Mr. Stan Marshall reports

FORTIS EARNS $151 MILLION IN FIRST QUARTER

Fortis Inc. achieved first quarter net earnings attributable to common equity shareholders of $151-million, or 79 cents per common share, compared with $121-million, or 64 cents per common share, for the first quarter of 2012.

Earnings for the quarter were favourably impacted by an extraordinary gain of approximately $22-million net of tax, or 12 cents per common share, related to the settlement of all matters, including release from all debt obligations, pertaining to the government of Newfoundland and Labrador's December, 2008, expropriation of non-regulated hydroelectric generating assets and water rights in central Newfoundland, then owned by Exploits River Hydro Partnership in which Fortis holds an indirect 51-per-cent interest.

"In addition to the settlement of expropriation matters relating to Exploits Partnership, performance for the quarter was driven by the regulated utilities in Western Canada, led by FortisAlberta," said Stan Marshall, president and chief executive officer, Fortis.

Canadian regulated electric utilities contributed earnings of $57-million, up $6-million from the first quarter of 2012. FortisAlberta's earnings increased $5-million, due to lower depreciation of $3-million and net transmission revenue of approximately $2-million recognized in the first quarter of 2013 associated with the finalization of 2012 transmission variances. The utility's depreciation rates were reduced, effective Jan. 1, 2012, as a result of the decision related to FortisAlberta's 2012 revenue requirements, the impact of which was not recognized until the second quarter of 2012 when the decision was received. FortisBC Electric's earnings were $2-million higher quarter over quarter, due to growth in energy infrastructure investment, timing of operating expenses, lower-than-expected finance charges and depreciation, and higher capitalized allowance for funds used during construction, partially offset by higher effective income taxes.

FortisBC Electric acquired Kelowna's electrical utility assets for approximately $55-million in March, 2013, which now allows FortisBC Electric to directly serve about 15,000 customers formerly served by the city. FortisBC Electric had provided the city with electricity under a wholesale tariff and had operated and maintained the city's electrical utility assets under contract since 2000.

Canadian regulated gas utilities contributed earnings of $85-million, up $3-million from the first quarter of 2012. The increase in earnings was mainly due to growth in energy infrastructure investment and increased gas transportation volumes to industrial customers, partially offset by lower-than-expected customer additions and higher effective income taxes.

Fortis paid a dividend of 31 cents per common share on March 1, 2013, up from 30 cents for the fourth quarter of 2012. The 3.3-per-cent increase in the quarterly dividend translates into an annualized dividend of $1.24 and extends the corporation's record of annual common share dividend increases to 40 consecutive years, the longest record of any public corporation in Canada.

FortisAlberta received a decision from its regulator in March, 2013, approving an interim increase in customer distribution rates, effective Jan. 1, 2013, including interim approval of 60 per cent of the revenue requirement associated with certain capital expenditures in 2013 not otherwise recovered under performance-based rates. Final decisions on the utility's rates are expected in the second half of 2013.

In April, 2013, Newfoundland Power received a cost of capital decision whereby the utility's allowed rate of return on common shareholder equity (ROE) and common equity component of capital structure will remain at 8.8 per cent and 45 per cent, respectively, for 2013 through 2015.

Final allowed ROEs and capital structure for 2013 remain to be determined for FortisBC and FortisAlberta. A decision associated with the first phase of a generic cost of capital (GCOC) proceeding in British Columbia as it affects FortisBC Energy Inc. is expected mid-2013 and the second phase of the proceeding, which will affect the other FortisBC utilities, commenced in March, 2013. The process for the GCOC proceeding in Alberta is scheduled to commence in the second quarter of 2013.

Caribbean regulated electric utilities contributed $3-million of earnings, consistent with the first quarter of 2012.

Non-regulated Fortis generation contributed $24-million of earnings compared with $5-million for the first quarter of 2012. Excluding the $22-million aftertax extraordinary gain on the settlement of expropriation matters, as noted above, earnings decreased $3-million, mainly related to lower production in Belize due to lower rainfall.

Fortis properties contributed earnings of less than $500,000 for the first quarter of 2013 compared with $1-million for the first quarter of 2012. The decrease was mainly due to lower occupancy levels at the hospitality division's operations in Central Canada.

