August 8, 2007 - Financial releases
Montreal, August 8, 2007 – Énergir Limited Partnership (TSX: GZM.UN, "Énergir") reports Partners’ income of $177.2 million, or $1.47 per unit, for the first nine months of the 2007 fiscal year, compared to $173.5 million, or $1.48 per unit, at the same date last year. For the third quarter of the current fiscal year, Partners’ income is $1.1 million, or $0.01 per unit, compared to a loss of $0.1 million for the same period the previous year.
Income for the third quarter is up due to a number of factors, including the inclusion of Green Mountain Power Corporation’s (GMP) net income since April 12, 2007 and lower expenses in respect of the Rabaska liquefied natural gas (LNG) terminal project. These factors, coupled with certain non-recurring revenues in subsidiaries in the Energy Services and Other Sector, are the reasons for the 2.1% increase in income for the first nine months of the 2007 fiscal year compared to 2006.
"The third quarter was an important one for Énergir, which acquired Green Mountain Power Corporation. Completed on April 12, this acquisition of the second largest electricity distributor in Vermont is perfectly in line with the targeted prudent diversification strategy of our energy activities", stated Sophie Brochu, President and Chief Executive Officer.
"In Quebec, the efforts we put into regulatory matters also produced results during the quarter. The Régie de l’énergie’s approval of the proposed changes to the performance incentive mechanism brings the regulatory framework more in line with the Partnership’s market reality. Furthermore, in connection with the 2008 rate application submitted to the Régie, we proposed changes to the present formula for determining the rate of return allowed on Partners’ deemed common equity. Those changes reflect more realistically Énergir’s business risk and the market’s expectations”, said Sophie Brochu.
“Lastly, the Rabaska LNG terminal project reached another major milestone with the publication, just after the end of the quarter, of a favourable joint report by the Bureau des audiences publiques sur l’environnement and the Environmental Studies Association of Canada", added Sophie Brochu.
Consolidated revenues for the third quarter of the 2007 fiscal year are $388.7 million, which is $65.6 million, or 20.3%, higher than the same period last year. The main reason for this is the consolidation of GMP’s sales since April 12, 2007. For the first nine months, consolidated revenues are down $113.5 million, or 6.4%, to $1,653.9 million. The main reason for this is a 24% decrease in the average selling price of natural gas during the period, offset in part by the consolidation of GMP’s sales.
The increase in revenues from the distribution activity in Quebec, coupled with the impact of the consolidation of GMP, increased gross margin by $12.9 million, or 11.8%, to $121.9 million during the third quarter of the 2007 fiscal year compared to the same period in 2006. After nine months, gross margin of $524.4 million is $25.6 million, or 5.1%, higher than the corresponding period last year.
Cash flows related to operating activities, before change in non-cash working capital items, are $45.1 million for the third quarter, an increase of $12.8 million over the same period last year. They are $337.3 million for the first nine months of the 2007 fiscal year, an increase of $39.2 million. This can be explained by temperatures that were colder than the first nine months of the previous year, resulting in greater average energy consumption, and the increase in the distributions received from Portland Natural Gas Transmission System (PNGTS).
Énergir inc., in its capacity as General Partner of the Partnership, declared today a distribution of $0.31 per unit, payable October 1, 2007 to Partners of record at the close of business on September 15, 2007.
Energy Distribution Sector
Following the acquisition of GMP, the Energy Distribution Sector, formerly the “Natural Gas Distribution Sector”, is now broader, and includes all Énergir’s energy distribution activities.
The Partners’ loss from the Energy Distribution Sector was $2.7 million in the third quarter, down $0.3 million, or 9.3% from the third quarter of the 2006 fiscal year. After nine months, Partners’ income is $157.8 million, an increase of $1.2 million, or 0.8%, which is attributable to the increase in income from the distribution of natural gas and the consolidation of GMP’s results since April 12, partially offset by additional interest expense for financing GMP’s activity.
Normalized deliveries (based on temperatures, in Quebec) during the third quarter of the 2007 fiscal year total 1,265 million cubic metres, which is 9.1% higher than the 1,160 million cubic metres in 2006. For the first nine months of the 2007 fiscal year, normalized volumes of 5,336 million cubic metres are 13.8% higher than last year. This can be largely explained by the start-up of the Bécancour cogeneration plant and increased consumption in the metallurgy sector.
