EXHIBIT 99.1
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[GREAT LAKES POWER INC. LOGO]
THIRD QUARTER 2002 INTERIM REPORT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
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INTERIM REPORT FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
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o HIGHLIGHTS YEAR TO DATE
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
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2002 2001 2002 2001
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Net income (Cdn$ millions) $ 42.8 $ 37.9 $138.0 $106.1
Net income per share - diluted (Cdn$) $ 0.34 $ 0.30 $ 1.09 $ 0.84
Power delivered (gigawatt hours) 1,362 837 4,450 2,804
o FINANCIAL RESULTS
Great Lakes recorded net income of $138.0 million for the nine months ended
September 30, 2002, an increase of 30% from $106.1 million in the first nine
months of 2001. Net income per share for the first nine months of 2002 was
$1.09, an increase of 30% from $0.84 in the same period last year.
The company's net income for the three months ended September 30, 2002 increased
13% to $42.8 million from $37.9 million in the same quarter of 2001. Net income
per share for the first three months of 2002 was $0.34, an increase of 13% from
last year.
The strength of the company's performance in the first nine months of 2002
reflects its strategy to build long-term sustainable cash flow by investing in
high-quality assets at attractive values, by actively working to increase
returns on capital invested in these assets and by continually pursuing
opportunities for future growth.
o STRATEGIC INITIATIVES
On September 4, 2002, Great Lakes agreed with Duke Energy to acquire its 50%
interest in the Lake Superior Power co-generation plant in Sault Ste. Marie,
Ontario. The consideration to acquire this additional interest is $65 million,
comprised of approximately $30 million in cash and the assumption of $35 million
of debt. Lake Superior Power is a 110 megawatt ("MW") natural gas-fired
co-generation facility, operated in conjunction with Great Lakes' 16
hydroelectric power stations in northern Ontario. All of its electricity
production is sold to Ontario Electricity Finance Corporation under long-term
contracts. The transaction is expected to close by the end of October.
This acquisition furthers the company's strategy of investing in high-quality,
low-cost generating assets that provide sustainable and growing cash flows.
During 2002 to date, Great Lakes also acquired interests in three additional
power generating operations, which include 16 hydroelectric generating stations
with a combined capacity of 645 MW:
MISSISSAGI POWER, ONTARIO - In May, Great Lakes acquired four hydroelectric
generating stations in northern Ontario from Ontario Power Generation Inc.
("OPG") for $340 million. These stations, located on the Mississagi River
east of Sault Ste. Marie, have a combined generating capacity of 488 MW and
are being operated in conjunction with the company's other 12 hydroelectric
stations in this area.
MAINE POWER - In February, Great Lakes entered the energy sector in the
northeastern United States with the acquisition of an integrated power
generating and distributing system in northern Maine from Great Northern
Paper Inc. for US$156.5 million. This system, located on the main and west
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GREAT LAKES POWER INC. 1
branches of the Penobscot River, includes six hydroelectric generating
stations with a combined generating capacity of 126 MW as well as an
interconnection with the New England Power Pool.
NEW HAMPSHIRE POWER - In May, Great Lakes expanded its presence in the
north-eastern United States with the acquisition of six hydroelectric
generating stations in northern New Hampshire from a local forest products
company for US$32 million. These stations, located on the Androscoggin
River in northern New Hampshire, are being operated in conjunction with the
company's Maine Power stations.
These three acquisitions increased the company's aggregate generating capacity
by over 60% to 1,636 MW.
o ASSETS UNDER DEVELOPMENT
The following projects were advanced on schedule and upon completion are
expected to contribute to the company's financial results commencing in 2003:
HIGH FALLS, ONTARIO - Construction is nearing completion on the 45 MW, High
Falls hydroelectric generating station on the Michipicoten River in
northern Ontario. This $75 million redevelopment project is expected to be
completed in the fourth quarter of 2002. The High Falls project will
enhance the company's on-peak capabilities in Ontario and increase the
efficiency of its power generating operations in northern Ontario.
PINGSTON CREEK, BRITISH COLUMBIA - Construction is also nearing completion
on the 30 MW Pingston Creek hydroelectric generating station near
Revelstoke, B.C. Developed in a 50/50 joint venture with Canadian Hydro
Developers Inc., this project is expected to be completed in early 2003. In
August, the partners signed a 20-year contract to sell its power to BC
Hydro. This project will increase Great Lakes' generating capacity in
British Columbia and will further enhance the company's geographic
diversification.
