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[GREAT LAKES POWER INC. LOGO]
FIRST QUARTER 2001 INTERIM REPORT
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[GREAT LAKES POWER INC. LOGO]
INTERIM REPORT FOR THE THREE MONTHS ENDED MARCH 31, 2001
On February 28, 2001, the shareholders of Great Lakes Power Inc. ("Great Lakes"
or the "company") approved a going-private transaction. The successor company
was established on March 2, 2001 under the same name. This interim report
presents the operating and financial results for these companies for the period
from January 1, 2001 to March 31, 2001.
First Quarter Highlights
- - Great Lakes Hydro Income Fund acquired a 50% interest in Powell River
Energy in British Columbia.
- - Site development commenced on the 45 megawatt High Falls redevelopment
in northern Ontario.
- - OPERATING RESULTS
The company's power operations generated 1,036 gigawatt hours ("GWh") of
electricity during the first quarter of 2001 compared to 1,326 GWh during the
same period in 2000. Lower generation from the company's operations in Ontario
and Quebec was partly offset by higher generation in the southern United States
and the acquisition of Powell River Energy in February 2001.
The company's northern Ontario power generating, transmission and distribution
system generated 249 GWh of electricity in the first quarter of 2001, down from
466 GWh in the same period in 2000 due to lower winter precipitation levels.
Power sales in the first quarter, including power purchased externally to meet
customer demand with the system's service area, increased to 631 GWh in 2001
from 623 GWh in 2000. The company's facilities upgrading program continues with
the returbining of two 5.5 MW units at the McPhail Generating Station on the
Michipicoten River. This work is expected to start in May 2001 for completion
before the year end.
The Great Lakes Hydro Income Fund generated a total of 340 GWh of power in the
first quarter of 2001, down from 456 GWh in the same period of last year. This
decrease reflects lower precipitation at the Fund's Maclaren Energy operations
in western Quebec, partly offset by the contribution of Powell River Energy
acquired at the beginning of February 2001.
The company's other power operations in Canada and the United States generated
447 GWh of electricity in the first quarter of 2001, up from 404 GWh in the same
period in 2000. Louisiana HydroElectric's generation was 176 GWh, up from 124
GWh last year as water flows on the Mississippi River started to return to more
normal levels after unusually dry conditions in 2000. Partly offsetting this
improvement was lower generation at Pontiac Power due to lower winter
precipitation levels in western Quebec.
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GREAT LAKES POWER INC. 1
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- - FINANCIAL REVIEW
Great Lakes earned net income of $30.4 million for the three months ended March
31, 2001 compared to $32.1 million in the first quarter of 2000.
Power revenues for the first quarter increased to $62.9 million in 2001 from
$53.6 million in 2000. Revenue for the quarter from Great Lakes Hydro Income
Fund increased by $4.8 million as a result of the company's increased ownership
of the Income Fund from 40% to 50% in May 2000, the startup of energy marketing
operations at Maclaren Energy and the acquisition of Powell River Energy in
February 2001, offset partly by lower power generation at Maclaren Energy during
the first quarter of 2001. Revenue for the quarter from Lake Superior Power
increased by $4.1 million as a result of higher prices for contracted gas sales.
Income from long-term investments, which consists of dividends from the
company's investments, was $11.4 million in the first quarter of 2001, unchanged
from the same period last year. Investment and other income consists of
dividends earned on the company's securities portfolio, interest on loans
receivable and other fee income. This income for the first quarter was $14.3
million in 2001 compared to $14.0 million in 2000.
Expenses for the first quarter increased to $58.2 million in 2001 from $46.9
million in 2000. Interest expenses for the quarter increased by $1.6 million due
to higher average interest rates and debt levels. Purchased power costs for the
quarter increased by $10.8 million. This reflects higher external power
purchases at the Northern Ontario Power system as a result of lower internal
generation due to drier conditions earlier this winter, offset partly by
hydrological insurance claims. Operating costs for the quarter increased by $1.5
million with the expansion of the company's operating assets. Taxes and other
provisions for the quarter decreased by $3.3 million due to lower federal and
municipal tax rates.
