Fortis Achieves Record Earnings of $147.2 Million in 2006

Fortis Inc. (TSX: FTS) "For the seventh consecutive year, Fortis has delivered record earnings to shareholders. Significant capital investments in electrical infrastructure, growth from acquisitions and lower corporate taxes were the major drivers of performance," says Stan Marshall, President and Chief Executive Officer, Fortis Inc.

Fortis Inc., ("Fortis" or the "Corporation") (TSX: FTS), realized net earnings applicable to common shares of $147.2 million, 7.4 per cent higher than earnings of $137.1 million last year. Earnings per common share were $1.42 compared to $1.35 last year. Earnings in 2005 included a $7.9 million after-tax gain resulting from the settlement of contractual matters between FortisOntario and Ontario Power Generation Inc. (the "Ontario Settlement"). Growth in annual earnings was primarily driven by the performance of FortisAlberta and FortisBC, hydroelectric generation in Belize, Fortis Properties, Belize Electricity and contributions from recently acquired utilities in the Turks and Caicos Islands ("Fortis Turks and Caicos").

Earnings for the fourth quarter were $33.9 million, or $0.33 per common share, compared to $22.3 million, or $0.22 cents per common share, for the fourth quarter last year. The increase in earnings was driven by Newfoundland Power, due to a change in the Company's revenue recognition policy to the accrual method, effective January 1, 2006, earnings growth at FortisAlberta and the contribution from Fortis Turks and Caicos.

"Our history of profitable growth has enabled Fortis to increase annual dividend payments for 33 consecutive years, the longest record of any public corporation in Canada," says Marshall. Dividends paid to common shareholders grew to 67 cents in 2006, up from 59 cents per common share last year. Commencing with the fourth quarter dividend paid on December 1, 2006, Fortis increased its quarterly dividend 18.75 per cent to 19 cents from 16 cents.

Canadian Regulated Utilities contributed $112.7 million to earnings, $7.9 million higher than earnings of $104.8 million last year. The increase was primarily driven by earnings derived from the significant investments in electrical infrastructure made by FortisAlberta and FortisBC and lower corporate income taxes at FortisAlberta.

"Our western utilities, especially FortisAlberta, continue to maintain, enhance and expand their electricity systems at an unprecedented pace to accommodate new customers and to improve system reliability," explains Marshall.

The western Canadian utilities invested approximately $354 million, before customer contributions, in capital projects, up 26 per cent from 2005. The rate bases of FortisAlberta and FortisBC have increased approximately 29 per cent and 36 per cent, respectively, since the utilities were acquired in May 2004. Over the next two years, each utility's rate base is expected to grow approximately 30 per cent.

The allowed rate of return on common equity ("ROE") for each of the Corporation's three largest utilities, FortisAlberta, FortisBC and Newfoundland Power, is formula based and tied to long-term Canada bond yields. Due to declining bond yields, the allowed ROEs for 2007 for these utilities have been lowered. "Strong rate base growth at our western utilities is expected to more than offset the impact of the lower allowed ROEs while earnings at Newfoundland Power are expected to be slightly lower," says Marshall.

"Fortis achieved a new milestone this year when we expanded our utility business to a third Caribbean country, the Turks and Caicos Islands," says Marshall. In August, Fortis acquired two electric utilities in the Turks and Caicos Islands for an aggregate purchase price of approximately US$90 million, including assumed debt. Fortis Turks and Caicos serves approximately 7,700 customers, or 80 per cent of electricity customers, in the Turks and Caicos Islands.

"The Turks and Caicos Islands is experiencing rapid growth in electricity demand, driven by a strong developing economy. With well-established electric utilities in Belize and Grand Cayman, Fortis has considerable experience meeting the electricity needs of growing communities in the Caribbean region. Our customers in the Turks and Caicos Islands will benefit from the expertise of Fortis in delivering reliable electricity service.

"In November, Fortis increased its investment in Caribbean Utilities Company, Ltd. to approximately 54 per cent to become controlling shareholder. This investment was immediately accretive to earnings and reflects our confidence in the future of Grand Cayman and the ability of Caribbean Utilities to meet the existing and future electricity needs of its customers. Fortis is the leading operator of electric distribution utilities in Canada. Our increased investment in Caribbean Utilities, combined with our investments in Belize Electricity and Fortis Turks and Caicos, positions Fortis as a leading utility operator in the Caribbean region," explains Marshall.

Caribbean Regulated Utilities delivered earnings of $23.6 million this year, 21.6 per cent higher than earnings of $19.4 million last year. Earnings growth was primarily attributable to $3.5 million of contribution from Fortis Turks and Caicos and improved earnings at Belize Electricity due to lower finance charges, growth in electricity sales and an overall 11 per cent increase in electricity rates, effective July 1, 2005.