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Fortis Reports Second Quarter Earnings of $29 Million

August 8, 2008

Fortis Inc. (“Fortis” or the “Corporation”) (TSX: FTS) recorded second quarter net earnings applicable to common shares of $29 million, or $0.19 per common share, compared to earnings of $41 million, or $0.31 per common share, for the second quarter of 2007. Year-to-date earnings applicable to common shares were $120 million, or $0.77 per common share, compared to earnings of $83 million, or $0.69 per common share, for the same period last year. Terasen was acquired on May 17, 2007 and, consequently, the Corporation’s financial results for the prior period last year reflected earnings’ contribution from Terasen for a partial second quarter.

Second quarter results included a $13 million, or $0.08 per common share, charge representing the Corporation’s approximate 70 per cent share of disallowed previously incurred fuel and purchased power costs at Belize Electricity. The charge was the result of the decision by the Public Utilities Commission of Belize on Belize Electricity’s 2008/2009 rate application. Belize Electricity filed an application for judicial review and appeal of the decision with the Supreme Court of Belize on July 25, 2008. At the end of the second quarter, Belize Electricity’s assets represented approximately 2 per cent of the total assets of Fortis.

Second quarter results also included a one-time charge of approximately $2 million at FortisOntario associated with the repayment of interconnection agreement amounts received in the fourth quarter of 2007.

Excluding the one-time items at Belize Electricity and FortisOntario, earnings for the second quarter were $44 million, or $0.28 per common share, compared to $41 million, or $0.31 per common share, for the same quarter last year. Earnings were favourably impacted by a full quarter of earnings’ contribution from the Terasen Gas companies, higher earnings at Newfoundland Power associated with a shift in the quarterly distribution of annual purchased power expense, increased non-regulated hydroelectric production and improved performance at Fortis Properties. Partially offsetting these items were lower earnings at FortisAlberta associated with higher corporate income taxes, and higher corporate financing costs associated with the Terasen acquisition.

“The Terasen Gas companies have contributed earnings of $120 million since acquisition almost 15 months ago and are now substantially integrated into the Fortis Group of Companies,” says Stan Marshall, President and Chief Executive Officer, Fortis.

The Terasen Gas companies contributed earnings of $12 million for the second quarter, up $11 million from the same quarter last year; however, contributions last year were from May 17, 2007, the date of acquisition. On a full quarter-over-quarter basis, earnings of the Terasen Gas companies were comparable. In August 2008, Terasen settled certain historical corporate tax matters and, as a result, is expected to record an earnings’ benefit of approximately $7.5 million in the third quarter of 2008.

Excluding the one-time item at FortisOntario, Canadian Regulated Electric Utilities’ earnings were $28 million for the second quarter compared to $33 million for the same quarter last year. The decrease in earnings was mainly due to a $7.5 million increase in future income tax expense at FortisAlberta associated with regulator-approved deferral accounts and the timing of their collection. FortisAlberta is expected to record a future income tax recovery when the deferral accounts are collected. Partially offsetting the above decrease was the favourable impact of a shift in the quarterly distribution of annual purchased power expense at Newfoundland Power, which increased earnings during the second quarter of 2008 by approximately $2.5 million. Newfoundland Power’s annual earnings are not expected to be impacted by the shift in quarterly earnings’ distribution; however, earnings are expected to be lower in the first and fourth quarters and higher in the second and third quarters compared to the same periods last year.

Excluding the one-time item at Belize Electricity, Caribbean Regulated Electric Utilities’ earnings were $8 million for the second quarter, comparable to earnings for the same quarter last year. The favourable impact of electricity sales growth and a change in the method of calculating fuel costs under Caribbean Utilities’ new transmission and distribution licence was largely offset by higher operating expenses, increased amortization costs, and the 3.25 per cent reduction in basic electricity rates at Caribbean Utilities, effective January 1, 2008. Commencing June 1, 2009, Caribbean Utilities will be permitted to adjust basic electricity rates with a formula tied to inflation.

Year to date, Fortis and its utilities have raised almost $900 million in preferred equity and 30-year debt including the issuance of $230 million 5.25% First Preference Shares at Fortis Inc., $250 million 5.80% debentures at Terasen Gas Inc., $250 million 6.05% debentures at Terasen Gas (Vancouver Island) Inc., $100 million 5.85% debentures at FortisAlberta and $60 million 6.05% bonds at Maritime Electric.

In June 2008, Caribbean Utilities announced a rights offering to shareholders of record on July 14, 2008. The estimated net proceeds of approximately US$28 million will be used to repay credit facility borrowings and to finance capital expenditures. The rights offering closes on August 15, 2008.

Non-Regulated Fortis Generation contributed earnings of $7 million for the second quarter, up $2 million from the same quarter last year. Results reflected increased hydroelectric production in central Newfoundland due to higher rainfall.

Fortis Properties contributed earnings of $7 million for the second quarter, up $1 million from the same quarter in 2007. The increase reflected contributions from the Delta Regina in Saskatchewan, acquired on August 1, 2007, and improved performance at the Company’s hospitality operations in Atlantic Canada.

Corporate and other expenses were $18 million for the second quarter compared to $12 million for the same quarter last year. The increase in corporate and other expenses was primarily driven by a full quarter of Terasen acquisition-related finance charges compared to a partial quarter last year.

Cash flow from operating activities was $244 million in the second quarter of 2008, up from $68 million in the same quarter last year. Cash flow from operating activities was $432 million year to date, up from $162 million in the same period last year. The improvement reflected seasonality of operations of the Terasen Gas companies and their contribution for all of the second quarter and year-to-date period in 2008 compared to a partial second quarter last year.

Consolidated capital expenditures, before customer contributions, were $389 million in the first half of 2008 and are expected to exceed $900 million for the year. Much of the consolidated capital program is being driven by the Terasen Gas companies, FortisAlberta, FortisBC, and regulated and non-regulated electric utility operations in the Caribbean. During the quarter, Terasen Gas (Vancouver Island) Inc. commenced construction of its $200 million liquefied natural gas storage facility.