On May 15, in connection with its rate application for the 2008 fiscal year with the Régie de l’énergie, Énergir proposed changes to the present formula for determining the rate of return allowed on deemed Partners’ common equity.
The Régie’s hearings on this matter should start towards the end of August, with a final decision expected in September 2007.
Income from the Transportation Sector is up $0.1 million in the third quarter to $2.5 million. For the first nine months of the fiscal year, income is $11.2 million, which is $3.5 million lower than last year. The cumulative decrease is due, among other things, to lower PNGTS earnings following the loss of two large customers that ceased to contribute to its results, the reduction in the rate of return allowed on Trans Québec & Maritimes Pipeline’s equity, as well as higher financial expenses related to this Sector.
Partners’ income from the Storage Sector is $0.3 million in the third quarter, which is $0.8 million lower than the third quarter the previous year. For the first nine months of the 2007 fiscal year, Partners’ income of $2.2 million is down $1.3 million. The main reasons for this are non-recurring revenue in the first quarter of 2006, a reduction in the rate for the Pointe-du-Lac storage site following a decision by the Régie de l’énergie on June 6, and an increase in financial expenses allocated to the Sector.
Energy Services and Other Activities Sector
Income from the Sector is $0.4 million in the third quarter compared to $1.0 million for the same period last year. For the first nine months of the 2007 fiscal year, income is $5.6 million, compared to $3.5 million during the corresponding period in the 2006 fiscal year. The main reason for the decrease in the third quarter is the fact that during that period in 2006 HydroSolution had non-recurring gains from financial instruments. The reasons for the increase after nine months are the partial recognition of the deferred gain on the sale in 2006 of a portion of the units of Climatisation et Chauffage Urbains de Montréal, and the recording of a non-recurring tax benefit in MTO Telecom Inc.
On July 5, the review committee formed by the Bureau d'audiences publiques sur l'environnement and the Environmental Studies Association of Canada made public a favourable report on the installation of the Rabaska LNG terminal and the related infrastructures. The next step is to get the Quebec government’s approval. There were no expenditures on the project affecting the results during the quarter, which reduced development and other expenditures by $2.2 million and $5.1 million in 2007, compared to the quarter and the nine months ended June 30, 2006 respectively.
On June 22, 2007, the House of Commons adopted Bill C-52 implementing the amendments to the Income Tax Act proposed in the Minister of Finance’s Tax Fairness Plan tabled on October 31, 2006 and concerning income trusts and limited partnerships (flow-through entities). As a result of these amendments, effective October 1, 2010, income tax (presently paid by each Partner) will be paid at the level of Énergir at the corporate tax rate and after-tax distributions will be considered as dividends for income tax purposes.
In its present form, this change to the tax rules would reduce income that can be distributed because it would be after tax. The impact on the Partners would depend on their individual tax status. Énergir is analyzing the various alternatives available to it.
The Partnership will hold a telephone conference with financial analysts to discuss its results for the third quarter of the 2007 fiscal year on Wednesday, August 8, 2007 at 4:00 p.m. (Eastern time). Interested parties are invited to listen in. Sophie Brochu, President and Chief Executive Officer, and Pierre Despars, Executive Vice President and Chief Financial Officer, will be the main speakers.
The conference can be accessed live by dialling 1 800 732 6179 or 416 644 3414. It will also be webcast on Énergir’s website (www.gazmetro.com/investors) in the “Webcasts” section.
Rebroadcasts can be accessed for 30 days by telephone at 1 877 289 8525 or 416 640 1917 (access code 21240457#), and for 90 days on Énergir’s website.
With more than $3.1 billion of assets and more than 1,500 employees in Quebec, Énergir is a leading Quebec energy company and one of Canada’s largest natural gas distributors. Énergir serves about 167,000 customers in Quebec through an underground pipeline network of almost 10,000 km.
Through its wholly-owned subsidiary, NNEEC, Énergir has been active in New England’s energy industry since 1986 and has nearly 300 employees there. NNEEC includes Vermont Gas Systems, the sole gas distributor in Vermont, and Green Mountain Power Corporation, the second largest electricity distributor in that State.
Through investments in wholly-owned subsidiaries or in partnerships with other investors, Énergir is active in natural gas transportation and storage as well as energy services and water and waste water systems and fibre optic networks. Énergir also participates in various development projects in the energy sector.
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