1. DESCRIPTION OF THE BUSINESS
NATURE OF OPERATIONS
Fortis Inc. ("Fortis" or the "Corporation") is principally an international distribution utility holding company. Fortis segments its utility operations by franchise area and, depending on regulatory requirements, by the nature of the assets. Fortis also holds investments in non-regulated generation assets, and commercial office and retail space and hotels, which are treated as two separate segments. The Corporation's reporting segments allow senior management to evaluate the operational performance and assess the overall contribution of each segment to the long-term objectives of Fortis. Each entity within the reporting segments operates autonomously, assumes profit and loss responsibility and is accountable for its own resource allocation.
The following outlines each of the Corporation's reportable segments and is consistent with the basis of segmentation as disclosed in the Corporation's 2012 annual audited consolidated financial statements.
The Corporation's interests in regulated gas and electric utilities in Canada and the Caribbean are as follows:
a. Regulated Gas Utilities - Canadian: Includes the FortisBC Energy companies, comprised of FortisBC Energy Inc., FortisBC Energy (Vancouver Island) Inc. ("FEVI") and FortisBC Energy (Whistler) Inc.b. Regulated Electric Utilities - Canadian: Comprised of FortisAlberta; FortisBC Electric; Newfoundland Power; and Other Canadian Electric Utilities, which includes Maritime Electric and FortisOntario. FortisOntario mainly includes Canadian Niagara Power Inc., Cornwall Street Railway, Light and Power Company, Limited and Algoma Power Inc.c. Regulated Electric Utilities - Caribbean: Comprised of Caribbean Utilities, in which Fortis holds an approximate 60% controlling ownership interest; three small wholly owned utilities in the Turks and Caicos Islands, which include FortisTCI Limited, Atlantic Equipment & Power (Turks and Caicos) Ltd. and Turks and Caicos Utilities Limited, acquired in August 2012, (collectively "Fortis Turks and Caicos").
NON-REGULATED - FORTIS GENERATION
Fortis Generation includes the financial results of non-regulated generation assets in Belize, Ontario, British Columbia and Upstate New York. Effective March 2013 the Corporation and the Government of Newfoundland and Labrador ("Government") settled all matters, including release from all debt obligations, pertaining to the Government's December 2008 expropriation of non-regulated hydroelectric generating assets and water rights in central Newfoundland, then owned by Exploits River Hydro Partnership ("Exploits Partnership") in which Fortis holds an indirect 51% interest through Fortis Properties (Note 11).
NON-REGULATED - FORTIS PROPERTIES
Fortis Properties owns and operates 23 hotels, comprised of more than 4,400 rooms, in eight Canadian provinces, and owns and operates approximately 2.7 million square feet of commercial office and retail space, primarily in Atlantic Canada.
CORPORATE AND OTHER
The Corporate and Other segment captures expense and revenue items not specifically related to any reportable segment, and those business operations that are below the required threshold for reporting as separate segments.
The Corporate and Other segment includes Fortis net corporate expenses and the net expenses of non-regulated FortisBC Holdings Inc. ("FHI") corporate-related activities. Also included in the Corporate and Other segment are the financial results of CustomerWorks Limited Partnership ("CWLP") and FortisBC Alternative Energy Services Inc. ("FAES"). CWLP is a non-regulated shared-services business in which FHI holds a 30% interest. CWLP provides billing and customer care services to utilities, municipalities and certain energy companies. CWLP's financial results are recorded using the equity method of accounting. FAES is a wholly owned subsidiary of FHI that provides alternative energy solutions, including thermal-energy and geo-exchange systems.