- - CAPITAL INVESTMENT PROGRAM
Work continues on Great Lakes' $500 million capital investment plan, which forms
an integral part of a strategic plan to double power operating earnings by the
year 2005.
High Falls, Ontario. Site development has begun 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.
Sault Ste. Marie, Ontario/Michigan. Permitting and preliminary engineering
are under way for a $25 million high voltage transmission interconnection
to link the company's generating stations in Ontario with the neighbouring
power grid in Michigan. This interconnection will have a capacity of up to
300 MW at 230 kilovolts and will enhance Great Lakes' ability to access
other energy markets to maximize the value of its power system.
Powell River, British Columbia. The Great Lakes Hydro Income Fund has
acquired a 50% economic interest in Powell River Energy, which owns and
operates two hydroelectric generating stations in the city of Powell River,
B.C. These stations have an aggregate capacity of 82 MW and a total cost of
$113 million.
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2 FIRST QUARTER 2000 INTERIM REPORT
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Pingston Creek, British Columbia. Construction has commenced on a 30 MW
hydroelectric generating station near Revelstoke, B.C. in a 50/50
partnership with Canadian Hydro Developers Inc. This $45 million project is
expected to be completed in mid 2002.
Brascan Energetica, Brazil. Development work continues for five new
hydroelectric generating stations in southern Brazil, which have a total
capacity of 81 MW. Construction has started on two of these projects, the
30 MW Passo do Meio generating station in the State of Rio Grande do Sul
and the 16 MW Pedrinho project in the State of Parana.
- - OUTLOOK
Although weather conditions have been drier than normal in northern Ontario and
western Quebec, their financial impact is expected to be partly offset by the
return to more normal water flows on the Mississippi River and the impact of the
company's ongoing facilities upgrading and business development programs.
Through its capital investment plan, the company is aggressively seeking to
increase returns as new development projects and acquisitions are brought on
stream.
Edward C. Kress
Chairman and Chief Executive Officer
April 19, 2001
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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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GREAT LAKES POWER INC. 3
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- - OPERATING STATISTICS
Electricity Generation and Sales
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THREE MONTHS ENDED MARCH 31
gigawatt hours 2001 2000
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GENERATION
Northern Ontario Power 249 466
Great Lakes Hydro Income Fund
Maclaren Energy 306 456
Powell River Energy (1) 34 -
Other Power Operations
Lake Superior Power (2) 211 211
Valerie Falls Power 11 10
Pontiac Power 49 59
Louisiana HydroElectric Power 176 124
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TOTAL GENERATION 1,036 1,326
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SALES
Northern Ontario Power (3) 631 623
Great Lakes Hydro Income Fund
Maclaren Energy 305 449
Powell River Energy (1) 34 -
Other Power Operations
Lake Superior Power (2) 211 211
Valerie Falls Power 11 10
Pontiac Power 47 58
Louisiana HydroElectric Power 171 120
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TOTAL SALES 1,410 1,471
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(1) Acquired February 2001
(2) Including electricity equivalents of contracted gas sales
(3) Including power purchased externally to supply customer demand in the
Northern Ontario Power service area
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4 FIRST QUARTER 2000 INTERIM REPORT
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- - CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheet
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MARCH 31 December 31
millions 2001 2000
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ASSETS
Securities $ 669.2 $ 661.3
Loans and other receivables 350.4 322.0
Long-term investments 536.2 536.2
Property, plant and equipment 992.9 956.8
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$2,548.7 $2,476.3
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LIABILITIES
Accounts payable and other $ 71.4 $ 76.4
Mortgage bonds 425.4 393.5
Term debentures 588.8 558.8
FUTURE INCOME TAX LIABILITY 110.6 104.4
MINORITY INTERESTS 93.8 94.2
SHAREHOLDERS' EQUITY (2) 1,258.7 1,249.0
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$2,548.7 $2,476.3
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GREAT LAKES POWER INC. 5
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Consolidated Statement of Income
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THREE MONTHS ENDED MARCH 31
millions, except per share amounts 2001 2000
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REVENUE
