Gaz Métro reports solid results for 2009 fiscal year

Favourable competitive situation for natural gas and diversity of operations contribute to strong financial performance

Montreal, November 18, 2009 – Gaz Métro Limited Partnership (TSX: GZM.UN, Gaz Métro) ends its 2009 fiscal year with adjusted net income of $159.6 million, or $1.32 per unit, which is $6.3 million, or $0.05 per unit higher than the previous fiscal year.¹

“We are proud to report solid financial results to our Partners. Even though Gaz Métro is not immune to the vagaries of the global economic situation, it is doing quite well in these turbulent times. Relying on its commercial agility, the Partnership has taken full advantage of business opportunities provided by the competitive position of natural gas in Quebec for several quarters, in particular in the industrial market where it has dislodged heavy fuel oil. In 2009, Gaz Métro also reaped the rewards of its prudent targeted diversification strategy of its markets and activities”, said Sophie Brochu, President and Chief Executive Officer.

“Our interest in the Trans Québec & Maritimes Pipeline transmission system, for which the National Energy Board approved a substantial adjustment of the rate of return on equity during the fiscal year, was an important contributor to our strong performance in 2009. This is also true of Green Mountain Power Corporation, the second largest electricity distributor in Vermont that we acquired in 2007, which itself generated net income before financing costs of $15.7 million, representing nearly 10% of our net income”, added Sophie Brochu.

“Following our strategy of investing in complementary infrastructure, we are resolutely pursuing our wind power projects. This year, these projects received the environmental permits they required to go ahead, thereby reaching another milestone towards making long-term value a reality for our Partners”, concluded Sophie Brochu.

Income Distribution

Gaz Métro distributed $0.31 per unit in each quarter of the 2009 fiscal year, for a total of $1.24 per unit, the same level as in the 2008 fiscal year. It also paid a distribution of $0.31 per unit to Partners last October 1.

Gaz Métro today declared a distribution of $0.31 per unit, payable on January 5, 2010, to Partners of record at the close of business on December 15, 2009. Gaz Métro expects to pay distributions of $0.31 per unit in each quarter of the 2010 fiscal year.
 
Segment Analysis

Vermont Energy Distribution

Net income from Vermont Energy Distribution was up $5.1 million²  for the 2009 fiscal year, in spite of lower electricity volumes distributed by Green Mountain Power Corporation (GMP). This solid performance is due, among other things, to the increase in revenues from GMP’s interest in Vermont Transco LLC, which transports electricity, the appreciation of the U.S. dollar in relation to the Canadian dollar and higher natural gas deliveries by Vermont Gas Systems, Inc. (VGS) as a result of relatively colder temperatures than the previous fiscal year.

Quebec Natural Gas Distribution (Gaz Métro-QDA)

In Quebec during the 2009 fiscal year, Gaz Métro-QDA signed 6,196 new contracts, bringing the number of customers to 179,370 as at September 30, 2009. The new housing penetration rate of natural gas was 19% in the Greater Montreal area. New customer satisfaction rate in Quebec remained high at 92%. 
 
The main reason for the 1.8% reduction in natural gas volumes in the residential market was energy conservation initiatives. Gaz Métro encourages those initiatives through energy efficiency programs while keeping investors’ expectations in mind. In accordance with its regulatory framework, Gaz Métro-QDA therefore received the total performance incentive of $4.0 million in 2009, as it did in 2008, from the achievement of its corporate energy efficiency objectives. 

In the commercial market, the economic recession was the main contributor to the 3.0% reduction in natural gas volumes compared to last year. The 19.9% volume reduction in the industrial market during the 2009 fiscal year was mainly in the metallurgy, refining, petrochemical and electricity production sectors.

Overall, Gaz Métro-QDA’s net income was down $7.2 million, mainly on account of the 0.58% reduction in the rate of return, including anticipated productivity gains, authorized for the 2009 fiscal year compared to the 2008 fiscal year and the reduction in income and capital taxes, which are included in rates charged to customers and subsequently assumed by the Partners. These items are partially offset by the increase in the share of the overearnings arising mainly as a result of higher revenues from short-term interruptible service sales at higher average prices than during the previous fiscal year due to the more favourable competitive position of natural gas compared to heavy fuel oil.  
 
Transportation of Natural Gas

Net income from the Transportation segment was up $0.3 million for the 2009 fiscal year, mainly because of the recognition, in the second quarter, of the retroactive $6.7 million favourable impact of a rate adjustment the National Energy Board approved on March 19, 2009 for Trans Québec & Maritimes Pipeline Inc. (TQM) for its 2007 and 2008 fiscal years, as well as interest income of $0.8 million related to that rate adjustment. These favourable items are mitigated by lower earnings in Portland Natural Gas Transmission System (PNGTS) and the non-recurring $5.3 million after-tax gain recorded in PNGTS during the 2008 fiscal year in connection with the partial settlement of the bankruptcy of Calpine Corporation, one of its former large customers.

Storage of Natural Gas

Adjusted net income³ for the Storage segment was up $1.1 million for the 2009 fiscal year, mainly on account of a slight indexing of rates and a reduction in financial expenses, reflecting lower interest rates.

Energy Services and Other

Adjusted net income³ for the Energy Services segment was up $6.6 million for the 2009 fiscal year, mainly because of improved profitability for some subsidiaries of Gaz Métro Plus Limited Partnership, including Consulgaz Inc., Climatisation et Chauffage Urbains de Montréal, s.e.c. and HydroSolution L.P.