“Fortis is a leading energy infrastructure builder in Canada. The Corporation’s consolidated capital expenditure program is expected to exceed $4.5 billion over the next five years which should drive earnings growth going forward,” concludes Mr. Marshall.

                Interim Management Discussion and Analysis              For the three and six months ended June 30, 2008                      Dated August 8, 2008 

The following analysis should be read in conjunction with the Fortis Inc. (“Fortis” or the “Corporation”) interim unaudited consolidated financial statements and notes thereto for the three and six months ended June 30, 2008 and the Management Discussion and Analysis (“MD&A”) and audited consolidated financial statements for the year ended December 31, 2007 included in the Corporation’s 2007 Annual Report. This material has been prepared in accordance with National Instrument 51-102 – Continuous Disclosure Obligations relating to MD&As. Financial information in this release has been prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) and is presented in Canadian dollars unless otherwise specified.

Fortis includes forward-looking information in the MD&A within the meaning of applicable securities laws in Canada (“forward-looking information”). The purpose of the forward-looking information is to provide management’s expectations regarding the Corporation’s future growth, results of operations, performance, business prospects and opportunities and may not be appropriate for other purposes. All forward-looking information is given pursuant to the “safe harbour” provisions of applicable Canadian securities legislation. The words “anticipates”, “believes”, “could”, “estimates”, “expects”, “forecasts”, “intends”, “may”, “might”, “plans”, “projects”, “schedule”, “should”, “will”, “would” and similar expressions are often intended to identify forward-looking information, although not all forward-looking information contains these identifying words. The forward-looking information reflects management’s current beliefs and is based on information currently available to the Corporation’s management. The forward-looking information in the MD&A includes, but is not limited to, statements regarding: that cash required to complete the consolidated capital expenditure program and to finance acquisitions is expected to be derived from a combination of borrowings under credit facilities and the issuance of common shares, preference shares and long-term debt; the belief of the Corporation and its subsidiaries that they do not anticipate any difficulties in accessing required capital on reasonable market terms; the Corporation’s consolidated forecasted gross capital expenditures for 2008 and in total over the next five years and the Corporation’s belief that its capital program should drive growth in earnings. The forecasts and projections that make up the forward-looking information are based on assumptions which include, but are not limited to: the receipt of applicable regulatory approvals and requested rate orders; no significant operational disruptions or environmental liability due to a catastrophic event or environmental upset caused by severe weather, other acts of nature or other major events; the Corporation’s ability to maintain its gas and electricity systems to ensure their continued performance; the competitiveness of natural gas pricing when compared with electricity and other alternative sources of energy; the availability of natural gas supply; favourable economic conditions; the level of interest rates; the ability to hedge certain risks; access to capital; maintenance of adequate insurance coverage; the ability to obtain licences and permits; the level of energy prices; retention of existing service areas; favourable labour relations; and sufficient human resources to deliver service and execute the capital program. The forward-looking information is subject to risks, uncertainties and other factors that could cause actual results to differ materially from historical results or results anticipated by the forward-looking information. The factors which could cause results or events to differ from current expectations include, but are not limited to: regulation; operating and maintenance risks; natural gas prices and supply; economic conditions; weather and seasonality; interest rates; changes in tax legislation; derivative financial instruments and hedging; risks related to Terasen Gas (Vancouver Island) Inc.; capital resources; environment; insurance; licences and permits; energy prices and the cessation of the Niagara Exchange Agreement; loss of service area; First Nations Lands; counterparty risk; labour relations; human resources; and liquidity risk. For additional information with respect to the Corporation’s risk factors, reference should be made to the Corporation’s continuous disclosure materials filed from time to time with Canadian securities regulatory authorities and to the heading “Business Risk Management” in the MD&A for the three and six months ended June 30, 2008 and for the year ended December 31, 2007.

All forward-looking information in the MD&A is qualified in its entirety by the above cautionary statements and, except as required by law, the Corporation undertakes no obligation to revise or update any forward-looking information as a result of new information, future events or otherwise after the date hereof.

COMPANY OVERVIEW AND FINANCIAL HIGHLIGHTS

Fortis is the largest investor-owned distribution utility in Canada serving almost 2,000,000 gas and electricity customers. Its regulated holdings include a natural gas utility in British Columbia and electric utilities in five Canadian provinces and three Caribbean countries. Fortis owns non-regulated generation assets across Canada and in Belize and Upper New York State, and hotels and commercial real estate in Canada. In 2007, the Corporation’s electricity distribution systems met a combined peak electricity demand of approximately 5,700 megawatts (“MW”) and its gas distribution systems met a peak day demand of 1,360 terajoules (“TJ”). For additional information on the Corporation’s business segments, refer to Note 1 to the Corporation’s interim unaudited consolidated financial statements for the three and six months ended June 30, 2008.

The key goals of the Corporation’s regulated utilities are to operate sound gas and electricity distribution systems, deliver gas and electricity safely and reliably to customers at reasonable rates, and conduct business in an environmentally responsible manner. The Corporation’s core utility business is highly regulated. It is segmented by franchise area and, depending on regulatory requirements, by the nature of the assets.

Fortis has adopted a strategy of profitable growth with earnings per common share as the primary measure of performance. Key financial highlights, including earnings by reportable segment, for the second quarter and year-to-date periods ended June 30, 2008 and June 30, 2007, are provided in the table below.