Corporate and other expenses were $18-million compared with $21-million for the first quarter of 2012. Corporate and other expenses for the first quarter of 2013 were reduced by $2-million related to foreign exchange, while corporate and other expenses for the same quarter last year were increased by $1.5-million associated with foreign exchange. CH Energy Group Inc. acquisition-related expenses were approximately $500,000 after tax for the first quarter of 2013 compared with $4-million after tax for the same quarter last year. Excluding the above-noted acquisition-related expenses and foreign exchange impacts, corporate and other expenses increased $4-million quarter over quarter, mainly as a result of higher preference share dividends, partially offset by lower finance charges.

Consolidated capital expenditures, before customer contributions, were approximately $250-million for the first quarter of 2013. Construction of the $900-million, 335-megawatt Waneta expansion hydroelectric generating facility in British Columbia continues on time and on budget, with completion of the facility expected in spring 2015. Approximately $483-million in total has been spent on the Waneta expansion since construction began in late 2010.

The corporation's capital program is expected to total $1.3-billion in 2013. Over the five years 2013 through 2017, the corporation's capital program, including expenditures at Central Hudson Gas & Electric Corp., is expected to total approximately $6-billion.

Cash flow from operating activities was $280-million for the quarter compared with $328-million for the first quarter of 2012. The decrease was largely due to changes in working capital quarter over quarter.

Fortis has consolidated credit facilities of $2.4-billion, of which $2-billion was unused as at March 31, 2013, including $910-million available for borrowing under its corporate credit facility.

The corporation's debt credit ratings of A- and A (low) were affirmed by Standard & Poor's and DBRS, respectively, in February, 2013.

Fortis announced in February, 2012, that it had entered into an agreement to acquire CH Energy Group, for an aggregate purchase price of approximately $1.5-billion (U.S.), including the assumption of approximately $500-million (U.S.) of debt on closing. Central Hudson, the main business of CH Energy Group, serves 375,000 electric and gas customers in New York's Mid-Hudson River Valley. Approval of the acquisition by the New York State Public Service Commission (PSC) is the last significant regulatory matter required to close the transaction. A settlement agreement among Fortis, CH Energy Group, PSC staff, registered interveners and other parties was filed with the PSC in January, 2013. A recommended decision issued on May 3, 2013, by administrative law judges in connection with the acquisition asserts that without modification of the terms of the settlement agreement, the benefits of the acquisition are outweighed by perceived detriments remaining after mitigation. The recommended decision is an advisory opinion that will be considered by the PSC in determining whether to approve the acquisition. While no assurance regarding a closing of the transaction can be given until an order is issued by the PSC, a final decision by the PSC and subsequent closing of the transaction is expected in June, 2013. Based on the terms of the current settlement agreement, the acquisition is expected to be accretive to earnings per common share of Fortis within the first full year of ownership, excluding acquisition-related expenses.

"We look forward to welcoming the employees of CH Energy Group to the Fortis Group. The addition of this well-run U.S. utility and its proven track record for providing customers with quality service will further enhance the positioning of Fortis as a leader in the North American utility industry," concluded Mr. Marshall.

                   CONSOLIDATED FINANCIAL HIGHLIGHTS
            (In millions of dollars, except for share data)

                                             Quarter ended March 31, 
                                                     2013       2012

Revenue                                            $1,113     $1,149
Energy supply costs                                   505        566
Operating expenses                                    221        214
Depreciation and amortization                         129        119
Other income (expenses), net                            6         (3)
Finance charges                                        89         91
Income taxes                                           30         23
Earnings before extraordinary item                    145        133
Extraordinary gain, net of tax                         22          -
Net earnings                                          167        133
Net earnings attributable to
non-controlling interests                               2          1
Preference equity shareholders                         14         11
Common equity shareholders                            151        121
Net earnings                                          167        133
Earnings per common share before
extraordinary item
Basic ($)                                            0.67       0.64
Diluted ($)                                          0.66       0.62
Earnings per common share
Basic ($)                                            0.79       0.64
Diluted ($)                                          0.76       0.62
Cash flow from operating activities                   280        328

We seek Safe Harbor.