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Fortis Earns $315 Million in 2012

Canadian Regulated Utilities Achieve 11% Growth in Earnings

ST. JOHN'S, NEWFOUNDLAND AND LABRADOR -- (Marketwire) -- 02/07/13 -- Fortis Inc. ("Fortis" or the "Corporation") (TSX:FTS) achieved net earnings attributable to common equity shareholders of $315 million, or $1.66 per common share, for 2012 compared to $311 million, or $1.71 per common share, for 2011.

"Our Canadian regulated utilities, led by strong growth at FortisAlberta, achieved approximately 11% growth in earnings year over year," says Stan Marshall, President and Chief Executive Officer, Fortis Inc.

Earnings in 2012 were reduced by $7.5 million as a result of expenses related to the CH Energy Group, Inc. ("CH Energy Group") acquisition, while earnings in 2011 were favourably impacted by $11 million as a result of a merger termination fee paid to Fortis. Excluding these items, earnings to common equity shareholders were $322.5 million, or $1.70 per common share, for 2012 up $22.5 million from $300 million, or $1.65 per common share, for 2011, driven by improved performance at the Canadian Regulated Utilities, partially offset by higher corporate expenses. A 5% increase in the weighted average number of common shares outstanding year over year, largely associated with the issuance of common equity in mid-2011, had the impact of lowering earnings per common share in 2012.

Fortis increased its quarterly common share dividend to 31 cents from 30 cents, commencing with the first quarter dividend payable on March 1, 2013, which translates into an annualized dividend of $1.24. Fortis has raised its annualized dividend to common shareholders for 40 consecutive years, the record for a public corporation in Canada. The dividend payout ratio was 72% in 2012.

"For the fourth consecutive year, our capital program surpassed $1 billion," says Marshall. "Fortis utilities collectively serve more than two million customers and our capital program, the majority of which is occurring in western Canada, will ensure we continue to meet the growing energy needs of our existing and new customers," he explains.

Fortis announced in February 2012 that it had entered into an agreement to acquire CH Energy Group for an aggregate purchase price of approximately US$1.5 billion, including the assumption of approximately US$500 million of debt on closing. CH Energy Group's main business, Central Hudson Gas & Electric Corporation ("Central Hudson"), serves 375,000 electric and gas customers in New York State's Mid-Hudson River Valley. Central Hudson's capital program over the next five years is expected to average more than $125 million annually.

Approval by the New York State Public Service Commission ("NYSPSC") of the Corporation's acquisition of CH Energy Group is the last significant regulatory matter required to close the transaction. A Settlement Agreement, among Fortis, CH Energy Group, NYSPSC staff, registered interveners and other parties, was filed with the NYSPSC in January 2013. The acquisition of CH Energy Group is anticipated to close during the second quarter of 2013. It is expected to be accretive to earnings per common share of Fortis within the first full year of ownership, excluding acquisition-related expenses.

"With the acquisition of CH Energy Group, the Corporation's regulated midyear rate base will increase to approximately $10 billion," says Marshall. "The regulated assets and earnings of Fortis will be further diversified by geographic location and regulatory jurisdiction, thereby helping to reduce business risk," he adds.

Capital expenditures were $1.13 billion for the year. At FortisBC Gas, the Customer Care Enhancement Project came into service at the beginning of 2012. The largest capital project currently underway, the non-regulated $900 million, 335-megawatt Waneta Expansion hydroelectric generating facility ("Waneta Expansion") on the Pend d'Oreille River in British Columbia, continues on time and on budget. Excavation of the intake, powerhouse and power tunnels was completed during the year. Approximately $436 million in total has been spent on the Waneta Expansion since construction began in late 2010, with a further $227 million expected to be spent in 2013. Fortis owns 51% of the Waneta Expansion and will operate and maintain the facility when it comes online, expected spring 2015.

Canadian Regulated Utilities contributed earnings of $345 million, $34 million higher than earnings of $311 million for 2011.

Canadian Regulated Electric Utilities contributed earnings of $207 million, up $33 million from 2011. FortisAlberta's earnings increased $22 million, mainly related to growth in energy infrastructure investment, net transmission revenue of $8.5 million recognized in 2012, and lower-than-expected depreciation expense and finance charges in 2012, partially offset by a $1 million gain on sale of property in 2011. FortisAlberta invested more than $400 million in capital projects in 2012 and is expected to invest a comparable amount in 2013. Newfoundland Power's earnings were $5 million higher year over year, largely due to lower effective income taxes. FortisBC Electric's earnings increased $2 million as a result of growth in energy infrastructure investment, higher pole-attachment revenue, and lower-than-expected finance charges in 2012, partially offset by the discontinuance of the performance-based rate-setting ("PBR") mechanism on December 31, 2011. Improved earnings of $4 million at Other Canadian Regulated Electric Utilities were mainly due to lower effective income taxes at Maritime Electric and cumulative return earned on capital investment in smart meters at FortisOntario.

FortisBC Electric's offer to purchase the City of Kelowna's electrical utility assets for approximately $55 million, which is subject to satisfaction of certain conditions and receipt of applicable approvals, including regulatory approval, is expected to close by the end of the first quarter of 2013. FortisBC Electric has operated and maintained the assets, which currently serve some 15,000 customers, since 2000.

Canadian Regulated Gas Utilities delivered earnings of $138 million, up $1 million from 2011. Growth in energy infrastructure investment, higher gas transportation volumes to industrial customers, lower-than-expected operating expenses in 2012 and lower effective income taxes were partially offset by lower-than-expected customer additions in 2012 and lower capitalized allowance for funds used during construction ("AFUDC").

"The regulatory calendar at our Canadian utilities was very busy in 2012 and remains so for 2013," says Marshall. "We expect continued regulatory stability, notwithstanding the significant proceedings in 2013," he adds.

FortisBC received regulatory decisions in 2012 for 2012/2013 revenue requirements at its gas and electric utilities and expects to file its next rate applications in the first half of 2013. A regulatory decision on a request by FortisBC Gas to amalgamate its three gas utilities into one legal entity and to implement common rates and services for customers across British Columbia, effective January 1, 2014, is pending. FortisAlberta received a decision in April 2012 for its 2012 revenue requirements. The Alberta Utilities Commission ("AUC") issued a generic decision in September 2012 on its PBR Initiative, outlining the PBR framework applicable to distribution utilities in Alberta for a five-year term, which commenced January 1, 2013. The Alberta PBR decision raises concerns and uncertainty for FortisAlberta regarding the treatment of certain capital expenditures. FortisAlberta, along with other distribution utilities operating in Alberta, have sought clarification of this matter in applications filed in November 2012 and have also requested leave to appeal the PBR decision to the Alberta Court of Appeal. Final allowed rates of return on common shareholder's equity and capital structure for 2013 remain outstanding for FortisBC, FortisAlberta and Newfoundland Power. In Alberta, a Generic Cost of Capital ("GCOC") Proceeding was initiated by the AUC in October 2012. In British Columbia, a public hearing occurred in December 2012 related to the first phase of a GCOC Proceeding initiated by the regulator in 2012. At Newfoundland Power, a public hearing commenced in January 2013 related to the utility's general rate application filed in September 2012 to set 2013/2014 customer rates and cost of capital.

Caribbean Regulated Electric Utilities contributed $19 million of earnings compared to $20 million for 2011. FortisTCI Limited acquired Turks and Caicos Utilities Limited ("TCU") in August 2012 for an aggregate purchase price of approximately $13 million (US$13 million), inclusive of debt assumed. TCU serves more than 2,000 customers on Grand Turk and Salt Cay. The utility currently operates pursuant to a 50-year licence that expires in 2036.

Non-Regulated Fortis Generation contributed $17 million to earnings compared to $18 million for 2011. The decrease in earnings was mainly due to overall lower production associated with less rainfall and a generating facility being out of service in 2012, partially offset by a $0.5 million after-tax gain on disposal of assets.

Fortis Properties delivered earnings of $22 million compared to $23 million for 2011. The Company acquired the 126-room StationPark All Suite Hotel in London, Ontario for approximately $13 million, inclusive of debt assumed, in October 2012.

Corporate and other expenses were $88 million compared to $61 million for 2011. Excluding CH Energy Group acquisition-related expenses, incurred largely in the first half of 2012, and the merger termination fee paid to Fortis in July 2011, corporate and other expenses were $8.5 million higher year over year. The increase was mainly the result of a $2 million foreign exchange loss recognized in 2012 compared to a $1.5 million after-tax net foreign exchange gain recognized in 2011, certain non-recurring operating expenses in 2012 and lower effective income tax recoveries, partially offset by lower finance charges.

Cash flow from operating activities was $976 million, up $61 million from 2011, driven by higher earnings and the collection of increased depreciation and amortization expense in customer rates.

Earnings for the fourth quarter were $87 million, or $0.46 per common share, up $5 million, or $0.02 per common share, from the same quarter in 2011. Improved performance at the Canadian Regulated Electric Utilities, led by FortisAlberta, was partially offset by lower non-regulated hydroelectric generation mainly in Belize, lower earnings contribution from the Canadian Regulated Gas Utilities and higher corporate expenses. The decrease in earnings at the Canadian Regulated Gas Utilities was driven by the timing of operating expenses during 2012 and lower capitalized AFUDC.

Fortis is one of the highest-rated utility holding companies in North America with its corporate debt rated A- by Standard & Poor's and A(low) by DBRS, unchanged from 2011. The credit ratings were affirmed in 2012, reflecting several factors, notably the diversity of the Corporation's utility asset mix, as well as its financing plans for the pending acquisition of CH Energy Group and the expected completion of the Waneta Expansion on time and on budget.

Fortis raised gross proceeds of approximately $601 million, upon issuance of 18.5 million Subscription Receipts at $32.50 each in June 2012, to finance a portion of the purchase price of CH Energy Group. The proceeds are being held by an escrow agent, pending satisfaction of closing conditions, including receipt of regulatory approvals, contained in the agreement to acquire CH Energy Group. Each Subscription Receipt will entitle the holder thereof to receive, on satisfaction of the closing conditions, one common share of Fortis. The Corporation issued $200 million 4.75% preference shares in November 2012, the net proceeds of which were used to repay borrowings under its committed corporate credit facility, which borrowings were primarily incurred to support the construction of the Waneta Expansion and for other general corporate purposes. FortisAlberta raised $125 million 40-year 3.98% unsecured debentures, largely in support of its capital expenditure program, in October 2012.

Fortis retroactively adopted accounting principles generally accepted in the United States ("US GAAP"), effective January 1, 2012, with the restatement of prior periods. The adoption of US GAAP did not have a material impact on the Corporation's earnings or earnings per common share for 2012 and 2011.

"We look forward to welcoming the employees of CH Energy Group to the Fortis Group. Their 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," says Marshall.

Central Hudson was recently recognized by the Edison Electric Institute ("EEI"), an association of electric companies representing 70% of the U.S. electric power industry, for its restoration work in response to Superstorm Sandy. Several FortisOntario crews worked with Central Hudson employees to reconnect some 104,000 customers who had been impacted by the storm. Two previous EEI Emergency Recovery Awards recognized Central Hudson's recovery efforts following severe snowstorms in October 2011 and February 2010, the latter being the most severe storm in the utility's history.

"Execution of our $1.3 billion capital program for 2013 is progressing well," says Marshall. "Capital investment will support continuing growth in earnings and dividends and will be mostly funded with cash from operations and long-term debt at the regulated utility level," he adds.

Over the five years 2013 through 2017, the Corporation's capital program, including expenditures at Central Hudson, is expected to total approximately $6 billion. Capital investment over that period is expected to allow utility rate base and hydroelectric generation investment to increase at a combined compound annual growth rate of approximately 6%.

"Serving our customers well is our utmost priority. We are also focused on closing the CH Energy Group acquisition," concludes Marshall.


                            Financial Highlights                            
           For the three and twelve months ended December 31, 2012          
                           Dated February 7, 2013                           

FORWARD-LOOKING STATEMENT

The following Fortis Inc. ("Fortis" or the "Corporation") fourth quarter 2012 earnings release should be read in conjunction with the following: (i) the audited consolidated financial statements and notes thereto for the year ended December 31, 2011, prepared in accordance with accounting principles generally accepted in the United States ("US GAAP") and voluntarily filed on the System for Electronic Document Analysis and Retrieval ("SEDAR") by Fortis on March 16, 2012; and (ii) the "Supplemental Interim Consolidated Financial Statements for the Year Ended December 31, 2011 (Unaudited)" contained in the above-noted voluntary filing, which provides a detailed reconciliation between the Corporation's interim unaudited consolidated 2011 financial statements prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP") and interim unaudited consolidated 2011 financial statements prepared in accordance with US GAAP; (iii) the interim Management Discussion and Analysis ("MD&A") and unaudited consolidated financial statements and notes thereto for the three and nine months ended September 30, 2012, prepared in accordance with US GAAP; and (iv) the MD&A and audited consolidated financial statements and notes thereto for the year ended December 31, 2011, prepared in accordance with Canadian GAAP, included in the Corporation's 2011 Annual Report. Financial information for 2012 and comparative periods contained in this material have been prepared in accordance with US GAAP and are presented in Canadian dollars unless otherwise specified.

Fortis includes forward-looking information in this fourth quarter 2012 earnings release 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 it 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", "budgets", "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 management. The forward-looking information in this fourth quarter 2012 earnings release includes, but is not limited to, statements regarding: the Corporation's consolidated forecasted gross capital expenditures for 2013; total gross capital expenditures over the five-year period 2013 through 2017 and average annual capital expenditures at Central Hudson Gas & Electric Corporation over the same time period; the nature, timing and amount of certain capital projects and their expected costs and time to complete; the expectation that the Corporation's significant capital expenditure program will support continuing growth in earnings and dividends; the expected timing of filing regulatory applications and of receipt of regulatory decisions; the expected timing of the closing of the acquisition of CH Energy Group, Inc. ("CH Energy Group") by Fortis and the expectation that the acquisition will be accretive to earnings per common share of Fortis within the first full year of ownership, excluding acquisition-related expenses; an expected favourable impact on the Corporation's earnings in future periods upon final enactment of legislative changes to Part VI.1 taxes; the expectation that the acquisition of the City of Kelowna's electrical utility assets by FortisBC Electric will close by the end of the first quarter of 2013; the expected combined compound annual growth rate of utility rate base and hydroelectric generation investment over the next five years; and the Corporation's expected regulated midyear rate base in 2013 upon closing of the CH Energy Group acquisition.

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 and no material adverse regulatory decisions being received; FortisAlberta continues to recover its cost of service and earn its allowed rate of return on common shareholder's equity ("ROE") under performance-based rate-setting ("PBR"), which commenced for a five-year term effective January 1, 2013; the acquisition of the City of Kelowna's electrical utility assets will be approved by the regulator; the receipt of regulatory approval from the New York State Public Service Commission of a settlement agreement, as filed, pertaining to the acquisition of CH Energy Group; the closing of the acquisition of CH Energy Group before the expiry of the Subscription Receipts on June 30, 2013; no significant variability in interest rates; 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 continued ability to maintain the gas and electricity systems to ensure their continued performance; no severe and prolonged downturn in economic conditions; no significant decline in capital spending; no material capital project and financing cost overrun related to the construction of the Waneta Expansion hydroelectric generating facility; sufficient liquidity and capital resources; the expectation that the Corporation will receive appropriate compensation from the Government of Belize ("GOB") for fair value of the Corporation's investment in Belize Electricity that was expropriated by the GOB; the expectation that Belize Electric Company Limited will not be expropriated by the GOB; the expectation that the Corporation will receive fair compensation from the Government of Newfoundland and Labrador related to the expropriation of the Exploits River Hydro Partnership's hydroelectric assets and water rights; the continuation of regulator-approved mechanisms to flow through the commodity cost of natural gas and energy supply costs in customer rates; the ability to hedge exposures to fluctuations in foreign exchange rates, natural gas commodity prices and fuel prices; no significant counterparty defaults;

the continued competitiveness of natural gas pricing when compared with electricity and other alternative sources of energy; the continued availability of natural gas, fuel and electricity supply; continuation and regulatory approval of power supply and capacity purchase contracts; the ability to fund defined benefit pension plans, earn the assumed long-term rates of return on the related assets and recover net pension costs in customer rates; the absence of significant changes in government energy plans and environmental laws that may materially negatively affect the operations and cash flows of the Corporation and its subsidiaries; no material change in public policies and directions by governments that could materially negatively affect the Corporation and its subsidiaries; maintenance of adequate insurance coverage; the ability to obtain and maintain licences and permits; retention of existing service areas; the ability to report under US GAAP beyond 2014 or the adoption of International Financial Reporting Standards after 2014 that allows for the recognition of regulatory assets and liabilities; the continued tax-deferred treatment of earnings from the Corporation's Caribbean operations; continued maintenance of information technology infrastructure; continued favourable relations with First Nations; 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. Risk factors, which could cause results or events to differ from current expectations, are detailed under the heading "Business Risk Management" in the Corporation's MD&A for the three and nine months ended September 30, 2012, for the year ended December 31, 2011 and as otherwise disclosed in this fourth quarter 2012 earnings release. Key risk factors for 2013 include, but are not limited to: uncertainty of the impact a continuation of a low interest rate environment may have on the allowed ROE at each of the Corporation's four large Canadian regulated utilities; uncertainty regarding the treatment of certain capital expenditures at FortisAlberta under the newly implemented PBR mechanism; risks relating to the ability to close the acquisition of CH Energy Group, the timing of such closing and the realization of the anticipated benefits of the acquisition; and risk associated with the amount of compensation to be paid to Fortis for its investment in Belize Electricity that was expropriated by the GOB; and the timeliness of the receipt of the compensation and the ability of the GOB to pay the compensation owing to Fortis.

