Posted at 11:00 a.m.
Are Hydro-Québec surpluses transferred to government coffers? If so, by what mechanism?
Patricia Goulet
In fact, Hydro-Québec pays a significant portion of its net profits each year in the form of a dividend that the Crown corporation pays to its sole shareholder, the Québec government. Hydro-Québec is what is popularly called one of the government’s three cash cows and is certainly the most lucrative.
“Annually, Hydro-Québec declares a dividend of a maximum of 75% of its net income. Concretely, this means that three-quarters of the company’s net profit is donated each year to the Quebec government,” explains Philippe Archambault, head of media and government affairs for the state-owned company.
The remaining 25% is retained by the company to finance its capital investments, for example, in 2021, the construction of the Romaine complex or new electricity transmission infrastructure.
Philippe Archambault, head of media and government affairs at Hydro-Québec
With the expensive post-storm work that the state-owned company has been engaged in all week, we can also understand that part of the profits earned during its last financial year will be used to pay for this emergency work which obviously weren’t planned or budgeted. By law, Hydro-Québec’s capitalization rate can never be less than 25%.
It was in 1981 that the concept of paying a dividend from Hydro-Québec to its sole shareholder was introduced. Over the years, the formula for calculating this dividend has been modified, but its ceiling has never exceeded 75% of its net profits, Philippe Archambault reminds us.
The original formula provided for the payment of 75% of consolidated operating income and net investment income, less interest on long-term debt, interest on bank advances and notes payable, and amortization discount and issue costs relating to the company’s debt securities. Over the years, foreign exchange losses have been taken into account and the calculation of the dividend has remained the same since 2010.
Important kitty
Last February, Hydro-Québec unveiled record results after having managed to generate a net profit of 3.6 billion for its 2021 fiscal year. These record profits allowed the state-owned company to deliver a dividend to the Quebec government historic 2.7 billion, a kitty that helped reduce the apprehended deficit of the Minister of Finance.
In his most recent budget, the Minister of Finance, Eric Girard, recorded a dividend of 2.7 billion from Hydro-Québec, 1.33 billion from the Société des alcools du Québec and 1.03 billion from Loto- Quebec, which confirms Hydro-Quebec’s status as the most lucrative cash cow of Quebec’s Crown corporations.
Hydro-Québec’s financial contribution to the government’s balance sheet is not limited to the sole payment of an annual dividend since the government corporation also pays various annual fees and taxes that are added to the revenues of the Québec government.
Thus, for the year 2021, Hydro-Québec paid the government 200 million in guarantee fees relating to debt securities, 300 million in taxes on services and 800 million in water-power royalties.
Over the past five years, the Crown corporation has paid over $11 billion in dividends to its one and only shareholder, the Quebec government.
Do you have questions about personal finance, the world of work, the stock market, finance, technology, management or another related subject? Our journalists will answer one of them every week.