Fortis Earns Record $193 Million in 2007

Fortis Inc. ("Fortis" or the "Corporation") (TSX: FTS) realized net earnings applicable to common shares of $193 million in 2007, 31 per cent higher than earnings of $147 million in 2006. Earnings per common share were $1.40 compared to $1.42 last year.

"Fortis has delivered record earnings for the eighth consecutive year. It was also a year of record growth with our expansion into natural gas distribution through the acquisition of Terasen," says Stan Marshall, President and Chief Executive Officer, Fortis Inc.

"The growth in annual earnings was primarily attributable to the acquisition of Terasen in May, but also reflects the first full year of ownership of Fortis Turks and Caicos, significant investment in electrical infrastructure at FortisAlberta and FortisBC, stronger performance at Fortis Properties and lower effective corporate taxes," explains Marshall.

Earnings for the fourth quarter were $79 million, or $0.51 per common share, compared to $34 million, or $0.33 per common share, for the same quarter last year. The 55 per cent increase in quarterly earnings per common share was driven by the acquisition of Terasen. The Terasen Gas companies delivered $52 million for the fourth quarter, including a $7 million after-tax gain on the sale of surplus land. Due to the seasonality of the business, virtually all of the earnings of the Terasen Gas companies are generated in the first and fourth quarters.

On May 17, 2007, Fortis acquired Terasen for $3.7 billion, establishing a new business segment. The gas distribution segment is carried on by Terasen Gas Inc. ("TGI"), Terasen Gas (Vancouver Island) Inc. ("TGVI"), and Terasen Gas (Whistler) Inc. ("TGWI"), and is collectively referred to as the Terasen Gas companies. Terasen serves over 918,000 customers or 96 per cent of natural gas users in British Columbia. The Terasen acquisition doubles the regulated rate base of Fortis to approximately $6.3 billion and establishes Fortis as the largest investor-owned gas and electric distribution utility in Canada.

"The integration of Terasen within the Fortis Group of Companies has progressed well. We expect the acquisition to be accretive to earnings per common share of Fortis over the first full year of our ownership," says Marshall.

Coincident with the closing of the Terasen acquisition in May 2007, Fortis completed a $1.15 billion common share issue, the net proceeds of which were used to complete the purchase of Terasen. The remaining purchase price was funded by assumed debt of $2.4 billion and drawings on existing credit facilities. The common share issue, combined with the seasonality of earnings of the Terasen Gas companies, diluted earnings per common share by approximately 7 cents in 2007.

Subsequent to the acquisition of Terasen, Standard and Poor's raised the unsecured debt credit rating of Fortis to 'A-' from 'BBB'.

Dividends paid per common share grew to 82 cents in 2007, up 22 per cent from 67 cents paid per common share the previous year. Fortis increased its quarterly common share dividend to 25 cents from 21 cents, commencing with the first quarter dividend payable on March 1, 2008.

"The 19 per cent increase in the quarterly common share dividend to 25 cents extends the Corporation's record of annual common share dividend increases to 35 consecutive years, the longest record of any public corporation in Canada," says Marshall. "Growth in earnings has enabled Fortis to increase its quarterly common share dividend by 92 per cent since 2003," he adds.

Canadian Regulated Electric Utilities delivered earnings of $125 million, up $12 million from earnings of $113 million in 2006. The increase was driven by investment in electrical infrastructure at FortisAlberta and FortisBC associated with customer growth, higher corporate income tax recoveries at FortisAlberta, rate increases at FortisBC and a one-time after-tax gain of approximately $2 million at FortisOntario.

"A number of significant regulatory decisions received in 2007 and early 2008 will provide regulatory stability for 2008, enabling our utilities to focus on carrying out the operations needed to meet the energy needs of customers," says Marshall.

TGI, FortisBC, Newfoundland Power and Maritime Electric received regulatory approval for their respective 2008 customer rates. In November, FortisAlberta filed with its regulator a Negotiated Settlement Agreement ("NSA") for the Company's 2008 and 2009 electricity rates. If approved, it will be the third consecutive NSA reached by FortisAlberta. The allowed rates of return on common equity for 2008 for the Corporation's four largest utilities, TGI, FortisAlberta, FortisBC and Newfoundland Power, have increased from 2007 and have been set at 8.62 per cent, 8.75 per cent, 9.02 per cent and 8.95 per cent, respectively.

Caribbean Utilities reached an agreement in principle with the Government of the Cayman Islands, in December, on the terms of the Company's new 20-year generation licence and a new exclusive 20-year transmission and distribution licence. The new licences are expected to be issued during the first quarter of 2008.