Net income of $2.3 billion in a context marked by the pandemic and mild temperatures

In a presentation on its financial results for 2020, Hydro-Québec announced that it had posted net income of $2,303 million, down $620 million from 2019. This decrease is mainly due to the impact of the COVID-19 pandemic on the company’s operations and the mild temperatures recorded this past year.

“Not surprisingly, our results were affected by the public health crisis and economic slowdown,” commented Hydro-Québec’s President and Chief Executive Officer, Sophie Brochu. “In these trying times, we fully assumed our role within Québec society by implementing exceptional measures totaling $90 million to help customers facing financial difficulties get through the situation. We also launched several initiatives that will contribute to Québec’s economic development and the acceleration of the energy transition in northeastern North America.”

2020 highlights

Québec market:
- 4% decrease in electricity consumption in Québec due to the public health measures
  - 7% decline in baseload demand from the commercial, institutional and small industrial sector and the large industrial sector
  - 4% increase in demand from the residential sector
- Milder temperatures in the winter and fall (3°C and 2°C higher, respectively, than in 2019)
Markets outside Québec:
- $537-million contribution to net income
- Net export volume: 31.3 TWh, down 2.4 TWh from 2019
- Price decline of some 25% on the company’s main export markets
  - Decrease mitigated by positive impact of sales and risk management strategies
  - Average price obtained: 4.2¢/kWh, compared to 4.3¢/kWh in 2019
Economic spinoffs of Hydro-Québec’s operations:
- Contribution to Québec government’s revenue: $3.6 billion
- Major investments throughout the province: $3.4 billion
Solidarity measures implemented to support Quebecers:
- More flexible payment terms offered to customers grappling with financial difficulties
- Moratorium on service interruptions for non-payment of bills
- Suspension, from March to September 2020, of administration charges on unpaid bills
Financing activities:
- Total proceeds: $4.6 billion
  - Issuance of fixed-rate bonds maturing in 2055 and 2060, at an average cost of 2.22%: $3.6 billion
  - Issuance of floating-rate bonds maturing in 2023: $1.0 billion

Consolidated results

On the Québec market, net electricity sales decreased by $146 million essentially because of the impact of temperatures, which were milder in 2020 than in 2019 during most of the months when heating requirements affect customers’ energy consumption. On markets outside Québec, net electricity exports declined by $116 million on account of first-quarter temperature variances, which resulted in lower demand and prices on export markets, and the repercussions of the pandemic, which also led to lower prices and market requirements, especially in the second quarter. Operational expenditure was $328 million higher than the previous year, partly because of the effect of the pandemic—in particular the rise in the allowance related to the collectibility risk for certain accounts receivable—and an increase in the Pension Plan’s current service cost, mainly due to a decrease in the discount rates.

“Although we faced strong headwinds in 2020, we’ll be able to pay a dividend of over $1.7 billion to our shareholder, the Québec government,” said Jean-Hugues Lafleur, Executive Vice President and Chief Financial Officer. “This amount, combined with the economic spinoffs of our operations throughout the province, confirms Hydro-Québec’s role as a major contributor to the Québec economy.”

Investments

Despite the slower overall pace of work on jobsites due to the public health crisis, Hydro-Québec’s investment program totaled $3.4 billion in 2020. Most of this amount was allocated to major development projects in the Generation and Transmission segments, as well as to large-scale projects to maintain and improve the quality of the company’s assets.

The main projects under way include the ongoing construction and connection of the Romaine hydroelectric complex (1,550 MW) in the Côte-Nord region. On the Romaine-4 (245 MW) jobsite, the dam and related structures went into operation in the third quarter of 2020, after reservoir impoundment was completed. Progress was also made during the year in clearing work for construction of the 735-kV line between Micoua substation, in the Côte-Nord region, and Saguenay substation, in Saguenay–Lac-Saint-Jean. The new line, which will extend 262 km, will help maintain the reliability of Hydro-Québec’s transmission system.

Major U.S. export projects

South of the border, the New England Clean Energy Connect (NECEC) project successfully completed the final steps in the regulatory approval process, which enabled the company’s U.S. partner to begin construction. In Québec, the regulatory authorities continue to assess the proposed Appalaches–Maine line, which will connect with NECEC. The deployment of this new interconnection with New England ranks among the largest energy transition projects currently under way in North America. As for the New York market, Hydro-Québec plans to submit a bid under the 1,500 MW renewable energy solicitation launched in early 2021.

For more information on Hydro-Québec’s 2020 financial results, visit www.hydroquebec.com/ar.

Information:

Louis-Olivier Batty
Hydro-Québec
Tel.: 514 289-5005
Batty.louis-olivier@hydroquebec.com