 ----------------------------------------------------------------------- ---                      Financial Highlights (Unaudited)                          Periods Ended June 30 --------------------------------------------------------------------------                                       Quarter                 Year-to-date -------------------------------------------------------------------------- ($ millions, except  earnings per  common share and  common shares  outstanding)        2008     2007   Variance     2008     2007   Variance -------------------------------------------------------------------------- Revenue               848      566        282    1,994    1,049        945 -------------------------------------------------------------------------- Cash flow from  operating  activities           244       68        176      432      162        270 -------------------------------------------------------------------------- Net earnings  applicable to  common shares         29       41        (12)     120       83         37 -------------------------------------------------------------------------- Basic earnings per  common share ($)    0.19     0.31      (0.12)    0.77     0.69       0.08 -------------------------------------------------------------------------- Diluted earnings per  common share ($)    0.18     0.27      (0.09)    0.75     0.61       0.14 -------------------------------------------------------------------------- Weighted average  number of common  shares outstanding  (millions)         157.0    131.1       25.9    156.8    120.2       36.6 --------------------------------------------------------------------------                                            Segmented Net Earnings --------------------------------------------------------------------------                                       Quarter                 Year-to-date --------------------------------------------------------------------------                      2008     2007   Variance     2008     2007   Variance -------------------------------------------------------------------------- Regulated Gas  Utilities -  Canadian   Terasen Gas    Companies (1)       12        1         11       70        1         69 -------------------------------------------------------------------------- Regulated Electric  Utilities -  Canadian --------------------------------------------------------------------------   FortisAlberta         7       15         (8)      18       27         (9) --------------------------------------------------------------------------   FortisBC (2)          7        6          1       19       18          1 --------------------------------------------------------------------------   Newfoundland Power   10        8          2       16       19         (3) --------------------------------------------------------------------------   Other Canadian (3)    2        4         (2)       6        8         (2) --------------------------------------------------------------------------                        26       33         (7)      59       72        (13) -------------------------------------------------------------------------- Regulated Electric  Utilities -  Caribbean (4)         (5)       8        (13)       2       12        (10) -------------------------------------------------------------------------- Non-Regulated -  Fortis Generation (5)  7        5          2       13       12          1 -------------------------------------------------------------------------- Non-Regulated -  Fortis Properties (6)  7        6          1       10        8          2 -------------------------------------------------------------------------- Corporate and  other (7)            (18)     (12)        (6)     (34)     (22)       (12) -------------------------------------------------------------------------- Net Earnings  Applicable to  Common Shares         29       41        (12)     120       83         37 -------------------------------------------------------------------------- (1) Comprised of Terasen Gas Inc. ("TGI"), Terasen Gas (Vancouver Island)     Inc. ("TGVI") and Terasen Gas (Whistler) Inc. ("TGWI").  Financial      results are reported from May 17, 2007, the date of acquisition. (2) Includes the regulated operations of FortisBC Inc. and operating,      maintenance and management services related to the Waneta, Brilliant      and Arrow Lakes hydroelectric generating plants and the distribution      system owned by the City of Kelowna.  Excludes the non-regulated      generation operations of FortisBC Inc.'s wholly owned partnership,      Walden Power Partnership. (3) Includes Maritime Electric and FortisOntario.  FortisOntario includes      Canadian Niagara Power and Cornwall Electric. (4) Includes Belize Electricity, in which Fortis holds an approximate 70      per cent controlling interest; Caribbean Utilities on Grand Cayman,      Cayman Islands, in which Fortis holds an approximate 54 per cent      controlling interest; and wholly owned Fortis Turks and Caicos.       Caribbean Utilities has an April 30 fiscal year end; therefore,      Caribbean Utilities' financial statements are consolidated in the      financial statements of Fortis on a two-month lag basis. (5) Includes the operations of non-regulated generation assets in Belize,     Ontario, central Newfoundland, British Columbia and Upper New York      State, with a combined generating capacity of 195 MW, mainly      hydroelectric. (6) Includes 19 hotels with more than 3,500 rooms in eight Canadian      provinces and approximately 2.8 million square feet of commercial real      estate primarily in Atlantic Canada. (7) Includes Fortis net corporate expenses and, from May 17, 2007, the net      expenses of non-regulated Terasen Inc. ("Terasen") corporate-related      activities and the financial results of Terasen's 30 per cent ownership     interest in CustomerWorks Limited Partnership ("CWLP") and of Terasen's     non-regulated wholly owned subsidiary Terasen Energy Services Inc.     ("TES"). -------------------------------------------------------------------------- SEGMENTED RESULTS OF OPERATIONS REGULATED GAS UTILITIES - CANADIAN Terasen Gas Companies --------------------------------------------------------------------------                         Terasen Gas Companies (1)                      Financial Highlights (Unaudited)                         Periods Ended June 30 --------------------------------------------------------------------------                                       Quarter                 Year-to-date --------------------------------------------------------------------------                      2008     2007   Variance     2008     2007   Variance -------------------------------------------------------------------------- Gas Volumes (TJ)   45,324   17,744     27,580  123,508   17,744    105,764 -------------------------------------------------------------------------- ($ millions) -------------------------------------------------------------------------- Revenue               390      130        260    1,025      130        895 -------------------------------------------------------------------------- Energy Supply Costs   256       73        183      693       73        620 -------------------------------------------------------------------------- Operating Expenses     62       28         34      123       28         95 -------------------------------------------------------------------------- Amortization           25       12         13       49       12         37 -------------------------------------------------------------------------- Finance Charges        30       15         15       63       15         48 -------------------------------------------------------------------------- Corporate Taxes         5        1          4       27        1         26 -------------------------------------------------------------------------- Earnings               12        1         11       70        1         69 -------------------------------------------------------------------------- (1) Financial results are reported from May 17, 2007, the date of      acquisition. -------------------------------------------------------------------------- 

On May 17, 2007, Fortis acquired all of the issued and outstanding common shares of Terasen. Terasen owns and operates a gas distribution business carried on by TGI, TGVI and TGWI, collectively referred to as the Terasen Gas companies, and is the principal distributor of natural gas in British Columbia.

Gas volumes: Gas volumes at the Terasen Gas companies were 45,324 TJ during the second quarter of 2008, up 846 TJ, or 1.9 per cent, from 44,478 TJ reported by the Terasen Gas companies for the full quarter last year. Gas volumes year to date were 123,508 TJ, up 3,080 TJ, or 2.6 per cent, from 120,428 TJ reported by the Terasen Gas companies for the full year-to-date period last year. The increases were driven by higher consumption due to cooler weather compared to the same periods last year.

Changes in consumption levels and energy supply costs from those forecasted to set gas distribution rates, do not materially impact earnings as a result of the operation of British Columbia Utilities Commission (“BCUC”)-approved regulatory deferral mechanisms.