All forward-looking information in this fourth quarter 2012 earnings release 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.

CORPORATE OVERVIEW

Fortis is the largest investor-owned distribution utility in Canada, serving more than 2 million gas and electricity customers. Its regulated holdings include electric utilities in five Canadian provinces and two Caribbean countries and a natural gas utility in British Columbia, Canada. Fortis owns non-regulated generation assets, primarily hydroelectric, across Canada and in Belize and Upstate New York, and hotels and commercial office and retail space in Canada. In 2012 the Corporation's electricity distribution systems met a combined peak demand of 5,244 megawatts ("MW") and its gas distribution system met a peak day demand of 1,336 terajoules. 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 nine months ended September 30, 2012 and to the "Corporate Overview" section of the 2011 Annual MD&A.

The key goals of the Corporation's regulated utilities are to operate sound gas and electricity distribution systems; deliver safe, reliable cost-efficient energy to customers; and conduct business in an environmentally responsible manner. The Corporation's main business, utility operations, is highly regulated and the earnings of the Corporation's regulated utilities are primarily determined under cost of service ("COS") regulation.

Generally under COS regulation, the respective regulatory authority sets customer gas and/or electricity rates to permit a reasonable opportunity for the utility to recover, on a timely basis, estimated costs of providing service to customers, including a fair rate of return on a regulatory deemed or targeted capital structure applied to an approved regulatory asset value ("rate base"). The ability of a regulated utility to recover prudently incurred costs of providing service and earn the regulator-approved rate of return on common shareholder's equity ("ROE") and/or rate of return on rate base assets ("ROA") depends on the utility achieving the forecasts established in the rate-setting processes. As such, earnings of regulated utilities are generally impacted by: (i) changes in the regulator-approved allowed ROE and/or ROA; (ii) changes in rate base; (iii) changes in energy sales or gas delivery volumes; (iv) changes in the number and composition of customers; (v) variances between actual expenses incurred and forecast expenses used to determine revenue requirements and set customer rates; and (vi) timing differences within an annual financial reporting period, between when actual expenses are incurred and when they are recovered from customers in rates. When forward test years are used to establish revenue requirements and set base customer rates, these rates are not adjusted as a result of actual COS being different from that which is estimated, other than for certain prescribed costs that are eligible to be deferred on the balance sheet. In addition, the Corporation's regulated utilities, where applicable, are permitted by their respective regulatory authority to flow through to customers, without markup, the cost of natural gas, fuel and/or purchased power through base customer rates and/or the use of rate stabilization and other mechanisms.

When performance-based rate-setting ("PBR") mechanisms are utilized in determining annual revenue requirements and resulting customer rates, a formula is generally applied that incorporates inflation and assumed productivity improvements. The use of PBR mechanisms should allow the utility a reasonable opportunity to recover prudent COS and earn its allowed ROE.

UPDATE ON SIGNIFICANT ITEMS

Pending Acquisition of CH Energy Group, Inc.: In February 2012 Fortis announced that it had entered into an agreement to acquire CH Energy Group, Inc. ("CH Energy Group") for US$65.00 per common share in cash, for an aggregate purchase price of approximately US$1.5 billion, including the assumption of approximately US$500 million of debt on closing. CH Energy Group is an energy delivery company headquartered in Poughkeepsie, New York. Its main business, Central Hudson Gas & Electric Corporation ("Central Hudson"), is a regulated transmission and distribution ("T&D") utility serving approximately 300,000 electric and 75,000 natural gas customers in eight counties of New York State's Mid-Hudson River Valley. The transaction received CH Energy Group shareholder approval in June 2012 and regulatory approval from the Federal Energy Regulatory Commission and the Committee on Foreign Investment in the United States in July 2012. In addition, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 expired in October 2012, satisfying another condition necessary for consummation of the transaction.

Approval by the New York State Public Service Commission ("NYSPSC") of the Corporation's acquisition of CH Energy Group is the last significant regulatory matter required to close the transaction. Closing of the transaction is now anticipated during the second quarter of 2013. The transaction is expected to be accretive to the Corporation's earnings per common share within the first full year of ownership of CH Energy Group, excluding acquisition-related expenses. A Settlement Agreement, among Fortis, CH Energy Group, NYSPSC staff, registered interveners, and other parties was filed with the NYSPSC in January 2013. The Settlement Agreement provides almost $50 million to fund customer and community benefits, including: (i) $35 million to cover expenses that normally would be recovered in customer rates, for example, storm-restoration expenses; (ii) guaranteed savings to customers of more than $9 million over five years resulting from the elimination of costs Central Hudson now incurs as a public company; and (iii) the establishment of a $5 million Customer Benefit Fund for economic development and low-income assistance programs for communities and residents of the Mid-Hudson River Valley. Another benefit provided under the Settlement Agreement is an electric and natural gas customer delivery rate freeze until July 1, 2014. The Settlement Agreement also contains customer protections, including the continuation of Central Hudson as a stand-alone utility. The parties to the Settlement Agreement have concluded that, based on the terms of the Settlement Agreement, the acquisition is in the public interest and have recommended approval by the NYSPSC.

During 2012 the Corporation's earnings were reduced by the incurrence of $7.5 million of after-tax CH Energy Group acquisition-related expenses, largely incurred in the first half of 2012.

Subscription Receipts Offering: To finance a portion of the pending acquisition of CH Energy Group, Fortis sold 18.5 million Subscription Receipts at $32.50 each in June 2012 through a bought deal offering underwritten by a syndicate of underwriters, realizing gross proceeds of approximately $601 million. The gross proceeds from the sale of the Subscription Receipts are being held by an escrow agent, pending satisfaction of closing conditions, including receipt of regulatory approvals, included in the agreement to acquire CH Energy Group (the "Release Conditions"). The Subscription Receipts began trading on the Toronto Stock Exchange on June 27, 2012 under the symbol "FTS.R".

Each Subscription Receipt will entitle the holder thereof to receive, on satisfaction of the Release Conditions and without payment of additional consideration, one common share of Fortis and a cash payment equal to the dividends declared on Fortis common shares during the period from June 27, 2012 to the date of issuance of the common shares in respect of the Subscription Receipts to holders of record.

If the Release Conditions are not satisfied by June 30, 2013, or if the agreement and plan of merger relating to the acquisition of CH Energy Group is terminated prior to such time, holders of Subscription Receipts shall be entitled to receive from the escrow agent an amount equal to the full subscription price thereof plus their pro rata share of the interest earned on such amount. Closing of the acquisition of CH Energy Group subsequent to June 30, 2013 could result in the Corporation having to raise alternative capital to finance the transaction.

Receipt of Regulatory Decisions: Regulatory decisions were received in 2012 for 2012/2013 revenue requirements at the FortisBC Energy companies and FortisBC Electric, and for 2012 revenue requirements at FortisAlberta. The Alberta Utilities Commission ("AUC") issued a generic decision in September 2012 on its PBR Initiative, outlining the PBR framework applicable to distribution utilities in Alberta for a five-year term, which commenced January 1, 2013. For further information, refer to the "Regulatory Highlights" section of this earnings release.

First Preference Share Offering: In November 2012 Fortis issued 8 million 4.75% First Preference Shares, Series J at $25.00 per share for total proceeds of $200 million. The net proceeds of $194 million were used to repay borrowings under the Corporation's committed corporate credit facility, which borrowings were primarily incurred to support the construction of the non-regulated Waneta Expansion hydroelectric generating facility ("Waneta Expansion") and for other general corporate purposes.

Long-Term Debt Offering - FortisAlberta: In October 2012 FortisAlberta issued 40-year $125 million 3.98% unsecured debentures. The net proceeds of the debt offering are being used to repay borrowings under the Company's credit facility incurred to finance capital expenditures, to fund future capital expenditures, and for general corporate purposes.

Part VI.1 Tax: Under the terms of the Corporation's first preference shares, the Corporation is subject to tax under Part VI.1 of the Income Tax Act (Canada) associated with dividends on its first preference shares. For corporations subject to Part VI.1 tax, there is an equivalent Part I tax deduction. As permitted under the Income Tax Act (Canada), a corporation may allocate its Part VI.1 tax liability and equivalent Part I tax deduction to its related subsidiaries. In the past, Fortis has allocated these items to Maritime Electric, Newfoundland Power and FortisOntario.

Upon transition to US GAAP, the Corporation reduced its consolidated opening 2012 retained earnings by $20 million to reflect the impact of differences between enacted and substantively enacted tax legislation associated with prior assessments and payments of Part VI.1 taxes, and the recovery of Part I taxes. The adjustment was done as US GAAP requires tax provisions to be based on enacted legislation versus substantively enacted legislation. A number of legislative amendments to Part VI.1 tax in Canada have yet to be enacted. The above-noted transitional US GAAP adjustment, as well as certain amounts recognized in 2012, will reverse through the Corporation's earnings in future periods when the legislation is finally enacted, which is expected in 2013, or as reassessment of corporate taxation years, upon which the enacted versus the substantively enacted rates were used to calculate taxes payable under US GAAP, become statute barred. During 2012 Newfoundland Power recorded a favourable $2.5 million adjustment to income taxes associated with statute-barred Part VI.1 taxes (2011 - $1 million).

Hotel Acquisition: In October 2012 Fortis Properties acquired the 126-room StationPark All Suite Hotel ("StationPark Hotel") in London, Ontario for approximately $13 million, inclusive of debt assumed of approximately $6 million.

Pending Acquisition of the Electrical Utility Assets from the City of Kelowna: FortisBC Electric has offered to purchase the City of Kelowna's electrical utility assets, which currently serve some 15,000 customers, for approximately $55 million. FortisBC Electric provides the City of Kelowna with electricity under a wholesale tariff and has operated and maintained the City of Kelowna's electrical utility assets under contract since 2000. Closing of the transaction, which is subject to satisfaction of certain conditions and receipt of applicable approvals, including regulatory approval, is expected by the end of the first quarter of 2013. An application was filed with the regulator in November 2012 requesting approval of the transaction.

Transition to US GAAP: Effective January 1, 2012, Fortis retroactively adopted US GAAP with the restatement of comparative reporting periods.

FINANCIAL HIGHLIGHTS

Fortis has adopted a strategy of profitable growth with earnings per common share as the primary measure of performance. The Corporation's business is segmented by franchise area and, depending on regulatory requirements, by the nature of the assets. Key financial highlights for the fourth quarters and years ended December 31, 2012 and December 31, 2011 are provided in the following table.


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Consolidated Financial Highlights (Unaudited)                               
Periods Ended December 31                  Quarter                   Annual 
($ millions, except for                                                     
 common share data)          2012    2011 Variance    2012    2011 Variance 
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Revenue                       999   1,034      (35)  3,654   3,738      (84)
Energy Supply Costs           430     490      (60)  1,522   1,697     (175)
Operating Expenses            247     233       14     868     850       18 
Depreciation and                                                            
 Amortization                 119     107       12     470     416       54 
Other Income, Net               6       6        -       4      38      (34)
Finance Charges                90      88        2     366     363        3 
Income Taxes                   17      26       (9)     61      84      (23)
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Net Earnings                  102      96        6     371     366        5 
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Net Earnings Attributable                                                   
 to:                                                                        
  Non-Controlling                                                           
   Interests                    2       2        -       9       9        - 
  Preference Equity                                                         
   Shareholders                13      12        1      47      46        1 
  Common Equity                                                             
   Shareholders                87      82        5     315     311        4 
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Net Earnings                  102      96        6     371     366        5 
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Basic Earnings per Common                                                   
 Share ($)                   0.46    0.44     0.02    1.66    1.71    (0.05)
Diluted Earnings per                                                        
 Common Share ($)            0.45    0.43     0.02    1.65    1.70    (0.05)
Weighted Average Number of                                                  
 Common Shares Outstanding                                                  
 (# millions)               191.0   188.1      2.9   190.0   181.6      8.4 
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Cash Flow from Operating                                                    
 Activities                   172     230      (58)    976     915       61 
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                Factors Contributing to Quarterly and Annual                
                              Revenue Variances                             

Unfavourable


--  Lower commodity cost of natural gas charged to customers 
--  The expropriation of Belize Electricity and the resulting discontinuance
    of the consolidation method of accounting for the utility, effective
    June 20, 2011, which reduced revenue year over year 
--  Lower average gas consumption by residential and commercial customers,
    driven by overall warmer temperatures 
--  Decreased non-regulated hydroelectric production, mainly due to lower
    rainfall and a generating facility in Upstate New York being out of
    service in 2012 
--  Decreased electricity sales at FortisBC Electric for the quarter 

Favourable


--  An increase in gas delivery rates and the base component of electricity
    rates at most of the regulated utilities, consistent with rate
    decisions, reflecting ongoing investment in energy infrastructure and
    forecasted certain higher expenses recoverable from customers 
--  Net transmission revenue of approximately $2 million recognized for the
    quarter and $8.5 million recognized for the year at FortisAlberta, as a
    result of the 2012 distribution revenue requirements decision received
    in April 2012 
--  The flow through in customer electricity rates of higher energy supply
    costs, where applicable, at most of the regulated electric utilities,
    which increased revenue 
--  Increased electricity sales at Newfoundland Power and Maritime Electric 
--  A $4 million increase in franchise fee revenue at FortisAlberta for the
    year 
--  Growth in the number of customers, driven by FortisAlberta 
--  Higher pole-attachment revenue at FortisBC Electric, and differences in
    the amount of PBR incentives refunded to FortisBC Electric's customers
    period over period 
--  Higher Hospitality revenue at Fortis Properties for the year, driven by
    revenue from the Hilton Suites Winnipeg Airport hotel ("Hilton Suites
    Hotel"), which was acquired in October 2011, and higher Hospitality
    revenue for the quarter, due to revenue from the StationPark Hotel,
    which was acquired in October 2012 

                                                                            
                Factors Contributing to Quarterly and Annual                
                        Energy Supply Costs Variances                       

Favourable


--  Lower commodity cost of natural gas 
--  The expropriation of Belize Electricity and the resulting discontinuance
    of the consolidation method of accounting for the utility, effective
    June 20, 2011, which reduced energy supply costs year over year 
--  Lower average gas consumption by residential and commercial customers,
    which reduced natural gas purchases 
--  Decreased electricity sales at FortisBC Electric for the quarter, which
    reduced power purchases 

Unfavourable


--  Increased fuel prices at Caribbean Utilities and increased purchased
    power costs at FortisBC Electric, Newfoundland Power and FortisOntario 
--  An increase in the base amount of energy supply costs expensed at
    Maritime Electric in accordance with the operation of the Energy Cost
    Adjustment Mechanism 
--  Increased electricity sales at Newfoundland Power and Maritime Electric,
    which increased power purchases 

                                                                            
                Factors Contributing to Quarterly and Annual                
                        Operating Expenses Variances                        

Unfavourable


--  General inflationary and employee-related cost increases at the
    Corporation's regulated utilities, and increased franchise fee expenses
    at FortisAlberta for the year 
--  Increased operating expenses at the FortisBC Energy companies for the
    quarter, mainly due to the timing of certain expenses during 2012,
    including consulting and contracting expenses 
--  Higher operating expenses at Fortis Properties for the year, mainly
    associated with the Hilton Suites Hotel, which was acquired in October
    2011, and higher operating expenses for the quarter associated with the
    StationPark Hotel, which was acquired in October 2012 
--  A $3 million non-recurring provision recognized in the fourth quarter of
    2012 associated with the Corporation's investment in CustomerWorks
    Limited Partnership ("CWLP") 

