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									                                        FORTISALBERTA INC.

                            MANAGEMENT’S DISCUSSION AND ANALYSIS
                      OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                               For the three months ended March 31, 2005

                                                 Dated April 18, 2005

The following discussion and analysis of financial condition and results of operations of FortisAlberta Inc.
(“FortisAlberta Inc.” or the “Corporation”) should be read in conjunction with the Corporation’s unaudited financial
statements for the three months ended March 31, 2005 and the Management Discussion & Analysis (MD&A) and
the audited financial statements for the year ended December 31, 2004.

FortisAlberta Inc. is a regulated electricity distribution utility under the jurisdiction of the Alberta Energy and
Utilities Board (the “EUB”). The Corporation’s distribution assets are regulated in their entirety on a cost-of-service
basis, and historical and current regulated rates have been established in accordance with this framework for the
period of 2001 – 2004. On November 26, 2004 FortisAlberta filed for interim rates in 2005 at the same level as
rates for 2003 and 2004. Consistent with applicable legislation, these rates will continue in effect until new rates are
approved by the EUB.

On April 13, 2005, FortisAlberta Inc. filed an application with the EUB to approve a Negotiated Settlement
Agreement (“Settlement”) dealing with all aspects of the Corporation’s 2005 Distribution Access Tariff Application
(“Application”). If the Settlement is approved, there will be no need for a full-scale hearing process. The Settlement
calls for a 2005 distribution revenue requirement of $215.4 million which translates to a 2.1 percent increase on base
rates for 2005. In reaching this Settlement, FortisAlberta Inc. has agreed to a level of operating expense of $101
million and capital expenditures of $134.3 million. EUB approval is expected by the end of the second quarter,
provided there are no material objections to the Application.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this MD&A constitute forward-looking statements, including statements regarding
the business and anticipated financial performance or condition of the Corporation. These statements involve known
and unknown risks and relate to future events, future financial performance, business strategy, plans and objectives
of management for future operations and projected business results. In some cases, forward-looking statements can
be identified by terms such as “may”, “will”, “should”, “expect”, “potential”, “enable”, “anticipate”, “plan”,
“believe”, “continue”, “contemplate”, “anticipate” or other comparable terminology. These forward-looking
statements are subject to a number of uncertainties that may cause actual results to differ materially from those
contemplated in the forward-looking statements. Some of the factors that could cause such differences include
legislative and regulatory developments that could affect costs, revenues and the speed and degree of competition
entering the electricity distribution market, loss of service areas, costs associated with environmental compliance
and liabilities, costs associated with labour disputes, adverse results from litigation, timing and extent of changes in
prevailing interest rates, inflation levels and general economic conditions in geographic areas where the
Corporation operates, results of financing efforts, counterparty credit risk and the impact of accounting policies
issued by Canadian or provincial standard setters.

The Corporation is not obligated to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. Because of these risks, uncertainties and assumptions, prospective investors
should not place undue reliance on these forward-looking statements.
RESULTS OF OPERATIONS

                                                                                                      Three Months Ended March 31,
                                                                                                          2005             2004
Statement of Operations Data
(all amounts are in thousands of dollars)
Total revenues ................................................... ………………………………..                        58,595               58,517
Operating costs .................................................. ………………………………..                        26,921                23,579
Depreciation and amortization........................... ………………………………..                                  13,846               12,712
Goodwill write-down......................................... ………………………………..                                  —                    —
Earnings from operations................................... ………………………………..                               17,828               22,226
Interest expense and foreign exchange
 Loss ................................................................. ………………………………..                    5,970                9,783
Earnings before income taxes............................ ………………………………..                                  11,858               12,443
Income tax expense ……………………………………………………………..                                                              4,012                4,152
Net earnings ...................................................... ………………………………..                        7,846                8,291

Financial information has been prepared in accordance with Canadian generally accepted accounting principles using the Canadian Dollar as the
reporting currency.

FortisAlberta Inc. recorded net earnings of $7.8 million during the first quarter of 2005. This compared to net
earnings of $8.3 million in the first quarter of 2004. The lower earnings are primarily related to increased operating
costs which were partially off-set by lower financing costs, as described below.