During the second quarter of 2008, net customer additions at TGI and TGVI totalled 845, bringing the total customer count to approximately 921,970 at June 30, 2008. Year-to-date 2008, net customer additions totalled 3,339, lower than net customer additions of 4,199 during the same period last year but in line with expectations. Favourable economic conditions and housing activity in British Columbia continue to positively impact customer growth in the region.

Revenue: The Terasen Gas companies contributed a full quarter and half year of revenue of approximately $390 million and $1.0 billion, respectively, compared to revenue of $130 million for a partial second quarter last year. Factors favourably impacting revenue during the second quarter and year-to-date period of 2008 included: (i) increased customer consumption due to cooler weather; (ii) higher gas commodity costs charged to customers; and (iii) an increase in gas distribution rates, effective January 1, 2008, associated with an increase in the 2008 allowed rates of return on common shareholders’ equity (“ROE”) for TGI and TGVI to 8.62 per cent and 9.32 per cent, respectively, from 8.37 per cent and 9.07 per cent, respectively.

Earnings: The Terasen Gas companies contributed a full quarter and half year of earnings of $12 million and $70 million, respectively, compared to earnings of $1 million for a partial second quarter last year. Seasonality materially impacts the earnings of the Terasen Gas companies as a major portion of the gas distributed is used for space heating. Virtually all of the annual earnings of the Terasen Gas companies occur in the first and fourth quarters. The significant factors favourably impacting earnings during the second quarter and year-to-date period of 2008 included the increase in the allowed ROEs, effective January 1, 2008, and lower effective corporate taxes, partially offset by increased amortization costs associated with continued investment in capital assets, and higher finance charges reflective of higher borrowing rates and increased credit facility borrowings.

For a discussion of the nature of regulation and material regulatory decisions and applications pertaining to the Terasen Gas companies, refer to “Regulatory Highlights”.

 REGULATED ELECTRIC UTILITIES - CANADIAN FortisAlberta --------------------------------------------------------------------------                               FortisAlberta                     Financial Highlights (Unaudited)                            Periods Ended June 30 --------------------------------------------------------------------------                                       Quarter                 Year-to-date --------------------------------------------------------------------------                      2008     2007   Variance     2008     2007   Variance -------------------------------------------------------------------------- Energy Deliveries  (GWh)              3,768    3,650        118    7,906    7,595        311 -------------------------------------------------------------------------- ($ millions) -------------------------------------------------------------------------- Revenue                75       68          7      148      132         16 -------------------------------------------------------------------------- Operating Expenses     32       30          2       65       59          6 -------------------------------------------------------------------------- Amortization           21       19          2       41       37          4 -------------------------------------------------------------------------- Finance Charges        11        9          2       20       18          2 -------------------------------------------------------------------------- Corporate Tax  Expense (Recovery)     4       (5)         9        4       (9)        13 -------------------------------------------------------------------------- Earnings                7       15         (8)      18       27         (9) -------------------------------------------------------------------------- 

Energy Deliveries: Energy deliveries at FortisAlberta increased 118 gigawatt hours (“GWh”), or 3.2 per cent, quarter over quarter and increased 311 GWh, or 4.1 per cent, year to date compared to the same period last year. The increases were due to increased energy demand attributable to customer growth. The number of customers at FortisAlberta increased by 5,500 to approximately 453,500 during the first half of 2008.

Revenue: Revenue was $7 million higher quarter over quarter and $16 million higher year to date compared to the same period last year. The increases were mainly due to customer growth; a 6.8 per cent increase in customer distribution rates, effective January 1, 2008; and the accrual of the impact for collection in future customer distribution rates of the increase in the 2008 allowed ROE to 8.75 per cent from 8.51 per cent, effective January 1, 2008.

Earnings: FortisAlberta’s earnings were $8 million lower quarter over quarter, driven by increased corporate taxes, primarily associated with the regulator-approved Alberta Electric System Operator (“AESO”) charges deferral account and the timing of its collection. Quarter over quarter, the impact of customer growth, the increase in customer distribution rates and a higher allowed ROE was partially offset by: (i) higher operating expenses due to increased contracted manpower costs, higher labour and employee-benefit costs associated with increased salaries and number of employees, partially offset by lower general operating expenses; (ii) increased amortization costs associated with continued investment in capital assets and higher amortization rates provided for in the 2008/2009 Negotiated Settlement Agreement (“NSA”); and (iii) increased finance charges due to higher debt levels in support of the Company’s significant capital expenditure program.

Earnings were $9 million lower year to date compared to the same period last year mainly as a result of increased corporate taxes for the reasons described above for the quarter. Additionally, the impact of (i) higher operating expenses due to increased contracted manpower costs, higher labour and employee-benefit costs associated with increased salaries and number of employees, and higher general operating expenses; and (ii) increased amortization costs and finance charges for the reasons described above for the quarter was more than offset by the impact of customer growth, the increase in customer distribution rates and a higher allowed ROE.

FortisAlberta collects from customers and records income taxes on the cash taxes payable method, as approved by its regulator, except for certain regulator-approved deferral accounts whereby income taxes are recorded on the liability method. FortisAlberta does not expect to incur any cash income taxes in 2008. For the second quarter and year-to-date period of 2008, the future corporate income tax expense of $4 million was primarily associated with an increase in the balance of deferred AESO charges. However, for the second quarter and year-to-date period of 2007, a recovery of future income tax expense of $3.5 million and $7 million, respectively, was recorded primarily due to a reduction in the balance of deferred AESO charges. FortisAlberta’s AESO charges deferral account captures variances between amounts charged by the AESO to FortisAlberta for transmission tariffs and amounts collected from FortisAlberta’s customers through the transmission tariff component of basic customer rates. Subject to regulatory approval, amounts charged by the AESO in excess of amounts collected from customers are deferred as a regulatory asset for future recovery from customers and amounts collected from customers in excess of amounts charged are deferred as a regulatory liability for future refund to customers. Generally, there is a two-year regulatory lag between the deferral of amounts in the AESO charges deferral account and when they are collected from, or refunded to, customers in rates. In 2007, the 2005 deferred AESO charges receivable balance was collected in customer rates. Additionally, FortisAlberta received regulatory approval to sell amounts in its annual AESO charges deferral account. In September 2007 and December 2007, the 2006 deferred AESO charges receivable balance of $28 million and approximately $37 million of the 2007 deferred AESO charges receivable balance, respectively, were sold to a Canadian chartered bank and, as a result, the proceeds were recognized in 2007. To date, FortisAlberta has not entered into any transaction to sell its 2008 deferred AESO charges receivable balance.

