The general rise in energy prices due to the war in Ukraine had a favorable impact on the performance of Hydro-Québec, which doubled its profits in the second quarter compared to the same period last year.
Posted at 11:00 a.m.
The state-owned company posted net income of $680 million in the second quarter, up $328 million from April, May and June last year.
This increase in profits is mainly due to the increase in the price of kilowatts exported to the American market, which are set according to the price of natural gas. The price of gas has risen sharply since the Russian invasion of Ukraine, especially in Europe, but also in the United States.
Thus, Hydro-Quebec obtained an average price of 7.2 cents per kilowatt hour exported against 4.6 cents last year. As the water level in the reservoirs is adequate and prices on the American market are expected to remain high over the coming months, exports will continue to be very profitable, indicated Jean-Hugues Lafleur, Executive Vice-President and Chief of the financial department of Hydro-Québec.
Hydro-Québec did not suffer from the generalized drought which handicapped several hydroelectric producers elsewhere in the world, including in Nordic countries such as Norway.
Hydro-Québec’s net earnings were also inflated by the 2.6% rate increase in effect since January 1er april. In addition, the increase in aluminum prices on international markets has benefited the company, whose price for a portion of its sales to aluminum smelters is indexed to the price of the metal.
May’s storm, known as the derecho, cut $55 million from the company’s profits. This is the worst weather event to occur on the power grid since the 1998 ice storm, said Mr. Lafleur in a conference call.
In total, sales in Quebec reported profits 201 million higher than those of the second quarter of last year, and exports added 268 million more.
Electricity sales and net profit reached an all-time high in the first half of the year. Halfway through its fiscal year, Hydro-Québec posted a net profit of $2.7 billion, up $749 million, or 38%, from the first six months of last year. The full-year profit target of 3.4 billion will likely be exceeded.
“I could say with some certainty that we’re going to have a record year,” said Jean-Hugues Lafleur.
The cold recorded in January 2022, the worst since 2004, contributed to the improvement in the results for the half-year. In January, the average temperature was -14 degrees Celsius, compared to -7 degrees the previous year.
Moreover, Hydro-Québec is beginning to feel the impact of rising interest rates on the financial markets. Since the beginning of the year, the state-owned company has borrowed $2.9 billion at an average interest rate of 4%, or 1% more than the rates obtained last year. “At 4%, that’s still an acceptable rate for the big projects we’re doing,” commented Jean-Hugues Lafleur.