Total revenue for the quarter ended March 31, 2005 was $58.6 million, compared to $58.5 million for the same
period in 2004. The increase in revenue of $0.1 million is primarily related to load growth as new customers and
increased capacity is added to the Corporation’s distribution system. FortisAlberta filed for interim rates in 2005 at
the same level as rates for 2003 and 2004. The Corporation, filed a settlement agreement with the EUB on April 13,
2005. If approved, FortisAlberta will increase rates by 2.1% (over interim rates) for 2005 and collect this increase
over the second half of the year.

Operating costs for the quarter ended March 31, 2005 were $26.9 million, compared to $23.6 million for the same
period in 2004. Expenses in the first quarter of 2005 were higher than 2004 due to higher labour and benefits costs
arising from increased staffing levels, higher costs related to increased IT infrastructure, distribution lines operating
maintenance, compliance with new governance initiatives, as well as an increase in franchise fee costs arising from
2005 municipality rate increases.

Depreciation for the quarter ended March 31, 2005 was $13.8 million, which was $1.1 million higher than the same
period in 2004. The increase was the result of an increase in depreciable assets in 2005 predominantly driven by
load growth within the Corporation’s service territory.

Interest expense (including amortization of deferred financing fees) and foreign exchange losses for the quarter
ended March 31, 2005 was $6.0 million as compared with $9.8 million for the same period in 2004. This decrease is
primarily due to the repayment of higher interest bearing bank loans and inter-company loans with the former parent
company upon close of the acquisition, which were replaced with lower interest-bearing public debt.

Income tax expenses for the quarter ended March 31, 2005 were $4.0 million compared with $4.2 million for the
same period in 2004. The decrease in income tax expense is mainly due to lower earnings before income taxes in the
first quarter of 2005.




Management Discussion and Analysis                                                                                                   -2-
March 31, 2005
SUMMARY OF QUARTERLY RESULTS

The following table sets forth certain quarterly information of the Corporation:
                                                                                    March 31,         December 31,         September 30,
                                                                                      2005                2004                 2004
(all amounts are in thousands of dollars)                                          (unaudited)         (unaudited)          (unaudited)

Total revenues ................................................... ……………......   58,595                  58,257               57,618
Net earnings……………………………………………………..                                                7,846                   7,182                8,324
Note   FortisAlberta Inc. has disclosed the quarterly data for only the last two quarters of 2004 as per National Instrument 51-102 Continuous
       Disclosure Obligations, which requires the Corporation to provide quarterly information for only those quarters since becoming a
       reporting issuer.

FINANCIAL POSITION

The following table outlines the significant changes in the Balance Sheets as at March 31, 2005 as compared to
December 31, 2004:


                                                Increase
         Balance Sheet Item                    (Decrease)                                        Explanation
                                               ($ millions)

Cash and Cash Equivalents                              (2.8)     During the first quarter cash and cash equivalents consisting of
                                                                 cash and short term investments decreased by $2.8 million to nil
                                                                 as the Corporation transitioned to the use of the Corporation’s
                                                                 line of credit.

Accounts Receivable                                     4.6      This increase is due to the December 31, 2004 accounts
                                                                 receivable reflecting a reduction due to a refund to customers
                                                                 which was made subsequent to year end.

Property, plant and equipment (net                      9.7      This increase was comprised of net additions to property, plant
of accumulated depreciation and                                  and equipment of $23.5 million, less depreciation of
regulatory tax basis adjustment)                                 $13.8 million, net of regulatory tax basis adjustment amortization
                                                                 of $1.3 million.

Accounts payable and accrued                            3.8      This increase is comprised of the following: a $5.7 million
liabilities                                                      increase in interest payable on long term debentures resulting
                                                                 from an additional three months of accrued interest to be paid in
                                                                 May 2005. This increase is offset by $5.7 million in lower trade
                                                                 payables due to the timing of cash disbursement to trade vendors
                                                                 as compared to year end. In addition, there was an increase of
                                                                 $1.9 million owing to the AESO (Alberta Electrical System
                                                                 Operator) for transmission customer contributions collected from
                                                                 the Corporation’s customers, increases in transmission cost
                                                                 accruals of $1.1 million, and an increase in distribution
                                                                 construction advances of $0.8 million.


