export sales have been forecast using the Corporation's computer simulation model of NB Power and neighbouring systems. The price of these sales has been estimated based on market conditions and other factors anticipated to prevail at the time.


Fuel and Purchased Power Costs

The forecast assumes that imported coal purchased from the United States and Colombia will be blended with 150,000 tons of New Brunswick coal for use at Belledune. In addition, 150,000 tons of New Brunswick coal will be used at Grand Lake.

The forecast accommodates all the initiatives outlined in the Business Plan, including:

  • External contracts for the sale of power will be fulfilled as indicated.
  • The energy and capacity charges associated with the wood-burning NUGs, for 38 MW commencing in January 1997 and 25 MW commencing in January 1998 have been incorporated. Contracts for both units require NB Power to purchase all energy produced and pay all capacity charges. These plants will supply approximately 450 GWh of energy per year.

The five year fuel forecast has been based on the Petroleum Economics Limited (PEL) forecast and internal estimates.

Based on PEL's analysis, oil prices are projected to decrease slightly over the course of this Business Plan.

The forecast imported coal prices are based on the PEL forecast at the beginning of December 1995. The forecast indicates that imported coal prices will remain relatively flat in real terms during the next five years.

Local coal prices are based on NB Coal production levels of 300,000 tons in each fiscal year.


Operations, Maintenance and Administration (OMA)

The forecast for OM&A expenses is being reduced to $260.1 million for 1996/97 and will gradually decrease over the course of this Business Plan. This forecast is based on detailed analysis of NB Power's operating and maintenance costs.


Finance Charges

The five year forecast for interest and foreign exchange rates is based on a survey of the four lead underwriters of the Province of New Brunswick as outlined in the Business Plan section on External Factors Influencing Operations.


Borrowing Requirements

With Point Lepreau, Belledune and Dalhousie all operating, thereby reducing fuel and purchased power costs, cash flow from operations is expected to rise dramatically over the next five years. This improvement, combined with lower captial spending, will lead to a rapid reduction in net debt as presented in Table 17.


Accounting Policies

The forecasts have been prepared in accordance with the accounting policies expected to be used in the actual financial statements during the period covered. These accounting policies are consistent with those which have been used and were disclosed in NB Power's 1994/95 annual report.


Changes from Previous Forecast

In last year's Business Plan the net income forecast for 1995/96 was $21.8 million. NB Power's current projection for the year indicates a net income of $1.7 million. Several factors have contributed toward this change.

The Point Lepreau extended outage detailed in the NB Power - Operations section, higher fuel prices, lower than average hydro conditions, a weaker Canadian dollar, and a lower than forecast rate increase have all contributed to the decreased net income projection. Offsetting this decline in part are savings from energy purchased from Hydro-Québec, increased export sales, increased miscellaneous revenue, and lower OM&A expenditures than projected



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