Hydro-Québec is heading for a second consecutive record year. The state-owned company posted an all-time net profit in the first half of 2022 of $2.74 billion, $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 established the business plan at 3.4 billion [pour 2022]and I could say with enough certainty that we risk having a record year this year,” he added.
This prediction is certainly not reckless: after just six months, Hydro-Québec is 81% of its objective for the whole year and 77% of the record of 3.55 billion reached in 2021.
An expensive derecho
The weather is partly responsible for this excellent result, especially the unusual cold last winter. But it also had its share of negative effects with the derecho last May: this windstorm had affected more than half a million subscribers, particularly in the Laurentians and Lanaudière.
“This is the meteorological event that has required the most work on the ground since the 1998 ice storm,” said the manager. More than 2,000 employees were mobilized for 11 days. In total, more than 1,100 poles and 400 transformers were replaced. This work cost approximately 70 million to Hydro-Quebec, which recorded a loss of 55 million in the books as operating expenses.
On the other hand, the Crown corporation certainly benefited from the unusually cold winter. For the month of January alone, the average was -14°C, which is 7 degrees colder 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-Québec to purchase some $227 million of electricity itself on the markets to meet local demand. This strong internal winter demand also led to a shortfall of $57 million on the export side, as the state-owned company was called upon to reduce them to deliver energy to Quebecers.
The balance sheet in terms of exports remains extremely positive despite the drop in sales volume. In particular, Hydro-Québec benefited from a sharp increase — +56.5% — in the price of electricity on export markets, which rose from 4.6¢ kWh to 7.2¢ kWh, enabling it to 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
Here in Quebec, it is not just the cold that has fattened the coffers of the state 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.
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-Quebec 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.
High level of dams
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 Nord-du-Québec, 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.