RATING AGENCY REPORTS

Transcription

1 Exhibit A2 Tab 3 Schedule 1 Page 1 of RATING AGENCY REPORTS 1.0 PURPOSE This evidence provides the rating agencies financial assessments of OPG and highlights the implications for OPG. 2.0 CREDIT RATINGS OPG obtains its credit ratings from Standard & Poor s and Dominion Bond Rating Service. On an annual basis, OPG management meets with each agency to review actual results, corporate strategies, operational performance, and financial forecasts. The agencies each produce an annual credit report on OPG following their meetings and a specific long-term and short-term rating for OPG based on their respective rating scales. OPG provides both agencies with quarterly financial performance updates and on-going communication related to significant business issues that may arise during the year. The credit ratings incorporate many quantitative and qualitative considerations relating to OPG s management, strategy, operations, and financial performance over both the short and longer term. As with all credit ratings, for a rating to increase OPG must consistently demonstrate notable or trend improvements over a period of time. The credit reports are used by the financial markets as an independent opinion of the general creditworthiness of OPG and its outstanding debt obligations. The reports are used by internal management as a benchmark comparison to the financial metrics of other companies in the same sector and as a guideline to address debt leverage and business issues that may affect OPG s rating. The cost and availability of liquidity under OPG s bank agreement is tied directly to the ratings provided by Dominion Bond Rating Service and Standard & Poor s. Lower ratings generally result in higher borrowing costs as well as reduced access to capital markets, conversely higher ratings result in lower borrowing costs and increased access to capital markets.

2 Exhibit A2 Tab 3 Schedule 1 Page 2 of CREDIT RATING OVERVIEW As of April, 2010, OPG had a long-term credit rating of A- (stable) by Standard & Poor s and A (low) by Dominion Bond Rating Service, and a short-term Canadian Scale Commercial Paper debt rating of A-1 (Low) by Standard & Poor s and R-1 (low) by Dominion Bond Rating Service. These ratings were confirmed in August 2009 by Dominion Bond Rating Service, and in October 2009 and April 2010 by Standard & Poor s. Copies of the most recent reports from Dominion Bond Rating Service and Standard & Poor s are provided in Attachments 1, 2 and 3.

3 Exhibit A2 Tab 3 Schedule 1 Page 3 of LIST OF ATTACHMENTS Attachment 1 Dominion Bond Rating Service Report Dated: August 12, 2009 Attachment 2: Standard & Poor s, Report Dated: October 16, 2009 Attachment 3: Standard & Poor s, Summary Report Dated: April 30, 2010

4 Rating Report Report Date: August 12, 2009 Previous Report: November 30, 2007 Analysts Robert Filippazzo Michael Caranci The Company Ontario Power Generation Inc. is an electricity generating company with a diverse portfolio of 21,762 megawatts of in-service generating capacity. The Company is wholly owned by the Province of Ontario. Authorized Commercial Paper Limit: $1 Billion Ontario Power Generation Inc. Rating Debt Rating Rating Action Trend Commercial Paper R-1 (low) Confirmed Stable Unsecured Debt* A (low) Confirmed Stable * Debt held by the Ontario Electricity Finance Corporation (OEFC). Rating Rationale Filed: Attachment 1 DBRS has confirmed the Unsecured Debt and Commercial Paper ratings of Ontario Power Generation Inc. (OPG or the Company) at A (low) and R-1 (low), respectively, with Stable trends. The rating confirmations reflect OPG s relatively modest level of business risk, stemming from its regulated and non-regulated electricity generation operations; solid financial profile, underpinned by its stable balance sheet and credit metrics; and an improved regulatory environment. DBRS notes that the OPG ratings continue to be supported by a sole shareholder, the Province of Ontario (the Province), which is rated AA with a Negative trend. The Province supports OPG by providing most of its long-term funding. The confirmation is further supported by OPG s limited credit risk exposure, since its principal counterparty is the Independent Electricity System Operator (IESO), a creation of the Province that is governed by provincial regulation and legislation. While provincial ownership and financial support limited downward movement in OPG s ratings during earlier periods of weak financial performance by the Company, the current ratings take into account OPG s improved financial profile on a stand-alone basis. The financial profile of OPG has improved since 2004, following the announcement of the interim regulated rate structure that came into effect on April 1, Credit metrics for the 12 months ending March 31, 2009, of 37.6% debt-to-capital, 24.3% cash flow-tototal debt and 7.85 times EBITDA gross interest coverage are well within the range that one would expect for the ratings. (Continued on page 2.) Rating Considerations Strengths (1) Dominant market position in Ontario (2) Improved regulatory framework favourable to OPG s financial profile (3) Nuclear waste management liabilities limited due to agreement with Province (4) Support of shareholder (Province of Ontario) Challenges (1) Higher operating and financial risks associated with nuclear assets (2) Future nuclear decommissioning and waste storage costs (3) Political intervention (4) Significant capital expenditure program Financial Information 1 Corporates: Utilities & Independent Power ($ millions) LTM Mar. 31/09 For the year ended December EBITDA interest coverage (Cash flow - n.w.f.*) / CAPEX (times) (Cash flow - n.w.f.*) / Total debt 24.3% 27.2% 10.3% 22.0% 21.1% Total debt-to-capital 37.6% 37.7% 37.9% 39.0% 43.8% Net income (before extras) (95.8) Net income (83.0) Cash flow from operations ** 1, , , , ,407.7 Gross electricity generated (TWh) * n.w.f. = nuclear waste funding. ** DBRS-adjusted.

5 Attachment 1 Ontario Power Generation Inc. Report Date: August 12, 2009 Rating Rationale (Continued from page 1.) The current ratings are reflective of recent regulatory rulings that DBRS believes minimize the uncertainty that surrounded the Company in the recent years. DBRS notes that the regulatory framework has improved, with the recent Ontario Energy Board (OEB) rulings establishing key elements of the regulatory framework that the Company needs over the medium term. Notably, the return on equity (ROE) for OPG s regulated facilities was increased from 5% to 8.65%, a positive change that supports OPG s credit profile. In 2008, the Province selected the Darlington Nuclear Generating Station (Darlington) for a new standalone two-unit nuclear plant, with OPG as the operator. The new nuclear power plant will be a new standalone two-unit nuclear power plant with up to a combined 3,200 megawatts (MW) generating capacity. Construction was expected to begin 2012; however, on June 29, 2009, the Province announced that it had suspended a competitive request for proposal (RFP) to procure two new nuclear reactors planned for the Darlington site, citing concerns about the cost of the project and the uncertainty surrounding the future of Atomic Energy of Canada Limited (AECL), one of the three companies bidding for the expansion project. If the project is restarted, it is expected that the Province, via the Ontario Electricity Financial Corporation (OEFC), will provide OPG with all of the funds required to build the expansion. Over the long term, the Company is considering a number of potential capital projects, including the refurbishment of Pickering and Darlington nuclear stations as well as construction of a number of new hydroelectric facilities. While these potential capital expenditures could pose several significant financing challenges and materially affect OPG s credit metrics during the build-out period, the Province would be expected to be directly involved in the planning and development processes of any major nuclear initiative and provide financial support if necessary. The ratings impact (if any) of a significant new nuclear build would be determined upon review of finalized construction and funding plans. DBRS expects the Province would provide significant support for any large nuclear undertaking by OPG. Over the next few years, it is expected that OPG will generate sufficient cash flow from operations to fund nuclear waste storage and decommissioning funding requirements, along with sustaining capital expenditures, but it will require debt financing to fund development capital expenditures and refurbishments. Additionally, DBRS expects the Province would forgo dividends during a period of heightened capital expenditures if necessary to preserve the Company s credit metrics. Cash flow-to-debt and interest-coverage ratios will likely decline modestly from their current levels, but they are expected to remain more than adequate to support the current ratings. Rating Considerations Details Strengths (1) OPG s importance in Ontario is demonstrated by the fact that it is the primary electricity generator in the Province, accounting for about 71% of electricity sold. DBRS believes that OPG will continue to be the dominant generator in Ontario after 2014, when the coal-fired generation plants are scheduled to be closed. Construction of the proposed Darlington expansion would solidify OPG s position as the primary generator in the Province. (2) The regulatory framework has contributed to an improved financial profile. The OEB issued its decision on OPG s regulated prices in November This was followed by an OEB order on December 2, 2008, that established the new regulated prices at $36.66 per megawatt hour (MWh), or 3.67 cents per kilowatt hour (kwh), and $54.98/MWh (5.50 cents/kwh) for OPG s regulated hydroelectric and nuclear facilities, respectively, based on an approved 21-month revenue requirement for the period from April 1, 2008, to December 31, 2009, of approximately $6.0 billion. These prices were approved effective April 1, The ROE for OPG s regulated facilities was increased from 5% to 8.65%. Additionally, the term of the revenue limit rebate, under which 85% of output from OPG s non-regulated generating facilities (with some exceptions) was subject to a revenue limit that was implemented on January 1, 2005, ended in May The termination of this revenue limit should help OPG s fiscal profile going forward. However, the 2 Corporates: Utilities & Independent Power