For a discussion of the nature of regulation and material regulatory decisions and applications pertaining to FortisAlberta, refer to “Regulatory Highlights”.

 FortisBC ----------------------------------------------------------------------- ---                                FortisBC                    Financial Highlights (Unaudited)                         Periods Ended June 30 --------------------------------------------------------------------------                                       Quarter                 Year-to-date --------------------------------------------------------------------------                      2008     2007   Variance     2008     2007   Variance -------------------------------------------------------------------------- Electricity Sales  (GWh)                673      670          3    1,548    1,549         (1) -------------------------------------------------------------------------- ($ millions) -------------------------------------------------------------------------- Revenue                53       52          1      119      115          4 -------------------------------------------------------------------------- Energy Supply Costs    12       13         (1)      33       33          - -------------------------------------------------------------------------- Operating Expenses     17       17          -       33       33          - -------------------------------------------------------------------------- Amortization            8        8          -       17       16          1 -------------------------------------------------------------------------- Finance Charges         7        6          1       14       12          2 -------------------------------------------------------------------------- Corporate Taxes         2        2          -        3        3          - -------------------------------------------------------------------------- Earnings                7        6          1       19       18          1 -------------------------------------------------------------------------- 

Electricity Sales: Electricity sales at FortisBC were comparable quarter over quarter and year to date compared to the same period last year. Electricity sales during the first half of 2008 were impacted by reduced industrial customer loads, as a result of a general slowdown in the forestry sector, largely offset by residential, general service and wholesale customer growth primarily in the Okanagan region.

Revenue: Revenue was $1 million higher quarter over quarter and $4 million higher year to date compared to the same period last year. Revenue increased mainly due to: (i) a 2.9 per cent increase in customer rates, effective January 1, 2008, which included the impact of an increase in the 2008 allowed ROE to 9.02 per cent from 8.77 per cent; and (ii) a 0.8 per cent increase in customer rates, effective May 1, 2008, as a result of the flow through to customers of increased purchased power costs from BC Hydro. The increase was partially offset by lower revenue contributions from non-regulated operating, maintenance and management services.

Earnings: FortisBC’s earnings were $1 million higher quarter over quarter. The impact of the 2.9 per cent increase in electricity rates and decreased energy supply costs, driven by lower average power purchase prices and the receipt of $0.6 million of insurance proceeds associated with a turbine generator failure in 2006, was partially offset by higher finance charges, reflective of the Company’s significant capital expenditure program.

Earnings were $1 million higher year to date compared to the same period last year. The impact of the 2.9 per cent increase in electricity rates was partially offset by higher amortization costs and finance charges reflective of the Company’s significant capital expenditure program.

Operating expenses were comparable quarter over quarter and year to date compared to the same period last year. The impact of the timing in 2008 of certain operating and maintenance projects combined with higher labour costs and general inflationary increases was largely offset by lower operating expenses associated with non-regulated operating maintenance and management services. Energy supply costs year to date were comparable to the same period last year. A higher proportion of energy generated from Company-owned hydroelectric generating plants versus power purchased period over period, combined with the receipt of insurance proceeds and lower electricity sales, were offset by higher average power purchase prices.

For a discussion of the nature of regulation and material regulatory decisions and applications pertaining to FortisBC, refer to “Regulatory Highlights”.

 Newfoundland Power --------------------------------------------------------------------------                            Newfoundland Power                    Financial Highlights (Unaudited)                           Periods Ended June 30 --------------------------------------------------------------------------                                       Quarter                 Year-to-date --------------------------------------------------------------------------                      2008     2007   Variance     2008     2007   Variance -------------------------------------------------------------------------- Electricity Sales  (GWh)              1,183    1,172         11    2,899    2,835         64 -------------------------------------------------------------------------- ($ millions) -------------------------------------------------------------------------- Revenue               120      115          5      284      269         15 -------------------------------------------------------------------------- Energy Supply Costs    70       74         (4)     192      180         12 -------------------------------------------------------------------------- Operating Expenses     13       13          -       27       27          - -------------------------------------------------------------------------- Amortization           12        9          3       22       19          3 -------------------------------------------------------------------------- Finance Charges         9        8          1       17       16          1 -------------------------------------------------------------------------- Corporate Taxes         6        3          3       10        8          2 -------------------------------------------------------------------------- Earnings               10        8          2       16       19         (3) -------------------------------------------------------------------------- 

Electricity Sales: Electricity sales at Newfoundland Power increased 11 GWh quarter over quarter, driven by customer growth, partially offset by lower average consumption. Electricity sales increased 64 GWh, or 2.3 per cent, year to date compared to the same period last year, largely due to the combined impact of customer growth and higher average consumption.

Revenue: Revenue was $5 million higher quarter over quarter and $15 million higher year to date compared to the same period last year. The increases were driven by electricity sales growth and an average increase in customer rates of 2.8 per cent, effective January 1, 2008, which included the impact of an increase in the 2008 allowed ROE to 8.95 per cent from 8.60 per cent. The increase in revenue also reflected higher amortization of regulatory liabilities in accordance with prescribed regulatory orders.

