Fortis Earns $49 Million in the Third Quarter

Market Wire, October, 2008

Fortis Inc. ("Fortis" or the "Corporation") (TSX: FTS) recorded third quarter net earnings applicable to common shares of $49 million, or $0.31 per common share, compared to earnings of $31 million, or $0.20 per common share, for the third quarter of 2007. Third quarter 2008 results included a tax reduction of approximately $7.5 million ($5.5 million at the Terasen Gas companies and $2 million at Terasen Inc.) associated with the settlement of historical corporate tax matters at Terasen. Excluding the tax reduction at Terasen, earnings for the third quarter were $41.5 million, or $0.26 per common share. Year-to-date earnings were $169 million, or $1.08 per common share, compared to earnings of $114 million, or $0.86 per common share, for the same period last year. Year-to-date 2007 financial results only reflected 4 1/2 months of earnings at Terasen, which was acquired on May 17, 2007.

Excluding the approximate $5.5 million tax reduction, the Terasen Gas companies incurred a loss of $4.5 million in the third quarter which was comparable to the same quarter last year. Due to seasonality of the business, virtually all of the annual earnings of the Terasen Gas companies are generated in the first and fourth quarters.

Earnings at Canadian Regulated Electric Utilities were $38 million for the third quarter, $10 million higher than earnings for the same quarter last year. The growth in earnings was driven primarily by the favourable impact of a shift in the quarterly distribution of annual purchased power expense at Newfoundland Power, which increased earnings during the third quarter of 2008 by approximately $5.5 million, lower energy supply costs at FortisBC and higher corporate tax recoveries at FortisAlberta.

Newfoundland Power's annual earnings are not expected to be impacted by the shift in the quarterly distribution of annual purchased power expense; however, earnings are expected to be lower in the first and fourth quarters and higher in the second and third quarters compared to the same periods last year.

In September, FortisBC filed its 2009 rate application requesting a general rate increase, effective January 1, 2009, reflecting the impact of ongoing investment in infrastructure and increasing power purchases driven by customer growth and increased electricity demand. In October, Maritime Electric filed for a basic rate increase, effective April 1, 2009, reflecting an increase in the amount of energy-related costs to be collected from customers through the basic rate component of customer billings.

Earnings at Caribbean Regulated Electric Utilities were $7 million for the third quarter compared to $10 million for the same quarter last year. The decrease related to the 3.25 per cent reduction in basic electricity rates at Caribbean Utilities, effective January 1, 2008; the lower allowed rate of return on rate base assets ("ROA") at Belize Electricity; and a loss of revenue at Fortis Turks and Caicos due to the impact of Hurricane Ike, partially offset by overall growth in electricity sales.

Belize Electricity's targeted allowed ROA was reduced to 10 per cent from 12 per cent as a result of the regulator's Final Decision on the utility's 2008/2009 Rate Application. On July 25, 2008, Belize Electricity filed applications with the Supreme Court of Belize for leave to apply for judicial review of 2008 amended bylaws upon which the Final Decision was premised, and appeal of the Final Decision. Leave was granted on October 3, 2008. It is expected that the judicial review will be heard in late 2008.

In September, Hurricane Ike struck the Turks and Caicos Islands causing damage to the distribution system of Fortis Turks and Caicos. The Category 4 hurricane did not cause any significant damage to the utility's generating facilities. By late October, electricity service had been restored to all customers of Fortis Turks and Caicos that were ready to receive service. Earnings for the third quarter at Fortis Turks and Caicos were reduced by approximately $1 million due to a loss of revenue as a result of damage caused by Hurricane Ike. The utility has business interruption insurance with a 30-day deductible period and is in the preliminary stage of determining its business interruption insurance claim. A large portion of the costs associated with re-connecting customers and restoring electricity service were capital in nature and, therefore, did not impact earnings.

Earnings at Non-Regulated Fortis Generation were $9 million for the third quarter, up $4 million from the same quarter last year, mainly due to increased hydroelectric production in Belize and upper New York State as a result of higher rainfall. Hydroelectric production in Belize was 22 per cent higher year to date compared to the same period last year. At the end of October, the Chalillo reservoir in Belize was at its full supply level.

Earnings at Fortis Properties were $9 million for the third quarter compared to $8 million for the same quarter last year. The increase was due to improved performance at the Hospitality and Real Estate Divisions, including contributions from the Delta Regina which was acquired on August 1, 2007.