Favourable


--  Reduced operating expenses at the FortisBC Energy companies during 2012,
    mainly due to the accrual of non-asset retirement obligation ("non-ARO")
    removal costs in depreciation, effective January 1, 2012, and lower
    customer care-related costs as a result of insourcing the customer care
    function, effective January 1, 2012. Non-ARO removal costs were recorded
    in operating expenses in 2011. 
--  The expropriation of Belize Electricity and the resulting discontinuance
    of the consolidation method of accounting for the utility, effective
    June 20, 2011, which decreased operating expenses year over year 
--  Lower operating expenses at FortisBC Electric for the quarter, due to
    the timing of certain expenses during 2012 

                                                                            
                Factors Contributing to Quarterly and Annual                
               Depreciation and Amortization Expense Variances              

Unfavourable


--  Continued investment in energy infrastructure 
--  Increased depreciation at the FortisBC Energy companies, mainly due to
    the accrual of non-ARO removal costs in depreciation, effective January
    1, 2012, as discussed above 

Favourable


--  The expropriation of Belize Electricity and the resulting discontinuance
    of the consolidation method of accounting for the utility, effective
    June 20, 2011, which decreased depreciation year over year 
--  Lower depreciation rates at FortisAlberta and FortisBC Electric,
    effective January 1, 2012, as a result of the 2012 revenue requirements
    decisions received in April 2012 and August 2012, respectively 

                                                                            
                Factors Contributing to Quarterly and Annual                
                         Other Income, Net Variances                        

Unfavourable


--  The $17 million (US$17.5 million) ($11 million after-tax) fee paid to
    Fortis in July 2011 following the termination of a Merger Agreement
    between Fortis and Central Vermont Public Service Corporation ("CVPS"),
    which increased other income in 2011 
--  Approximately $9 million ($7.5 million after tax) of costs, incurred
    largely in the first half of 2012, related to the pending acquisition of
    CH Energy Group 
--  A foreign exchange loss of approximately $2 million recognized for the
    year associated with the translation of the US dollar-denominated long-
    term other asset representing the book value of the Corporation's
    expropriated investment in Belize Electricity. A net foreign exchange
    gain of approximately $1 million ($1.5 million after tax) was recognized
    in 2011 related to the above item. 
--  Lower capitalized equity component of allowance for funds used during
    construction ("AFUDC") for the year, mainly at the FortisBC Energy
    companies 
--  An approximate $1 million gain on the sale of property at FortisAlberta
    during the first quarter of 2011 

Favourable


--  A foreign exchange gain of approximately $1 million recognized in the
    fourth quarter of 2012, compared to a net foreign exchange loss of $0.5
    million ($1 million after tax) recognized in the fourth quarter of 2011,
    associated with the translation of the US dollar-denominated long-term
    other asset representing the book value of the Corporation's
    expropriated investment in Belize Electricity 
--  An approximate $1 million ($0.5 million after-tax) gain recognized in
    the fourth quarter of 2012 on the involuntary disposition of assets,
    associated with damaged equipment at a generating facility in Upstate
    New York and related proceeds received under an insurance claim 


                                                                            
                Factors Contributing to Quarterly and Annual                
                          Finance Charges Variances                         

Unfavourable


--  Higher long-term debt levels in support of the utilities' capital
    expenditure programs 
--  Lower capitalized debt component of AFUDC at the regulated utilities,
    mainly at the FortisBC Energy companies 

Favourable


--  Higher capitalized interest associated with the financing of the
    construction of the Corporation's 51% controlling ownership interest in
    the Waneta Expansion 
--  The expropriation of Belize Electricity and the resulting discontinuance
    of the consolidation method of accounting for the utility, effective
    June 20, 2011, which decreased finance charges year over year 
--  Lower short-term borrowings at the regulated utilities year over year 

                                                                            
                Factors Contributing to Quarterly and Annual                
                           Income Taxes Variances                           

Favourable


--  Lower statutory income tax rates and lower earnings before income taxes 
--  Differences in deductions for income tax purposes compared to accounting
    purposes period over period 

                                                                            
             Factors Contributing to Quarterly Earnings Variance            

Favourable


--  Increased earnings at FortisAlberta, mainly due to rate base growth, net
    transmission revenue of $2 million recognized in the fourth quarter of
    2012, and the rate revenue reduction accrual during the fourth quarter
    of 2011, reflecting the cumulative impact from January 1, 2011 of the
    decrease in the allowed ROE for 2011 
--  Increased earnings at Other Canadian Regulated Electric Utilities,
    mainly due to lower effective income taxes at Maritime Electric and the
    accrual of cumulative return earned on FortisOntario's capital
    investment in smart meters 
--  Increased earnings at FortisBC Electric, due to rate base growth, lower-
    than-expected finance charges in 2012, higher pole-attachment revenue
    and the expiry of the PBR mechanism on December 31, 2011 

Unfavourable


--  Decreased non-regulated hydroelectric production, mainly in Belize due
    to lower rainfall, partially offset by an approximate $0.5 million
    after-tax gain recognized in the fourth quarter of 2012 on the
    involuntary disposition of generation assets in Upstate New York 
--  Increased corporate expenses, largely due to the $3 million non-
    recurring provision recognized in the fourth quarter of 2012 and lower
    effective income tax recoveries, partially offset by a foreign exchange
    gain of approximately $1 million recognized in the fourth quarter of
    2012, compared to an after-tax net foreign exchange loss of
    approximately $1 million recognized in the fourth quarter of 2011, and
    lower finance charges 
--  Decreased earnings at the FortisBC Energy companies, due to the timing
    of certain operating and maintenance expenses during 2012, lower
    capitalized AFUDC and lower-than-expected customer additions in 2012,
    partially offset by rate base growth, higher gas transportation volumes
    to industrial customers and lower effective income taxes 

                                                                            
              Factors Contributing to Annual Earnings Variance              

Favourable


--  Increased earnings at FortisAlberta, due to rate base growth, net
    transmission revenue of $8.5 million recognized in 2012, and lower-than-
    expected depreciation expense and finance charges in 2012, partially
    offset by an approximate $1 million gain on the sale of property during
    the first quarter of 2011 
--  Increased earnings at Newfoundland Power, mainly due to lower effective
    income taxes, a higher allowed ROE and electricity sales growth,
    partially offset by the impact of the support structure arrangements
    with Bell Aliant Regional Communications Inc. ("Bell Aliant") during
    2011, higher purchased power costs and higher depreciation expense 
--  Increased earnings at Other Canadian Regulated Electric Utilities,
    largely for the same reasons discussed above for the quarter 
--  Increased earnings at FortisBC Electric, due to rate base growth, higher
    pole-attachment revenue and lower-than-expected finance charges in 2012,
    partially offset by the expiry of the PBR mechanism on December 31, 2011
--  Increased earnings at the FortisBC Energy companies, mainly due to rate
    base growth, higher gas transportation volumes to industrial customers,
    lower-than-expected operating and maintenance expenses during 2012 and
    lower effective income taxes, partially offset by lower-than-expected
    customer additions in 2012 and lower capitalized AFUDC 

Unfavourable


--  Higher corporate expenses due to: (i) the favourable impact in 2011 of
    the $11 million after-tax fee paid to Fortis in July 2011 following the
    termination of a Merger Agreement between Fortis and CVPS; (ii)
    approximately $7.5 million of after-tax costs incurred in 2012 related
    to the pending acquisition of CH Energy Group; (iii) a $2 million
    foreign exchange loss recognized in 2012 compared to a $1.5 million
    after-tax net foreign exchange gain recognized in 2011; (iv) the $3
    million non-recurring provision recognized in the fourth quarter of
    2012; and (v) lower effective income tax recoveries. The above items
    were partially offset by lower finance charges, primarily due to higher
    capitalized interest associated with financing of the construction of
    the Corporation's 51% controlling ownership interest in the Waneta
    Expansion. 
--  Decreased non-regulated hydroelectric production, mainly due to lower
    rainfall and a generating facility in Upstate New York being out of
    service in 2012, partially offset by an approximate $0.5 million after-
    tax gain recognized in the fourth quarter of 2012 on the involuntary
    disposition of generation assets in Upstate New York 

SEGMENTED RESULTS OF OPERATIONS


----------------------------------------------------------------------------
Segmented Net Earnings Attributable to Common Equity Shareholders           
 (Unaudited)                                                                
Periods Ended December 31                   Quarter                  Annual 
($ millions)                  2012   2011  Variance   2012   2011  Variance 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Regulated Gas Utilities -                                                   
 Canadian                                                                   
  FortisBC Energy Companies     49     51        (2)   138    137         1 
----------------------------------------------------------------------------
Regulated Electric Utilities                                                
 - Canadian                                                                 
  FortisAlberta                 23     16         7     96     74        22 
  FortisBC Electric             12     10         2     50     48         2 
  Newfoundland Power             9      8         1     37     32         5 
  Other Canadian Electric                                                   
   Utilities                     6      2         4     24     20         4 
----------------------------------------------------------------------------
                                50     36        14    207    174        33 
----------------------------------------------------------------------------
Regulated Electric Utilities                                                
 - Caribbean                     3      4        (1)    19     20        (1)
Non-Regulated - Fortis                                                      
 Generation                      2      5        (3)    17     18        (1)
Non-Regulated - Fortis                                                      
 Properties                      5      5         -     22     23        (1)
Corporate and Other            (22)   (19)       (3)   (88)   (61)      (27)
----------------------------------------------------------------------------
Net Earnings Attributable to                                                
 Common Equity Shareholders     87     82         5    315    311         4 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

For an update on material regulatory decisions and applications pertaining to the Corporation's regulated utilities, refer to the "Regulatory Highlights" section of this earnings release. A discussion of the financial results of the Corporation's reporting segments is as follows.

REGULATED GAS UTILITIES - CANADIAN

FORTISBC ENERGY COMPANIES (1)


----------------------------------------------------------------------------
Financial Highlights                                                        
 (Unaudited)                               Quarter                   Annual 
Periods Ended December 31    2012   2011  Variance    2012   2011  Variance 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gas Volumes (petajoules)       60     63        (3)    199    203        (4)
Revenue ($ millions)          422    476       (54)  1,426  1,566      (140)
Earnings ($ millions)          49     51        (2)    138    137         1 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1)  Includes FortisBC Energy Inc. ("FEI"), FortisBC Energy (Vancouver      
     Island) Inc. ("FEVI") and FortisBC Energy (Whistler) Inc. ("FEWI")     
                                                                            
                                                                            
                                                                            
                Factors Contributing to Quarterly and Annual                
                            Gas Volumes Variances                           

Unfavourable


--  Lower average gas consumption by residential and commercial customers,
    driven by overall warmer temperatures 

Favourable


--  Higher gas transportation volumes to industrial customers, due to
    certain customers switching to natural gas from alternative sources of
    fuel as a result of low natural gas prices 

With the implementation of the Customer Care Enhancement Project on January 1, 2012, the FortisBC Energy companies changed their definition of a customer. As a result of this change, the FortisBC Energy companies reduced their combined customer count by approximately 18,000, as at January 1, 2012. As at December 31, 2012, the total number of customers served by the FortisBC Energy companies was approximately 945,000.

The FortisBC Energy companies earn approximately the same margin regardless of whether a customer contracts for the purchase and delivery of natural gas or only for the delivery of natural gas. As a result of the operation of regulator-approved deferral mechanisms, changes in consumption levels and the commodity cost of natural gas from those forecast to set residential and commercial customer gas rates do not materially affect earnings.

Seasonality has a material impact on the earnings of the FortisBC Energy companies as a major portion of the gas distributed is used for space heating. Most of the annual earnings of the FortisBC Energy companies are realized in the first and fourth quarters.


                Factors Contributing to Quarterly and Annual                
                              Revenue Variances                             

Unfavourable


--  Lower commodity cost of natural gas charged to customers 
--  Lower average gas consumption by residential and commercial customers 
--  Lower-than-expected customer additions in 2012 

Favourable


--  A net increase in the delivery component of customer rates, effective
    January 1, 2012, mainly due to ongoing investment in energy
    infrastructure and forecasted certain higher expenses recoverable from
    customers as reflected in the 2012/2013 revenue requirements decision
    received in April 2012 
--  Higher gas transportation volumes to industrial customers 

                                                                            
            Factors Contributing to Quarterly Earnings Variance             

Unfavourable


--  The timing of certain operating and maintenance expenses during 2012 
--  Lower capitalized AFUDC, due to lower assets under construction period
    over period 
--  Lower-than-expected customer additions in 2012 

Favourable


--  Rate base growth, due to continued investment in energy infrastructure 
--  Higher gas transportation volumes to industrial customers 
--  Lower effective income taxes 

                                                                            
              Factors Contributing to Annual Earnings Variance              

Favourable


--  Rate base growth, due to continued investment in energy infrastructure 
--  Higher gas transportation volumes to industrial customers 
--  Lower-than-expected operating and maintenance expenses during 2012 
--  Lower effective income taxes 

Unfavourable


--  Lower-than-expected customer additions in 2012 
--  Lower capitalized AFUDC, for the same reason discussed above for the
    quarter 

REGULATED ELECTRIC UTILITIES - CANADIAN

FORTISALBERTA


----------------------------------------------------------------------------
Financial Highlights                                                        
 (Unaudited)                                Quarter                   Annual
Periods Ended December 31    2012    2011  Variance   2012    2011  Variance
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Energy Deliveries                                                           
 (gigawatt hours ("GWh"))   4,365   4,232       133 16,799  16,367       432
Revenue ($ millions)          113     102        11    448     408        40
Earnings ($ millions)          23      16         7     96      74        22
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
                                                                            
                Factors Contributing to Quarterly and Annual                
                        Energy Deliveries Variances                         

Favourable


--  Higher average consumption by oilfield and commercial customers, due to
    increased activity 
--  Higher average consumption by residential customers, driven by cooler
    temperatures in the fourth quarter, which increased heating load 
--  Growth in the number of customers, mainly in the residential and
    commercial sectors, with the total number of customers increasing by
    approximately 9,000 year over year, driven by favourable economic
    conditions 

As a significant portion of FortisAlberta's distribution revenue is derived from fixed or largely fixed billing determinants, changes in quantities of energy delivered are not entirely correlated with changes in revenue. Revenue is a function of numerous variables, many of which are independent of actual energy deliveries.


             Factors Contributing to Quarterly Revenue Variance             

Favourable


--  An increase in customer electricity distribution rates, effective
    January 1, 2012, driven primarily by ongoing investment in energy
    infrastructure and forecasted certain higher expenses recoverable from
    customers 
--  Net transmission revenue of approximately $2 million recognized in the
    fourth quarter of 2012. In its April 2012 distribution revenue
    requirements decision, the regulator did not approve the continuation in
    2012 of the deferral of transmission volume variances associated with
    FortisAlberta's Alberta Electric System Operator ("AESO") charges
    deferral account. In the absence of full deferral, FortisAlberta was
    subject to volume risk in 2012 on actual transmission costs relative to
    those charged to customers based on forecast volumes and prices.
    Transmission volumes are influenced by many factors, which may result in
    actual transmission volumes varying from those forecasted. The deferral
    of transmission volume variances was reinstated, effective January 1,
    2013, as approved by the regulator and, therefore, such variances will
    not impact earnings in 2013. 
--  Growth in the number of customers 
--  The cumulative impact on revenue, from January 1, 2011, of the decrease
    in the allowed ROE to 8.75%, effective for both 2011 and 2012, from
    9.00% for 2010 was recognized during the fourth quarter of 2011, when
    the regulatory decision was received. As a result, an approximate $2
    million rate revenue reduction was accrued during the fourth quarter of
    2011, of which approximately $1.5 million related to the first three
    quarters of 2011. 
--  An increase in franchise fee revenue of approximately $1 million 

                                                                            
               Factors Contributing to Annual Revenue Variance              

Favourable


--  An increase in customer electricity distribution rates, for the same
    reason discussed above for the quarter 
--  Net transmission revenue of approximately $8.5 million recognized in
    2012, for the same reason discussed above for the quarter 
--  Growth in the number of customers 
--  An increase in franchise fee revenue of approximately $4 million 

                                                                            
             Factors Contributing to Quarterly Earnings Variance            

Favourable


--  Rate base growth, due to continued investment in energy infrastructure,
    which is being favourably impacted by growth in the number of customers 
--  Net transmission revenue of approximately $2 million recognized in the
    fourth quarter of 2012, as a result of the distribution revenue
    requirements decision received in April 2012 
--  The rate revenue reduction accrual during the fourth quarter of 2011,
    reflecting the cumulative impact from January 1, 2011 of the decrease in
    the allowed ROE for 2011 

                                                                            
              Factors Contributing to Annual Earnings Variance              

Favourable


--  Rate base growth, for the same reason discussed above for the quarter 
--  Net transmission revenue of approximately $8.5 million recognized in
    2012, for the same reason discussed above for the quarter 
--  Lower-than-expected depreciation expense in 2012, mainly due to
    construction projects being completed later in the year and lower AESO
    transmission-related capital expenditures 
--  Lower-than-expected finance charges in 2012 associated with the timing
    of debt issuances and associated interest rates on the debt 