Income taxes payable                                    2.1      December 31, 2004 income taxes were in a receivable position.
                                                                 Current year income taxes payable, less prior years income taxes
                                                                 receivable, have exceeded current year income tax installment
                                                                 payments by $2.1 million.



Management Discussion and Analysis                                                                                                   -3-
March 31, 2005
LIQUIDITY AND CAPITAL RESOURCES


Statement of Financial Highlights                                  Three Months Ended
                                                                       March 31,
(all amounts are in thousands of dollars)                       2005              2004

Cash, beginning of period ...............................         2,765            46,584
Cash provided from (used in) .........................
   Operating activities.....................................     28,845            28,373
   Financing activities.....................................     (3,105)          (28,374)
   Investing activities......................................   (28,505)          (22,312)
Cash, end of period..........................................         -            24,271

  Sources of Liquidity and Capital Resources

    FortisAlberta’s primary sources of liquidity and capital resources are the following:

    •    funds generated from operations;

    •    the issuance and sale of debt instruments;

    •    bank financing and operating lines of credit; and

    •    equity contributions from the Corporation’s parent corporation.

  Operating Activities

For the three months ended March 31, 2005, net cash from operating activities was $28.8 million, which is $0.5
million higher than the same period in 2004. Net income was $0.4 million lower than 2004 net income, the addition
of items not involving cash are $1.2 million lower in 2005, however these are more than offset by an increase in
cash provided by both changes in non-cash working capital and other non-cash items of $2.1 million.

FortisAlberta Inc. expects that it will be able to generate sufficient cash flows from operations to pay for operating
costs, interest on debt, distributions to the Corporation’s parent and to have surplus available for investment in
capital assets. However, the Corporation will not generate sufficient funds from operations to meet all forecasted
capital expenditures and to repay all principal amounts of debt when due. There are no long-term debt principal
repayments anticipated in 2005.

  Financing Activities

For the three months ended March 31, 2005, net cash used in financing activities was $3.1 million, compared to
$28.4 million used in financing activities during the same period in 2004. In 2004, the Corporation used the
proceeds from the US$100.0 million CSFB loan to repay short-term debt and the remaining securitization financing
that was outstanding during that period. During the same period in 2005, the Corporation used available funds to
pay dividends of $3.0 million to Fortis Alberta Holdings Inc. (“FAHI”, the Corporation’s parent and wholly owned
subsidiary of Fortis Inc.).

As at March 31, 2005, FortisAlberta Inc. had outstanding debt of approximately $400.0 million. This debt balance
was made up of the long term debt issued October 25, 2004, and no amounts were outstanding on the long-term
operating facility, or the short-term overdraft facility. At March 31, 2005 accrued interest on this long term debt
was $10.1 million. The first interest payment is due May 2, 2005.

The Corporation has available a $100 million revolving bank credit facility. Drawings are available by way of prime
loans, banker’s acceptances and letters of credit. As at March 31, 2005 there were nil amounts drawn in loans and



Management Discussion and Analysis                                                                            -4-
March 31, 2005
$41.0 million drawn in letters of credit. As at December 31, 2004, there were nil amounts drawn in loans and $51.5
million drawn in letters of credit. (See Outlook)

FortisAlberta Inc. expects to be able to meet interest payments on outstanding indebtedness from internally
generated funds but rely upon the proceeds of new indebtedness to meet the principal obligations when due.

  Capital Resources

FortisAlberta’s business requires the Corporation to have ongoing access to capital to allow it to build and maintain
the electrical distribution system in the Corporation’s service territory. In order to ensure that this access to capital
is maintained, the Corporation intends to maintain the Corporation’s current credit ratings and targets a long-term
capital structure that includes approximately 60% debt and 40% equity.