Development Projects

In connection with the Seigneurie de Beaupré wind power projects, on July 7, 2009, Gaz Métro and its partner, Boralex Inc., obtained a decree from the Government of Quebec, on the recommendation of the provincial ministry of natural resources (ministère des Ressources naturelles et de la Faune), authorizing two projects with a total installed capacity of 272 megawatts. The two wind farms should be put in service no later than December 1, 2013 on Seigneurie de Beaupré lands, which are owned by the Séminaire de Québec. Having achieved this important environmental milestone, the consortium may now proceed with the other planned stages of the projects.
 
In terms of the natural gas supply diversification initiatives, the timetable for the proposed liquefied natural gas terminal has been extended as external factors and uncertainties in the financial, commodity and construction markets have slowed discussions between the project’s partners and Gazprom Marketing & Trading USA, Inc. In Gaz Métro’s view, a correction in the economic situation is to be expected, but it does not foresee the signing of final agreements in the short term.

Quarterly Results

Given the seasonal nature of its operations and the normally low demand for energy during the summer months, Gaz Métro has always incurred a loss during the fourth quarter of its fiscal year. The adjusted net loss³ for the fourth quarter of the 2009 fiscal year is $36.7 million, compared to $39.5 million for the corresponding period of the previous fiscal year, an improvement of $2.8 million. The adjusted net loss per unit is $0.31 in the fourth quarter of the 2009 fiscal year, compared to $0.32 in the fourth quarter of the previous fiscal year, an improvement of $0.01 per unit.

Conference Call

The Partnership will hold a telephone conference with financial analysts on Wednesday, November 18, 2009, at 4:00 p.m. (Eastern time) to discuss its results for the fiscal year ended September 30, 2009. Sophie Brochu, President and Chief Executive Officer, and Pierre Despars, Executive Vice President and Chief Financial Officer, will be the main speakers. This will be followed by a question period. Media and other interested individuals are invited to listen in.

The conference can be accessed live by dialling 416-644-3426 or toll-free 1-800-731-5319. It will also be Webcast on Gaz Métro’s Web site (www.gazmetro.com/investors) in the “Webcasts” section.

Rebroadcasts can be accessed for 30 days by telephone at 416-640-1917 or toll-free at 1-877-289-8525 (access code: 4179945#), and for 90 days on Gaz Métro’s Web site.

Gaz Métro Overview

With over $3.3 billion in assets, Gaz Métro is Quebec’s leading natural gas distributor. Operating in this regulated industry for over 50 years, Gaz Métro has become the trusted energy provider to some 180,000 customers in Quebec and 136,000 customers in Vermont while developing the skills and expertise needed to diversify beyond natural gas. Gaz Métro’s prudent growth strategy has been marked by the successful entry into electricity distribution in Vermont and development of wind power projects in Quebec. Offering historically strong and stable distributions with a competitive spirit, Gaz Métro is committed to its customers, Partners, employees and the community. Gaz Métro’s units are listed on the Toronto Stock Exchange under the symbol GZM.UN.www.gazmetro.com
 
Cautionary note regarding forward-looking statements

Certain statements in this press release may be forward-looking pursuant to applicable securities laws. Such forward-looking information reflects the intentions, plans, expectations and opinions of the management of Gaz Métro inc. (GMi), Gaz Métro’s general partner, and is based on information currently available to management and on assumptions with respect to future events. The words “plans”, “expects”, “estimates”, “forecasts”, “intends”, “anticipates” or “believes”, or similar expressions, including the negative of these terms and future or conditional forms, often identify forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties and other factors outside management’s control. A number of factors could cause actual results of Gaz Métro and GMi to differ materially from the results discussed in the forward-looking statements, including, but not limited to, terms of decisions rendered by regulatory bodies, general economic conditions, the competitiveness of natural gas in relation to other energy sources, the reliability of natural gas supplies, the integrity of the natural gas distribution system, exchange rates fluctuations and other factors described in the Annual Information Form of each of Gaz Métro and GMi under the item “Risks”, and in the Management’s Discussion and Analysis of each of Gaz Métro and GMi for the fiscal year ended September 30, 2009. Although the forward looking statements contained herein are based upon what management believes to be reasonable assumptions, including assumptions to the effect that no unforeseen changes in the legislative and operating framework of energy markets in Quebec and in the State of Vermont will occur, that no significant event occurring outside the ordinary course of business, such as a natural disaster or other calamity, will occur, and other assumptions described in the Management’s Discussion and Analysis of each of Gaz Métro and GMi for the fiscal year ended September 30, 2009, management cannot assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of this date, and management assumes no obligation to update or revise them to reflect new events or circumstances, except as required pursuant to applicable securities laws. Readers are cautioned not to place undue reliance on these forward-looking statements.

Adjusted indicators not standardized in accordance with GAAP

In the view of Gaz Métro’s management, certain “adjusted” indicators, such as adjusted net income and adjusted net income per unit provide readers with information it considers useful for analyzing its financial results. However, they are not standardized in accordance with Canadian generally accepted accounting principles (GAAP) and should not be considered in isolation or as substitutes for other performance measures that are in accordance with GAAP. The results obtained might not be comparable with similar indicators used by other issuers and should therefore only be considered as complementary information.

¹Adjusted net income excludes an unfavourable non-monetary adjustment of $1.1 million related to future income taxes for the 2009 fiscal year (favourable non-monetary adjustment of $1.1 million for the 2008 fiscal year).
²Net of financing costs
³Adjusted net income (adjusted net loss) excludes non-monetary adjustments related to future income taxes.

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For additional information: 

Investors and analysts
Caroline Warren 
Investor Relations 
514 598-3324 

Media
Marie-Noëlle Cano
Media and Public Relations
514 598-3449