Unfavourable


--  An approximate $1 million gain on the sale of property during the first
    quarter of 2011 

FORTISBC ELECTRIC (1)


----------------------------------------------------------------------------
Financial Highlights                                                        
 (Unaudited)                                Quarter                   Annual
Periods Ended December 31     2012   2011  Variance    2012   2011  Variance
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Electricity Sales (GWh)        830    843       (13)  3,143  3,143         -
Revenue ($ millions)            81     81         -     306    296        10
Earnings ($ millions)           12     10         2      50     48         2
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1)  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 electrical     
     utility assets owned by the City of Kelowna. Excludes the non-regulated
     generation operations of FortisBC Inc.'s wholly owned partnership,     
     Walden Power Partnership.                                              
                                                                            
                                                                            
                                                                            
         Factor Contributing to Quarterly Electricity Sales Variance        

Unfavourable


--  Lower average consumption, due to warmer weather 

                                                                            
                Factors Contributing to Quarterly and Annual                
                              Revenue Variances                             

Favourable


--  An overall increase in customer electricity rates, effective January 1,
    2012, mainly due to ongoing investment in energy infrastructure and
    forecasted certain higher expenses recoverable from customers as
    reflected in the 2012/2013 revenue requirements decision received in
    August 2012 
--  A 1.4% increase in customer electricity rates, effective June 1, 2011,
    as a result of the flow through to customers of increased purchased
    power costs charged to FortisBC Electric by BC Hydro, which increased
    revenue for the year 
--  Higher pole-attachment revenue 
--  Higher wheeling revenue for the year 
--  Differences in the amount of PBR incentives refunded to customers period
    over period 

Unfavourable


--  Decreased electricity sales for the quarter 

                                                                            
             Factors Contributing to Quarterly Earnings Variance            

Favourable


--  Rate base growth, due to continued investment in energy infrastructure 
--  Lower-than-expected finance charges in 2012. As approved in the
    2012/2013 revenue requirements decision received in August 2012,
    variances between actual finance charges and those forecasted in
    determining customer electricity rates, beginning January 1, 2012, are
    no longer permitted deferral account treatment and, therefore,
    favourably impacted earnings in 2012. 
--  Higher pole-attachment revenue 
--  The expiry of the PBR mechanism on December 31, 2011. In the fourth
    quarter of 2011, lower-than-expected electricity revenue and higher-
    than-expected operating expenses, which were shared equally between
    customers and FortisBC Electric under the PBR mechanism, unfavourably
    impacted earnings in that quarter. Pursuant to the Company's 2012/2013
    revenue requirements decision received in August 2012, variances between
    actual electricity revenue and purchased power costs and those used in
    determining customer electricity rates were subject to full deferral
    account treatment and, therefore, did not impact earnings in the fourth
    quarter of 2012. 

                                                                            
              Factors Contributing to Annual Earnings Variance              

Favourable


--  Rate base growth, for the same reason discussed above for the quarter 
--  Higher pole-attachment revenue 
--  Lower-than-expected finance charges, for the same reason discussed above
    for the quarter 

Unfavourable


--  The expiry of the PBR mechanism on December 31, 2011. In 2011 lower-
    than-expected costs, primarily purchased power costs, which were shared
    equally between customers and FortisBC Electric under the PBR mechanism,
    favourably impacted earnings in that year. In 2012 variances between
    actual electricity revenue and purchased power costs and those used in
    determining customer electricity rates were subject to full deferral
    account treatment and, therefore, did not impact earnings in 2012.  

NEWFOUNDLAND POWER


----------------------------------------------------------------------------
Financial Highlights                                                        
 (Unaudited)                                 Quarter                  Annual
Periods Ended December 31      2012   2011  Variance   2012   2011  Variance
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Electricity Sales (GWh)       1,539  1,527        12  5,652  5,553        99
Revenue ($ millions)            159    156         3    581    573         8
Earnings ($ millions)             9      8         1     37     32         5
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
                                                                            
                Factors Contributing to Quarterly and Annual                
                         Electricity Sales Variances                        

Favourable


--  Growth in the number of customers 
--  Higher concentration of electric-versus-oil heating in new home
    construction combined with economic growth, which increased consumption 

Unfavourable


--  Sunnier weather conditions, which reduced average consumption 

                                                                            
              Factor Contributing to Quarterly Revenue Variance             

Favourable


--  The 0.8% increase in electricity sales 

                                                                            
               Factors Contributing to Annual Revenue Variance              

Favourable


--  The 1.8% increase in electricity sales 
--  Increased amortization to revenue of regulatory liabilities and
    deferrals, as approved by the regulator 

Unfavourable


--  Revenue for 2011 included amounts related to support structure
    arrangements, which were in place with Bell Aliant during 2011,
    associated with the joint-use poles and related infrastructure held for
    sale to Bell Aliant. The joint-use poles and related infrastructure were
    sold in October 2011. 

                                                                            
             Factors Contributing to Quarterly Earnings Variance            

Favourable


--  An increase in the allowed ROE from 8.38% to 8.80%, effective January 1,
    2012, which was accrued in 2012, as approved by the regulator, as a
    decrease in operating expenses for deferred recovery from customers 
--  Electricity sales growth 
--  Lower effective income taxes 
--  Lower operating expenses, due to lower conservation costs associated
    with customer rebate programs and decreased maintenance costs 

Unfavourable


--  Higher purchased power costs, as a result of lower generation associated
    with the Company's hydroelectric generating facilities in 2012 due to
    lower water inflows 
--  Higher depreciation, due to continued investment in energy
    infrastructure 

                                                                            
              Factors Contributing to Annual Earnings Variance              

Favourable


--  Lower effective income taxes, primarily due to lower Part VI.1 taxes,
    including the favourable impact of reversals of statute-barred Part VI.1
    taxes, and a lower statutory income tax rate. For further information on
    Part VI.1 tax, refer to the "Update on Significant Items" section of
    this earnings release. 
--  A higher allowed ROE, as discussed above for the quarter 
--  Electricity sales growth 

Unfavourable


--  The impact of the support structure arrangements with Bell Aliant during
    2011, as discussed above 
--  The same factors discussed above for the quarter 

OTHER CANADIAN ELECTRIC UTILITIES (1)


----------------------------------------------------------------------------
Financial Highlights                                                        
 (Unaudited)                                 Quarter                  Annual
Periods Ended December 31      2012   2011  Variance   2012   2011  Variance
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Electricity Sales (GWh)         578    568        10  2,381  2,366        15
Revenue ($ millions)             89     83         6    353    339        14
Earnings ($ millions)             6      2         4     24     20         4
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1)  Includes Maritime Electric and FortisOntario. FortisOntario mainly     
     includes Canadian Niagara Power, Cornwall Electric and Algoma Power.   
                                                                            
                                                                            
                                                                            
        Factors Contributing to Quarterly Electricity Sales Variance        

Favourable


--  Growth in the number of residential and commercial customers on Prince
    Edward Island ("PEI") 
--  Higher average consumption by residential customers on PEI, due to
    colder temperatures, and an increase in the number of such customers
    using electricity for home heating 
--  Higher average consumption by commercial customers in the agricultural
    processing sector on PEI 

                                                                            
          Factors Contributing to Annual Electricity Sales Variance         

Favourable


--  The same factors discussed above for the quarter 

Unfavourable


--  Lower average consumption by residential and industrial customers in
    Ontario, primarily during the first quarter of 2012, reflecting more
    moderate temperatures and weak economic conditions in the region 

                                                                            
                Factors Contributing to Quarterly and Annual                
                              Revenue Variances                             

Favourable


--  The overall 1.8% and 0.6% increase in electricity sales for the quarter
    and year, respectively, for the reasons discussed above 
--  An increase in the basic component of customer rates at Maritime
    Electric, effective March 1, 2012, associated with the higher flow
    through and recovery of energy supply costs 
--  The accrual of cumulative return earned on FortisOntario's capital
    investment in smart meters, of which approximately $0.5 million related
    to prior years 
--  The flow through in customer electricity rates of higher energy supply
    costs at FortisOntario 
--  Increased base customer electricity rates at FortisOntario 

                                                                            
             Factors Contributing to Quarterly Earnings Variance            

Favourable


--  Lower effective income taxes at Maritime Electric, primarily due to
    lower Part VI.1 taxes 
--  The accrual of cumulative return earned on FortisOntario's capital
    investment in smart meters, of which approximately $0.5 million related
    to prior years 
--  Increased operating expenses at Maritime Electric in the fourth quarter
    of 2011 associated with retirement costs 
--  Lower operating expenses at FortisOntario in the fourth quarter of 2012,
    largely due to the timing of certain expenses during 2012 

                                                                            
              Factors Contributing to Annual Earnings Variance              

Favourable


--  Lower effective income taxes at Maritime Electric, primarily due to
    lower Part VI.1 taxes 
--  The accrual of cumulative return earned on FortisOntario's capital
    investment in smart meters, as discussed above for the quarter 
--  Higher earnings contribution by FortisOntario's operations in Cornwall,
    due to an increase in base customer electricity rates 
--  Net cost savings at FortisOntario in 2012 associated with the exercising
    of the Company's option to purchase all of the electricity distribution
    assets previously leased under an operating lease agreement with the
    City of Port Colborne 

REGULATED ELECTRIC UTILITIES - CARIBBEAN (1)


----------------------------------------------------------------------------
Financial Highlights                                                        
 (Unaudited)                                Quarter                  Annual 
Periods Ended December 31      2012   2011 Variance    2012   2011 Variance 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Average US:CDN Exchange Rate                                                
 (2)                           0.99   1.02    (0.03)   1.00   0.99     0.01 
Electricity Sales (GWh)         181    174        7     728    918     (190)
Revenue ($ millions)             71     71        -     273    305      (32)
Earnings ($ millions)             3      4       (1)     19     20       (1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1)  Includes Caribbean Utilities on Grand Cayman, Cayman Islands, in which 
     Fortis holds an approximate 60% controlling ownership interest; three  
     wholly owned utilities in the Turks and Caicos Islands, comprised of   
     FortisTCI Limited, Atlantic Equipment & Power (Turks and Caicos) Ltd.  
     and Turks and Caicos Utilities Limited, acquired in August 2012,       
     (collectively "Fortis Turks and Caicos"); and the financial results of 
     the Corporation's approximate 70% controlling ownership interest in    
     Belize Electricity up to June 20, 2011. On June 20, 2011, the          
     Government of Belize expropriated the Corporation's investment in      
     Belize Electricity. As a result of no longer controlling the operations
     of the utility, Fortis discontinued the consolidation method of        
     accounting for Belize Electricity, effective June 20, 2011. For further
     information, refer to the "Business Risk Management" section of the    
     MD&A for three and nine months ended September 30, 2012.               
                                                                            
(2)  The reporting currency of Caribbean Utilities and Fortis Turks and     
     Caicos is the US dollar. The reporting currency of Belize Electricity  
     was the Belizean dollar, which is pegged to the US dollar at           
     BZ$2.00=US$1.00.                                                       
                                                                            
                                                                            
                                                                            
        Factors Contributing to Quarterly Electricity Sales Variance        

Favourable


--  Electricity sales of 6 GWh for the quarter and 8 GWh year to date at
    Turks and Caicos Utilities Limited ("TCU"), which was acquired in August
    2012 
--  Higher tourism activity in the Turks and Caicos Islands 
--  Growth in the number of customers, excluding the impact of customers
    acquired with TCU 

                                                                            
          Factors Contributing to Annual Electricity Sales Variance         

Unfavourable


--  The expropriation of Belize Electricity and the resulting discontinuance
    of the consolidation method of accounting for the utility, effective
    June 20, 2011. Excluding Belize Electricity, electricity sales increased
    0.6% year over year. 
--  Higher rainfall and cooler temperatures experienced on Grand Cayman,
    which decreased air conditioning load, combined with continued weak
    economic conditions in the region 

Favourable


--  The same factors discussed above for the quarter 

                                                                            
             Factors Contributing to Quarterly Revenue Variance             

Unfavourable


--  Approximately $2 million of unfavourable foreign exchange associated
    with the translation of US dollar-denominated revenue, due to the
    weakening of the US dollar relative to the Canadian dollar quarter over
    quarter 
--  The discontinuance of government subsidization of FortisTCI Limited's
    ("FortisTCI's") South Caicos operations, effective April 1, 2012, in
    accordance with a rate decision received in February 2012 

Favourable


--  Increased electricity sales at FortisTCI 
--  The flow through in customer electricity rates of higher energy supply
    costs at Caribbean Utilities, due to an increase in the cost of fuel
    period over period, which increased revenue period over period 
--  An increase in electricity rates for FortisTCI's large hotel customers,
    effective April 1, 2012, in accordance with a rate decision received in
    February 2012 
--  An increase in base electricity rates at Caribbean Utilities, effective
    June 1, 2012 

                                                                            
               Factors Contributing to Annual Revenue Variance              

Unfavourable


--  The expropriation of Belize Electricity and the resulting discontinuance
    of the consolidation method of accounting for the utility, effective
    June 20, 2011, which decreased revenue by approximately $45 million year
    over year 
--  The discontinuance of government subsidization of FortisTCI's South
    Caicos operations, effective April 1, 2012, in accordance with a rate
    decision received in February 2012 
--  Decreased electricity sales at Caribbean Utilities 

Favourable


--  The same factors discussed above for the quarter 
--  Approximately $3 million of favourable foreign exchange associated with
    the translation of US dollar-denominated revenue, due to the
    strengthening of the US dollar relative to the Canadian dollar year over
    year 

                                                                            
             Factors Contributing to Quarterly Earnings Variance            

Unfavourable


--  Excluding foreign exchange impacts, higher depreciation expense, largely
    at Caribbean Utilities, mainly due to investment in utility capital
    assets 

Favourable


--  Increased electricity sales at FortisTCI 

                                                                            
              Factors Contributing to Annual Earnings Variance              

Unfavourable


--  Excluding foreign exchange impacts, overall higher depreciation expense,
    and higher finance charges at FortisTCI, largely due to debt incurred to
    finance the acquisition of TCU 
--  Decreased electricity sales at Caribbean Utilities 

Favourable


--  Increased electricity sales at FortisTCI 
--  Excluding foreign exchange impacts, lower energy supply costs at
    FortisTCI, mainly due to more fuel-efficient production realized with
    the use of new generation units at the utility 

FortisTCI acquired TCU in August 2012 for an aggregate purchase price of approximately $13 million (US$13 million), inclusive of debt assumed of $5 million (US$5 million). The utility serves more than 2,000 customers on Grand Turk and Salt Cay with a diesel-fired generating capacity of 9 MW.