6 Attachment 1 Ontario Power Generation Inc. Report Date: August 12, 2009 interim regulatory framework governing OPG, although an improvement over the previous pricing mechanisms, is less favourable than frameworks governing regulated electric utilities in many other jurisdictions in North America, where deemed equity components range from 35% to 55% and ROEs from 9% to 13%. (3) OPG established and manages, jointly with the Province, the Used Fuel Fund (UFF) and the Decommissioning Fund (DF), which are funded by OPG in accordance with the Ontario Nuclear Funds Agreement (ONFA). Under ONFA, the Province guarantees OPG s annual rate of return on the UFF related to the first 2.23 million fuel bundles used. The DF and UFF were underfunded at March 31, 2009, based on the 2006 approved reference plan. (4) The Province indirectly provides OPG with a majority of its long-term funding requirements. The Province is the sole shareholder of the Company and is actively involved in the energy-planning process in Ontario and the overall business of the Company. The Province does not directly guarantee OPG or its financial obligations; however, DBRS believes the Province will continue to support its investment since it is a creation of the Province and an integral part of meeting the energy needs of Ontario. The Province has provided support to OPG in the past by extending the maturities of OPG s debt held by the OEFC on a number of occasions and by allowing OPG flexibility on dividends. OPG enters into negotiated financing agreements with the OEFC on a project-by-project basis. Challenges (1) Nuclear generation accounts for approximately 30% of in-service generating capacity and approximately 45% of OPG s 2008 annual production. Nuclear generation faces higher operating risks than other types of generation due to the complexity of the technology. Financial implications of forced outages are greater given the high fixed-cost nature of these plants, as well as the fact that lost revenues resulting from outages are not recoverable through rates. Additionally, nuclear generation carries more regulatory and political uncertainty as a result of the risks associated with the ownership of these plants, such as evolving regulatory rules, safety targets and measures and costs associated with nuclear waste storage and future decommissioning. Furthermore, older nuclear units, such as Pickering, are more susceptible to forced outages. For example, in 2008, Pickering A and Pickering B had capability factors in the 71% to 72% range compared with Darlington, which is newer and witnessed a 94.5% capability factor. OPG is undertaking a business-case examination on the feasibility of the potential refurbishment and life extension of its Pickering B nuclear station and on the Darlington refurbishment. (2) In terms of its nuclear facilities (and those leased to Bruce Power Limited Partnership), OPG is facing long-term risks in the uncertainty surrounding nuclear waste storage costs and future decommissioning costs. Under the ONFA, OPG bears the risk and the liability for cost increases and fund earnings in the DF. As at March 31, 2009, the DF was underfunded compared with the estimated completion costs for nuclear fixed-asset removal and the disposal of low and intermediate-level nuclear waste materials, according to the most recently approved ONFA reference plan. (3) OPG is subject to political intervention, largely due to changes in government mandates and policies, as well as limits that restrict revenues and earnings should the price of electricity rise quickly. Due to political influence, OPG has been underearning for a regulated utility. The Company is a creation of and wholly owned by the Province; therefore, it has been subject to various policy changes and interventions. DBRS notes the Province has committed to having OPG run more autonomously; however, the risk of further government intervention still exists. (4) OPG has a significant capital expenditure program underway and this is likely to increase given the new nuclear plants and the refurbishments of existing facilities under consideration. It is expected that OPG will not undertake any major capital projects without having its financing and a cost-recovery mechanism in place, thus minimizing the financial risks. Although OPG may be able to reduce its risks through fixedprice contracts, the extent to which overrun risk can be placed on a contractor for large construction projects remains to be seen. 3 Corporates: Utilities & Independent Power

7 Attachment 1 Ontario Power Generation Inc. Report Date: August 12, 2009 Regulation Regulation pursuant to the Electricity Restructuring Act, 2004 (Ontario) allows OPG to receive regulated prices for electricity generated from its nuclear facilities (6,606 MW) and most of its baseload hydroelectric power facilities namely, Sir Adam Beck I, Sir Adam Beck II, Sir Adam Beck Pump Generating Station, DeCew Falls I, DeCew Falls II and R.H. Saunders Station (totaling 3,332 MW) effective April 1, About 45% of OPG s installed in-service capacity, or 62% of its total generation output, is sold at regulated prices. The OEB s decision on OPG s regulated hydroelectric and nuclear facilities was issued in November 2008 for a 21-month period using a forecast cost-of-service methodology. The OEB established the following regulated prices for electricity generated by OPG s regulated assets, effective April 1, 2008: $36.66/MWh, subject to a revised incentive mechanism. The OEB approved a revised incentive mechanism effective December 1, Under this mechanism, OPG receives the approved hydroelectric payment amount for the actual average hourly net energy production from the prescribed hydroelectric facilities in that month. In the hours when the net actual energy production in Ontario is greater or less than the average hourly net volume, OPG s revenues are adjusted by the difference between the average hourly net volume in the month and the actual net energy production, multiplied by the market price. $54.98/MWh for nuclear facilities. To ensure that OPG collected the new prices effective April 1, 2008, the OEB approved additional rate riders of $2.18/MWh and $3.22/MWh for the production from OPG s hydroelectric and nuclear facilities, respectively. These riders allow OPG to recover the retroactive amounts for production during the period from April 1, 2008, to November 30, 2008, over the 13-month period from December 1, 2008, to December 31, As part of the decision, the OEB also approved OPG s application for the disposition of regulatory balances recorded as at December 31, 2007, without significant adjustments. This resulted in the inclusion of a rate rider of $2.00/MWh in the nuclear regulated price of $54.98/MWh. Any shortfall or over-recovery of the regulatory balances will be collected from or refunded to ratepayers following OPG s next application to the OEB. OPG will also apply for the disposition of regulatory asset and liability balances recorded since January 1, 2008, in its next application to the OEB. The higher revenue resulting from the recovery of the deferral and variance accounts is offset by additional amortization expense retroactive to April 1, OPG recorded amortization expense of $75 million in the fourth quarter of 2008, retroactive to April 1, 2008, as a result of the OEB decision. In its decision, the OEB determined that the appropriate ROE for OPG s regulated facilities for the purposes of determining the new regulated prices is 8.65%. This rate is higher than the 5% ROE, which was the basis for the initial regulated prices established by the Province for the period up to April 1, The OEB determined that the appropriate deemed capital structure, for the purposes of determining the new regulated prices, is 47% equity and 53% debt. The OEB also approved OPG s application for an adjustment formula for the ROE for the years after 2009, which would result in a 75 basis point change in the rate of ROE for every 100 basis point change in the 30-year Long Canada Bond forecast. The OEB determined the new payment amounts based on an approved revenue requirement of $6.0 billion compared with the $6.2 billion submitted in OPG s application. The production from OPG s other generating assets remains unregulated and has been sold at the Ontario electricity spot market price since the expiry of the revenue limit rebate on April 30, Under the revenue limit rebate, 85% of the generation output from OPG s unregulated hydroelectric and fossil-fuelled generating stations, excluding the Lennox Generation Station, and forward sales as of January 1, 2005, were subject to a revenue limit. 4 Corporates: Utilities & Independent Power

8 Attachment 1 Ontario Power Generation Inc. OPG s Price Structure Report Date: August 12, 2009 REGULATED UNREGULATED Baseload Hydro 18.7 TWh* $36.66/MWh Nuclear 47.6 TWh* $54.98/MWh Intermediate & Peaking Hydro 15.0 TWh* Coal Stations Lennox 20.1 TWh* 0.1 TWh* Contingency Support Agreement for Nanticoke GS and Lambton GS Reliability Must Run Contract * All TWh production numbers are 2009 business plan estimates Market Revenues Supplemental Revenues ROE of 8.65% 5 Corporates: Utilities & Independent Power

9 Attachment 1 Ontario Power Generation Inc. Earnings and Outlook Report Date: August 12, 2009 Income Statement LTM March 31, For the year ended December 31 ($ millions) Total revenues (net of rebate) 6,000 6,082 5,660 5,564 5,798 EBITDA 1,734 1,844 1,331 1,583 1,878 Depreciation and amortization Increase in net nuclear-related liabilities* EBIT ,030 Gross interest costs Net interest costs Net income (before extras) (96) Non-recurring (14) (250) Net income (as reported) (83) Return on avg. equity (before extras) (1.4%) 1.2% 8.3% 9.1% 11.8% EBITDA by Segment (before extras) Hydroelectric - Unregulated Fossil-fuel - Unregulated Total Unregulated Hydroelectric - Regulated Nuclear - Regulated Total Regulated 1,001 1, Other ** Total EBITDA 1,734 1,844 1,331 1,583 1,878 * These are non-cash amounts ** Includes EBITDA associated with share of Brighton Beach joint venture, real estate rentals and trading activities. Summary Revenues have generally stabilized since the 2005 change to rate regulations that govern the nuclear and baseload hydroelectric facilities. In 2008 and the 12 months ending March 31, 2009, financial and operating results for the Company s generation business improved considerably compared with 2007, primarily due to higher electricity prices and electricity production. EBITDA increased as a result of higher prices for generation from OPG s regulated facilities, following the OEB s decision to increase prices effective December 1, 2008, retroactive to April 1, OPG recorded $214 million of retroactive revenue for the period from April 1, 2008, to November 30, EBITDA was also favourably affected by higher generation from OPG s nuclear and hydroelectric generating stations, partially offset by lower generation from OPG s fossil-fuelled generating stations and higher fuel costs. While EBITDA increased, EBIT was negatively affected because of a $670 million loss in 2008 in the nuclear waste segment, attributable to a decrease in earnings on invested funds as a result of the financial market downturn throughout 2008 and the first quarter of This amount has no impact on a cash basis. The interest expense increase was primarily due to the impact of a higher average debt balance and a lower amount of deferred interest associated with regulatory balances, which was partially offset by higher interest capitalization for capital projects. 6 Corporates: Utilities & Independent Power

10 Attachment 1 Ontario Power Generation Inc. Report Date: August 12, 2009 Outlook The commissioning of new generating facilities in 2009 should provide revenue and earnings growth. Additionally, the recent OEB decision on rate increases, deemed capital structure and ROE should help improve the Company s financial profile going forward. Interest expense is expected to increase in the medium term, given the debt financing required to fund the increased capital expenditures; therefore, coverage ratios will weaken slightly. Furthermore, should the nuclear refurbishments and nuclear new-build generating projects be approved, the Company will witness a substantial increase in interest expense as the projects are significant in size. Longer-term earnings growth will largely be driven by capital projects coming into service from both current projects (i.e., the Niagara Tunnel Project) and the large projects under consideration. The closing of the coal-fired units in 2014 should not materially affect EBITDA or earnings as these assets currently do not provide a significant margin. OPG will recover the net book value of these facilities by Financial Profile LTM March 31, For the year ended December 31 ($ millions) EBITDA 1,734 1,844 1,331 1,583 1,878 Net income adj. for non-recurring (96) Depreciation and amortization Incr. in net liab. on decom. & waste fuel mgm't Future income taxes 142 (72) (52) Recurring non-cash adjustments (94) Cash Flow From Operations 1,504 1,692 1,297 1,408 1,408 n.w.f.* and decommissioning (509) (567) (869) (599) (521) Common dividends (128) - Capital expenditures (654) (661) (666) (637) (494) Free Cash Flow Before Work. Cap. Changes (238) Working capital changes (23) ,004 Net Free Cash Flow (169) 521 1,397 Revenue limit rebate (including MPMA rebate) (280) (292) (167) (860) (851) Other investments & adjustments (22) (27) (39) (42) (105) Net debt financing (122) (13) 479 (521) 465 Net change in cash and s.t. inv. (106) (902) 906 EBITDA interest coverage (times) Fixed-charges coverage (times) Senior debt-to-capital (1) 30.7% 30.9% 31.0% 31.0% 36.0% Total debt-to-capital (2) 37.6% 37.7% 37.9% 39.0% 43.8% Net total debt-to-capital (3) 36.4% 35.9% 37.3% 39.0% 37.9% (Cash flow - n.w.f.*) / CAPEX (Cash flow - n.w.f.*) / Total debt 24.3% 27.2% 10.3% 22.0% 21.1% (1) Senior debt = Senior debt held by the OEFC + Bank debt + A/R securitization (2) Total debt = Senior debt + Subordinated debt held by the OEFC. (3) Net debt-to-capital = (Total debt - Cash) / (Total capital - Cash). * n.w.f. = nuclear waste funding. This is subtracted from cash flow because the payments are not discretionary. Note: Debt ratios include receivable sales as a debt equivalent. 7 Corporates: Utilities & Independent Power Summary Cash flow from operations has largely tracked EBITDA trends, with a marked improvement evident since the imposition of regulated pricing in early Capital expenditures have ranged from $500 million to $700 million since 2005, a result of increased spending on such initiatives as the Portlands Energy Centre, investments in coal and nuclear facilities and the Niagara Tunnel Project. Funding for nuclear fuel waste and decommissioning, however, has remained reasonably steady.

