Montréal, November 13, 2020
Financial resultsQuarterly net income nearly equal to last year’s despite the pandemic
Hydro-Québec’s financial results stabilized in the third quarter with the resumption of most economic activities in Québec and in neighboring markets. The company posted net income of $203 million for the third quarter of 2020, an amount almost equal to the $205 million recorded a year earlier.
That said, the current crisis has had significant repercussions on the company’s results since the beginning of the year. Consequently, Hydro-Québec’s net income for the first three quarters is down $435 million compared to the corresponding period of 2019.
With the second wave of the pandemic upon us, it is impossible to estimate precisely the duration and scope of the public health crisis or the extent of the economic turmoil that will follow. It is also difficult to assess the fallout on Hydro-Québec’s operations and financial results over the short and longer term. “We’re carefully monitoring developments and are continuing to work on initiatives to mitigate the pandemic’s impacts on the Québec economy and our own results,” said Jean-Hugues Lafleur, Executive Vice President and Chief Financial Officer of Hydro-Québec.
Highlights of the first nine months
- 4% decline in the province’s electricity consumption due to the public health measures
- Baseload demand down 8% in the commercial, institutional and small industrial segment and 9% in the large industrial segment
- 5% increase in demand from residential customers
- Milder temperatures in winter 2020
- 3°C higher than in winter 2019
Markets outside Québec
- Lower energy requirements and market prices on export markets due to warmer temperatures in the first quarter and the impact of the pandemic
- Net electricity export volume: 23.3 TWh, down 3.2 TWh from the corresponding period of 2019
- Average export price obtained: 4.3¢/kWh, compared to 4.4¢/kWh a year earlier
- Negative impact of lower market prices mitigated by the positive impact of the company’s sales and risk management strategies
Increase in the allowance related to the collectibility risk
- Up $54 million due to the fact that some accounts receivable are showing signs of deterioration as a result of the difficult economic conditions
- Investments of $2.3 billion in property, plant and equipment and intangible assets during the first nine months of 2020, compared to $2.5 billion in 2019
- Slowdown of activities on the company’s jobsites due to the pandemic, especially in the second quarter
On the Québec market, net electricity sales decreased by $107 million compared to the first three quarters of 2019. First, temperatures, which were milder in winter 2020 than during the previous winter, had a negative impact of $257 million on electricity sales. However, baseload demand grew by $26 million. The sales decline in certain segments following the shutdown of numerous stores and businesses for several weeks in the spring was offset by the increase in consumption by residential customers and higher demand from aluminum smelters, itself attributable to the gradual resumption of operations at a large production facility in summer 2019, following a prolonged labor conflict. Finally, external electricity and fuel purchases related to distribution activities dropped by $62 million, mainly because of lower output from wind farms under contract.
On markets outside Québec, Hydro-Québec Production’s net electricity exports decreased by $151 million to total $1,004 million. This is due to the impact of temperatures in the first quarter, which resulted in lower demand and a decline in prices on export markets, as well as to the repercussions of the global pandemic, which also led to lower prices and market requirements, especially in the second quarter. However, the decline in market prices was partially offset by the positive impact of the company’s sales and risk management strategies.
Other factors also contributed to the decline in net income, including a rise in pension plan costs resulting from a decrease in the discount rate, a reduction in the number of work hours capitalized in the cost of investment projects and an increase in the allowance related to the collectibility risk for certain accounts receivable.
Finally, Hydro-Québec invested $2,263 million in property, plant and equipment and intangible assets during the first nine months of 2020, compared to $2,458 million in the same period last year. Work progressed on the Romaine-4 jobsite in spite of the slowdown of activities due to the pandemic. In particular, the company began operating the dam and related structures during the third quarter, with a view to commissioning the generating station in 2022. It also carried on with its investments to ensure the reliability and long-term operability of its generation, transmission and distribution assets.
For more information:
Tel.: 514 289-5005