NON-REGULATED - FORTIS GENERATION (1)


----------------------------------------------------------------------------
Financial Highlights                                                        
 (Unaudited)                                Quarter                  Annual 
Periods Ended December 31      2012   2011 Variance    2012   2011 Variance 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Energy Sales (GWh)               50    112      (62)    306    389      (83)
Revenue ($ millions)              5      9       (4)     31     34       (3)
Earnings ($ millions)             2      5       (3)     17     18       (1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1)  Includes the financial results of non-regulated generation assets in   
     Belize, Ontario, central Newfoundland, British Columbia and Upstate New
     York, with a combined generating capacity of 139 MW, mainly            
     hydroelectric                                                          
                                                                            
                                                                            
                                                                            
           Factor Contributing to Quarterly Energy Sales Variance           

Unfavourable


--  Decreased production in Belize and Upstate New York, due to lower
    rainfall 

                                                                            
            Factors Contributing to Annual Energy Sales Variance            

Unfavourable


--  Decreased production in Upstate New York, due to a generating facility
    being out of service and lower rainfall 
--  Decreased production in Belize and Ontario, due to lower rainfall 

                                                                            
                Factors Contributing to Quarterly and Annual                
                              Revenue Variances                             

Unfavourable


--  Decreased production in Belize and Upstate New York 
--  Decreased production in Ontario for the year 

                                                                            
            Factors Contributing to Quarterly Earnings Variances            

Unfavourable


--  Decreased production in Belize and Upstate New York 

Favourable


--  An approximate $1 million ($0.5 million after-tax) gain recognized in
    the fourth quarter of 2012 on the involuntary disposition of assets,
    associated with damaged equipment at Moose River's hydroelectric
    generating facility in Upstate New York and related proceeds received
    under an insurance claim  

                                                                            
              Factors Contributing to Annual Earnings Variance              

Unfavourable


--  Decreased production in Upstate New York and Ontario 
--  Decreased production in Belize, partially offset by lower finance
    charges in Belize 

Favourable


--  The approximate $1 million (0.5 million after-tax) gain on involuntary
    disposition of generation assets, for the same reason discussed above
    for the quarter 

NON-REGULATED - FORTIS PROPERTIES (1)


----------------------------------------------------------------------------
Financial Highlights                                                        
 (Unaudited)                             Quarter                    Annual  
Periods Ended December                                                      
 31                        2012    2011 Variance     2012    2011 Variance  
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Hospitality - Revenue                                                       
 per Available Room                                                         
 ("RevPar")             $ 73.94 $ 73.66      0.4% $ 80.00 $ 78.76      1.6% 
Real Estate - Occupancy                                                     
 Rate (as at) (2)          91.9%   93.2%    (1.4)%   91.9%   93.2%    (1.4)%
----------------------------------------------------------------------------
Hospitality Revenue ($                                                      
 millions)                   44      41        3      175     164       11  
Real Estate Revenue ($                                                      
 millions)                   17      17        -       67      67        -  
----------------------------------------------------------------------------
  Total Revenue ($                                                          
   millions)                 61      58        3      242     231       11  
----------------------------------------------------------------------------
Earnings ($ millions)         5       5        -       22      23       (1) 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1)  Fortis Properties owns and operates 23 hotels, collectively            
     representing more than 4,400 rooms in eight Canadian provinces, and    
     approximately 2.7 million square feet of commercial office and retail  
     space primarily in Atlantic Canada.                                    
                                                                            
(2)  Reduced occupancy rate is primarily due to increased vacancy in New    
     Brunswick.                                                             
                                                                            
                                                                            
                                                                            
              Factors Contributing to Quarterly RevPar Variance             

Favourable


--  A 0.6% increase in the average daily room rate, due to increases in
    western Canada and central Canada, partially offset by a decrease in
    Atlantic Canada 

Unfavourable


--  A 0.2% decrease in occupancy, due to a decrease in central Canada,
    partially offset by increases in Atlantic Canada and western Canada 

                                                                            
               Factors Contributing to Annual RevPar Variance               

Favourable


--  The Hilton Suites Hotel, acquired in October 2011, contributed 1.2% to
    the increase in RevPAR. 
--  A 1.5% increase in the average daily room rate, excluding the impact of
    the Hilton Suites Hotel, due to increases in western Canada and central
    Canada 

Unfavourable


--  A 1.1% decrease in occupancy, excluding the impact of the Hilton Suites
    Hotel, due to decreases in central Canada and Atlantic Canada, partially
    offset by an increase in western Canada 

                                                                            
       Factors Contributing to Quarterly Hospitality Revenue Variance       

Favourable


--  Revenue contribution from the StationPark Hotel, which was acquired in
    October 2012 
--  Higher revenue from operations in western Canada and Atlantic Canada 

                                                                            
         Factors Contributing to Annual Hospitality Revenue Variance        

Favourable


--  Revenue contribution from the Hilton Suites Hotel for a full year in
    2012 and from the StationPark Hotel for the fourth quarter of 2012 
--  Higher revenue from operations in western Canada 

Unfavourable


--  Lower revenue from operations in central Canada and Atlantic Canada 

                                                                            
              Factors Contributing to Annual Earnings Variance              

Unfavourable


--  Lower performance at the Hospitality Division, excluding the Hilton
    Suites Hotel, primarily due to the impact of decreased occupancy at
    hotel operations in central Canada and Atlantic Canada, partially offset
    by the impact of increased average room rates and occupancy in western
    Canada 
--  Increased depreciation due to capital additions and improvements 

Favourable


--  Contribution from the Hilton Suites Hotel for a full year in 2012 

CORPORATE AND OTHER (1)


----------------------------------------------------------------------------
Financial Highlights                                                        
 (Unaudited)                                                                
Periods Ended December 31                   Quarter                  Annual 
($ millions)                  2012   2011  Variance   2012   2011  Variance 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue                          6      6         -     24     23         1 
Operating Expenses               6      2         4     14      9         5 
Depreciation and                                                            
 Amortization                    1      1         -      2      2         - 
Other Income (Expenses), Net     2      1         1     (9)    21       (30)
Finance Charges                 11     13        (2)    47     54        (7)
Income Tax Recovery             (1)    (2)        1     (7)    (6)       (1)
----------------------------------------------------------------------------
                                (9)    (7)       (2)   (41)   (15)      (26)
Preference Share Dividends      13     12         1     47     46         1 
----------------------------------------------------------------------------
Net Corporate and Other                                                     
 Expenses                      (22)   (19)       (3)   (88)   (61)      (27)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1)  Includes Fortis net corporate expenses, net expenses of non-regulated  
     FortisBC Holdings Inc. ("FHI") corporate-related activities, and the   
     financial results of FHI's wholly owned subsidiary FortisBC Alternative
     Energy Services Inc. ("FAES") and FHI's 30% ownership interest in CWLP.
     The contracts between CWLP and the FortisBC Energy companies ended on  
     December 31, 2011.                                                     
                                                                            
                                                                            
                                                                            
                     Factors Contributing to Quarterly                      
                  Net Corporate and Other Expenses Variance                 

Unfavourable


--  Increased operating expenses, primarily due to a $3 million non-
    recurring provision recognized in the fourth quarter of 2012 associated
    with the Corporation's investment in CWLP 
--  Lower effective income tax recoveries, due to higher Part VI.1 taxes,
    partially offset by the release of income tax provisions at FortisBC
    Holdings Inc. ("FHI") in 2012 
--  Higher preference share dividends, due to the issuance of First
    Preference Shares, Series J in November 2012 

Favourable


--  Increased other income, net of expenses, primarily due to a foreign
    exchange gain of approximately $1 million recognized in the fourth
    quarter of 2012 compared to a net foreign exchange loss of $0.5 million
    ($1 million after tax) recognized in the same quarter last year,
    associated with the translation of the US dollar-denominated long-term
    other asset representing the book value of the Corporation's
    expropriated investment in Belize Electricity 
--  Lower finance charges, primarily due to higher capitalized interest
    associated with the financing of the construction of the Corporation's
    51% controlling ownership interest in the Waneta Expansion and the
    impact of the conversion of the Corporation's US$40 million convertible
    debentures into common shares in November 2011. The above items were
    partially offset by higher interest on credit facility borrowings, due
    to higher average credit facility borrowings. 

                                                                            
                       Factors Contributing to Annual                       
                  Net Corporate and Other Expenses Variance                 

Unfavourable


--  Increased other expenses, net of other income, primarily due to: (i) the
    favourable impact in 2011 of the $17 million (US$17.5 million) ($11
    million after-tax) fee paid to Fortis in July 2011 following the
    termination of a Merger Agreement between Fortis and CVPS; (ii)
    approximately $9 million ($7.5 million after tax) of costs, incurred
    largely in the first half of 2012, related to the pending acquisition of
    CH Energy Group; and (iii) a foreign exchange loss of approximately $2
    million recognized in 2012 compared to a net foreign exchange gain of
    approximately $1 million ($1.5 million after tax) recognized in 2011,
    associated with the translation of the US dollar-denominated long-term
    other asset representing the book value of the Corporation's
    expropriated investment in Belize Electricity  
--  Increased operating expenses, for the reason as discussed above for the
    quarter, as well as increased employee compensation-related expenses 
--  Excluding income tax expense associated with the merger termination fee
    paid to Fortis in July 2011, effective income tax recoveries decreased,
    primarily due to the same reason discussed above for the quarter 
--  Higher preference share dividends, for the same reason discussed above
    for the quarter 

Favourable


--  Lower finance charges, for the same reasons discussed above for the
    quarter. However, higher fees associated with the increase in the
    Corporation's committed revolving credit facility to $1 billion in May
    2012 had an unfavourable impact on finance charges year over year. 

REGULATORY HIGHLIGHTS

The following provides an update on material regulatory decisions and applications associated with the Corporation's regulated gas and electric utilities from that disclosed in the interim MD&A for the three and nine months ended September 30, 2012.


MATERIAL REGULATORY DECISIONS AND APPLICATIONS                              
----------------------------------------------------------------------------
Regulated      Summary Description                                          
Utility                                                                     
----------------------------------------------------------------------------
FEI/FEVI/FEWI  - Following the announcement by the Government of British    
               Columbia of the Greenhouse Gas Reductions (Clean Energy      
               Regulation) ("GHG Regulation") under the Clean Energy Act,   
               which was promulgated in May 2012, FEI announced an incentive
               funding program to assist eligible vehicle operators in      
               purchasing liquefied natural gas ("LNG")-fuelled vehicles.   
               The incentive program funding includes up to $62 million,    
               over a period of several years, to offset a percentage of the
               incremental capital cost for eligible operators in purchasing
               qualifying LNG-fuelled vehicles. The eligible applicants for 
               the incentive program are commercial return-to-base fleet    
               operators of heavy-duty trucks, buses, vocational vehicles   
               and marine vessels. Awarding of the incentives commenced in  
               late 2012 and will cover up to 75% of the eligible operators'
               incremental capital costs. Additionally, the GHG Regulation  
               allows FEI to invest up to $30 million for LNG fuelling      
               stations and up to $12 million for compressed natural gas    
               ("CNG") fuelling stations. In October 2012 the BCUC approved 
               the rate treatment of the above expenditures being made under
               the GHG Regulation.                                          
                                                                            
               - In December 2012 the British Columbia Utilities Commission 
               ("BCUC") issued its decision regarding the BCUC-initiated    
               public process, which commenced in May 2011, inquiring into  
               whether FEI should be able to provide alternative energy     
               services as regulated utility services and to establish      
               guidelines that would apply to the provision of such         
               services. The BCUC determined that CNG and LNG refuelling    
               services are regulated when they are provided by a public    
               utility such as FEI. The BCUC recommended, however, that FEI 
               undertake such services in the future through a separate non-
               regulated affiliate, with the exception of expenditures      
               permitted under the GHG Regulation in British Columbia.      
               Similarly, the BCUC determined that biomethane services are  
               part of FEI's regulated service offering, but that ownership 
               of any biogas upgrading systems will be determined on a case 
               by case basis. Moreover, district energy systems and other   
               geo-exchange systems are regulated, and should continue to be
               carried out through FEI's affiliate, FortisBC Alternative    
               Energy Services Inc. ("FAES"), although an exemption from    
               regulation can be sought for discrete energy systems. FEI is 
               considering the findings of the decision and its impact on   
               its provision of alternative energy services.                
                                                                            
               - A public oral hearing for the first phase of a Generic Cost
               of Capital ("GCOC") Proceeding in British Columbia occurred  
               in December 2012. The BCUC has determined that a second,     
               subsequent phase be added to the GCOC Proceeding to determine
               an appropriate allowed ROE and capital structure for all     
               other regulated utilities in British Columbia once the       
               benchmark utility has been established in the first phase of 
               the GCOC Proceeding. FEI has been designated as the benchmark
               utility. FEVI, FEWI and FortisBC Electric will have their    
               allowed ROEs and capital structures determined in the second 
               phase of the GCOC Proceeding. A decision on the benchmark    
               utility, FEI, is expected mid-2013. Effective January 1,     
               2013, as ordered by the BCUC in December 2012, the current   
               allowed ROE and capital structure for FEI and all other      
               regulated entities in British Columbia that rely on the      
               benchmark utility to establish rates are to be maintained and
               made interim. The results of the GCOC Proceeding could       
               materially impact the earnings of the FortisBC Energy        
               companies and FortisBC Electric.                             
                                                                            
               - FAES has filed applications for approval of various        
               thermal-energy projects. These projects and their status are 
               as follows: (i) Delta School District - approval has been    
               granted by the BCUC; (ii) Tsawwassen Springs Development -   
               approval has been granted by the BCUC; (iii) PCI Marine      
               Gateway - approval has been granted by the BCUC for the      
               capital expenditures, but approval of revisions to the rate  
               design and rates are pending; (iv) Telus Garden - a BCUC     
               decision is expected in early 2013; and (v) Kelowna District 
               Energy System - the regulatory process is ongoing and a BCUC 
               decision is expected in the second quarter of 2013.          
----------------------------------------------------------------------------
FortisBC       - In November 2012 FortisBC Electric filed an application    
Electric       with the BCUC requesting approval for FortisBC Electric to   
               acquire the City of Kelowna's electrical utility assets and  
               to include the assets in FortisBC Electric's rate base.      
----------------------------------------------------------------------------
FortisAlberta  - In September 2012 the AUC issued a generic PBR Decision    
               outlying the PBR framework applicable to distribution        
               utilities in Alberta, including FortisAlberta, for a five-   
               year term commencing January 1, 2013. In the PBR Decision, a 
               formula that estimates inflation annually and assumes        
               productivity improvements is to be used by the distribution  
               utilities to determine customer rates on an annual basis. The
               PBR Decision raises concerns and uncertainties for           
               FortisAlberta regarding the treatment of certain capital     
               expenditures. While the PBR Decision did provide for a       
               capital tracker mechanism for the recovery of certain capital
               expenditures, FortisAlberta sought further clarification     
               regarding this mechanism in its required Compliance          
               Application filed in November 2012 and a Review and Variance 
               Application currently before the AUC. FortisAlberta has also 
               sought leave to appeal the issue to the Alberta Court of     
               Appeal. In December 2012 FortisAlberta filed a 2013 Capital  
               Tracker Application with the AUC for specific categories of  
               capital expenditures. A decision on the Compliance           
               Application is expected in the first quarter of 2013.        
               Decisions on the Review and Variance and Capital Tracker     
               Applications are expected in the third quarter of 2013. The  
               outcome of the outstanding applications, including the impact
               on financial results, if any, and the timing of recognition  
               of such financial results are currently unknown. However, the
               implementation of PBR does not alter a utility's right to a  
               reasonable opportunity to recover prudent COS and the right  
               to earn a reasonable ROE.                                    
                                                                            
               - In its Compliance Application, FortisAlberta requested a   
               1.71% increase in customer distribution rates, effective     
               January 1, 2013, reflecting the determination of the         
               inflationary and productivity factors in accordance with the 
               PBR Decision. FortisAlberta also requested customer          
               distribution rate adjustments for flow-through costs and     
               transitional adjustments. In December 2012 the AUC issued a  
               decision setting 2012 customer distribution rates as interim 
               rates for 2013, pending AUC decisions on FortisAlberta's     
               Compliance and Capital Tracker Applications.                 
                                                                            
               - In October 2012 the AUC initiated a GCOC Proceeding, which 
               includes the determination of: (i) the allowed ROE for 2013; 
               (ii) whether a formulaic ROE automatic mechanism should be   
               re-established; and (iii) whether the PBR Decision or other  
               decisions require the adjustment of the allowed ROE or equity
               component of total capital structure as a result of any      
               changes in risk.                                             
                                                                            
               - In November 2012 the AUC reinitiated a Utility Asset       
               Disposition ("UAD") Proceeding which will address, among     
               other things, cost responsibility for stranded assets.       
               FortisAlberta is fully participating in the UAD Proceeding   
               and common-utility evidence has been filed and experts have  
               been engaged. The UAD Proceeding is expected to continue     
               through the first quarter of 2013 with a decision expected by
               the second quarter of 2013. Any decision by the AUC regarding
               the treatment of stranded assets does not alter a utility's  
               right to a reasonable opportunity to recover prudent COS and 
               the right to earn a reasonable ROE.                          
                                                                            
               - In June 2012 AESO filed with the AUC a Customer            
               Contribution Policy Application and an Amortized Construction
               Contribution Rider I Application. The first application      
               proposed a reduction in the level of AESO contributions that 
               transmission customers, including FortisAlberta, would pay   
               versus what the transmission facility owner would pay. The   
               second application proposed that transmission customers be   
               given the option to make the required AESO contributions as a
               series of payments over a number of years, rather than as an 
               up-front payment. Effectively, this would result in the      
               transmission facility owner financing the AESO contributions.
               In December 2012 the AUC issued a decision that denied both  
               applications and directed AESO to bring forward its proposals
               as part of its next comprehensive AESO tariff application. As
               a result, the current contribution policy and the manner in  
               which contributions are paid remain in effect.               
                                                                            