Summary of Capital Structure                                                       March 31, 2005                 March 31, 2004
                                                                          ($ millions)         Per cent   ($ millions)        Per cent

Total Debt .........................................................          400.0             56.4        381.6             55.2
Shareholder Equity ............................................               309.3             43.6        309.2             44.8
Total .................................................................       709.3            100.0        690.8            100.0

As at March 31, 2005, the Corporation’s credit ratings were as follows:

      Dominion Bond Rating Service Limited (“DBRS”)                                                        A (low), Stable Outlook
      Moody’s Investors Service                                                                              Baa1, Stable Outlook

On November 30, 2004, the EUB released its Order U2004-423 – 2005 Return on Equity setting the generic rate of
return on common equity at 9.5% for 2005 for FortisAlberta Inc. and other applicant utilities. The Corporation filed
a General Rate Application to establish 2005 distribution rates using this rate of return on equity and the deemed
regulated capital structure of 63% debt and 37% equity, approved in Decision 2004-052 for applicant utilities.

  Investing Activities

The Corporation’s utility operations are capital intensive. For the three months ended March 31, 2005 FortisAlberta
Inc. had additions to capital assets of approximately $28.5 million, compared to $22.3 million for the same period in
2004. The increase in capital expenditures was largely driven by customer growth and system replacement
programs.

It is expected that capital expenditures will be financed by drawing on the revolving bank credit facility, utilizing the
proceeds from future debt issues and from funds generated by operating activities.

As an electricity distribution utility, the Corporation is obligated to provide service to customers within the
Corporation’s service territory. The Corporation has filed with the EUB in the Settlement, to establish 2005
distribution rates, a capital expenditures forecast of $134.3 million, largely driven by load growth, customer requests
or specifically identified capital projects.

RELATED PARTY TRANSACTIONS

In the normal course of business, the Corporation transacts with its parent and other related companies under
common control. The amounts included in accounts receivable and accounts payable for related parties are as
follows:
                                                                        March 31,            December 31,
                                                                           2005                  2004
                                                                              $                    $
     Included in accounts receivable                                           627                1,615
     Included in accounts payable                                              176                  182


Management Discussion and Analysis                                                                                                  -5-
March 31, 2005
OUTLOOK

The Corporation is currently in the process of finalizing an agreement which will result in amendments to its
syndicated operating facility. These amendments include increasing the facility to $150 million, extending the term
to three years, and improving certain covenants. These amendments enhance FortisAlberta's liquidity and access to
funds, which are required for forecasted capital expenditures and operating needs. Pending EUB approval, this
agreement will become effective in May 2005.

Given the assumption of a consistently applied regulated capital structure and ROE, the expectation of recovering all
of the Corporation’s cost-of-service components in rates and the expected growth in rate base assets as a result of the
Corporation’s annual capital expenditures, the Corporation expects earnings to increase during 2005.

On November 30, 2004, the EUB released its Order U2004-423 - 2005 Return on Equity setting the generic rate of
return on common equity at 9.50% for 2005 for FortisAlberta Inc. and other applicant utilities. The Corporation
filed the 2005 GRA using this rate of return on equity and the deemed regulated capital structure of 63% debt and
37% equity, approved in Decision 2004-052 for applicant utilities.

Currently the Corporation is on an interim tariff utilizing rates that are the same as 2004. On April 13, 2005,
FortisAlberta Inc. filed an application with the EUB to approve a Negotiated Settlement Agreement (“Settlement”)
dealing with all aspects of the Corporation’s 2005 Distribution Access Tariff Application. If the Settlement is
approved, there will be no need for a full-scale hearing process. The Settlement calls for a 2005 distribution revenue
requirement of $215.4 million which translates to a 2.1 percent increase on base rates for 2005. In reaching this
Settlement, FortisAlberta Inc. has agreed to a level of operating expense of $101 million and capital expenditures of
$134.3 million. EUB approval is expected by the end of the second quarter, provided there are no material
objections to the Application. The impact of the settlement will be recorded in the period in which it is approved by
the EUB.
FortisAlberta Inc. expects to file a Tariff Application for 2006 and 2007 in the fall of 2005.

Note: Additional information concerning FortisAlberta Inc. is available on SEDAR at www.sedar.com.




Management Discussion and Analysis                                                                             -6-
March 31, 2005

								
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