BRASCAN ENERGETICA, BRAZIL - Development work continues on five new
hydroelectric generating stations in southern Brazil. Construction is under
way on three of these stations: the 30 MW Passo do Meio project in the
State of Rio Grande do Sul and the 16 MW Pedrinho and 15 MW Salto Natal
projects in the State of Parana.
o OTHER INITIATIVES
Following the opening of the electricity market in the Province of Ontario to
competition in May 2002, the company's power purchase agreement with OPG
terminated and a number of other changes were made in response to the new
regulatory environment. The company's northern Ontario power operations have
been restructured into two separate businesses: a power generation unit, and a
regulated power transmission and distribution unit. The company continues to be
a distributor of power in its historical service area in the Algoma District,
and sells electricity to the Public Utility Commission of Sault Ste. Marie and
St. Marys Paper under power sales agreements.
o OPERATING RESULTS
Electricity generation in the first nine months of 2002 increased by 59% to
4,450 gigawatt hours ("GWh") compared to 2,804 GWh in the same period last year,
mainly due to the acquisition of power operations in northern Ontario, Maine and
New Hampshire. Correspondingly, net power revenue for the first nine months
increased to $248.1 million in 2002 from $169.4 million in 2001.
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2 THIRD QUARTER 2002 INTERIM REPORT
Operating and maintenance costs for the first nine months of 2002 increased by
$15.8 million to $42.7 million, and depreciation increased by $10.5 million to
$30.7 million with the acquisition of new operations in Ontario, Maine and New
Hampshire.
Revenue from investments and other income, which consists of dividends from the
company's investments and securities portfolios, interest on loans receivable
and other fee income, was $69.7 million for the first nine months of 2002, down
from $79.3 million in 2001 due to lower average interest rates and balances.
Electricity generation for the three months ended September 30, 2002 increased
by 61% to 1,362 GWh compared to 837 GWh last year. As a result, net power
revenue for the third quarter increased by $24.8 million to $86.5 million, and
total revenue increased to $107.5 million. Expenses for the quarter increased by
$15.1 million to $64.7 million, due mainly to higher operating and depreciation
costs.
Power delivered and net power revenue by operating segment for the year to date
compared to the same periods in 2001 are shown below:
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
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2002 2001 2002 2001
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POWER DELIVERED
(gigawatt hours)
North-East
Canada 990 687 3,295 2,266
United States 207 -- 385 --
Other Power Operations 165 150 770 538
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Total 1,362 837 4,450 2,804
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POWER REVENUE
($ millions)
North-East
Canada $ 81.9 $ 75.1 $ 215.2 $ 193.3
United States 10.2 -- 21.5 --
Other Power Operations (5.6) 0.7 25.5 19.8
86.5 75.8 262.2 213.1
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Power Purchases (1) -- 14.1 14.1 43.7
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Net Power Revenue $ 86.5 $ 61.7 $ 248.1 $ 169.4
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(1) Great Lakes had an obligation to serve all customers in its service area in
northern Ontario up to May 1, 2002, the date of the market opening. Power
purchases were from OPG and were used to serve demand beyond the company's
own production. After May 1, 2002, this requirement ceased and, as a
result, the corresponding power purchases are no longer necessary.
o OUTLOOK
With the acquisition of power facilities in Ontario, Maine and New Hampshire,
Great Lakes is well positioned to increase power generation levels in 2002
compared to prior years. Great Lakes is aggressively seeking to increase returns
by optimizing the use of its facilities and as new development projects and
acquisitions are brought on stream.