Earnings: Newfoundland Power’s earnings were $2 million higher quarter over quarter, reflecting a quarterly shift in the distribution of annual purchased power expense which increased earnings by approximately $2.5 million during the second quarter of 2008. Under the regulated rate structure, annual purchased power expense per kilowatt hour (“kWh”) is higher in the winter months and lower in the summer months. During 2007, Newfoundland Power estimated and recognized monthly purchased power expense based on forecast annual average cost per kWh. Differences between the estimated monthly purchased power expense and that based on the actual cost per kWh were adjusted to a regulatory reserve that was discontinued for use effective January 1, 2008. Monthly purchased power expense is now being recorded at actual cost per kWh. As a result of this change, earnings in 2008 are expected to be lower in the first and fourth quarters and higher in the second and third quarters compared to the same periods in 2007. Annual earnings will not be impacted by the shift in quarterly earnings.

Excluding the $2.5 million favourable shift in quarterly earnings, as described above, earnings were $7.5 million for the quarter, slightly lower than $8 million for the same quarter last year. Timing differences related to operating expenses and the rebasing of customer rates were partially offset by the 2.8 per cent increase in customer rates.

Newfoundland Power’s earnings were $3 million lower year to date compared to the same period last year, reflecting the quarterly shift in the distribution of annual purchased power expense which decreased year-to-date earnings by approximately $3.5 million. Excluding the $3.5 million unfavourable shift in earnings, year-to-date earnings were approximately $19.5 million, slightly higher than $19 million for the same period last year. The increase was mainly the result of the 2.8 per cent increase in customer rates along with related timing differences associated with the rebasing of customer rates, and increased electricity sales, partially offset by timing differences related to operating expenses. Amortization costs are allocated quarterly based on gross margin. Amortization costs have increased during 2008 reflecting the regulator-approved recovery of previously deferred amortization costs in customer rates, effective January 1, 2008. Higher effective corporate income tax rates quarter over quarter and year to date compared to the same period last year were driven by decreased deductions taken for tax purposes compared to accounting purposes.

For a discussion of the nature of regulation and material regulatory decisions and applications pertaining to Newfoundland Power, refer to “Regulatory Highlights”.

 Other Canadian Electric Utilities --------------------------------------------------------------------------                     Other Canadian Electric Utilities (1)                       Financial Highlights (Unaudited)                            Periods Ended June 30 --------------------------------------------------------------------------                                       Quarter                 Year-to-date --------------------------------------------------------------------------                      2008     2007   Variance     2008     2007   Variance -------------------------------------------------------------------------- Electricity Sales  (GWh)                508      516         (8)   1,107    1,118        (11) -------------------------------------------------------------------------- ($ millions) -------------------------------------------------------------------------- Revenue                61       65         (4)     131      135         (4) -------------------------------------------------------------------------- Energy Supply Costs    40       43         (3)      89       91         (2) -------------------------------------------------------------------------- Operating Expenses      7        7          -       14       14          - -------------------------------------------------------------------------- Amortization            5        4          1        9        8          1 -------------------------------------------------------------------------- Finance Charges         5        5          -        9        9          - -------------------------------------------------------------------------- Corporate Taxes         2        2          -        4        5         (1) -------------------------------------------------------------------------- Earnings                2        4         (2)       6        8         (2) -------------------------------------------------------------------------- (1) Includes Maritime Electric and FortisOntario -------------------------------------------------------------------------- 

Electricity Sales: Electricity sales at Other Canadian Electric Utilities decreased 8 GWh, or 1.6 per cent, quarter over quarter, and decreased 11 GWh, or 1.0 per cent, year to date compared to the same period last year, driven by lower average consumption, in part due to warmer-than-normal weather conditions, the impact of a temporary shutdown of operations of an industrial customer in Ontario and an unscheduled maintenance outage by a large customer at Maritime Electric.

Revenue: Revenue was $4 million lower quarter over quarter and year to date compared to the same period last year. Revenue decreased approximately $3 million associated with the repayment, during the second quarter of 2008, of a refund FortisOntario had received during the fourth quarter of 2007. In April 2008, the US Federal Energy Regulatory Commission (“FERC”) issued an order stating that the one-time refund of approximately $3 million ($2 million after-tax) received by FortisOntario in December 2007 from Niagara Mohawk Power Corporation (“NIMO”), associated with cross-border transmission interconnection agreements, should not have been originally ordered as FERC does not have jurisdiction over the interconnection agreements in question and, therefore, did not have jurisdiction to order the refund. In May 2008, FortisOntario repaid the refunded amounts to NIMO.

Revenue was also lower due to a decrease in customer rates at FortisOntario associated with the flow through to customers of lower energy supply costs in addition to lower electricity sales. The decrease was partially offset by the impact of an average 1.1 per cent increase in basic electricity distribution rates at FortisOntario, effective May 1, 2008, and a 1.8 per cent increase in basic electricity rates at Maritime Electric, effective April 1, 2008.

Earnings: Earnings were $2 million lower quarter over quarter and year to date compared to the same period last year. Excluding the one-time $2 million after-tax repayment by FortisOntario of the refund described above, earnings were comparable, reflecting stable operating conditions.

In August 2008, FortisOntario and Grimsby Power Inc. entered into a non-binding letter of intent for the acquisition by FortisOntario of a 10 per cent minority interest in Grimsby Power Inc.’s electricity distribution business for a cash payment of approximately $1.1 million plus the provision of services to migrate Grimsby Power Inc.’s customer information system to FortisOntario’s SAP-based system. Grimsby Power Inc. serves approximately 10,000 customers in a service territory that is in close proximity to FortisOntario’s operations in Fort Erie. The transaction is structured to take advantage of the existing transfer tax holiday which expires in October 2008. The transaction is subject to the completion of due diligence, negotiation, board approval, signing of definitive documentation and receipt of regulatory approvals.

For a discussion of the nature of regulation and material regulatory decisions and applications pertaining to Maritime Electric and FortisOntario, refer to “Regulatory Highlights”.