11 Attachment 1 Ontario Power Generation Inc. Report Date: August 12, 2009 Dividends to the Province were reinstituted in 2006, with a $128 million payment, the first dividend paid since However, the dividend payments were subsequently cancelled to help fund OPG s ongoing capital expenditures. Operating cash flows have been sufficient to fund nuclear waste storage and decommissioning expenses, as well as capital expenditures. Debt levels have modestly increased year over year, due primarily to the ongoing capital expenditures for both sustaining capital assets and generation development. Key credit metrics (debt-to-capital, EBITDA-tointerest and cash flow-to-debt) have remained reasonably consistent since Outlook In the near term, operating cash flows are expected to be reasonably stable compared with current levels and should be sufficient to fund maintenance capital expenditures and nuclear waste storage and decommissioning expenses. However, given the growth and enhancement projects currently under construction and the large expected nuclear-funds cash contribution, DBRS would anticipate free cash flow deficits to be incurred. Note this does not assume the undertaking of any of the as-yet-uncommitted capital projects (e.g., the Pickering B refurbishment, the Darlington refurbishment and new nuclear unit construction). OPG s forecast capital expenditures for 2009 are approximately $1.1 billion, which includes amounts for the Niagara Tunnel Project, the Upper Mattagami Redevelopments (hydroelectric) and other nuclear and hydroelectric development projects. DBRS believes that the capital projects currently underway will result in modest free cash flow deficits that would be funded with a modest increase in debt. As debt is added to fund capital expenditures, credit metrics would be expected to decline from current levels as assets do not generate earnings or cash flows until placed in service. Once in service, metrics would be expected to improve. Longer term, cash flow will be driven by prices received on the regulated and unregulated generating assets and on incremental cash flow generated from new assets. The inclusion of any of the material capital projects currently under consideration would be the key drivers of cash flow deficits. DBRS would expect the Province to continue to forgo dividends as the Company executes on its significant capital expenditures. 8 Corporates: Utilities & Independent Power

12 Attachment 1 Ontario Power Generation Inc. Report Date: August 12, 2009 Long-Term Debt Maturities and Credit Facilities Long-term Debt December 31, 2008 (CAD millions) Total OEFC Senior debt ,910 OEFC Subordinated debt Total ,660 Credit Facilities as at March 31, 2009 (CAD millions) Bank facilities Maturity Amount Outstanding Available Committed credit facility - Tranche 1 May 19, Committed credit facility - Tranche 2 May 20, Short-term uncommitted credit facilities No Maturity Short-term uncommitted overdraft facilities No Maturity Upper Mattagami/Hound Chute 20-May Total 1, ,158 OEFC facilities Niagara Tunnel project facility Nov. 30, , Portlands Energy Centre project facility Dec. 31, Lac Seul project facility Dec. 31, General corporate facility Mar. 31, 2008* Credit facility Sept. 22, Total 2,900 1,605 1,295 * Maximum maturity is Mar. 31, 2018 The OEFC provides OPG with most of its long-term debt financing on a project-by-project basis. OPG s long-term debt outstanding with the OEFC was $3.6 billion as at March 31, The current debt maturity profile is shorter than comparable entities, considering the remaining asset life. This necessitates continued financial support from the Province to refinance OEFC debt maturities. Approximately $1.9 billion of long-term debt must be repaid or refinanced within the next four years. To ensure that adequate financing resources are available beyond its $1 billion commercial paper program backed by a bank credit facility, OPG reached an agreement with the OEFC in 2007 for a $950 million credit agreement to refinance senior notes as they mature from September 2007 to September In the second quarter of 2008, OPG entered into a $100 million five-year revolving committed bank credit facility in support of the Upper Mattagami/Hound Chute Redevelopment Project. As at March 31, 2009, there had been no borrowing under this credit facility. In addition, project financing was completed for the project in May The senior notes have an interest rate of 7.59% and will mature in These notes are secured by the assets of the Upper Mattagami/Hound Chute Redevelopment Project. 9 Corporates: Utilities & Independent Power

13 Attachment 1 Ontario Power Generation Inc. Report Date: August 12, 2009 OPG currently has a total of $1,450 million of project facilities, with $665 million drawn as of December 31, 2008, for the construction of the Niagara Tunnel Project, the Portlands Energy Centre and the Lac Seul Generating Station. It is expected that OPG will not undertake any further major capital projects without being assured of financing. OPG s $1 billion revolving committed bank credit facility is divided into two tranches: a $500 million 364- day term tranche and a $500 million five-year term tranche. During the first quarter of 2009, OPG renewed and extended the maturity date of the 364-day term tranche to May 19, The five-year term tranche has a maturity date of May 20, As at March 31, 2009, and at December 31, 2008, no commercial paper was outstanding and there were no other outstanding borrowings under the bank credit facility. OPG s liquidity is also supported by its securitization agreement (maturing August 2009) with an independent trust to sell receivables up to a maximum of $300 million. As at March 31, 2009, the maximum $300 million was outstanding. Capital Expenditure Outlook OPG s forecast capital expenditures for 2009 are approximately $1.1 billion, which includes amounts for the Niagara Tunnel Project, the Upper Mattagami Redevelopments and other nuclear and hydroelectric development projects. The Niagara Tunnel Project is expected to increase annual energy production of the Sir Adam Beck generating stations in Niagara Falls, Ontario, by approximately 1.6 TWh. At March 31, 2009, the tunnelboring machine had advanced to 3,794 metres, which represents 37% of the tunnel length. It is now operating on a revised alignment that will minimize remaining excavation in the Queenston shale formation. OPG and the contractor are renegotiating the design-build contract, with a revised target cost and schedule, taking into account the difficult rock conditions encountered and the parallel mining and liner installation work required for completion of the job. While the original project cost was estimated at $985 million, with a scheduled completion of June 2010, the revised project cost is estimated at $1.6 billion, with a scheduled completion of December This contract was expected to be finalized during the second quarter of OPG has an agreement with the OEFC to finance the Niagara Tunnel Project for up to $1 billion over the duration of the project. Advances under this facility amounted to $370 million as at March 31, OPG is in the process of pursuing an amendment to the Niagara Tunnel Project credit facility, consistent with the revised cost estimate and the revised schedule. OPG s capital program is expected to remain significant over the medium to longer term because of the large number of potential projects in OPG s concept and development pipelines, most notably a refurbishment of Pickering B and Darlington potential new units at Darlington, the Upper Mattagami/Hound Chute Redevelopment, the Lower Mattagami Project and a possible re-powering of the Lakeview Generating Station site. 10 Corporates: Utilities & Independent Power

14 Attachment 1 Ontario Power Generation Inc. Company Profile Report Date: August 12, 2009 Generation Portfolio Plant Availability Per Capacity Year ended Cent (MW) Nuclear Darlington 16% 3,512 95% 90% 89% 91% Pickering A 5% 1,030 72% 41% 72% 70% Pickering B 9% 2,064 71% 75% 75% 78% 30% 6,606 Fossil-Fuel (1) Nanticoke (Coal) 17% 3,640 Lambton (Coal) 9% 1,920 Atikokan (Coal) 1% 211 Thunder Bay (Coal) 1% 306 Lennox (Duel oil & gas) 10% 2,100 38% 8, % (1) 11.5% (1) 14.1% (1) 15.9% (1) Hydroelectric Non-regulated (2) 17% 3,645 95% 94% 92% 92% Regulated (2) 15% 3,332 94% 94% 94% 93% 32% 6,977 Other (Wind) 0% 2 Total Capacity 100% 21,762 (1) Fossil fuel availability is measured by equivalent forced outage rate. (2) Total hydroelectric portfolio comprises 65 stations. Ontario Power Generation is responsible for approximately 71% of the electricity generation in the Province. As of March 31, 2009, OPG had a total in-service capacity of 21,762 MW and generated terawatt hours (TWh) of electricity during OPG s electricity generating portfolio consists of the following: Three nuclear generating stations (Pickering A, Pickering B and Darlington), with a capacity of 6,606 MW. Five fossil-fuelled generating stations, with a capacity of 8,177 MW. 65 hydroelectric generating stations, with a capacity of 6,977 MW. Two wind-power turbines, with a capacity of 2 MW. In August 2007, the Province finalized a regulation that commits to the elimination of coal stations by December 31, The Lac Seul Generating Station and the Portlands Energy Centre co-generation facility, co-owned with TransCanada Energy Ltd., were declared in service in February 2009 and April 2009, respectively. OPG has a 50% proportional interest in the Portlands Energy Centre. The OEFC debt financed the Lac Seul Generating Station and OPG s share in the Portlands Energy Centre. 11 Corporates: Utilities & Independent Power

15 Attachment 1 Ontario Power Generation Inc. Report Date: August 12, 2009 OPG partnerships consist of the following: OPG, ATCO Power and ATCO Resources Ltd. co-own the Brighton Beach Power Station, a 580 MW natural gas-fired generating station. OPG and TransCanada Energy Ltd. jointly own the Portlands Energy Centre, a 550 MW natural gas-fired generating station. OPG also owns two other nuclear generating stations, Bruce A and Bruce B, which are leased on a longterm basis to Bruce Power Limited Partnership. OPG and the Lac Seul First Nations (LSFN) jointly own the Lac Seul Generating Station, with the LSFN owning 25% of the facility. 12 Corporates: Utilities & Independent Power

