Montréal, August 25, 2023
Hydro-Québec posts net income of $2.7 billion for the first half of 2023
Hydro-Québec posted net income of $2,687 million for the first six months of 2023, down $55 million from the historic high of $2,742 million recorded for the same period last year. The risk management strategy implemented by the company has allowed it to benefit from the high forward prices in 2022, bringing about a notable increase in sales outside Québec in 2023. This increase was offset by the combined effect of three main factors: namely, lower electricity sales in Québec due to a milder winter, higher operational expenditure and increased depreciation and amortization expense.
“Overall, we’re very pleased with our results for the first two quarters,” said Jean-Hugues Lafleur, Hydro-Québec’s Executive Vice President and Chief Financial Officer. “All the same, the second quarter of 2023 was marked by unfavorable weather conditions in our export markets. Though our risk management strategy continues to mitigate the impact of falling energy prices, our quarterly net income is lower, largely due to the drop in volumes sold outside Québec. Looking ahead, we expect the drop in prices we have seen since early 2023 to continue to significantly impact results.”
Highlights of the first six months
- Markets outside Québec
- Positive impact of the risk management strategy more than offset the drop in prices on export markets
- Average export price obtained (including the hedging effect): 10.9¢/kWh
- Average market price: 5.2¢/kWh
- Sales volume: 14.9 TWh, down 2.2 TWh compared to the first half of 2022
- Québec market
- Milder winter temperatures in 2023
- Mainly in January (9°C higher than in January 2022)
- April ice storm
- Major meteorological event caused almost 10,000 power outages and affected 1.3 million customers
- Approximately $50 million in service restoration costs
- No impact on electricity rates
- More than $2 billion invested in property, plant and equipment and intangible assets across Québec
- More than two-thirds of investments allocated to asset sustainment
- Financing activities raised $1.1 billion in the second quarter
- Medium-term notes maturing in 2029, at a cost of 3.53%: $0.6 billion
- Bonds maturing in 2063, at a cost of 4.19%: $0.5 billion
- Total proceeds since the start of the year: $2.2 billion
Revenue from electricity sales on markets outside Québec was $1,626 million, a $390-million increase from the $1,236 million posted for the same period in 2022. On the one hand, the positive impact of the risk management strategy that Hydro-Québec implemented to reduce price volatility more than offset the decrease in prices on the energy markets. Thanks to this strategy, the company was able to benefit from the high forward prices in 2022 arising from the global geopolitical situation, which has had a positive impact on revenue this year. On the other hand, in a context marked by unfavorable weather conditions, the volume of sales outside Québec decreased by 2.2 TWh compared to the same period last year.
In Québec, sales brought in $114 million less than the $7,200 million recorded a year earlier, mainly due to temperatures, which resulted in a decrease of $335 million. This decrease was nonetheless partially offset by the indexation of rates on April 1, 2022 and 2023, which generated additional revenues of $212 million.
Operating expenses increased by $121 million, partly due to the expansion of the company’s activities to improve service quality and reliability, in particular the increase in servicing and maintenance activities and growth in expenditure related to the digital services to meet Hydro-Québec’s increased business needs and support the company’s technological evolution. The impact of this increase was mitigated, however, by a decrease in the current service cost of employee future benefit plans, related to the rise, in late 2022, in long-term interest rates on the capital markets, which determine the discount rates.
Lastly, recognition of other components of employee future benefit cost led to a negative variance of $166 million, due essentially to the rise in interest on bonds in a context marked by rising long-term interest rates. Depreciation and amortization expense increased by $81 million, largely due to the growth in depreciation and amortization of property, plant and equipment and intangible assets.
In addition, Hydro-Québec invested $2,028 million in property, plant and equipment and intangible assets, compared to $2,005 million in the same six-month period in 2022. More than two-thirds of this year’s investment has been allocated to major projects aimed at ensuring the reliability and long-term operability of the company’s generation, transmission and distribution assets.
For more information on Hydro-Québec’s financial results for the first half of 2023, visit www.hydroquebec.com/about/financial-results/quarterly-bulletin.html.
Caroline Des Rosiers
Tel.: 514 289-5005