/s/ Edward C. Kress
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Edward C. Kress
Chairman
October 22, 2002
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GREAT LAKES POWER INC. 3
o CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
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(unaudited) SEPTEMBER 30 December 31
Cdn$ millions 2002 2001
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ASSETS
Cash and cash equivalents $ 38.7 $ 10.3
Accounts receivable and other 185.5 425.0
Corporate investments and securities 1,170.3 1,227.1
Property, plant and equipment 2,035.0 1,267.6
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$3,429.5 $2,930.0
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LIABILITIES
Accounts and other payables $ 133.1 $ 91.9
Mortgage bonds 869.5 555.6
Term debentures 592.5 596.2
FUTURE INCOME TAX LIABILITY 114.3 116.4
MINORITY INTERESTS 343.3 271.3
SHAREHOLDERS' EQUITY (Note 2) 1,376.8 1,298.6
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$3,429.5 $2,930.0
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Note: This Interim Report contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. The words "believe",
"expect", "anticipate", "intend", "estimate" and other expressions which are
predictions of or indicate future events and trends and which do not relate to
historical matters identify forward-looking statements. Reliance should not be
placed on forward-looking statements because they involve known and unknown
risks, uncertainties and other factors, which may cause the actual results,
performance or achievements of the company to differ materially from anticipated
future results, performance or achievements expressed or implied by such
forward-looking statements. Factors that could cause actual results to differ
materially from those set forth in the forward-looking statements include
general economic conditions, interest rates, availability of equity and debt
financing and other risks. The company undertakes no obligation to publicly
update or revise any forward-looking statement, whether as a result of new
information, future events or otherwise.
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4 THIRD QUARTER 2002 INTERIM REPORT
CONSOLIDATED STATEMENT OF INCOME
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THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
(unaudited) -------------------- ----------------------
Cdn$ millions, except per share amounts 2002 2001 2002 2001
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REVENUE
Power revenue $ 86.5 $ 75.8 $262.2 $213.1
Power purchases -- 14.1 14.1 43.7
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Net power revenue 86.5 61.7 248.1 169.4
Investment and other income 21.0 25.8 69.7 79.3
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107.5 87.5 317.8 248.7
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EXPENSES
Interest 24.1 20.0 64.0 61.9
Operating and maintenance 15.1 9.8 42.7 26.9
Fuel purchases 3.8 6.9 11.7 18.0
Depreciation 10.1 6.7 30.7 20.2
Minority interests 8.2 3.1 17.8 8.6
Income and other taxes 3.4 3.1 12.9 7.0
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64.7 49.6 179.8 142.6
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NET INCOME $ 42.8 $ 37.9 $138.0 $106.1
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FULLY DILUTED NET INCOME PER
COMMON SHARE $ 0.34 $ 0.30 $ 1.09 $ 0.84
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CONSOLIDATED STATEMENT OF RETAINED EARNINGS
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THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
(unaudited) -------------------- ----------------------
Cdn$ millions 2002 2001 2002 2001
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RETAINED EARNINGS
Balance, beginning of period $503.1 $424.9 $447.7 $397.8
Net income 42.8 37.9 138.0 106.1
Convertible debenture interest (3.7) (3.6) (11.1) (12.3)
Common share dividends (16.3) (16.3) (48.7) (48.7)
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Balance, end of period $525.9 $442.9 $525.9 $442.9
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GREAT LAKES POWER INC. 5
CONSOLIDATED STATEMENT OF CASH FLOWS
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THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
(unaudited) -------------------- ----------------------
Cdn$ millions 2002 2001 2002 2001
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CASH PROVIDED FROM OPERATIONS (Note 3) $ 53.8 $ 40.0 $165.7 $102.9
Net change in non-cash working capital 4.9 (1.0) (3.8) (2.4)
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CASH PROVIDED BY OPERATING ACTIVITIES 58.6 39.0 161.9 100.5
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FINANCING AND SHAREHOLDER DISTRIBUTIONS
Borrowings 10.7 1.8 334.8 72.8
Debt repayments (7.6) (2.2) (20.8) (6.2)
Convertible debenture interest (3.7) (3.6) (11.1) (12.3)
Common share dividends (16.3) (16.3) (48.7) (48.7)
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(16.9) (20.3) 254.2 5.6
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INVESTING
Sale of securities 50.0 1.2 57.7 (40.3)
Loans and other receivables (79.5) 11.2 311.3 58.4
Property, plant and equipment (6.3) (26.6) (756.6) (123.5)
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(35.8) (14.2) (387.6) (105.4)
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CASH AND CASH EQUIVALENTS
Increase 5.9 4.5 28.4 0.7
Balance, beginning of period 32.8 14.9 10.3 18.7
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Balance, end of period $ 38.7 $ 19.4 $ 38.7 $ 19.4
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6 THIRD QUARTER 2002 INTERIM REPORT
o NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements include the
accounts of the company consolidated with the accounts of all its subsidiaries.