               - In January 2013 the Government of Alberta responded to the 
               recommendations of the Retail Market Review Committee and, as
               part of that response, requested that the AUC begin the      
               process to remove the electricity rate increase limitations  
               that have been in effect since February 2012. As the AUC     
               proceeds with the process of removing the electricity rate   
               increase limitations, it is expected that FortisAlberta's    
               interim 2013 customer distribution rates will be adjusted to 
               reflect the AUC's rulings with respect to the Company's      
               Compliance and Capital Tracker Applications.                 
----------------------------------------------------------------------------
Newfoundland   - In September 2012 Newfoundland Power filed a 2013/2014     
Power          General Rate Application for the purpose of setting customer 
               electricity rates and cost of capital. Newfoundland Power is 
               proposing an overall average increase in customer electricity
               rates of 6%, effective March 1, 2013. The Company is also    
               proposing the discontinuance of the ROE automatic adjustment 
               formula. A public hearing on the application is expected to  
               conclude in February 2013.                                   
----------------------------------------------------------------------------
Maritime       - In February 2012 the PEI Energy Commission ("PEI           
Electric       Commission") released its Discussion Paper, Charting Our     
               Electricity Future, which outlined discussion points on which
               the PEI Commission should seek input through a consultative  
               process with stakeholders and the general public. Maritime   
               Electric participated in public forums and stakeholder       
               consultations held in early 2012. In January 2013 the PEI    
               Commission released a Final Report of its recommendations to 
               the Government of PEI, which included the following: (i)     
               Maritime Electric should continue as PEI's primary electric  
               utility; however, the PEI Energy Corporation should acquire  
               Maritime Electric's generation assets over a reasonable      
               period of time, thereby reducing the utility's rate base and 
               equity; (ii) the equity component of Maritime Electric's     
               capital structure should be maintained at no less than 35%   
               and no more than 40% of total capital structure; (iii) the   
               current COS regulatory model should be maintained but        
               responsibility for the Electric Power Act (PEI) should be    
               assigned to a new three-person panel of commissioners that   
               deals only with electric utility regulation and oversight and
               will operate independently of the Island Regulatory Appeals  
               Commission; (iv) a consumer advocate for electricity should  
               be appointed to better facilitate the participation of       
               interested parties at regulatory hearings; (v) the Government
               of PEI should assume the responsibility for financing the    
               existing $47.5 million of deferred incremental replacement   
               energy costs at Maritime Electric associated with the        
               refurbishment of the New Brunswick Power Point Lepreau       
               nuclear generating station ("Point Lepreau"); (vi) a new     
               cable interconnection with New Brunswick should be pursued   
               immediately and ownership of the cable should reside with the
               Government of PEI; and (vii) responsibility for demand-side  
               management programming, currently with the Government of PEI,
               should transfer back to Maritime Electric.                   
                                                                            
               - In December 2012 the Electric Power (Energy Accord         
               Continuation) Amendment Act (PEI) ("Accord Continuation Act")
               was enacted which sets out the inputs, rates and other terms 
               for the continuation of the PEI Energy Accord ("Accord") for 
               an additional three years covering the period March 1, 2013  
               through February 29, 2016. Over the three-year period,       
               increases in electricity costs for a typical residential     
               customer have been set at 2.2% annually and Maritime         
               Electric's allowed ROE has been capped at 9.75% each year.   
               Under the terms of the Accord Continuation Act and the       
               Accord, the Government of PEI assumed responsibility,        
               effective March 1, 2011, for the cost of incremental         
               replacement energy and monthly operating and maintenance     
               costs related to Point Lepreau during its refurbishment      
               period, which ended in fall 2012.                            
                                                                            
               - In December 2012 Maritime Electric's 2013 Capital Budget   
               Application totaling approximately $26 million, before       
               customer contributions, was approved, as filed, with the     
               exception of approximately $1 million related to preparatory 
               work for a third submarine-cable interconnection, which has  
               been deferred for additional consideration by the regulator. 
----------------------------------------------------------------------------
FortisOntario  - In November 2012 the Ontario Energy Board approved, as     
               filed, a settlement agreement pertaining to FortisOntario's  
               COS Application for electricity distribution rates in Fort   
               Erie, Port Colborne and Gananoque, effective January 1, 2013,
               using a 2013 forward test year. The allowed ROE for 2013, as 
               determined under the ROE automatic adjustment formula, has   
               been calculated at 8.93%, down from the 9.12% that was       
               estimated in the COS Application. In November 2012 the OEB   
               also determined that most of a $1 million income tax-related 
               regulatory deferral is not required to be dispersed to       
               customers. The result of the above decisions, including the  
               impact of the decrease in the allowed ROE effective January  
               1, 2013, was an average 6.8% increase in residential customer
               rates in Fort Erie; an average 5.9% increase in residential  
               customer rates in Gananoque; and an average 7.4% increase in 
               residential customer rates in Port Colborne.                 
                                                                            
               - In October 2012 Algoma Power filed a Third-Generation      
               Incentive Rate Mechanism application for customer electricity
               distribution rates effective January 1, 2013. The application
               was prepared in a manner consistent with the OEB's decision  
               on the utility's 2012 rate application; however, the 2013    
               rate application has been complicated by the requirement to  
               dispose of smart meter costs. Since distribution rates for   
               Algoma Power's residential customers are governed by separate
               regulation, recovery of smart meter investments will impact  
               the determination of Rural and Remote Rate Protection Program
               funding for 2013. The OEB has scheduled a written hearing for
               the application.                                             
                                                                            
               - In December 2012 the OEB issued an order making Algoma     
               Power's customer rates for 2012 interim rates for 2013, until
               a final rate order is issued on 2013 customer rates.         
----------------------------------------------------------------------------
Fortis Turks   - Negotiations between Fortis Turks and Caicos and the       
and Caicos     Interim Government of the Turks and Caicos Islands ("Interim 
               Government") occurred during the third quarter of 2012 with  
               Fortis Turks and Caicos presenting a new regulatory framework
               proposal to the Interim Government. A third-party consultant 
               was engaged by the Interim Government to review the proposal 
               and provide recommendations. No agreement was reached with   
               the Interim Government; however, management expects to       
               continue dialogue on regulatory reform with the newly elected
               government.                                                  
----------------------------------------------------------------------------

LIQUIDITY AND CAPITAL RESOURCES

The table below outlines the Corporation's consolidated sources and uses of cash for the fourth quarter and year ended December 31, 2012, as compared to the same periods in 2011, followed by a discussion of the nature of the variances in cash flows.


----------------------------------------------------------------------------
Summary of Consolidated Cash Flows (Unaudited)                              
Periods Ended December 31                  Quarter                   Annual 
($ millions)                 2012   2011  Variance   2012    2011  Variance 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash, Beginning of Period     147    106        41     87     107       (20)
Cash Provided by (Used in):                                                 
  Operating Activities        172    230       (58)   976     915        61 
  Investing Activities       (319)  (367)       48 (1,080) (1,115)       35 
  Financing Activities        154    118        36    171     180        (9)
----------------------------------------------------------------------------
Cash, End of Period           154     87        67    154      87        67 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Operating Activities: Cash flow from operating activities was $58 million lower quarter over quarter. The decrease was mainly due to unfavourable changes in working capital at the FortisBC Energy companies and FortisAlberta. The unfavourable changes in working capital were associated with current regulatory deferral accounts and inventories. The above decrease was partially offset by favourable changes in long-term regulatory deferral accounts, higher earnings and the collection from customers of regulator-approved increased depreciation and amortization expense.

Cash flow from operating activities was $61 million higher year over year. The increase was primarily due to higher earnings and the collection from customers of regulator-approved increased depreciation and amortization expense, partially offset by unfavourable changes in working capital. The unfavourable changes in working capital were associated with inventories, accounts payable and other current liabilities, and current regulatory deferral accounts, partially offset by favourable changes in accounts receivable.

Investing Activities: Cash used in investing activities was $48 million lower for the quarter and $35 million lower for the year. The decreases were mainly due to: (i) a $49 million deferred payment made in December 2011 in accordance with an agreement, associated with FHI's acquisition of FEVI in 2002, which increased cash used in investing activities in 2011; (ii) a decrease in capital spending; and (iii) a decrease in cash used for business acquisitions. The decrease in capital spending for the quarter was mainly due to the timing of AESO transmission-related capital projects at FortisAlberta. The decrease in capital spending for the year was mainly due to the completion of the Customer Care Enhancement Project at FEVI in early 2012, a delay in capital spending in 2012 at FortisBC Electric, due to the timing of receipt of approval for its 2012/2013 revenue requirements, and the expropriation of Belize Electricity and the resulting discontinuance of the consolidation method of accounting for the utility, effective June 20, 2011. The above decreases for the year were partially offset by higher capital spending at FortisAlberta, due to the connection of new customers driven by strong economic growth in Alberta, and increased capital spending related to the Waneta Expansion. The decrease in cash used in business acquisitions was the result of the acquisition of the Hilton Suites Hotel in October 2011 for $25 million, compared to: (i) the acquisition of the StationPark Hotel in October 2012 for $7 million, net of debt assumed; (ii) the acquisition of TCU in August 2012 for $8 million (US$8 million), net of debt assumed; and (iii) the acquisition of the electricity distribution assets from the City of Port Colborne in April 2012 for $7 million. The above decreases in cash used in investing activities were partially offset by lower proceeds from the sale of utility capital assets. In October 2011 Newfoundland Power sold joint-use poles and related infrastructure to Bell Aliant for $45 million, net of costs.

Financing Activities: Cash provided by financing activities was $36 million higher quarter over quarter due to: (i) proceeds from the issuance of preference shares in November 2012; (ii) higher net proceeds from short-term borrowings; and (iii) higher advances from non-controlling interests in the Waneta Expansion Limited Partnership ("Waneta Partnership"). The above increases were partially offset by: (i) lower proceeds from long-term debt; (ii) higher net repayments under committed credit facilities classified as long term; and (iii) higher repayments of long-term debt.

Cash provided by financing activities was $9 million lower year over year, mainly due to: (i) lower proceeds from the issuance of common shares; (ii) lower proceeds from long-term debt; (iii) higher repayments of long-term debt; (iv) higher common share dividends; and (v) costs related to the issuance of Subscription Receipts in June 2012. The above items were partially offset by: (i) higher net borrowings under committed credit facilities classified as long term; (ii) proceeds from the issuance of preference shares in November 2012; (iii) lower net repayments of short-term borrowings; and (iv) higher advances from non-controlling interests in the Waneta Partnership.

In November 2012 Fortis completed a $200 million public offering of 8 million First Preference Shares, Series J. The net proceeds of approximately $194 million were used to repay borrowings under the Corporation's committed corporate credit facility, which borrowings were primarily incurred to support the construction of the Waneta Expansion and for other general corporate purposes.

Mid-2011 Fortis publicly issued 10.3 million common shares for $341 million. The net proceeds of $327 million were largely used to repay borrowings under credit facilities and support the construction of the Waneta Expansion and for other general corporate purposes.

CAPITAL STRUCTURE

The consolidated capital structure of Fortis is presented in the following table.


----------------------------------------------------------------------------
Capital Structure (Unaudited)                                          As at
                                     December 31, 2012     December 31, 2011
                                 ($ millions)      (%) ($ millions)      (%)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total debt and capital lease and                                            
 finance obligations (net of                                                
 cash) (1)                              6,317     55.3        6,296     57.1
Preference shares                       1,108      9.7          912      8.3
Common shareholders' equity             3,992     35.0        3,823     34.6
----------------------------------------------------------------------------
Total (2)                              11,417    100.0       11,031    100.0
----------------------------------------------------------------------------
----------------------------------------------------------------------------


                                                                            
(1)  Includes long-term debt and capital lease and finance obligations,     
     including current portion, and short-term borrowings, net of cash      
                                                                            
(2)  Excludes amounts related to non-controlling interests                  

The improvement in the capital structure was primarily due to: (i) the First Preference Shares, Series J offering in November 2012 for net proceeds of approximately $194 million, which were used to repay borrowings under the Corporation's committed corporate credit facility; (ii) common shares issued under the Corporation's dividend reinvestment and stock option plans; (iii) net earnings attributable to common equity shareholders, net of dividends; and (iv) an increase in cash. The capital structure was also impacted by an increase in long-term debt, largely in support of energy infrastructure investment.

Excluding capital lease and finance obligations, the Corporation's capital structure as at December 31, 2012 was 53.6% debt, 10.1% preference shares and 36.3% common shareholders' equity (December 31, 2011 - 55.3% debt, 8.6% preference shares and 36.1% common shareholders' equity).

Credit Ratings: The Corporation's credit ratings are as follows:


Standard & Poor's ("S&P")     A- (long-term corporate and unsecured debt    
                              credit rating)                                
DBRS                          A(low) (unsecured debt credit rating)         

In May 2012 and July 2012, S&P and DBRS, respectively, affirmed the Corporation's debt credit ratings. Due to the Corporation's financing plans for the pending acquisition of CH Energy Group and the expected completion of the Waneta Expansion on time and on budget, S&P and DBRS also removed the ratings from credit watch with negative implications and under review with developing implications, respectively, where the ratings had been placed in February 2012.

CAPITAL EXPENDITURE PROGRAM

Capital investment in infrastructure is required to ensure continued and enhanced performance, reliability and safety of the gas and electricity systems and to meet customer growth. All costs considered to be maintenance and repairs are expensed as incurred. Costs related to replacements, upgrades and betterments of capital assets are capitalized as incurred.

A breakdown of the approximate $1.1 billion in gross capital expenditures by segment for 2012 is provided in the following table.


----------------------------------------------------------------------------
Gross Consolidated Capital Expenditures (Unaudited) (1)                     
Year Ended December 31, 2012                                                
($ millions)                                                                
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                       Other
                                                                   Regulated
                                                                    Electric
FortisBC                                                           Utilities
Energy                    Fortis      FortisBC   Newfoundland              -
Companies                Alberta      Electric          Power       Canadian
----------------------------------------------------------------------------
206                          442            69             86             48
----------------------------------------------------------------------------
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Gross Consolidated Capital Expenditures (Unaudited) (1)                     
Year Ended December 31, 2012                                                
($ millions)                                                                
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                         Total   Regulated        Non-        Non-          
                     Regulated    Electric   Regulated   Regulated          
FortisBC             Utilities   Utilities           -           -          
Energy                       -           -      Fortis      Fortis          
Companies             Canadian   Caribbean  Generation  Properties     Total
----------------------------------------------------------------------------
206                        851          48         196          35     1,130
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1)  Relates to cash payments to acquire or construct utility capital       
     assets, income-producing properties and intangible assets, as reflected
     on the consolidated statement of cash flows. Excludes capitalized      
     depreciation and amortization and non-cash equity component of AFUDC.  

Gross consolidated capital expenditures of $1,130 million for 2012 were $161 million lower than $1,291 million forecasted for 2012, as disclosed in the MD&A for the year ended December 31, 2011. Planned capital expenditures are based on detailed forecasts of energy demand, weather, cost of labour and materials, as well as other factors, including economic conditions, which could change and cause actual expenditures to differ from forecasts. Lower-than-forecasted capital spending was mainly due to: (i) a shift in capital expenditures from 2012 to 2013 related to the timing of payments associated with the Waneta Expansion; (ii) a delay in capital spending at FortisBC Electric and the FortisBC Energy companies, due to the timing of receipt of regulatory approvals for their 2012/2013 revenue requirements; and (iii) timing of capital spending associated with the construction of Fortis Properties' office building in St. John's, Newfoundland. The above decreases were partially offset by higher-than-forecasted capital spending at FortisAlberta, due to higher spending associated with customers in the oil and gas sectors and capital expenditures associated with a distribution control centre, partially offset by lower-than-forecasted AESO transmission-related capital expenditures.

An update on larger capital projects for 2012 from that disclosed in the MD&A as at December 31, 2011 is provided below.

FEI's Customer Care Enhancement Project came into service at the beginning of 2012 at a total project cost of approximately $110 million.

During 2012 FortisAlberta continued with the replacement of vintage poles under its Pole-Management Program, which involves approximately 110,000 poles in total, to prevent risk of failure due to age. The total capital cost of the program through 2019 is now expected to be approximately $327 million, compared to $335 million forecasted as at December 31, 2011. Approximately $27 million was spent on this program in 2012.

The Environmental Compliance Project at FortisBC Electric relates to work required to ensure compliance of the utility's substation equipment with the Canadian Environmental Protection Act PCB Regulations by 2014. The project has been approved by the regulator and is estimated to cost approximately $28 million through 2014. Approximately $6 million has been spent on this project to the end of 2012.

Construction progress on the $900 million, 335-MW Waneta Expansion is going well and the project is currently on schedule and on budget. Major construction activities on-site during 2012 included the completion of the excavation of the intake, powerhouse and power tunnels. Approximately $436 million in total has been spent on the Waneta Expansion since construction began in late 2010, with $192 million spent in 2012.

Fortis Properties is constructing a 12-storey office building in downtown St. John's, Newfoundland at an estimated cost of approximately $47 million. Approximately $20 million has been spent on this project to the end of 2012. Construction is expected to be completed by the end of 2013.

