Major impact of the COVID-19 pandemic on the company’s results - Hydro-Québec posts net income of $1.6 billion for the first six months of 2020

For the first six months of 2020, Hydro-Québec posted net income of $1,605 million, a $433-million decrease compared to the $2,038 million recorded a year earlier. The global COVID-19 pandemic declared in mid-March 2020 has had an impact on the company’s results, particularly in the second quarter.

“The current crisis has affected our business and financial performance, as reflected in our results for the first six months of the year,” commented Jean-Hugues Lafleur, Executive Vice President and Chief Financial Officer of Hydro-Québec. “Our electricity sales are down both in and outside Québec, and we’ve had to postpone several capital projects. We expect that the pandemic’s repercussions on our operations will continue to be felt in the coming months and we’re currently assessing the extent of those impacts over the longer term. In the meantime, we’re taking steps to support our customers during these trying times, while also striving to enhance our performance. In addition, we’re developing various ways to maximize our contribution to Québec’s economic recovery to help the province get back on its feet.”

Highlights of the first six months

• Québec market
  • Reduction in the province’s electricity consumption due to the measures implemented by the government to manage the pandemic
    • In the second quarter, baseload demand declined by 11% in the commercial, institutional and small industrial segment and by 12% in the large industrial segment
  • Milder temperatures in winter 2020
    • 3°C higher than in winter 2019

• Markets outside Québec
  • Lower energy needs and lower market prices on export markets as a result of the pandemic
  • Net electricity exports: 14.7 TWh, down 1.7 TWh from the first half of 2019
  • Average export price obtained: 4.4¢/kWh, compared to 4.9¢/kWh a year earlier
    • Negative impact of lower market prices mitigated by the positive impact of the company’s sales and risk management strategies

• Investing activities
  • Investments of $1.4 billion in property, plant and equipment and intangible assets during the first six months of 2020, compared to $1.5 billion in 2019
  • Slowdown of activities on the company’s jobsites in the second quarter due to the pandemic
    
    
• Financing activities
  • Issuance of fixed-rate bonds and variable-rate notes in the second quarter, which brought in $1.7 billion
  • Total amount raised since the beginning of the year: $3.1 billion
    
    

On the Québec market, net electricity sales decreased by $145 million compared to the first six months of 2019, primarily on account of the $271-million negative impact of temperatures, which were milder in winter 2020 than in the previous winter. The decline is also attributable to a reduction in baseload demand in the commercial, institutional and small industrial segment, as well as in the large industrial customer segment, following the shutdown of numerous stores and businesses for several weeks in the spring. However, this reduction was offset by higher consumption by aluminum smelters due to the resumption of operations at a large facility in the Centre-du-Québec region in summer 2019, following a prolonged labor conflict. External electricity and fuel purchases related to the company’s distribution activities dropped by $76 million because of lower output from wind farms under contract.

On markets outside Québec, Hydro-Québec Production’s net electricity exports were $647 million, a $158-million decrease due to the impact of temperatures in the first quarter, which resulted in lower demand and lower prices on export markets, as well as to the global pandemic in the second quarter, which also led to lower prices. However, the lower market prices were partially offset by the positive impact of the company’s sales and risk management strategies.

Other factors contributed to the decrease in net income, including a reduction in the number of work hours capitalized in the cost of investment projects, an increase in the allowance serving to mitigate the risk associated with potentially uncollectible debts and a rise in pension plan costs resulting from a decrease in the discount rate.

Finally, Hydro-Québec invested $1,388 million in property, plant and equipment and intangible assets in the first six months of 2020, compared to $1,513 million in the same period last year. Work progressed on the Romaine-4 jobsite, in the Minganie region, in spite of the slowdown of activities due to the pandemic. The company also carried on with its investments to ensure the reliability and long-term operability of its generation, transmission and distribution assets.