Reference is made to the company's most recently issued Annual Financial Report,
which included information necessary or useful to understanding the company's
businesses and financial statement presentations. In particular, the company's
significant accounting policies and practices were presented as Note 1 to the
Consolidated Financial Statements included in that report. The company's
accounting policies and methods of their application are consistent with those
of the most recent annual financial statements, except as may be described
elsewhere in these financial statements.
The quarterly financial statements are unaudited. Financial information in this
Interim Report reflects any adjustments (consisting only of normal recurring
adjustments) that are, in the opinion of management, necessary to a fair
statement of results for the interim periods in accordance with generally
accepted accounting principles.
The results reported in these consolidated financial statements should not be
regarded as necessarily indicative of results that may be expected for the
entire year.
The company is incorporated under the laws of Ontario and develops, owns and
operates hydroelectric and other power generating facilities principally in
Canada. The company also conducts investment activities, which include the
receipt of interest and dividends on the company's financial assets as well as
gains realized on investment transactions.
2. SHAREHOLDERS' EQUITY
The company is authorized to issue an unlimited amount of common shares, of
which the following were issued and outstanding:
SEPTEMBER 30 December 31
Cdn$ millions 2002 2001
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101,383,135 (2001 - 101,383,135) Common shares $ 603.2 $ 603.2
Retained earnings 525.9 447.7
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1,129.1 1,050.9
Subordinated convertible debentures 247.7 247.7
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$1,376.8 $1,298.6
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The subordinated convertible debentures mature September 30, 2013, bear interest
at the prime rate subject to a minimum of 6% and a maximum of 8%.
3. CASH PROVIDED FROM OPERATIONS
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
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Cdn$ millions 2002 2001 2002 2001
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Net income $ 42.8 $ 37.9 $138.0 $106.1
Add non-cash items:
Depreciation 10.1 6.7 30.7 20.2
Hydrological provisions -- (6.8) -- (6.8)
Equity (income) loss and other 0.9 2.2 (3.0) (16.6)
------ ------ ------ ------
$ 53.8 $ 40.0 $165.7 $102.9
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4. COMPARATIVE FIGURES
Certain of the prior year's figures have been reclassified to conform with the
2002 presentation.
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GREAT LAKES POWER INC. 7
o PROFILE
Great Lakes Power Inc. generates, transmits and distributes electricity in
Ontario and Quebec, and has ownership and operating interests in other power
generating facilities and developments in Canada, the United States and Brazil.
Its production base currently includes 38 generating stations with an installed
generating capacity of 1,636 megawatts.
Great Lakes is a wholly-owned subsidiary of Brascan Corporation (TSX: BNN.A,
NYSE: BNN). Brascan conducts its power operations under the business name
"Brascan Power".
PRODUCTION BASE
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Generating Generating Installed
Operations Ownership Stations Units Capacity
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(megawatts)
North-East - Canada
Great Lakes Power Limited (1) 100% 12 22 331
Mississagi Power (1) 100% 4 8 488
Valerie Falls Power (1) 65% 1 2 10
Lievre River Power (1) 100% 3 10 238
Lake Superior Power (2) 100% (3) 1 3 110
Pontiac Power (1) 100% 2 7 28
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23 52 1,205
North-East - United States
Maine Power (1) 100% 6 31 126
New Hampshire Power (1) 100% 6 21 31
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12 52 157
Other Power Operations
Louisiana Hydroelectric Power (1) 75% (4) 1 8 192
Powell River Energy (1) 50% 2 7 82
---- -- --- -----
3 15 274
-- --- -----
TOTAL 38 119 1,636
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(1) Hydroelectric generating facilities
(2) Natural gas-fired cogeneration plant
(3) Increase from 50% to 100% to be completed in fourth quarter
(4) Residual interest
o HEAD OFFICE
GREAT LAKES POWER INC.
Suite 4400, P.O. Box 762
BCE Place, 181 Bay Street
Toronto, Ontario
M5J 2T3
Telephone: 416-363-9491
Facsimile: 416-363-2856
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8 THIRD QUARTER 2002 INTERIM REPORT