Over the five-year period 2013 through 2017, consolidated gross capital expenditures, including expenditures at Central Hudson, are expected to be approximately $6 billion. The approximate breakdown of the capital spending expected to be incurred is as follows: 59% at the Canadian regulated electric utilities, driven by FortisAlberta; 19% at the regulated gas utilities; 11% at Central Hudson; and the remaining 11% at non-regulated operations. Capital expenditures at the regulated utilities are subject to regulatory approval. Over the five-year period, on average annually, the approximate breakdown of the utility capital spending to be incurred is as follows: 38% to meet customer growth; 43% to ensure continued and enhanced performance, reliability and safety of generation and T&D assets, i.e., sustaining capital expenditures; and 19% for facilities, equipment, vehicles, information technology and other assets.

Gross consolidated capital expenditures for 2013, excluding capital expenditures at Central Hudson, are expected to be approximately $1.3 billion. Central Hudson's capital program over the next five years is expected to average more than $125 million annually.

A breakdown of forecast gross consolidated capital expenditures by segment for 2013 is provided in the following table.


----------------------------------------------------------------------------
Forecast Gross Consolidated Capital Expenditures (1)                        
Year Ending December 31, 2013                                               
($ millions)                                                                
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                       Other
                                                                   Regulated
                                                                    Electric
FortisBC                                                           Utilities
Energy                    Fortis      FortisBC   Newfoundland              -
Companies                Alberta      Electric          Power       Canadian
----------------------------------------------------------------------------
229                          437           133             86             54
----------------------------------------------------------------------------
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Forecast Gross Consolidated Capital Expenditures (1)                        
Year Ending December 31, 2013                                               
($ millions)                                                                
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                         Total   Regulated        Non-                      
                     Regulated    Electric   Regulated      Fortis          
FortisBC             Utilities   Utilities           -  Properties          
Energy                       -           -      Fortis   and Other          
Companies             Canadian   Caribbean  Generation         (2)     Total
----------------------------------------------------------------------------
229                        939          69         229         113     1,350
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1)  Relates to forecasted cash payments to acquire or construct utility    
     capital assets, income producing properties and intangible assets, as  
     would be reflected on the consolidated statement of cash flows.        
     Excludes forecasted capitalized depreciation and amortization and non- 
     cash equity component of AFUDC.                                        
                                                                            
(2)  Includes forecasted capital expenditures of approximately $70 million  
     at Fortis Properties and approximately $43 million at FAES, which is   
     currently reported in the Corporate and Other segment. For further     
     information refer to the "Material Regulatory Decisions and            
     Applications" section of this earnings release.                        

The most significant capital project for 2013 is the continuation of the construction of the non-regulated Waneta Expansion, with approximately $227 million expected to be spent in 2013. Key project activities for 2013 include completion of the powerhouse structural steel and building envelope; excavation of the intake approach channel; construction of the intake and tailrace structures; and removal of rock plug. In addition, installation of the stationary imbedded turbine and generator components will continue.

CREDIT FACILITIES

As at December 31, 2012, the Corporation and its subsidiaries had consolidated credit facilities of approximately $2.5 billion, of which $2.1 billion was unused, including $946 million unused under the Corporation's $1 billion committed revolving corporate credit facility. The credit facilities are syndicated almost entirely with the seven largest Canadian banks, with no one bank holding more than 20% of these facilities. Approximately $2.3 billion of the total credit facilities are committed facilities with maturities ranging from 2013 to 2017.

The following table outlines the credit facilities of the Corporation and its subsidiaries.


----------------------------------------------------------------------------
Credit Facilities (Unaudited)                                         As at 
                                                         December  December 
                       Regulated      Fortis  Corporate       31,       31, 
($ millions)           Utilities  Properties  and Other      2012      2011 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total credit                                                                
 facilities                1,402          13      1,045     2,460     2,248 
Credit facilities                                                           
 utilized:                                                                  
  Short-term                                                                
   borrowings               (136)          -          -      (136)     (159)
  Long-term debt                                                            
   (including current                                                       
   portion)                  (97)          -        (53)     (150)      (74)
Letters of credit                                                           
 outstanding                 (66)          -         (1)      (67)      (66)
----------------------------------------------------------------------------
Credit facilities                                                           
 unused                    1,103          13        991     2,107     1,949 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

OUTLOOK

Over the five years 2013 through 2017, the Corporation's capital program, including expenditures at Central Hudson, is expected to total approximately $6 billion, and will support continuing growth in earnings and dividends. Capital investment over that period is expected to allow utility rate base and hydroelectric generation investment to increase at a combined compound annual growth rate of approximately 6%.

Approval by the NYSPSC of the Corporation's acquisition of CH Energy Group is the last significant regulatory matter required to close the transaction. The acquisition is anticipated to close during the second quarter of 2013. With the acquisition of CH Energy Group, the Corporation's regulated midyear rate base will increase to approximately $10 billion.

Fortis is focused on closing the CH Energy Group acquisition. Fortis also remains disciplined and patient in its pursuit of additional electric and gas utility acquisitions in the United States and Canada that will add value for Fortis shareholders. Fortis will also pursue growth in its non-regulated businesses in support of its regulated utility growth strategy.


FORTIS INC.                                                                 
                                                                            
Consolidated Financial Statements                                           
As at and for the three and twelve months ended December 31, 2012 and 2011  
(Unaudited)                                                                 

Prepared in accordance with accounting principles generally accepted in the United States


                                 Fortis Inc.                                
                   Consolidated Balance Sheets (Unaudited)                  
                              As at December 31                             
                      (in millions of Canadian dollars)                     
                                                                            
                                                       2012            2011 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
ASSETS                                                                      
                                                                            
Current assets                                                              
Cash and cash equivalents                       $       154     $        87 
Accounts receivable                                     587             638 
Prepaid expenses                                         18              19 
Inventories                                             133             134 
Regulatory assets                                       185             230 
Deferred income taxes                                    16              24 
                                            --------------------------------
                                                      1,093           1,132 
                                                                            
Other assets                                            200             184 
Regulatory assets                                     1,515           1,388 
Deferred income taxes                                     -               8 
Utility capital assets                                9,623           9,018 
Income producing properties                             626             594 
Intangible assets                                       325             325 
Goodwill                                              1,568           1,565 
                                            --------------------------------
                                                                            
                                                $    14,950     $    14,214 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
LIABILITIES AND SHAREHOLDERS' EQUITY                                        
                                                                            
Current liabilities                                                         
Short-term borrowings                           $       136     $       159 
Accounts payable and other current                                          
 liabilities                                            966             977 
Regulatory liabilities                                   72              51 
Current installments of long-term debt                  117             103 
Current installments of capital lease and                                   
 finance obligations                                      7               7 
Deferred income taxes                                    10               8 
                                            --------------------------------
                                                      1,308           1,305 
                                                                            
Other liabilities                                       622             564 
Regulatory liabilities                                  681             612 
Deferred income taxes                                   718             676 
Long-term debt                                        5,783           5,685 
Capital lease and finance obligations                   428             429 
                                            --------------------------------
                                                      9,540           9,271 
                                            --------------------------------
                                                                            
Shareholders' equity                                                        
Common shares (1)                                     3,121           3,036 
Preference shares                                     1,108             912 
Additional paid-in capital                               15              14 
Accumulated other comprehensive loss                    (96)            (95)
Retained earnings                                       952             868 
                                            --------------------------------
                                                      5,100           4,735 
Non-controlling interests                               310             208 
                                            --------------------------------
                                                      5,410           4,943 
                                            --------------------------------
                                                                            
                                                $    14,950     $    14,214 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1)  no par value: unlimited authorized shares; 191.6 million and 188.8     
     million issued and outstanding as at December 31, 2012 and 2011,       
     respectively                                                           
                                                                            
                                                                            
                                                                            
                                 Fortis Inc.                                
               Consolidated Statements of Earnings (Unaudited)              
                      For the periods ended December 31                     
         (in millions of Canadian dollars, except per share amounts)        


                                         Quarter Ended            Year Ended
                                       2012       2011       2012       2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Revenue                           $     999  $   1,034  $   3,654  $   3,738
                                --------------------------------------------
Expenses                                                                    
  Energy supply costs                   430        490      1,522      1,697
  Operating                             247        233        868        850
  Depreciation and amortization         119        107        470        416
                                --------------------------------------------
                                        796        830      2,860      2,963
                                --------------------------------------------
Operating income                        203        204        794        775
Other income, net                         6          6          4         38
Finance charges                          90         88        366        363
                                --------------------------------------------
Earnings before income taxes            119        122        432        450
Income taxes                             17         26         61         84
                                --------------------------------------------
Net earnings                      $     102  $      96  $     371  $     366
                                --------------------------------------------
                                --------------------------------------------
Net earnings attributable to:                                               
  Non-controlling interests       $       2  $       2  $       9  $       9
  Preference equity shareholders         13         12         47         46
  Common equity shareholders             87         82        315        311
                                --------------------------------------------
                                  $     102  $      96  $     371  $     366
                                --------------------------------------------
                                --------------------------------------------
Earnings per common share                                                   
  Basic                           $    0.46  $    0.44  $    1.66  $    1.71
  Diluted                         $    0.45  $    0.43  $    1.65  $    1.70
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
                                                                            
                                 Fortis Inc.                                
         Consolidated Statements of Comprehensive Income (Unaudited)        
                      For the periods ended December 31                     
                      (in millions of Canadian dollars)                     
                                                                            
                                            Quarter Ended        Year Ended 
                                            2012     2011     2012     2011 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Net earnings                             $   102  $    96  $   371  $   366 
                                        ------------------------------------
                                        ------------------------------------
Other comprehensive income (loss)                                           
Unrealized foreign currency translation                                     
 gains (losses), net of hedging                                             
 activities and tax                            1       (4)      (2)       1 
Reclassification of unrealized foreign                                      
 currency translation losses, net of                                        
 hedging activities and tax, related to                                     
 Belize Electricity                            -        -        -       17 
Reclassification to earnings of net                                         
 losses on discontinued cash flow                                           
 hedges, net of tax                            1        -        1        1 
Unrealized employee future benefits                                         
 losses, net of tax                           (1)      (6)       -       (6)
                                        ------------------------------------
                                               1      (10)      (1)      13 
                                        ------------------------------------
                                                                            
Comprehensive income                     $   103  $    86  $   370  $   379 
                                        ------------------------------------
                                        ------------------------------------
Comprehensive income attributable to:                                       
  Non-controlling interests              $     2  $     2  $     9  $     9 
  Preference equity shareholders              13       12       47       46 
  Common equity shareholders                  88       72      314      324 
                                        ------------------------------------
                                         $   103  $    86  $   370  $   379 
----------------------------------------------------------------------------
----------------------------------------------------------------------------


                                                                            
                                                                            
                                                                            
                                 Fortis Inc.                                
              Consolidated Statements of Cash Flows (Unaudited)             
                      For the periods ended December 31                     
                      (in millions of Canadian dollars)                     
                                                                            
                                            Quarter Ended        Year Ended 
                                            2012     2011     2012     2011 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Operating activities                                                        
Net earnings                             $   102  $    96  $   371  $   366 
Adjustments to reconcile net earnings to                                    
 net cash provided by operating                                             
 activities:                                                                
  Depreciation - utility capital assets                                     
   and income producing properties           108       97      424      381 
  Amortization - intangible assets            11       11       44       38 
  Amortization - other                         -       (1)       2       (3)
  Deferred income taxes                        9        1       17        4 
  Accrued employee future benefits            14        5       10       18 
  Equity component of allowance for                                         
   funds used during construction             (3)      (3)      (7)     (13)
  Other                                        9       (5)      (1)      (1)
Change in long-term regulatory assets                                       
 and liabilities                              63       35       38       26 
Change in non-cash operating working                                        
 capital                                    (141)      (6)      78       99 
                                        ------------------------------------
                                             172      230      976      915 
                                        ------------------------------------
                                                                            
Investing activities                                                        
Change in other assets and other                                            
 liabilities                                  (2)     (46)       -      (45)
Capital expenditures - utility capital                                      
 assets                                     (316)    (338)  (1,053)  (1,083)
Capital expenditures - income producing                                     
 properties                                  (11)     (10)     (35)     (30)
Capital expenditures - intangible assets      (9)     (19)     (42)     (58)
Contributions in aid of construction          23       26       68       75 
Proceeds on sale of utility capital                                         
 assets and income producing properties        3       45        3       51 
Business acquisitions, net of cash                                          
 acquired                                     (7)     (25)     (21)     (25)
                                        ------------------------------------
                                            (319)    (367)  (1,080)  (1,115)
                                        ------------------------------------
                                                                            
Financing activities                                                        
Change in short-term borrowings               39      (84)     (22)    (198)
Proceeds from long-term debt, net of                                        
 issue costs                                 124      304      124      343 
Repayments of long-term debt and capital                                    
 lease and finance obligations               (31)     (13)     (88)     (40)
Net (repayments) borrowings under                                           
 committed credit facilities                (150)     (40)      71     (145)
Advances from non-controlling interests       23        4      106       81 
Subscription Receipts issue costs              -        -      (13)       - 
Issue of common shares, net of costs and                                    
 dividends reinvested                         12        4       24      345 
Issue of preference shares, net of costs     194        -      194        - 
Dividends                                                                   
  Common shares, net of dividends                                           
   reinvested                                (42)     (42)    (170)    (151)
  Preference shares                          (12)     (12)     (46)     (46)
  Subsidiary dividends paid to non-                                         
   controlling interests                      (3)      (3)      (9)      (9)
                                        ------------------------------------
                                             154      118      171      180 
                                        ------------------------------------
                                                                            
Change in cash and cash equivalents            7      (19)      67      (20)
                                                                            
Cash and cash equivalents, beginning of                                     
 period                                      147      106       87      107 
                                        ------------------------------------
                                                                            
Cash and cash equivalents, end of period $   154  $    87  $   154  $    87 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
                                                                            
                                 Fortis Inc.                                
          Consolidated Statements of Changes in Equity (Unaudited)          
                      For the periods ended December 31                     
                      (in millions of Canadian dollars)                     


                                          Accu-                             
                                        mulated                             
                                 Addi-    Other                Non-         
                 Com-  Prefe-   tional  Compre-            Control-         
                  mon   rence  Paid-in  hensive  Retained      ling   Total 
               Shares  Shares  Capital     Loss  Earnings Interests  Equity 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
As at January                                                               
 1, 2012      $ 3,036 $   912 $     14 $    (95) $    868 $     208 $ 4,943 
                                                                            
Net earnings        -       -        -        -       362         9     371 
                                                                            
Other                                                                       
 comprehensive                                                              
 loss               -       -        -       (1)        -         -      (1)
Preference                                                                  
 share issue        -     196        -        -         -         -     196 
Common share                                                                
 issues            85       -       (3)       -         -         -      82 
Stock-based                                                                 
 compensation       -       -        4        -         -         -       4 
Advances from                                                               
 non-                                                                       
 controlling                                                                
 interests          -       -        -        -         -       106     106 
Foreign                                                                     
 currency                                                                   
 translation                                                                
 impacts            -       -        -        -         -        (4)     (4)
Subsidiary                                                                  
 dividends                                                                  
 paid to non-                                                               
 controlling                                                                
 interests          -       -        -        -         -        (9)     (9)
Dividends                                                                   
 declared on                                                                
 common shares                                                              
 ($1.21 per                                                                 
 share)             -       -        -        -      (231)        -    (231)
Dividends                                                                   
 declared on                                                                
 preference                                                                 
 shares             -       -        -        -       (47)        -     (47)
              --------------------------------------------------------------
                                                                            
As at December                                                              
 31, 2012     $ 3,121 $ 1,108 $     15 $    (96) $    952 $     310 $ 5,410 
----------------------------------------------------------------------------
                                                                            
As at January                                                               
 1, 2011      $ 2,575 $   912 $     12 $   (108) $    774 $     162 $ 4,327 
                                                                            
Net earnings        -       -        -        -       357         9     366 
                                                                            
Other                                                                       
 comprehensive                                                              
 income             -       -        -       13         -         -      13 
Common share                                                                
 issues           461       -       (2)       -         -         -     459 
Stock-based                                                                 
 compensation       -       -        4        -         -         -       4 
Advances from                                                               
 non-                                                                       
 controlling                                                                
 interests          -       -        -        -         -        81      81 
Foreign                                                                     
 currency                                                                   
 translation                                                                
 impacts            -       -        -        -         -         3       3 
Subsidiary                                                                  
 dividends                                                                  
 paid to non-                                                               
 controlling                                                                
 interests          -       -        -        -         -        (9)     (9)
Expropriation                                                               
 of Belize                                                                  
 Electricity        -       -        -        -         -       (38)    (38)
Dividends                                                                   
 declared on                                                                
 common shares                                                              
 ($1.17 per                                                                 
 share)             -       -        -        -      (217)        -    (217)
Dividends                                                                   
 declared on                                                                
 preference                                                                 
 shares             -       -        -        -       (46)        -     (46)
              --------------------------------------------------------------
                                                                            