 REGULATED ELECTRIC UTILITIES - CARIBBEAN --------------------------------------------------------------------------                   Regulated Electric Utilities - Caribbean (1)                          Financial Highlights (Unaudited)                              Periods Ended June 30 --------------------------------------------------------------------------                                       Quarter                 Year-to-date --------------------------------------------------------------------------                      2008     2007   Variance     2008     2007   Variance -------------------------------------------------------------------------- Average US:CDN  Exchange Rate (2)   1.01     1.10      (0.09)    1.01     1.13      (0.12) -------------------------------------------------------------------------- Electricity Sales  (GWh)                276      258         18      534      499         35 -------------------------------------------------------------------------- ($ millions) -------------------------------------------------------------------------- Revenue                78       74          4      153      151          2 -------------------------------------------------------------------------- Energy Supply Costs    64 (3)   41         23      104 (3)   85         19 -------------------------------------------------------------------------- Operating Expenses     12       11          1       23       28 (4)     (5) -------------------------------------------------------------------------- Amortization            8        7          1       15       14          1 -------------------------------------------------------------------------- Finance Charges         2        3         (1)       7        7          - -------------------------------------------------------------------------- Corporate Taxes        (1)       1         (2)       -        1         (1) -------------------------------------------------------------------------- Non-Controlling  Interest              (2)       3         (5)       2        4         (2) -------------------------------------------------------------------------- (Loss) Earnings        (5)       8        (13)       2       12        (10) -------------------------------------------------------------------------- (1) Includes Belize Electricity, Caribbean Utilities and Fortis Turks and     Caicos (2) The reporting currency of Belize Electricity is the Belizean dollar      which is pegged to the US dollar at BZ$2.00 equals US$1.00. The      reporting currency of Caribbean Utilities and Fortis Turks and Caicos      is the US dollar.  The Cayman Islands dollar is pegged to the US dollar     at CI$1.00 equals US$1.20. (3) Energy supply costs during the second quarter of 2008 included an $18      million (BZ$36 million) charge as a result of a regulatory rate      decision by the Public Utilities Commission ("PUC") in Belize in June      2008. (4) Operating expenses during the first quarter of 2007 included a $4.4      million (US$3.7 million) charge on the disposal of steam-turbine assets     at Caribbean Utilities. -------------------------------------------------------------------------- 

Electricity Sales: Regulated Electric Utilities – Caribbean electricity sales increased 18 GWh, or 7 per cent, quarter over quarter and increased 35 GWh, or 7.0 per cent, year to date compared to the same period last year. The increases were primarily due to higher demand driven by customer growth. Electricity sales growth is expected to remain strong throughout the second half of 2008. Caribbean Utilities expects sales growth for its fiscal year ended April 30, 2009 to be approximately 5 per cent, slightly lower than sales growth experienced during its previous fiscal year, reflecting the impact of slowing construction trends and the expected impact on tourism of the current downturn being experienced in the U.S. economy.

Revenue: Revenue increased $4 million quarter over quarter and increased $2 million year to date compared to the same period last year. Excluding the unfavourable impact of foreign exchange during the second quarter and year to date period, associated with the translation of foreign currency-denominated revenue due to the strengthening of the Canadian dollar against the US dollar compared to the same periods last year, revenue increased $11 million quarter over quarter and increased $21 million year to date compared to the same period last year. Excluding foreign exchange impacts, factors increasing revenue were strong electricity sales growth, the full flow through of higher fuel and oil costs to customers at Caribbean Utilities under the terms of the Company’s new transmission and distribution (“T&D”) licence, and the flow through of higher fuel and oil costs at Fortis Turks and Caicos. Partially offsetting the above factors was a 3.25 per cent reduction in basic customer rates and the elimination of the hurricane cost recovery surcharge (“CRS”) at Caribbean Utilities, effective January 1, 2008, under the terms of the Company’s new T&D licence.

Earnings: Earnings’ contribution was $13 million lower quarter over quarter. However, second quarter 2008 earnings were reduced by $13 million, representing the Corporation’s approximate 70 per cent share of $18 million of disallowed previously incurred fuel and purchased power costs at Belize Electricity. The $18 million (BZ$36 million) charge was the result of the PUC’s decision on Belize Electricity’s 2008/2009 rate application. Excluding the $13 million charge, earnings’ contribution was $8 million for the second quarter of 2008, comparable to the same quarter last year.

Earnings’ contribution was $10 million lower year to date compared to the same period last year. Earnings’ contribution year-to-date last year was reduced by approximately $2 million as a result of a charge on the disposal of steam-turbine assets at Caribbean Utilities. Excluding the above item and the $13 million charge associated with Belize Electricity, earnings’ contribution increased $1 million year to date compared to the same period last year.

Excluding the one-time items in 2008 and 2007 described above and the unfavourable impact of foreign exchange, electricity sales growth and the favourable impact on energy supply costs associated with the movement in deferred fuel costs at Caribbean Utilities were largely offset by higher operating expenses, increased amortization costs, and the 3.25 per cent reduction in basic electricity rates at Caribbean Utilities. The movement in deferred fuel costs was the result of a change in the basis for calculating those costs under Caribbean Utilities’ new T&D licence. Excluding the impact of foreign exchange, operating costs increased mainly due to increased activity associated with a high-growth environment, the timing of maintenance activities and increased provisions for bad debts. Amortization costs increased as a result of continued investment in capital assets.

In April 2008, Caribbean Utilities and the Government of the Cayman Islands entered into a new exclusive 20-year T&D licence and a new non-exclusive 21.5-year generation licence. Under the new T&D licence, customer rates will be set using an initial targeted rate of return on rate base assets (“ROA”) of 10 per cent, down from 15 per cent as allowed under the previous licence.

Following the receipt of the new licences, Standard & Poor’s (“S&P”) affirmed its ‘A’ credit ratings on Caribbean Utilities’ long-term corporate credit and senior unsecured debt and removed the ratings from credit watch.

In June 2008, Caribbean Utilities announced a rights offering to shareholders of record on July 14, 2008. The estimated net proceeds of approximately US$28 million will be used to repay credit facility borrowings and to finance capital expenditures. The rights offering closes on August 15, 2008.

For additional information on the impact of the new licences and the nature of regulation and material regulatory decisions and applications pertaining to Belize Electricity, Caribbean Utilities and Fortis Turks and Caicos, refer to “Regulatory Highlights”.

