Even before it was hit by the nuclear-size charge associated with the closing of the Gentilly-2 plant, Hydro-Québec's operating profit melted 7 per cent in the summer to $376-million on mostly stagnant revenue.
Quebec's state-owned electricity producer blames low aluminum prices and an unfavourable exchange rate, which affected the revenue it derives from some of its large industrial customers through special contracts.
Hydro-Québec was forced to purchase the electricity produced by Rio Tinto Alcan during the lockout that halted the aluminum producer's Alma plant for months. Flush with surpluses, Hydro-Québec doesn't need this electricity, which it continued to buy through October as the Alma plant was still ramping up production. The controversial contract has cost Hydro-Québec close to $120-million so far this year.
The additional export revenue was insufficient to offset these losses. The state producer is selling all that it can on export markets to make up ground, even if electricity prices are down this year to an average of 4 cents per kWh, against 5.4 cents per kWh for the first nine months of 2011.
Overall, Hydro-Québec reported a net loss of $1.48 billon in its third quarter ended Sept. 30. The writeoff and the asset impairment tied to the closing of the Gentilly 2 nuclear plant totalled $1.8-billion, a charge that is slightly higher than the initial estimate of $1.7-billion.
As a result, Hydro-Québec's profit is down 88 per cent for the first nine months of the year, at $265-million, on revenue that fell 1.4 per cent to $9-billion. Milder weather and slowing demand from industrial clients explain Hydro-Québec's lacklustre sales.
These are difficult times for the utility. Last week, Finance Minister Nicolas Marceau asked Hydro-Québec to cut 2,000 jobs – 9 per cent of its work force – through attrition, hoping to receive an extra $225-million in dividends. Three quarters of Hydro-Québec's profits are sent to the government's coffers each year.