As at December                                                              
 31, 2011     $ 3,036 $   912 $     14 $    (95) $    868 $     208 $ 4,943 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

SEGMENTED INFORMATION (Unaudited)

Information by reportable segment is as follows:


                                                                   REGULATED
              --------------------------------------------------------------
                    Gas                                                     
              Utilities                                   Electric Utilities
              --------------------------------------------------------------
               FortisBC                                                     
Quarter Ended    Energy                     New-                            
December 31,  Companies                   found-             Total          
 2012                 -   Fortis FortisBC   land    Other Electric  Electric
($ millions)   Canadian  Alberta Electric  Power Canadian Canadian Caribbean
----------------------------------------------------------------------------
Revenue             422      113       81    159       89      442        71
Energy supply                                                               
 costs              197        -       22    106       59      187        46
Operating                                                                   
 expenses            90       42       23     20       13       98        10
Depreciation                                                                
 and                                                                        
 amortization        40       34       12     11        6       63         8
----------------------------------------------------------------------------
Operating                                                                   
 income              95       37       24     22       11       94         7
Other income,                                                               
 net                  -        2        -      -        -        2         -
Finance                                                                     
 charges             35       16       10      9        5       40         3
Income tax                                                                  
 expense                                                                    
 (recovery)          11        -        2      3        -        5         -
----------------------------------------------------------------------------
Net earnings                                                                
 (loss)              49       23       12     10        6       51         4
Non-                                                                        
 controlling                                                                
 interests            -        -        -      1        -        1         1
Preference                                                                  
 share                                                                      
 dividends            -        -        -      -        -        -         -
----------------------------------------------------------------------------
Net earnings                                                                
 (loss)                                                                     
 attributable                                                               
 to common                                                                  
 equity                                                                     
 shareholders        49       23       12      9        6       50         3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Goodwill            913      227      221      -       67      515       140
Identifiable                                                                
 assets           4,595    2,776    1,705  1,389      720    6,590       740
----------------------------------------------------------------------------
Total assets      5,508    3,003    1,926  1,389      787    7,105       880
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gross capital                                                               
 expenditures                                                               
 (1)                 62      138       17     28       13      196        15
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Quarter Ended                                                               
December 31,                                                                
 2011                                                                       
($ millions)                                                                
----------------------------------------------------------------------------
Revenue             476      102       81    156       83      422        71
Energy supply                                                               
 costs              264        -       23    103       55      181        46
Operating                                                                   
 expenses            84       38       25     21       14       98         9
Depreciation                                                                
 and                                                                        
 amortization        30       34       11     10        6       61         9
----------------------------------------------------------------------------
Operating                                                                   
 income              98       30       22     22        8       82         7
Other income,                                                               
 net                  2        2        -      -        -        2         1
Finance                                                                     
 charges             33       16       10      9        4       39         3
Income tax                                                                  
 expense                                                                    
 (recovery)          16        -        2      4        2        8         -
----------------------------------------------------------------------------
Net earnings                                                                
 (loss)              51       16       10      9        2       37         5
Non-                                                                        
 controlling                                                                
 interests            -        -        -      1        -        1         1
Preference                                                                  
 share                                                                      
 dividends            -        -        -      -        -        -         -
----------------------------------------------------------------------------
Net earnings                                                                
 (loss)                                                                     
 attributable                                                               
 to common                                                                  
 equity                                                                     
 shareholders        51       16       10      8        2       36         4
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Goodwill            913      227      221      -       63      511       141
Identifiable                                                                
 assets           4,579    2,483    1,665  1,299      670    6,117       719
----------------------------------------------------------------------------
Total assets      5,492    2,710    1,886  1,299      733    6,628       860
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gross capital                                                               
 expenditures                                                               
 (1)                 73      163       24     26       14      227        14
----------------------------------------------------------------------------
----------------------------------------------------------------------------

                                    NON-REGULATED                           
              ------------------------------------                          
                                                                            
                                                                            
Quarter Ended                                                               
December 31,                                            Inter-              
 2012               Fortis      Fortis  Corporate      segment              
($ millions)    Generation  Properties  and Other eliminations  Consolidated
----------------------------------------------------------------------------
Revenue                  5          61          6           (8)          999
Energy supply                                                               
 costs                   -           -          -            -           430
Operating                                                                   
 expenses                3          42          6           (2)          247
Depreciation                                                                
 and                                                                        
 amortization            1           6          1            -           119
----------------------------------------------------------------------------
Operating                                                                   
 income                  1          13         (1)          (6)          203
Other income,                                                               
 net                     2           -          2            -             6
Finance                                                                     
 charges                 1           6         11           (6)           90
Income tax                                                                  
 expense                                                                    
 (recovery)              -           2         (1)           -            17
----------------------------------------------------------------------------
Net earnings                                                                
 (loss)                  2           5         (9)           -           102
Non-                                                                        
 controlling                                                                
 interests               -           -          -            -             2
Preference                                                                  
 share                                                                      
 dividends               -           -         13            -            13
----------------------------------------------------------------------------
Net earnings                                                                
 (loss)                                                                     
 attributable                                                               
 to common                                                                  
 equity                                                                     
 shareholders            2           5        (22)           -            87
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Goodwill                 -           -          -            -         1,568
Identifiable                                                                
 assets                737         655        511         (446)       13,382
----------------------------------------------------------------------------
Total assets           737         655        511         (446)       14,950
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gross capital                                                               
 expenditures                                                               
 (1)                    52          11          -            -           336
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Quarter Ended                                                               
December 31,                                                                
 2011                                                                       
($ millions)                                                                
----------------------------------------------------------------------------
Revenue                  9          58          6           (8)        1,034
Energy supply                                                               
 costs                   -           -          -           (1)          490
Operating                                                                   
 expenses                2          39          2           (1)          233
Depreciation                                                                
 and                                                                        
 amortization            1           5          1            -           107
----------------------------------------------------------------------------
Operating                                                                   
 income                  6          14          3           (6)          204
Other income,                                                               
 net                     -           -          1            -             6
Finance                                                                     
 charges                 -           6         13           (6)           88
Income tax                                                                  
 expense                                                                    
 (recovery)              1           3         (2)           -            26
----------------------------------------------------------------------------
Net earnings                                                                
 (loss)                  5           5         (7)           -            96
Non-                                                                        
 controlling                                                                
 interests               -           -          -            -             2
Preference                                                                  
 share                                                                      
 dividends               -           -         12            -            12
----------------------------------------------------------------------------
Net earnings                                                                
 (loss)                                                                     
 attributable                                                               
 to common                                                                  
 equity                                                                     
 shareholders            5           5        (19)           -            82
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Goodwill                 -           -          -            -         1,565
Identifiable                                                                
 assets                546         610        469         (391)       12,649
----------------------------------------------------------------------------
Total assets           546         610        469         (391)       14,214
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gross capital                                                               
 expenditures                                                               
 (1)                    43          10          -            -           367
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1)  Relates to cash payments to acquire or construct utility capital       
     assets, income-producing properties and intangible assets, as reflected
     on the consolidated statements of cash flows                           
                                                                            
                                                                            
                                                                            
                                                                   REGULATED
              --------------------------------------------------------------
                    Gas                                                     
              Utilities                                   Electric Utilities
              --------------------------------------------------------------
               FortisBC                                                     
Year Ended       Energy                     New-                            
December 31,  Companies                   found-             Total          
 2012                 -   Fortis FortisBC   land    Other Electric  Electric
($ millions)   Canadian  Alberta Electric  Power Canadian Canadian Caribbean
----------------------------------------------------------------------------
Revenue           1,426      448      306    581      353    1,688       273
Energy supply                                                               
 costs              669        -       76    380      227      683       170
Operating                                                                   
 expenses           287      158       85     74       48      365        34
Depreciation                                                                
 and                                                                        
 amortization       160      133       48     44       26      251        32
----------------------------------------------------------------------------
Operating                                                                   
 income             310      157       97     83       52      389        37
Other income                                                                
 (expenses),                                                                
 net                  2        4        1      2        -        7         2
Finance                                                                     
 charges            142       65       39     36       21      161        13
Income tax                                                                  
 expense                                                                    
 (recovery)          31        -        9     11        7       27         -
----------------------------------------------------------------------------
Net earnings                                                                
 (loss)             139       96       50     38       24      208        26
Non-                                                                        
 controlling                                                                
 interests            1        -        -      1        -        1         7
Preference                                                                  
 share                                                                      
 dividends            -        -        -      -        -        -         -
----------------------------------------------------------------------------
Net earnings                                                                
 (loss)                                                                     
 attributable                                                               
 to common                                                                  
 equity                                                                     
 shareholders       138       96       50     37       24      207        19
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Goodwill            913      227      221      -       67      515       140
Identifiable                                                                
 assets           4,595    2,776    1,705  1,389      720    6,590       740
----------------------------------------------------------------------------
Total assets      5,508    3,003    1,926  1,389      787    7,105       880
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gross capital                                                               
 expenditures                                                               
 (1)                206      442       69     86       48      645        48
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Year Ended                                                                  
December 31,                                                                
 2011                                                                       
($ millions)                                                                
----------------------------------------------------------------------------
Revenue           1,566      408      296    573      339    1,616       305
Energy supply                                                               
 costs              854        -       72    369      218      659       192
Operating                                                                   
 expenses           293      144       83     75       48      350        40
Depreciation                                                                
 and                                                                        
 amortization       113      134       45     42       24      245        33
----------------------------------------------------------------------------
Operating                                                                   
 income             306      130       96     87       49      362        40
Other income,                                                               
 net                  8        5        1      -        -        6         3
Finance                                                                     
 charges            137       60       39     36       20      155        14
Income tax                                                                  
 expense                                                                    
 (recovery)          40        1       10     18        9       38         1
----------------------------------------------------------------------------
Net earnings                                                                
 (loss)             137       74       48     33       20      175        28
Non-                                                                        
 controlling                                                                
 interests            -        -        -      1        -        1         8
Preference                                                                  
 share                                                                      
 dividends            -        -        -      -        -        -         -
----------------------------------------------------------------------------
Net earnings                                                                
 (loss)                                                                     
 attributable                                                               
 to common                                                                  
 equity                                                                     
 shareholders       137       74       48     32       20      174        20
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Goodwill            913      227      221      -       63      511       141
Identifiable                                                                
 assets           4,579    2,483    1,665  1,299      670    6,117       719
----------------------------------------------------------------------------
Total assets      5,492    2,710    1,886  1,299      733    6,628       860
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gross capital                                                               
 expenditures                                                               
 (1)                250      416      102     81       47      646        71
----------------------------------------------------------------------------
----------------------------------------------------------------------------

                                    NON-REGULATED                           
              ------------------------------------                          
                                                                            
                                                                            
Year Ended                                                                  
December 31,                                            Inter-              
 2012               Fortis      Fortis  Corporate      segment              
($ millions)    Generation  Properties  and Other eliminations  Consolidated
----------------------------------------------------------------------------
Revenue                 31         242         24          (30)        3,654
Energy supply                                                               
 costs                   1           -          -           (1)        1,522
Operating                                                                   
 expenses                9         166         14           (7)          868
Depreciation                                                                
 and                                                                        
 amortization            4          21          2            -           470
----------------------------------------------------------------------------
Operating                                                                   
 income                 17          55          8          (22)          794
Other income                                                                
 (expenses),                                                                
 net                     3           -         (9)          (1)            4
Finance                                                                     
 charges                 2          24         47          (23)          366
Income tax                                                                  
 expense                                                                    
 (recovery)              1           9         (7)           -            61
----------------------------------------------------------------------------
Net earnings                                                                
 (loss)                 17          22        (41)           -           371
Non-                                                                        
 controlling                                                                
 interests               -           -          -            -             9
Preference                                                                  
 share                                                                      
 dividends               -           -         47            -            47
----------------------------------------------------------------------------
Net earnings                                                                
 (loss)                                                                     
 attributable                                                               
 to common                                                                  
 equity                                                                     
 shareholders           17          22        (88)           -           315
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Goodwill                 -           -          -            -         1,568
Identifiable                                                                
 assets                737         655        511         (446)       13,382
----------------------------------------------------------------------------
Total assets           737         655        511         (446)       14,950
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gross capital                                                               
 expenditures                                                               
 (1)                   196          35          -            -         1,130
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Year Ended                                                                  
December 31,                                                                
 2011                                                                       
($ millions)                                                                
----------------------------------------------------------------------------
Revenue                 34         231         23          (37)        3,738
Energy supply                                                               
 costs                   1           -          -           (9)        1,697
Operating                                                                   
 expenses                8         156          9           (6)          850
Depreciation                                                                
 and                                                                        
 amortization            4          19          2            -           416
----------------------------------------------------------------------------
Operating                                                                   
 income                 21          56         12          (22)          775
Other income,                                                               
 net                     1           -         21           (1)           38
Finance                                                                     
 charges                 2          24         54          (23)          363
Income tax                                                                  
 expense                                                                    
 (recovery)              2           9         (6)           -            84
----------------------------------------------------------------------------
Net earnings                                                                
 (loss)                 18          23        (15)           -           366
Non-                                                                        
 controlling                                                                
 interests               -           -          -            -             9
Preference                                                                  
 share                                                                      
 dividends               -           -         46            -            46
----------------------------------------------------------------------------
Net earnings                                                                
 (loss)                                                                     
 attributable                                                               
 to common                                                                  
 equity                                                                     
 shareholders           18          23        (61)           -           311
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Goodwill                 -           -          -            -         1,565
Identifiable                                                                
 assets                546         610        469         (391)       12,649
----------------------------------------------------------------------------
Total assets           546         610        469         (391)       14,214
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gross capital                                                               
 expenditures                                                               
 (1)                   174          30          -            -         1,171
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(1)  Relates to cash payments to acquire or construct utility capital       
     assets, income-producing properties and intangible assets, as reflected
     on the consolidated statements of cash flows                           

CORPORATE INFORMATION

Fortis Inc. is the largest investor-owned distribution utility in Canada, with total assets of approximately $15 billion and fiscal 2012 revenue totalling $3.7 billion. The Corporation serves more than 2 million gas and electricity customers. Its regulated holdings include electric distribution utilities in five Canadian provinces and two Caribbean countries and a natural gas utility in British Columbia. Fortis owns and operates non-regulated generation assets across Canada and in Belize and Upstate New York. It also owns hotels and commercial office and retail space in Canada.

The Common Shares, First Preference Shares, Series C; First Preference Shares, Series E; First Preference Shares, Series F; First Preference Shares, Series G; First Preference Shares, Series H; First Preference Shares, Series J; and Subscription Receipts of Fortis are traded on the Toronto Stock Exchange under the symbols FTS, FTS.PR.C, FTS.PR.E, FTS.PR.F, FTS.PR.G, FTS.PR.H, FTS.PR.J and FTS.R, respectively.


Share Transfer Agent and Registrar:                                         
Computershare Trust Company of Canada                                       
9th Floor, 100 University Avenue                                            
Toronto, ON M5J 2Y1                                                         
T: 514.982.7555 or 1.866.586.7638                                           
F: 416.263.9394 or 1.888.453.0330                                           
W: www.investorcentre.com/fortisinc                                         

Additional information, including the Fortis 2011 Annual Information Form, Management Information Circular and Annual Report, are available on SEDAR at www.sedar.com and on the Corporation's web site at www.fortisinc.com.

Contacts:
Barry V. Perry
Vice President Finance and Chief Financial Officer
Fortis Inc.
709.737.2822

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As a disruptive technology, Web Real-Time Communication (WebRTC), which is an emerging standard of web communications, is redefining how brands and consumers communicate in real time. The on-going narrative around WebRTC has largely been around incorporating video, audio and chat functions to apps. In his session at Internet of @ThingsExpo, Alex Gouaillard, Founder and CTO of Temasys Communications, will look at a fourth element – data channels – and talk about its potential to move WebRTC beyond browsers and into the Internet of Things.
SYS-CON Events announced today that Gigaom Research has been named "Media Sponsor" of SYS-CON's 15th International Cloud Expo®, which will take place on November 4-6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Ashar Baig, Research Director, Cloud, at Gigaom Research, will also lead a Power Panel on the topic "Choosing the Right Cloud Option." Gigaom Research provides timely, in-depth analysis of emerging technologies for individual and corporate subscribers. Gigaom Research's network of 200+ independent analysts provides new content daily that bridges the gap between break...
The Industrial Internet revolution is now underway, enabled by connected machines and billions of devices that communicate and collaborate. The massive amounts of Big Data requiring real-time analysis is flooding legacy IT systems and giving way to cloud environments that can handle the unpredictable workloads. Yet many barriers remain until we can fully realize the opportunities and benefits from the convergence of machines and devices with Big Data and the cloud, including interoperability, data security and privacy.