16 Attachment 1 Ontario Power Generation Inc. Report Date: August 12, 2009 Ontario Power Generation Inc. Balance Sheet As at December 31 As at December 31 March 31, 2009 March 31, 2009 ($ millions) Cash + short-term investments Debt due one year Accounts receivable A/P + accr'ds + other 802 1,131 1,031 1,132 Future income taxes MPMA rebate Fuel Current Liabilities 1,576 1,573 1,538 1,593 Material & supplies Long-term debt 2,338 2,733 2,696 2,203 Current Assets 1,492 1,746 1,201 1,043 Subordinate l.t. debt Net fixed assets 12,698 12,730 12,777 12,761 Waste mgmt. liab. 11,516 11,384 10,957 10,520 Defined pension assets Other liabilities 1, Regulatory & other assets 1,571 1, Post-employ. benefits 1,729 1,703 1,556 1,396 Nuclear waste management fund 9,137 9,209 9,263 7,594 Equity 6,823 6,829 6,807 5,749 Total 25,743 25,579 24,839 22,750 Total 25,743 25,579 24,839 22,750 March 31, 2009 For the year ended December 31 Liquidity & Cash Flow Ratios Current ratio Cash flow / CAPEX (Cash flow - n.w.f.*) / CAPEX (Cash flow - n.w.f.* - Dividends) / CAPEX (Cash flow - n.w.f.*) / Total debt 24.3% 27.2% 10.3% 22.0% 21.1% Leverage Ratios Senior debt-to-capital (1) 30.7% 30.9% 31.0% 31.0% 36.0% Total debt-to-capital (2) 37.6% 37.7% 37.9% 39.0% 43.8% Net debt-to-capital (3) 36.4% 35.9% 37.3% 39.0% 37.9% Total gross debt / EBITDA Coverage Ratios (4) EBIT interest coverage Fixed-charges coverage EBITDA interest coverage Earnings Quality & Operating Efficiency Fuel costs / Revenues 19.1% 19.6% 22.4% 19.7% 22.4% EBIT margin 5.6% 7.0% 10.8% 14.2% 17.8% Net margin (before extras) (1.6%) 1.4% 9.2% 9.1% 10.6% Return on average equity (before extras) (1.4%) 1.2% 8.3% 9.1% 11.8% Profit returned to gov't (before extras) 135.3% 76.0% 5.5% 46.6% 34.5% Common dividend payout (before extras) 0.0% 0.0% 0.0% 25.4% 0.0% * n.w.f. = nuclear waste funding. This is subtracted from cash flow because the payments are not discretionary. (1) Senior debt = Senior debt held by the OEFC + bank debt + securitization of receivables. (2) Total debt = Senior debt held by the OEFC + bank debt + securitization of receivables + subordinated debt held by the OEFC. (3) Net debt-to-capital = (Gross debt - cash) / (Total capitalization - cash). (4) EBIT includes interest income. Interest expense before capitalized interest, AFUDC and debt amortizations. 13 Corporates: Utilities & Independent Power

17 Attachment 1 Ontario Power Generation Inc. Report Date: August 12, 2009 Rating Debt Rating Rating Action Trend Commercial Paper R-1 (low) Confirmed Stable Unsecured Debt* A (low) Confirmed Stable * Debt held by the Ontario Electricity Finance Corporation (OEFC). Rating History Current Commercial Paper R-1 (low) R-1 (low) R-1 (low) R-1 (low) R-1 (low) R-1 (low) Unsecured Debt* A (low) A (low) A (low) A (low) A (low) A (low) * Debt held by the Ontario Electricity Finance Corporation (OEFC). 14 Corporates: Utilities & Independent Power Note: All figures are in Canadian dollars, unless otherwise noted. Copyright 2009, DBRS Limited and DBRS, Inc. (collectively, DBRS). All rights reserved. The information upon which DBRS ratings and reports are based is obtained by DBRS from sources believed by DBRS to be accurate and reliable. DBRS does not perform any audit and does not independently verify the accuracy of the information provided to it. DBRS ratings, reports and any other information provided by DBRS are provided as is and without representation or warranty of any kind. DBRS hereby disclaims any representation or warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability, fitness for any particular purpose or non-infringement of any of such information. In no event shall DBRS or its directors, officers, employees, independent contractors, agents and representatives (collectively, DBRS Representatives) be liable (1) for any inaccuracy, delay, loss of data, interruption in service, error or omission or for any damages resulting therefrom, or (2) for any direct, indirect, incidental, special, compensatory or consequential damages arising from any use of ratings and rating reports or arising from any error (negligent or otherwise) or other circumstance or contingency within or outside the control of DBRS or any DBRS Representative, in connection with or related to obtaining, collecting, compiling, analyzing, interpreting, communicating, publishing or delivering any such information. Ratings and other opinions issued by DBRS are, and must be construed solely as, statements of opinion and not statements of fact as to credit worthiness or recommendations to purchase, sell or hold any securities. A report providing a DBRS rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. DBRS receives compensation for its rating activities from issuers, insurers, guarantors and/or underwriters of debt securities for assigning ratings and from subscribers to its website. DBRS is not responsible for the content or operation of third party websites accessed through hypertext or other computer links and DBRS shall have no liability to any person or entity for the use of such third party websites. This publication may not be reproduced, retransmitted or distributed in any form without the prior written consent of DBRS.

18 Attachment 2 Ontario Power Generation Inc. Primary Credit Analyst Nicole Martin. Toronto ( ; nicole_manin@standardandpoors.com Table Of Contents Major Rating Factors Rarionale Outlook Business Description Rating Methodology Strong Business Risk Profile Significant Financial Risk Profile SlaOOard &1'00($. AD f1111'11s rl!sl!mlll. No lepiwil oflflssolllllnudn "Iili'oul: 58!'". pellllisso:jn. See Terms of lise/oi5t~ 0I'I1llt Inl~

19 Attachment 2 Ontario Power Generation Inc. Major Rating Factors Strengths: Government ownership and financial support Dominam position in a strong market with a diversified economic base Regulatory support for nuclear and the bulk of hydroelectric assets Diversified portfolio of gcm:rating assets Low-cost hydroelectric assets with civer system diversity Corporate Credit Rating A-/Stable/- Weaknesses: Uncertain profitability due to variability in asset operating performance, river flows, and weather Significant financial risk profile given low allowed returns on regulated operations, increasing fuel costs, and a revenue cap on nonregulated operations Nuclear technology that exposes the company to significam operating risk and potential for unexpected large capital expenditures Exposure to tegulatory delay and cost overruns rdated to new construction (nuclear and hydroelectric) and refurbishment of existing facilities (nuclear) Aging assets' declining ~rformance Rationale In Standard & Poor's Ratings Services' opinion, the ratings on Ontario Power Generation Inc. (OPCl, which is wholly owned by the Province of Ontario (ANNegative/A-l+), reflect the regulatory oversight of OPC's basdoad, nuclear, and hydroelectric assets; a diverse generation portfolio; and strong cost-competitive position. Weak cash flow mettles and operational and nuclear technology risk offset the company's credit strengths, in our view. Environmental constraints and commodity- and fuel-risk related to OPG's unregulated production further constrain the stand-alone rating. The bulk of the company's C$4 billion debt outstanding as of June 30, 2009, is in the form of notes payable to the company's government shareholder. We base the 'A ' rating on OPG's stand-alone credit profile (SACPj and our opinion that there is "high W likelihood that the province would provide timely and sufficient extraordinary support in the event of financial distress. We assess the company's Stand alone credit profile at 'BBB'. We view its role as "important" to the province and the link between OPC and the province as very strong." The generator plays a major role in government energy policy. The ratings of the two entities are linked. A change in the relationship with or a change in the ratings on the shareholder could also affect the ratings on OPC, as could a return to a stable outlook on the province. As of April 1,2008, the Ontario Energy Board (OEB) assumed regulatory oversight of OPG's nuclear and ba~load hydroelectric assets. Greater assurance of cost recovery for these assets is a positive for the credit. It will be several years, however, before we can fully assess the nature of the OEB's regulatory framework and of its relationship with OPG. The company's first cost-of-service application to the OEB was submitted in fall 2007 and it received its first decision Nov. J, OPG requested a 14.8% price increase that included a 10.5% allowed return on a 57.5% deemed equity layer. The final revenue requirement allowed for an 8.65% return on a 47% deemed equity layer. Standard & Poor's RatingsDirect I October z StandaAI & Poor'l. AI rights ItSeAIll No.-pronl Cll lisse...!jcin withilul WS pemlissicn Sell Tenns ~ ijmo'1)iscii",.. m1n1isl: f8ge:

20 Attachment 2 The company expecrs to apply in 2010 for a funher rate increase in January Ontario Power Generation 111G. The fuel diversity and large number of generating units in OPG's generation portfolio mitigate the risk of operational disruptions and enhance the company's business position, in our opinion. As ofjune 30, the portfolio of assets that the company owns and operates includes: 6,606 megawatts (MWj of baseload regulated nuclear generation; 6,947 MW of predominantly run-of-the-river hydroelectric generation, of which 3,302 MW is regulated; and 8,177 MW of intermediate unregulated fossil-fired generation (of which about 2,000 MW will be shut down at the shareholder's direction by October 2010). We believe OPG has a strong competitive position. The company dominates the Ontario electricity market, producing at least two-thirds (most of it baseload) of the terawatt-hours (TWh) of annual electricity consumption in Ontario. Irs unregulated hydro assets typically enjoy a competitive advantage over higher marginal cost gas-fired alternatives. Constraining OPC's unregulated cash flows are the lowest wholesale electricity prices seen since the market opened about 10 years ago. Our analysis assumes prices will not significantly recover from current levels within the outlook period (18-24 months). Cash generation from this segment is exposed to volume risk due to fluctuations in Ontario-based market demand, the inherent uncertainty of available water flows, conservation efforts, and competitively priced imports from neighboring markets. Mild weather and an approximately 20"10 loss of manufacturing demand for electricity has contributed to about a 10% drop in forecast provincial consumption in 2009 compared with 2008 levels. Excess haseload generation in Ontario, and potentially the province's caps on fossil production, can have a material impact on both price and OPG's production. Technical challenges associated with key componems of nuclear facilities have the potential to expose the units to lengthy outages, hurring cash flow performance and increasing capital demands. OPG's nuclear liability risk-sharing agreement with the province limits the company's used nuclear fuel liabilities and is a long-term credit positive. We believe OPG's stand-alone financial risk profile is significant. Stand-alone cash flow metrics are genetally weak for the ratings. Adjusted funds from operations (FFO) interest coverage was 3.4x and FFO to-rotal debt was 13.8% as of Dec. 31, 2008, an improvement as expected from 2007 results. Based on current market conditions, we expect OPG's financial risk profile to be weaker in 2009 and 2010 until there is a sustained recovery in gas and electricity prices. While we expect ongoing fluctuation in cash-flow strength given exposure to unregulated prices, excess baseload generation, and regularory recovery and deferrals, sustained FFO-to-interest coverage of less than 3x and FFO-to-debt of less than 10% would put downward pressure on the SACP. We expect, on average, the company will manage its balance sheel al about 45%-50% total debt-io<apital, consistent with the SACP of BBB'. Liquidity OPG's liquidity is adequale to meet cash outlay commitments in the next 12 months. Expe<:ted cash flow from operations of about CS700 million in 2009 should be sufficient to fuod more than half the total estimated 2009 capital expenditures (about CSI billion). We expect capital expenditure to continue at about the same level in 2010 but cash flow to deteriorate, assuming no quick recovery to electricity prices and given that the company will not apply for a 2010 rate increase. We do not expect OPG to payout dividends in the foreseeable future. It has credit facilities with its shareholder to fully debt-finance developments under construction. Furthermore, significant debt maturities within the next 12 months do not present a material concern, given the shareholder's practice of 3 Star>da.rd & Poor',. AJI n!llns rl'served. No lep'int II! dissemination wi!tlllljl SIliP', PIlrmission See Terms of Usll'Oisdarmer on the Int page.

