Hydro-Quebec Q1 profit falls to $1.34 billion, partially due to Rio Tinto Alcan lockout

MONTREAL – Hydro-Quebec profits dipped 4.7 per cent to $1.34 billion in the first quarter, with the company citing a requirement to purchase electricity from Rio Tinto Alcan during its lockout of employees in Alma, Que., among reasons for the decrease.

The public utility, which earned $1.4 billion in its seasonally strongest period a year ago, also said lower export revenues and mild winter temperatures contributed to the earnings decline this year.

Hydro-Quebec purchased $33 million of excess power produced by Rio Tinto Alcan, which is operating at about one-third of capacity at its Alma location after locking out 780 employees on Dec. 30.

A contract with the aluminum division of the metal giant required Hydo-Quebec to pay the large commercial rate of 4.2 cents per kilowatt-hour for 0.8 TWh of power. It could realize revenue to offset the charge by selling the power.

It was also affected by a $30-million decrease in revenue from net electricity exports and a $10-million payment of a required annual contribution to province’s Northern Plan Fund.

Lise Croteau, vice-president accounting, said the utility has also purchased power from Rio Tinto Alcan in the second quarter but couldn’t say if it will again face a $33-million charge.

“I don’t want to speculate on the duration of the conflict but we have contractual arrangements to respect,” she said during a conference call.

Revenues for the period ended March 31 were $3.79 billion, compared with $3.82 billion a year ago.

Revenue from electricity sales in Quebec decreased by $116 million to $3.24 billion. Mild winter temperatures, which were 3C on warmer than average, cut $133 million of revenues as it sold two TWh less power. The lower revenues were partially offset by $36 million in sales on Feb. 29 since 2012 is a leap year.

The 2012 winter was the second mild season in three years as temperatures were even higher in 2010.

Despite stable volumes, revenues from exports decreased by $45 million, due to a reduction in selling prices.

Hydro-Quebec’s selling price for electricity was 4.7 cents per kWh, down from 5.3 cents a year ago. The average cost of power is 3.4 cents per kWh.

The U.S. market price for electricity fell to 3.8 cents per kWh, from 5.2 cents a year earlier.

“It’s a big decrease (from last year) but our hedging practices allowed us to offset the decline,” she added.

Other revenues were $177 million, an increase of $131 million because extra payments from customers related to climate conditions.