 NON-REGULATED - FORTIS GENERATION --------------------------------------------------------------------------                        Non-Regulated - Fortis Generation (1)                          Financial Highlights (Unaudited)                                Periods Ended June 30 --------------------------------------------------------------------------                                       Quarter                 Year-to-date --------------------------------------------------------------------------                      2008     2007   Variance     2008     2007   Variance -------------------------------------------------------------------------- Energy Sales (GWh)    312      274         38      600      565         35 -------------------------------------------------------------------------- ($ millions) -------------------------------------------------------------------------- Revenue                22       18          4       41       39          2 -------------------------------------------------------------------------- Energy Supply Costs     2        2          -        4        4          - -------------------------------------------------------------------------- Operating Expenses      4        4          -        8        8          - -------------------------------------------------------------------------- Amortization            3        2          1        5        5          - -------------------------------------------------------------------------- Finance Charges         2        2          -        4        5         (1) -------------------------------------------------------------------------- Corporate Taxes         2        2          -        5        4          1 -------------------------------------------------------------------------- Non-Controlling  Interest               2        1          1        2        1          1 -------------------------------------------------------------------------- Earnings                7        5          2       13       12          1 -------------------------------------------------------------------------- (1) Includes the operations of non-regulated generation assets in Belize, Ontario, central Newfoundland, British Columbia and Upper New York State. -------------------------------------------------------------------------- 

Energy Sales: Energy sales from Non-Regulated – Fortis Generation increased 38 GWh, or 13.9 per cent, quarter over quarter and increased 35 GWh, or 6.2 per cent, year to date compared to the same period last year. The increases were mainly due to higher production in central Newfoundland during the second quarter of 2008 as a result of higher rainfall. At the end of July 2008, the reservoir at the Corporation’s generating facility in central Newfoundland was at approximately two-thirds of its maximum energy supply level while the Chalillo reservoir in Belize was at its full supply level.

Revenue: Revenue was $4 million higher quarter over quarter. Factors increasing revenue were: (i) higher production; (ii) increased average wholesale energy prices per megawatt hour (“MWh”) in Ontario of $46.86 during the second quarter of 2008 compared to $42.93 for the same quarter last year; and (iii) higher average wholesale energy prices per MWh in Upper New York State of US$80.89 for the second quarter of 2008 compared to US$56.97 for the same quarter last year. Partially offsetting the above factors was the unfavourable impact of foreign exchange associated with the translation of foreign currency-denominated revenue, due to the strengthening of the Canadian dollar against the US dollar compared to the same quarter last year.

Revenue was $2 million higher year to date compared to the same period last year. Factors increasing revenue were higher production and increased average wholesale energy prices per MWh in Upper New York State of US$76.90 year-to-date 2008 compared to US$56.92 for the same period last year. Partially offsetting the above factors was the unfavourable impact of foreign exchange.

Earnings: Earnings were $2 million higher quarter over quarter and $1 million higher year to date compared to the same period last year, driven by increased production and increased average wholesale energy prices, partially offset by the unfavourable impact of foreign exchange associated with the translation of foreign currency-denominated earnings.

 NON-REGULATED - FORTIS PROPERTIES --------------------------------------------------------------------------                       Non-Regulated - Fortis Properties                        Financial Highlights (Unaudited)                            Periods Ended June 30 --------------------------------------------------------------------------                                       Quarter                 Year-to-date -------------------------------------------------------------------------- ($ millions)         2008     2007   Variance     2008     2007   Variance -------------------------------------------------------------------------- Real Estate Revenue    15       14          1       31       28          3 -------------------------------------------------------------------------- Hospitality Revenue    39       33          6       68       59          9 -------------------------------------------------------------------------- Total Revenue          54       47          7       99       87         12 -------------------------------------------------------------------------- Operating Expenses     35       29          6       66       57          9 -------------------------------------------------------------------------- Amortization            3        3          -        7        6          1 -------------------------------------------------------------------------- Finance Charges         6        6          -       12       12          - -------------------------------------------------------------------------- Corporate Taxes         3        3          -        4        4          - -------------------------------------------------------------------------- Earnings                7        6          1       10        8          2 -------------------------------------------------------------------------- 

Revenue: Fortis Properties’ Real Estate revenue was $1 million higher quarter over quarter and $3 million higher year to date compared to the same period last year. Revenue grew throughout the real estate portfolio and was also significantly impacted by the real estate operations acquired on August 1, 2007 as part of the Delta Regina acquisition. The occupancy rate of the Real Estate Division was 96.7 per cent as at June 30, 2008, up from 96.0 per cent as at June 30, 2007.

Hospitality Revenue was $6 million higher quarter over quarter and $9 million higher year to date compared to the same period last year, reflecting revenue contribution from the Delta Regina and improved performance at the Company’s hospitality operations in Atlantic Canada.

On August 1, 2007, Fortis Properties purchased the Delta Regina in Saskatchewan for approximately $50 million, including acquisition costs. Delta Regina is comprised of 274 hotel rooms, the Saskatchewan Trade and Convention Centre, 52,000 square feet of Class A commercial office space and a parking garage.

Revenue per available room for the second quarter was $87.54 compared to $82.11 for the same quarter last year, and year to date was $77.68 compared to $73.84 for the same period last year. The increases were mainly due to higher average room rates.

Earnings: Fortis Properties’ earnings were $1 million higher quarter over quarter and $2 million higher year to date compared to the same period last year. The increases reflected contributions from the Delta Regina and improved performance at the Company’s hospitality operations in Atlantic Canada.

 CORPORATE AND OTHER --------------------------------------------------------------------------                           Corporate and Other (1)                       Financial Highlights (Unaudited)                            Quarter Ended June 30 --------------------------------------------------------------------------                                       Quarter                 Year-to-date -------------------------------------------------------------------------- ($ millions)         2008     2007   Variance     2008     2007   Variance -------------------------------------------------------------------------- Revenue                 5        4          1       12        8          4 -------------------------------------------------------------------------- Operating Expenses      3        1          2        6        3          3 -------------------------------------------------------------------------- Amortization            1        1          -        4        2          2 -----------------



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