21 Attachment 2 Ontario Power Generation Inc. refinancing notes payable at their due date. OPG has a CSt billion, fuuy committed credit facility with a CS500 million, 364-day term tranche maturing May 19,2010, and a CS500 million, five-year revolving tranche maturing May 20, 20t3. The facility backstops the generator's CSI billion commercial paper program and supports collateral requirements that arise from commodity market-related risk exposure. As of Aug. 14,2009, OPG was pursuing an amendment to it Niagara Tunnel project credit facility with the Ontario Electricity Financial Corp. (OEFC; senior unsecured debt rating 'AN), consistent with a revised COSt estimate of CS 1.6 million. Outlook The stable outlook reflects regulatory support (for more than half of the company's output), which brings with it better assurance of more timely recovery of prudently incurred costs, For the SACP to move a notch higher, OPG's overall cash flow strength would have to improve significantly and stabilize. A move to a more aggressive financial policy could negatively affect the SACP. The ratings on OrG and the province are linked through our enhanced government-related entity (GRE) methodology. The negative outlook on the province currently constrains the rating on OPG at 'A-'. Improvement in the provincial credit risk profile leading ro a return to a stable outlook would likely result in a one-notch upgrade on OPG, as long as the likelihood of extraordinary support and OPC's SACP do not change. A one-notch downgrade on the province is unlikely to affect the ratings on OPG. Business Description OPG is an electricity generator with both regulated (nuclear and hydroelectric) and unregulated (coal, hydroelectric, and oil- and gas-fired) assets. In addition to energy revenues, the company receives payments from Bruce Power L.P., which operates OPG's Bruce A and Bruce B nuclear stations under a long-term lease arrangement; and revenues from sales of radioactive isotopes used for medical treatments. The company also undertakes power-marketing activities; however, it is a minor part of its operations, representing less than 2% of total revenue, Rating Methodology Government support and government-related entities: Methodology impact We base the 'A-' rating on OPG on the company's SACP and our view that there is "high~ likelihood that the province would provide timely and sufficient extraordinary support in the event of financial distress. We assess [he generator's stand-alone credit at 'BBB'. In accordance with our criteria for GREs, we base our view of a ~high ~ support on the following assessment. likelihood of extraordinary government Within the context of our GRE methodology and scale for assessing the importance of a GRE's role to its government owner, we view OPG's role as "important" to the province. The generator operates as a profit-~eking enterprise and its credit standing is important to [he government because it provides an essential infrastructure service to the population. OPG's role is clear, important, and intertwined with the government's energy policy. As an example, the province's energy policy is forcing OPG to shut down its coal fired plants in an effort to meet provincial carbon dioxide (C02) emission reduction targets, Furthermore, although we do not believe that default Standard & Poor's RatingsDirecl I October 16, Standard & Poor's. All righti resemld. No "plio! (II d'$1,mlf\llt;o., W1trout $&P's pe,minioll. Set TtrlM oll/se/o,sclaimer 00 lhe Inl page

22 Attachment 2 Omario Power GeneratiOI1 11,,;. or credit stress would lead to a disruption of OPG's or the province's operations, it would affect the credibility of the Ontario e1ecuicity market and have a negative impact on the province's reputation. Within the context of our GRE methodology and scale for assessing strength and durability, we view the link between OPG and the province as very strong. The government is a suong and stable shareholder, and it has a policy and track record of both constraining profitability and providing financial support to the generator. Government policy has a strong influence on the company's strategic and business plans_ Ministerial directives instruct the company where to invest. Management updates government staff on the company's monthly financial and operational performance. Furthermore, the province appoints OPG's board of directors. We believe there are no plans to privatize in the medium term. Financial support is available to the company from the province through the Ontario Electricity Finance Corp. (Debt rating of AAj OEFC). The OEFC is an established provincial agency with a legislated mandate "to provide financial assistance to the successor corporations of Ontario Hydro," of which OPC is one. The province provides OPG with both liquidity support and ongoing long term financing (credit facilities and five- and 10-year notes) at market rates for the company's existing operations and new investments. The government has also directed its agency, the Ontario Power Authority (OPAl, to negotiate long-term conuacls with OPG for these projects that provide revenue certainty backed by a solid counterparty. For a more detailed outline of the rating criteria used, refer to ~General Criteria: Enhanced Methodology And Assumptions For Rating Government-Related Entities, M published June 29, 2009, on RatingsDirect. Strong Business Risk Profile We have assessed OPG's standalone credit risk profile as 'BBB', supported by a strong business risk profile and significant financial risk profile. Regulation Total output from OPG's regulated assets supports about 40% of provincial consumption and generates about 50%-60% of OPG's energy-related revenues. The company's regulated facilities include the Niagara River plants, the St. Lawrence River plant, the Pickering Nuclear Generating Stations (A and B), and the Darlington station. Before April 2008, these assets were subject to a shareholder imposed fixed price cap set in We do not expect the OEB to regulate any new assets, rather that the energy from new facilities will be sold to the Independent Electricity System Operator (leso) with revenue top-ups from the OPA, ensuring, on average, a very modest regulated return. The OEB has no jurisdiction over the economic viability of OPG as a consolidated entity; its mandate is to regulate the electricity and gas sectors in the public interest and to set just and reasonable rates. 11 is an independent, quasijudicial tribunal that reports to the Ontario Legislature through the minister of energy. Although it operates independently from the government, it provides advice on energy matters thar the minister responsible refers to it. In our opinion, OEB regulation reduces uncertainty surrounding cost recovery and supports OPG's strong business risk profile but does not fully alleviate volume risk linked to nuclear output and available hydrology. Furthermore, OPG's nuclear segment is highly susceptible to poorer-than-targeted performance (aging assets), and cost overruns that, we believe, heighten regulatory risk. OPG is the only regulated generator in the province. It will be several years before we will be able to fully assess the nature of the OEB's framework, as applied to generation, and its relationship with OPG. 5 Staooard & Po«'s_ All rights reserved. No repr;m Of d1sleminalion W1!h1;1Ul S&P'l perminion. See h,ms o1ljst/dixla;mer on ~ las! page 7521' I]II,HR. "",

23 Attachment 2 Olltario Power Generation 1m:. The timeliness of the cash recovery of large, often unexpected COStS related to nuclear could be slow, given general reluctance to raise energy prices. There is a long history of regulated entities in Ontario being allowed to recoup unforeseen costs (regulatory assets) or having to refund the CUSlomer (regulatory liabilities) after the fact through rates. The cash recovery or repayment, however, is subject 10 a prudency review and regulatory approval. Furthermore, depending on the magnitude, the OEB may spread Ihe recovery over multiple years to avoid rate shock. OPG received a fairly balanced first regulalory decision Ihat resulted in a moderate price increase for its regulated assets in late 2008 (sec table 1). About 97% of OPC's requested revenue requirement for 2009 was rolled into the OEB's final rate calculation. Nevertheless, the price increase awarded is well below what the Ontario government negotiated in 2005 with the privately owned Bruce Power, the only other nuclear operator in Ontario, to operate similar plants. Table 1 Ontario Power Generation Inc. fopg) Prices For Regulated Assets ICWWl1J OPG fegtjlated ouclear" OPG regulated hydro Bruce Power urvegulaled nuclear Produetion unit energy cost lpuec)- 44.3\ (2Oll); (2007) 6.01 (2OOlj; 5.30 (20071 NA Priceli set by Ontario PUEC is IXfllb;tm lj1it erergy cost cnt indllles qlei"illioos and maintenance n M'MI-Me9awalt-lJoln.. NjA Not applicable. NA-Not available. Bruce A:. 57,00; Bruce 8: (floor) Regulated price effective April ZOOS NIA fuel C05U. t.d does 001 ioclude capital maintenance Of fwjancing regulated rata ridars 5.22 The new regulated rates for OPG were effective April 1, 2008, but were not implemented until December Through a rate rider, the OEB has allowed OPG to recover its approved revenue requirement effective April 1, For its regulated assets, Ihe generator was awarded a 47% equity layer (thicker than the 40% allowed for wires and gas companies) and an 8.65% return on equity (ROE) based on the OEB's generic formula for low-risk entities. OrG had requested a 10.5% ROE and a thicker equity layer. The rate increase awarded was about 11 % for regulated hydro and 7% for regulated nuclear. Low demand and low spot prices pressure higher risk unregulated cash flow Prices have been the lowest since market opening from January 10 August of 2009 at C$38.80 per megawatt-hour (MWh) average on peak and C$23.45 per MWh off-peak, with no relief in sight. Typically, prices in Ontario have loosely tracked the same trends as natural gas prices, which were also low at the time of publication. Excess baseload generation in the province due to new generation coming online and lower demand is putting further pressure on already low prices. Arithmetic average price in the Ontario spot market for 2008 was C$48.92 per MWh (CS47.87 per MWh in 2007; see dian). The average on peak price in 2008 was CS62.56 (2007 CS60.55 per MWh), and the average off-peak was CS37.22 per MWh, (2007 CS37.13 per MWh; see chart). Electricity consumption in Ontario tolaled teraw:il.n-hours (fwh) in 2008 (151.61Wh in 2007); the IESO expects it 10 decrease by about 5% in 2009 compared with 2008 and a very modest reversal in 2010, ~ssuming modest economic recovery. The decrease is largely linked to a decline in the province's manufacturing and resource base and mild weather. Although long-term average growth from the 1950s to the 1990s was about 4% per year in Ontario, beginning in the 1990s, growth in consumption has been quite flat in comparison. Total provincial electricity consumption declined modestly by 2.3% from Government initiatives to increase 2.18 NtA Standard & Poor's RatingsOirect I October SllIndiltd & Poor'I. An tighls,~erved. No,eprinl Of llisulminalion without S&P"I perminion. See Terms of USelOiKI~lmer on the lall page.