Power operations $ 62.9 $ 53.6
Long-term investments 11.4 11.4
Investment and other income 14.3 14.0
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88.6 79.0
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EXPENSES
Interest 20.1 18.5
Power and fuel purchases 24.9 14.1
Operating costs 6.9 5.4
Depreciation 5.5 5.1
Minority interests 1.2 0.9
Income and other taxes (0.4) 2.9
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58.2 46.9
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NET INCOME $ 30.4 $ 32.1
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FULLY DILUTED NET INCOME PER COMMON SHARE $ 0.24 $ 0.25
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Consolidated Statement of Retained Earnings
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THREE MONTHS ENDED MARCH 31
millions 2001 2000
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RETAINED EARNINGS
Balance, beginning of year $397.8 $364.8
Net income 30.4 32.1
Convertible debenture interest (4.4) (4.1)
Common share dividends (16.2) (16.2)
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Balance, end of period $407.6 $376.6
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Consolidated Statement of Cash Flows
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THREE MONTHS ENDED MARCH 31
millions 2001 2000
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CASH PROVIDED FROM OPERATIONS $ 27.9 $ 32.9
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FINANCING AND SHAREHOLDER DISTRIBUTIONS
Borrowings 25.5 --
Debt repayments (2.2) (1.9)
Convertible debenture interest (4.4) (4.1)
Common share dividends (16.2) (16.2)
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2.7 (22.2)
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INVESTING
Securities -- (29.2)
Loans and other receivables 10.1 30.7
Property, plant and equipment (28.5) (2.5)
Other (0.9) (6.4)
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(19.3) (7.4)
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CASH AND CASH EQUIVALENTS
Increase 11.3 3.3
Balance, beginning of year 6.7 6.2
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Balance, end of period $ 18.0 $ 9.5
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GREAT LAKES POWER INC. 7
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- - 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 financial statements
that 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.
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 ("GAAP").
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:
March 31 December 31
millions 2001 2000
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101,383,135 (2000 - 101,393,934) Common shares $ 603.4 $ 603.5
Retained earnings 407.6 397.8
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1,011.0 1,001.3
Subordinated convertible debentures 247.7 247.7
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$1,258.7 $1,249.0
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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%, and are
convertible at $10.00 per common share into 24.8 million common shares.
Principal and interest are payable at the company's option with cash or common
shares.
3. COMPARATIVE FIGURES
Certain of the prior year's figures have been reclassified to conform with the
2001 presentation.
4. PRIVATIZATION
On February 28, 2001, the company's shareholders approved the going private
transaction proposed by Brascan Corporation, its majority shareholder. The
successor private company, established in March 2, 2001, continues the business
of Great Lakes Power Inc. under the same name.
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8 FIRST QUARTER 2000 INTERIM REPORT
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- - 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 and development base includes 22 generating stations with an
installed generating capacity of 987 megawatts.
Great Lakes is a wholly-owned subsidiary of Brascan Corporation (BNN: TSE,
NYSE).
PRODUCTION BASE
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Generating Generating Installed
Ownership Stations Units Capacity
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(megawatts)
Northern Ontario Power (1) 100% 12 22 327
Great Lakes Hydro Income Fund (50%)
Maclaren Energy, Quebec (1) 100% 3 10 238
Powell River Energy, British Columbia (2) 50% 2 7 82
Other Power Operations
Lake Superior Power, Ontario (3) 50% 1 3 110
Valerie Falls Power, Ontario (2) 65% 1 2 10
Pontiac Power, Quebec (2) 100% 2 7 28
Louisiana HydroElectric Power (2) 75%(4) 1 8 192
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TOTAL 22 59 987
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(1) Integrated hydroelectric power generating and transmission systems
(2) Other hydroelectric stations
(3) Natural gas-fired cogeneration plant
(4) Residual interest
- - 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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9 FIRST QUARTER 2000 INTERIM REPORT