Hydro-Québec's profit slumps 50%

- Profit at Hydro-Québec plummeted 50 per cent in the third quarter because of a dramatic drop in lucrative electricity sales to Ontario and the northeastern United States.

Hydro's profit fell to $143 million in the quarter ended Sept. 30 from $287 million last year. Revenues in the quarter were $2.4 billion, off by almost $1 billion from last year.

A cooler summer this year in export markets compared with last year's scorching temperatures, coupled with higher demand in Quebec, explain the sharp decline in revenue and profit in the quarter, Hydro executives explained recently.

Electricity consumption in the province jumped 7.5 terawatt-hours, or 6.6 per cent, in the first nine months of 2003. The increase can be attributed to cold temperatures last winter, higher industrial activity and rising residential demand amid brisk housing construction.

Delivering more power to Quebec customers is slashing the amount of power available for export.

Net exports will fall to about 5 Twh this year from 12.6 Twh in 2002.

Hydro's production arm is required to sell electricity to the utility's distribution arm for sale in Quebec at 2.8 cents a kilowatt hour vs. more than the 6 cents it can typically get on spot export markets.

For the first nine months, Hydro-Québec posted net income of $1.5 billion vs. $1.2 billion in the year-earlier period.

Nine-month revenues fell 12 per cent to $8.7 billion.

Quebec Finance Minister Yves Séguin has called on Hydro to deliver a $2.1-billion dividend to the government for the fiscal year ending March 31.

Hydro-Québec chief financial officer Daniel Leclair reiterated recently the stated position of chief executive André Caillé that: "There's a lot of work to be done to meet (the target). But we're not giving up."

Hydro distribution, the arm responsible for delivering electricity to customers in Quebec, posted a loss of $197 million in the quarter on sales of $6.2 billion.

The utility has applied to government regulators for a three-per-cent rate increase this year and another three per cent in 2004.

Caillé has said rising demand in Quebec will require aggressive action to increase electricity production over the next five years, including speeding up dam projects and building a controversial natural-gas-fired plant at Suroît on the South Shore.

But Hydro critics say the utility can do a much better job on energy conservation.

Hydro's operating expenses climbed by a healthy 8.6 per cent in the third quarter and 2.9 per cent in the nine months.

Caillé has promised to freeze the utility's operating expenses at their 2003 level for the next three years.