24 Attachment 2 Ontario Power GCfleratiOIf hie. conservation have also contributed to recent trends. Nevertheless, residential and commercial customer account for about two-thirds of electricity consumed in the province, adding some stability to Ontario's base electricity needs. Ontario r.1onthly Average Electricity And Natural Gas Prices (C$iMWll) --HOEP (left scale) --Natural gas price at Dawn, Ont (right SCale) (C$lOJ) 16, ~'\', Source: t1depelldett Bectricly System Operator lor eledridy prices; BIoolTilerg ICIf Mu'a1 gas prices at Der.oYn, OR.~. HOEP -Hourly Or1orio Bectricly Price. Poor's Dominant player in a large and well diversified economy OPC operates primarily in Ontario (population about 12 million) and electricity production represents more than two-thirds of provincial consumption. The outlook for the Ontario economy, which has depth and scale in many sectors, is far less rosy than it has been in many years. For 2009, we expect rcal COP to decline 2.5% and nominal COP 2.4%. Employment is expected to fall by about 2.0% as the unemployment rate increases to about 8.8%. Retail sales and housing starts should also decline this year. The chief risk to the economic outlook remains the U.S. economy's recovery and the resumption of export growth. For more information on the province, please refer to our analysis published June 9, 2009, on RatingsDirect. Although Ontario's economic results and pros~ts have weakened noticeably, comparisons with peers have not worsened as their p<:rformances and prospects have generally deteriorated in lock step. Ontario's real CDP growth in 2008 was in the middle of the pack. We ex~ct that the province should retain this position in Ontario's unemployment rate was better than the 'AA' category median. Within the Canadian peer group, Ontario's economy is significantly morc diversified than those of New Brunswick and Saskatchewan, bur only somewhat more diversified than that of Manitoba and Quebec. Stanclald &Poo' s. All rights reseryed. No reprrm ()I dinemil'latioo without S&P's ~mission. See Terms 01 USeJDisclaimer OIl tile lasl PilQl!. 7

25 Ontario Power Generation Inc. Attachment 2 Operations: Diversified portfolio The excellent diversification of OPG's existing generation portfolio (see tables 2 and 3) mitigates cash flow exposure to hydrology and nuclear-related operating risks. Fuel diversification, however, will decrease significantly in the medium term. By 2014, the province expects OPG to cease operations of its more than 6,000 MW of coal-fired generation to comply with its owner's energy policy. The company may, however, retain abour 2,500 MW of gas- or oil-fired production capacity. It is also exploring the use of biomass, on a much smaller scale. OPG's generating assets produced TWh during 2008, of which about 33% was derived from hydroelectric, about 45% from nuclear, and 22% from coal. The government announced in August 2009 that the first four coal-fired units, representing about 2,000 MW, would be shut down in labla2 Ontario Power Generation Inc.~~Generation Portfolio Project MW TWh Fuel Regulatory Status Emission controls Nanticoke' 3, low sulphur coal Unregulated Nitrogen oxide emission reduction lambton' 1, Low sulphur coal Unregulated Sulphur dioxide and nitrogen oxide emission reduction Thunder Bay lignite Unregulated N,M. Atikokan lignite Unregulated N.M. lennox 2, Oil/gas Unregulated N.M. Total fossil capacity NfA NfA NfA St. lawrence River (Saundersl Hydco Regulated N.M. Niagara 2, Hydro Regulated N.M. Ottawa Sl. Lawrence Hydro Unregulated N.M. Northeast Hydro Unregulated N,M. Northwest Hydro Unregulated N.M. Evergreen Energy Hydro Unregulated N.M. Total hydroelectric capacity NfA NfA NfA Pickering A Uranium Regulated N.M. Pickering B 2,064 12,9 Uranium Regulated N.M. Darlington 3,512 28,9 Uranium Regulated N.M. Total nuclear capacity 6, NfA NfA N.M, Wind 2 0 Wind Unregulated N.M Total 21, NfA NfA NfA Oata as of Oec. 31, 'Four units of Nanticoke and lambton (total of 2,000 MW) will be shut down ~ Unit2 and 3at Pickering Aale being placed in safe storage. MW Megawatls. TWh Terawall hours. N.M. Nol meaningful. N/A Not applicable. Table 3 Ontario Power Generalion Inc.--Portfolio Diversification Fossil Capacity Hyrlroelectric Capacity Nuclear Capacity Wind Capacity Total Capacity Regulated 2008 Megawatts ,963 6, ,748 9,938 Portfolio diversification (by capacity; %) Portfolio Diversification (by energy;%l o o Standard & Poor's RatingsDirecl I October 16, Sl~,.j~rd '" Poor's. All fights reserved. No reprinl or dissemination without S&l'"s permission See Terms Df Use/Oisclaimer on the lasl page.

26 Table 3 Ontario Power Generation Inc.--Portfolio Diversification (cont) Data as of Dec I. Filed: Ontario Power Generation Illc. Attachment 2 Hydroelectric Hydro assets mature but perfonning well. OPC's hydroelectric assets have lower operating risk than either the coal-fired or nuclear-fueled ass(:ts, as illustrated by strong capability factors and low forced outage rates. We expect the generator to continue investing a modcst-but-appropriate level of capital in its long-lived hydroelectric assets. Sustaining capital expenditures of almost C$4OO million are earmarked for hydroelectric maintenance in the period. Although the in-service datcs of the company's hydroelectric assets range from 1898 to 2009, OPC's two largest hydroelectric facilitics (representing about 36% of its total hydroelectric capacity) are among the youngest, at about 50 years old. PropoS(:d changes to provincial dam safety regulations could require some one-time additional capital spending. We expect the spending to be manageable (in terms of time and cost) and that a large portion would be eventualjy recovered through regulation. Numerous river systems OIlU large geographic area support fairly stable Jrydroelectric production. Operating risk is relatively low for OPG's hydroelectric generating units compared with the rest of the generation portfolio. Two key assets on the Great Lakes, in addition to the benefits of more than 200 run-of-the-river plants on numerous river systems throughout the province, reduce OPG's exposure to variable hydrology. The Niagara Falls facilities (harnessing the water flow between [wo adjoining Great Lakes) produce almost 33% of OPG's hydro-based electricity output. A further 19% of its hydroelectric production comes from Saunders on the St. Lawrence River that connects the Great Lakes to the Atlantic Ocean. OPG's consistent production levels relative to peers' during years of low water supports this view. In the past six years, its total hydroelectric energy production has fluctuated by plus 5% or minus 9% from 49-year average historical annual production of 34.6 TWh. Nevertheless, year-to-year fluctuations can be larger. Total production was about 5% above average in 2008 at 3604 TWh, and 14% higher than in 2007 (about 9% below average). CmlstTUctiml risk. Although OPC is not directly involved in constructing new generation developments, it nevertheless remains exposed to construction risk. The development of a loa-kilometer (km) tunnel at the company's Sir Adam Beck facility to expand the Niagara Falls generating capacity was contracted out to Strabag AG (a subsidiary of Strabag SE; BSB-IStable/--). The tunnel-boring machine had advanced about 4,6 km as of June 30, 2009, bur continues 10 progress much slower than expected. The original estimated cost of C$985 million was revised to C$I.6 billion with an expected in-service date of December 2013 (three and half years later than originally planned). The OEFC is providing the project's financing. In the long term, we expect OPG to face significant construction risk as it proceeds with major refurbishments at two of its nuclear units and construction of new nuclear units. OPG's refurbishment of two Pickering A nuclear units incurred significant cost overruns and delays. A decision had been expected early in 2009 on whether the company would proceed with its Pickering B nuclear plant refurbishment and in 2010 regarding the Darlington plant. Although no decision on refurbishment has been made to date, the company is continuing necessary planning work and regulatory submissions. In addition, the government selected OPG's Da.rlington site for two new nuclear units (see table 4) but suspended, we believe temporarily, the procurement process this summer. 9 SIo1tld d S I'oor't AI ngiits,...-i NCI...pnnt or ~\ign wid'olt SSP'I penaissian See Te'lIlI 01 ~ 0tI1:lle lasl pig!.

27 Table 4 Ontario Power Generation Inc.~-Construction Filed: Attachment 2 Projects And Facility Shutdowns At The Province's Direction Ontario Power Generation Inc. Expected cost Con$1Juction projects Fuel typl! Capacity (MW) Expected in service (mil. CS) Contracted Niagara Tunnel Hydroelectric 10.4 kin long lunnel llij to add 1.6 1\'''1",,, lowel Mattagami Hydroelectric ' BO HESA with OPA Upper Managami Wawatin. Hydroelectric 44 10" 300 HESA with OPA Sandy Falls. lower StlSgeon and Hound OlUte Healey Fails Hydroelectric 6 mid-20lo 21 HESA with OPA New Units at Darlington Nuclear Uranium Plaming stage Initial target year is 201 B(the Planning stage P1aming stage Generating Site province SlJspended the procljrement p:ocess in 2009) Shut down facilities fuel type Capacity Shut-down date Co" Contracted- Two units in Nanticoke and two Fossil Target year Not applicable Not applicable; in lambton unregulated peaking unit lakeview Fossil Not applicable Not applicable; unregulated HfSA-HYlkoeleclticity setvices agreement MW-Megawatts_ OPA-Ontario I'owef Authority. 180-To be delclmined. T'Wll-TerawatHlolU Nuclear Improving the performance ofits nudear fleet is an ongoing djq//enge. OPG has rypically been unable to meet targeted performance in the past several years, in part due to longer-than-expected maintenance and inspection outages. Performance reliabiliry and output of the Pickering A station, which includes two refurbished operating units (one of which returned to service in 2003 and the other in November 2005), remains uncertain. The Picketing B station's performance remains below historical global standards (see table 5). Darlington, the newest of the three stations, has performed consistently better than Pickering A and B stations. The average age of nuclear units that QPG operates is 26 yeats (on a MW-weighted basis). Table 5 Ontario Power Generation Inc.~-Historical Nuclear Performance As Of Dec ' 100' Capability facto, Target Actual Target Actual Target Actual Target Actual Target Actual Industry Benchmark N/A 83_5 N/A 91.2 NfA 001 N/A 89.6 NfA 00.9 Pickering A no Pickering _8 Darlington J OOA 86.1 'Capabiljly filttor fepresenl$ the 31'flOl1'lt Of eletllicity the station is actually tapabte of producing as a percem of ils potential capacity_ NjA Not applicable. Asset retirement obligations. The costs associated with the retirement of nuclear generation are material, but mitigating OPG's exposure is a segregated nuclear asset decommissioning and waste management fund, and regulatory suppor!. In addition, OPG has established a nuclear liabiliry risk-sharing framework with the province that caps Ihe company's exposure 10 nuclear-related liabilities at CS 10 billion. As of Dec , the fund had a fair value of CS9.2 billion compared with a liabiliry of CSt t billion. The company will reassess the liability in Standard & Poor's RatingsDirect I October SutlWd II 1'0<10'"1. M '9'GrlSlfWd. Na f!1l'1tii1li dissenloti;i\lgn wntdutwi p!f...ssion. Setr_ of UIoI/IlildIIn>I CtllhIlIst pi9i.

