Hydro-Québec’s quarterly profit exceeded the $ 2 billion mark “for the first time in its history”, while a particularly cold month of January supported demand and the war in Ukraine led to rising prices of that exported electricity.
The state-owned company said Friday that its net income rose $ 421 million, or 25.6%, to $ 2.06 billion in the first quarter. We start the year with a remarkable financial performance, which took place in an environment marked by cold temperatures and a sharp rise in prices in energy markets.summary with Jean-Hugues Lafleur, the chief financial officer of Hydro-Quebec, at a press conference.
January is the coldest month since 2004 with an average temperature of -14 degrees Celsius, compared to -7 degrees Celsius last year. The temperature alone led to an increase in electricity sales of 3.6 TWh, generating revenues of $ 311 million.
In total, electricity sales in Quebec jumped 5.3 TWh, leading to a revenue increase of 546 million, to 4.39 billion dollars. However, this number was offset by electricity purchases to meet demand during the winter, which rose by $ 269 million.
The energy market is emerging
The global energy crisis caused by Russia’s invasion of Ukraine created favorable conditions for Quebec’s electricity exports in the first quarter. Sadly, but we benefit from itrecognizes Mr. Lafleur.
Fuel oil, coal, natural gas, which are inputs for generating electricity to neighboring markets, many of them are exported to Europe, he explained. This leads to an incident of higher prices.
The average sale price outside Quebec was 7.4 cents/kWh, compared to 5.1 cents/kWh for the same period last year.
Without the hedging products it uses to reduce price volatility, Hydro-Québec would have gotten even more. The average price will be 11 cents/kWh, the CFO said. You have to go back to 2008 to have prices as high as that. In recent years, we have been working at approximately 4 cents/kWh.
While Crown’s corporate hedging strategy appears to have missed an opportunity to reap more profits in the first quarter, hedging against market changes is a strategy that pays off in the long run, Lafleur said. . Hydro-Québec is also taking advantage of high prices to adjust a portion of its future sales to high prices using hedging products.
Despite strong demand, however, Hydro-Québec had to reduce its exports by 1.8 TWh compared to last year due to increased demand by Quebec consumers during the extreme cold weather. Net revenue from sales outside Quebec, after all, rose by $ 115 million.
Rapidly rising interest rates
Hydro-Québec, which issued the equivalent of $ 1 billion in debt securities in the first quarter, has not escaped rising interest rates, but it is still replacing mature debt issues with higher rates, ”Lafleur said.
We are replacing loans issued in the early 1990s to finance phase 2 of James Bay. Rates have to go back up to 9% or 10% for loan renewal to take place at a less lucrative rate. We are still far from that.
Interest rates are, however, on an upward trend, Mr. Lafleur said. In February, the company earned a fixed rate of 3.04% for a 600 million issue ending in 2060.
A few months later, in May, an issue with comparable conditions was produced at a rate of approximately 4.04%. There are no plans to return rates of 9-10%, but the amount of financing is higher than in previous years.
Source: Radio-Canada
