Hydro-Québec posts record net income of $2.742 billion in the first half

Pierre Saint-Arnaud, The Canadian Press

MONTREAL — Hydro-Québec is heading for a second consecutive record year.

The state-owned company posted an unprecedented net profit in the first half of 2022 of $2.742 billion, or $749 million more than for the same period of 2021, an increase of almost 38%.

« This is the highest profit for continuing operations at a historic level, » acknowledged Hydro’s vice-president and chief financial officer, Jean-Hugues Lafleur, when presenting these results to the press on Friday.

“Last year we obtained $3.6 billion in profits, which was still a record year. We have established the business plan at $3.4 billion (for 2022) and I could say with enough certainty that we risk having a record year this year,” he added. His prediction is certainly not reckless since after only six months, we are 81% of the objective for the whole year and 77% of the record of $ 3.546 billion reached in 2021.

An expensive derecho

The weather is partly responsible for this excellent result, especially the unusual cold of last winter, but it also had its share of negative effects with the derecho, this windstorm which affected more than half a million subscribers, particularly in the Laurentians and Lanaudière.

This derecho, “it is the meteorological event which has required the most work on the ground since the ice storm of 1998”, confided the leader.

“More than 2,000 employees were mobilized for 11 days. In total, more than 1,100 poles and 400 transformers have been replaced.”

This work cost approximately $70 million to Hydro-Québec, which recorded a loss of $55 million in the books as operating expenses.

A cold with multiple consequences

On the other hand, Hydro certainly benefited from the unusually cold winter. For the month of January alone, the average was -14 degrees Celsius, or 7 degrees less than the average for January 2021, which brought $323 million in additional revenue into its coffers.

On the other hand, the cold weather also had negative consequences, forcing Hydro itself to buy some $227 million worth of electricity on the markets to meet Quebecers’ demand. Also, this strong internal demand during the winter led to a shortfall of $57 million on the export side, as the state-owned company was called upon to reduce exports in order to meet domestic demand.

However, the balance sheet in terms of exports is still extremely positive, despite the drop in sales volume. In particular, Hydro-Québec benefited from a sharp 56.5% increase in the price of electricity on export markets, which rose from 4.6 cents/kWh to 7.2 cents/kWh, making it possible to earn $440 million more than last year at the same date. In the end, taking into account the shortfall of $57 million mentioned above, the net increase in export revenues outside Quebec was $383 million.

Growing internal demand

Even here in Quebec, it is not just the cold that has fattened the coffers of the Crown corporation. Thus, a general increase in demand from customers in the residential, commercial and institutional sectors independent of cooling generated an increase of $188 million in cash inflows.

The sharp rise in the price of aluminum, to which the tariff paid by the aluminum smelters is linked, made it possible to increase entries on this side by $120 million and the tariff increases imposed in April 2021 and 2022 brought in additional revenues. of $107 million.

The wind bond

Wind gusts have increased the production of electricity from wind farms that are under contract with the state company, contracts that oblige it to buy this production. Hydro-Québec thus found itself paying out $53 million more than the previous year.

Added to the purchases required to meet demand as well as the entry into force of new purchase contracts and an increase in export-related transmission costs, electricity purchases thus increased by $365 million in total during the first six months of the year compared to the same period last year.

Jean-Hugues Lafleur was also pleased that the weather helped keep dam levels high, as Quebec did not experience drought as evidenced by the limited number of forest fires. He did not yet have the data on this subject, but “the hydraulicity is still good this year”, he confided.

“Currently, we have enough energy and we are not at risk when we sell on the markets and we take advantage of it, he added. Considering the few forest fires there are in northern Quebec, this is very positive for us.

“In a context where export prices are very, very, very high, this is good news for Hydro-Québec,” he concluded.

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