28 Attachment 2 Ontario Power Generatioll ll1c. Coal Some midmerit coal-fired assets are still required to meet market demand in the medium tenn. The company's coal-fired units were designed to run as midmerit units with capacity factors typically below 50%. Despite the wear and tear of higher-than-expected production from of dose to 40 TWh per year, availability factors for OPG's aging coal-fired plants remain better than 70%. The return to service of about 2,400 MW of base-load nuclear generating capacity in the Ontatio market since 2004 has offset demand for fossil fuel-fired &eneration production. The addition of 1,083 MW of must-take wind to the Ontario market has exacerbated excess supply during off-peak hours. We expect a further 492 MW of commiued wind projects to come online by The government cap on average annual production level from the coal plant declines each year from now until their shutdown in In May 2008, the province announced new annual targets and limits on C02 emissions from OPC's coal fired generating stations to ensure that such emissions are reduced by two-thirds of 2003 levels by For 2009, OPG has limited C02 emissions arising from its coal-fired generating stations to not more than 19.6 million metric tonnes. For the first six months of the year, C02 emissions were 6.4 million metric tonnes, compared with 12.4 million metric tonnes for the same period in Emis~ions fell significantly as a result of mild weather and lower demand and therefore lower production, not lower emission intensity. OPG's hedging program partially mitigates exposure to increasing coal prices. As ofjune 3D, it had hedged its estimated fuel (all fuels) requirements about 100% for the remainder of 2009 and 2010, and about 84% for Most of the coal at OPG's fossil fuel stations is shipped across the Great Lakes, with related fuel transportation risk. To mitigate this, the company maintains sufficient inventories for typically higher demand winter months when the shipping lanes are closed. Fuel expense in 2008 accounted for about 54% of total fossil fuel production cost (as compared with 58% in 2007). The decrease was largely due to lower volumes, and we expect this trend to continue until The bulk of fossil-fuel expense represents purchases in U.S. dollars, which exposes OPG to foreign-exchange risk that it manages through its hedging program. Strong competitive position OPG's strong competitive position in the Ontario wholesale electricity spot market is founded on its market dominance and the low marginal operating costs of its hydroelectric and nuclear generating facilities. If the company lost its regulntory support, it would have little, if any, dispatch risk for these baseloaded assets. Although there are other independent generators participating in the Ontario wholesale spot market, the demand for energy and capacity is such that all nuclear and most hydroelectric generators have relatively modest exposure to dispatch risk. Further reinforcing OPG's strong competitive position was the province's tecent decision to locate two planned nuclear units at an existing company site. Access ro interconnected markets in New York and Michigan, where OPG's generation is generally competitively priced (on a marginal cost basis), further reduces the company's competitive risk. Its competitive' position as a coal-fired generator is also Strong but constrained by the governments emission targets. OPG owns all coal-fired assets in Ontario and these midmerit facilities use mainly lower~cost Powder River Basin coal. The units are COSt competitive with gas-fired production in Ontario and neighboring jurisdictions. The company's volume of coal-fired production is most affected by nuclear unit availability, natural gas prices, weather conditions, and available water flow in the province. Fluctuations in both the on- and off-peak prices for electricity in Ontario typically mirror those in the price of 11 S'-*d a 1'Iu'1, AI rq.s menoed. No ferrint or 6sse-..lion wiilwt S&J"i pelnluion. See TerN d.ljmit\ridi... on... li$l jtilgl.

29 Attachment 2 Ontario Power Generation I"c. natural gas, because gas would be the alternative to coal or peaking hydroelectric generation. Nevertheless, from , the market heat fate in the province has, on average, been too low for a new gas-fired generator wirh a heat rate of 7,000 million British Thermal Units to recover its COSts -further evidence of OPC's strong competitive position. Hydroelectric imports from Quebec and Manitoba do not pose an immediate competitive threat to OPC, although they do give Ontario some added supply security. Imports from Quebec face transmission constraints and faster-ihan-expected growth in that province's domestic electricity demand. Funhermore, Ontario consumers must compete with generally higher-priced U.S markets for Hydro-Quebec's available surplus generation. Provincial-level discussions continue regarding the potential for more significant long-term commitments to import from Manitoba and Quebec beyond These contracts would rely on the timely development of major new hydroelectric generalion projects, in addition to significant transmission infrastructure expansion in all three provinces. Significant Financial Risk Profile Financial policy OPC has a moderate dividend policy, having paid the province on occasion approximalely 35% of its net income in addition to special dividends related 10 the government-directed sale of assets. It paid no dividends in 2007 or 2008 and we expect none in the next few years. Accounting OPC's consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles (CAAP). The accounting policies the company adopted in preparing irs 2008 financial statements appear reasonable. International Financial Reporting Standards (lfrs) are replacing Canadian GAAP during a five-year rransilion period to Despite IFRS being relatively similar to Canadian GAAP, it does not yet have comprehensive guidance for rate-regulated assets and liabilities. This lack of regulatory accounting guidance equid result in changes to the reported financial position and results Qf Qperations for Canadian regulated entities. We dq noi expect, however, IQ make any rating changes as a result. In assessing OPC's creditworthiness and overall financial risk profile, Standard & Poor's treats payments to nuclear wasle and decommissioning funds as a cost of ongoing operations and deducts them from FFO before working capital, as presented in the company's financial statements. We have not adjusted the company's balance sheet tq ref1eci financial risk involved in trading activities because, given the company's limited risk exposure, the amount was not material. OPC engages primarily in asset-backed physical trades, boughl and sold at the Ontario border. Typical commirments last less than a year. OPC's Value af Risk (VaR) was es2.5 million or less during the first six months of 2009, below the company's VaR limit of es5.0 million. Counterparty risk for energy-uading transactions is concentrated in '8B' territory but is very small. Energy trading represents less than 3% of the company's total revenues. Our adjusted ratios reflect significant post retirement benefit obligations, operating leases and securitization. We adjusted debt est.7 billion compared with reported debt of CS3.8 billion (see table 6). The impact is significant on leverage, which on an adjusted basis is 47% debt to total capital compared with 36% on a reported basis. The above figures are based Qn Dec. 31, 2008 fiscal year-end. Standard & Poor's RatingsDirect I October 16, SUwl(lald &1'00"', All rights r~e-rved. No lelllint 01 diuenmatio/l withoot S&P's permission, See Tenm of lise/diwaimer on tl1e lait page.

30 Tillble 6 Filed: Olltario Power Generation Inc. Attachment 2 Reconciliation Of Ontario Power Generation Inc. Reported Amounts With Standard & Poor's Adjusted Amounts (Mil. CSj* Fiscel yeillr ended Dec. 31, 2008 Ontario Power Operating Operating Operating Generation Inc. income income income Cash flow Cash flow reported Shareholders' (before (before lafter Interest from ".m Capital amounts Debt equity D&AI D&AI D&Al expense operations operations expenditures Reported Standard & Poor's adjustments Trade receivables NIA NtA NtA NIA 15.0 NIA NIA NIA.. sold or $llctj"itized Operating leases NIA Postretirement (617.1) '.7,.7 NIA benefit obligations Capitalized NIA NtA NIA NtA NIA interest Reclassification NIA NIA NtA NtA 13.0 NIA NIA NIA NIA of nonoperating inrome lexpensesl Reclassification NIA NIA NtA NIA NIA NIA NIA NIA.f working capital cash flow changes Total (617.1) Jl (109.7) 7.9 adjustments Operating Standard & income Cash flow Poor's adjusted (before Interest from Funds from Capital amounts Debt Equity D&AI EBITDA EBIT expense operations opelations expenditures Adjusted 'Ontario Powcr Generation Inc. reported amounts shown are taken from the wmpany's financial StatementS but mig~l include adjustments made bydata providers or reclassifications made by Standard &Poar'S analysts. Please note that two reported amounts (operating income before DSA and cash flow from operationsl are used to derive more than one Standard & Poor's adjusted amount (operating income befare D&A and EBITDA. and cash flow flam operations and funds from operations. respectively). Consequentlv. the first section in some tables may feature duplicate descriptions and amounts, D80A Depreciation and amortilation. N/A--N01 applicable, Weather, hydrology, and nuclear performance i.nfluence profitability The profitability of OPC's regulated segment relies on favorable hydrology and the company's ability to maximize its targeted nuclear production without exceeding forecast operating costs on the downside. Constraining profitability are regulated prices that allow a modest return for such a high risk and capital intensive business. Profitability of OPC's unregulated merchant segment is a function of weather and the economy (that affect electricity demand and price), available hydrology and asset performance. This segment was constrained by a government-imposed revenue cap in effect until May 1,2009. The company's earnings were constrained to an avl':ragl': C$48 per MWh on 85% of unregulated generation output from Jan.l ApriI30. The negative impact of the rl':venue cap on the generator's nonregulated earnings was limited given very low electricity market prices and excess baseload generation in off peak hours SlM'danl6 f'l:io(s AI rights.estmd, NIl ~ or dissel'llntjan wiihout WS per1iiissiorl Sa T_crll.lseJtlndi,... an... list pigli.

31 Ontario Power CeneratiOlI Illc. Attachment 2 Cash low strength As a result of favorable unregulated prices and very good hydrology in 2008, OPG's adjusted FFO (AFFO) imerest coverage as of Dec 31, 2008, was 3.4x, with AFFO-to-total debt at 13.8%. We expect the company to target this cash flow strength on average to maintain the stand-alone 'BBB' credit profile. The company's cash-flow strength has historically been weaker and variable. Before 2008, AFFO imerest coverage generally hovered near 2x, with AFFO-to-total-debt at less than 10% given a government imposed price cap on 85% of OPe's unregulated production and no rate increase for its now regulated output since Low spot prices, new regulated rates implemented in 2009 (see Regulation section) and the removal of the unregulated revenue cap underpin our expectations for We believe OPC should be able to achieve AFFO interest coverage of about 3x and AFFO-to-total debt better than 10%, a bit below our target for maintaining the 'BBB' stand-alone credit profile. In 2010, we expect a further softening in cash flow metries to below target. OPG is collecting about C$2 per MWh on regulated hydro and C$3 per MWh on regulated nuclear production in 2009 that will not apply in These rate riders should provide about C$300 million in revenue based on 2008 production levels. Furthermore, the. company will not apply for a regulated rate increase until 2010, with rates effective in Dim prospects of recovering long-term cash flow strength at or above target in 2011 (due to sustained low prices forecast for 2011, poor asset perfonnance, or a poor regulatory outcome for 201 t) could negatively affect OPG's stand-alone credit profile and the ratings. The recovery of unregulated electricity prices would decrease the risk of OPG falling shaft of target in A five-year contingency agreement with the OEFC to support OPG's coal-fired operations as they wind down should help avert further deterioration in cash flow credit metrics_ Liquidity and liability management We believe total debt outstanding could increase as much as SO% in the next five years, given the number of proposed projects. We also expect that the OEFC will continue to provide financing for the construction of shareholder-directed projects, if required. OPG has an agreement with the OEFC to finance the Niagara Tunnel project for up to C$l billion. The company is negotiating a larger facility to accommodate the revised cost estimate of C$1.6 billion. Funding is available in the form of lo-year notes. Advances made on the facility totaled C$405 million as ofjune 30, The OEFC has also provided an additional C$4S0 million in financing for Port lands Energy Centre and the Lac Seul hydroelectric project. Approximately C$2.1 billion of its C$2.9 billion total long-term debt obligations must be repaid or refinanced within the next five years, with C$970 million or about a quarter, maturing in Nevertheless, refinancing risk is not a concern, given OPG's relationship with its shareholder. All of OPG's debt is in the form of notes payable to its shareholder, who has consistently refinanced the company's debt outstanding at maturity in each of the past several years. Until 2006, the average tenor of the notes issued to the province was five years. Notes refinanced with the shareholder since then have 10-year maturities. We expect that OPG will eventually improve its maturity profile and align it with asset life by issuing longer tenor notes in the public capital market. We do not expect the OEFC to issue notes to the generator with more than a IO-year tenor. Almost all of the company's\debt is at fixed rates in Canadian currency, thus limiting interest rate and foreign Standard & Poor's RatingsDirect I October 16, Standard & Poof'l. All lights rese<wd. No leplim or d,nem'l'ill1icll'l WlthatJI S&P's permission, See Telms of USeJl)iiClaimer 00 the last liagil.

32 Attachment 2 Ontario Power GeneratiOll InG. exchange exposure rdated ro debt financing. The generator mitigates forward interest rate risk related to new financing through swap agreements. OPC must, by law, contribute cash annually to funds set aside to cover the cost of nudear used- fuel management, decommissioning and management of other nuclear waste. We expect contributions to these funds will be recognized by the DEB as a prudent cost of operations and should lx: recovered through rates. Furthermore, the province guarantees an inflation protected rate of rcrurn on a portion of these liabilities (the used fuel fund) for the first 2.23 million fuel bundles used. As of 2008, OPC provides ~gmented results for nuclear waste management. The bulk of OPC's staff works in the regulated nuclear division, so we expect that the hulk of pension costs will be recovered through regulated rates. Based on the latest actuarial valuation (Jan. 1,2008) OPC had an unfunded pension liability of C$239 million and a deficiency (on a windup basis) of C$2.8 billion. Financial flexibility The keystone to OPG's average financial flexibility is its supportive owner, with deep pockets and demonstrated record of support. The shareholdet's previous willingness to defer significant debt maturities, and curtent willingness to forgo dividend payments supports our view. We believe the owner would also support the company's short-term liquidity, if only by allowing the deferral of various payments OPG makes to the province. Based on past experience, access to additional debt financing from the company's owner is likely, should it be required. Further, but less timely, flexibility comes from the regulatory framework that includes an ability to recoup unexpected costs if approved by the regulator. Financial flexibility is somewhat restricted given limited discretionary capital spending once new projects arc committed. There is no indication of additional equity injections forthcoming from the shareholder, and there arc likely political constraints on the sale of assets. Table 7 Ontario Power Generation Inc.--Peer Comparisonwww.standardandpoors.comJralingsdirect 15 Slill'ld d 80 1'00<'1. All rights resemjd No reprim (II dinemnauoo IYitl-out SlIP's permission. ~ TetrJl5 01 USelO'sclilimer on!hi! lasl plj!jl!.

33 Table 7 Ontario Power Generation InC. -Peer Comparison (cont.) FFQ interest coverage {xl 22 FFO/debt 1%1 58 Oiscretionary cash flow/debt (%1 (2.9) Net cash flow/capell (%) 43.5 Total debvdebt plus equity (%) Relul"n on common equity 1%1 Common dividend payout ralio (unadjusted; % ot \ 'Fully adjusted (intluding postretirement obligations). 1Eltess cash and investments nened against debt Table 8 Ontario Power Generalion Inc.--Financial Summary Filed: Attachment { Ontario Power Generation fllc ( (5.4) Ratings Detail (As Of October r Ontario Power Generation Inc. Corporate Credit Rating Commercial Paper Canadian National Scale Comml1fcial Paper Rating Corporale Credit Ratings History 13-Aug Sep 2005 A!Statje!- A l(low) A /Stable/ BBB-t/Positive/ - Standard & Poor's RalingsDirecl I October

34 Ratings Detail las Of October 16, 2009)"(cont) ll6-1wg.1oo4 Businau Risk Profile Financial Risk Profile Filed: Attachment 2 B8B+JI)eveloping!- s." Significant Omario Power GetleratiOlI Illc. Oebt Maturities ZOO9 C$J57 mil. 2010CS978 mil C$38J mil C$409 mil and thereafter: CS1,713 mil, k. of Dec. 31, Related Enlilies Hydro One Inc, Issuer Credil Raling Commercial Paper locaf CU{ffHlCY ~~~~ti~/~k~m~~~&~ SeniOl' Unsecured 11Blssuesl On1ario (Province of) Issuer Credit Raling Commercial Paper Canadian Narional Scale CtxrvnetciaJ Paper RatJfJg Senior Unsecuffid 1162 Issues) UMH Energy Partnership Senior Secured {1 ISSlJe} A+!Slable/A-l.. A ' A-I{MIOI AA/Negative/A-1+ A-1+ A-llHIGH) AA A,lSlable 'Unless othefwise ooted. au latings in this lejlofl Me global scale latiogs. Standard & Poor's ae6i1 ratings on!he global scale are collliarable atl'q$s Cl»ltries. SlaMard & Poor's uellit ratings on a fliilional scale are relalne 10 obli1p's or obligations within lhal specific country_ Sl4I\dard & Pool',. All 'IghU,...lMVed. No lep-;nt O! dineminarion withoot Sgp's permissl(lll See Tell'lll of USe;1)isdairner on the last page. 17

35 Attachment 2 Cov/ri!t1t l1:l ZllJ9 by Sl lliard & Poas Fni!ncial semces ltc 1S&P\. a SlDsidiMfol The MtGriIW-H~1 ~nies.1nc. AI rig.'lts resefw:d. No pan 01 this information ITIIY be repn:o.lc;ed DrdiSlJibuted III any form Dr by arly means. or stored in a liata!lase ~ retriewl system. witiwi ~ prior written pemi:ssion of S&P. S&P. iu aff~iates. td/~ IheIf ltiirdparty ~lpo'iders t\aye exdusiye ~oprietary rights in th:! information. including fatings. treditr2lated analyses and data, provided herein. This information shall IlOl be used lor iiii'f lililawiui or unauthofiled IUJIOSeS. Neither S&P. nor its affiliates. nor lheiflhird-p;flv proyidefs guarantee ~ accuracy. completeness. limei~ or imilabl~ty of in( information. S&P. rls affiliates or theil third-party providers and!heir directors. officers. silal'ehoiders. tll1iloyees or agenls are not lesponsible for aj"fy" erjois or omissiorls. rl!9ilrdless 0I1tIe cause.or lor tile fesulls obtained from tile use 01 such information. S&P. ITS AfAlIATES AND TliEiR TliIRD PARTY F'flOVIDHIS OISQ.AlM ANY AND AU EXPfIESS DR IMPLIED WARRANTlES.INnUDING.llUT NOT LIMITED TO. ANY WARRANTIES OF MERCHANTABIlITY OR FITNESS FOR APARTlCll.AR PURPOSE OR USE. In no event shalt S8oP. ils affiliates or their third-party providers and theil' directors. oificers. shareholders. employees or agents be liable to any party for any direct. indirect. incidemal.exemplary. compensatory. punitive. special or wnsequential damages. costs. expenses. legal fees. or losses (including. without limitalion.lost incl)itle or 10Sl profits and opportunily costsl in connection with any use 01 the information contained herein even if advised of the possibility of such damages. The ratings arod credihelated analyses of S&P arod its ahiliates and the obsefvations contained herein are statements of opinion as of the date they are expressed and not statements of fact or retornmenclations to purchase. hold. or sell any securities or make any investmerlt decisions. S&P assumes no obligation to update any imjlfmation following public<ltion. Users 01 the inlormation tojitained herein should not re/yon any 01 II in Il\1Iking any investment decision. S&P's opinions and analyses do /lilt address the suitabilily 01 i'n'f security. S&P does /lilt act <ls a lidociary or an investment advisor. \\'?lila S&P has obtained information lmm SDl.J'teS il believes to be reuable. S&P does nul perform M audit ancil.i'ldertates no duly of due ciiligence or independent verification 01 any informatillll it fec:eiyes. S&P keeps eenain activities 01 its business Lnits separate from eadl othef liorljer to presenoe the i1ldepefidera arlcl objectivity 01 8adl 01 these aetiyities. A$ a result. celtain busifflss lriu 01 S&P may have information that is IlllI available to 0!heJ' S&P IlIsiness Lnits. S&P has established policies arlcl pllla!cbes to maintain the confidentiality 01 certain non-p.lblit information lecened... COMedion will1 each ana/yttcal process. S&f"s Ratings Services lminess may receive ~ion for its ratings and credihelated analyses. normally from JSSUefS or uooer'milen of seomities or fromobllqof$. S&P resenes the light to dlssemlrlilte its opinions arlcl analyses. S&P's public liltings and analyses are made available 011 its Web sites. chaiyel and WWoN. latingsdrrect.com lsubstriptionl. and may be distribuled through other rreans. including via S&P IXJblications and ll1illj.pany fedistrilxltors. Additional information about our ratings fees is available at WWoN.standarllandpoor5.comJusratingslees. Any PaSSWQrdsJuser los issu&d by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwqrds/user los and no simullaneous access via the same passwurd/user fd is permitted. To reprint. translate. or use the data or infotmation other than as provided herein. contact Client Services. 55 Water Street. New York. NY 10041; (1) I)f by e--mail to: research.jequest@standardandpoors,com. Cor i9ht 1tl1994 ZllJ9 by Standilfd & Poors Financial5ervices ltc. a suljsidiilry 01 The McGraw Hill Companies, Inc. All Rights Reserwd. ~ McGraw Hill Conrpnn: Standard & Poor's RatingsDirect I October 15,

36 Attachment 3 Summary: Ontario Power Generation Inc. Primary Credit Analyst: Greg Pau, Toronto (1) ; greg-pau@standardandpoors.com Secondary Credit Analyst: Faye Lee, Toronto (1) ; fayejee@standardandpoors.com Table Of Contents Rationale Outlook Related Research 1