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HYDRO-QUEBEC: 1992 FINANCIAL RESULTS

 MONTREAL, March 9, /PRNewswire/ -- Hydro-Quebec ended the year with net income of $724 million. This financial performance was slightly better than forecast, although net income fell by $36 million or 4.7 percent from that of 1991. Not counting the exceptional measures deployed in recent years to offset low runoff, the 1990, 1991 and 1992 returns on revenue are comparable at about 12 percent. This is in spite of the difficult economic context in which the utility operated in 1992 and the application since January 1992 of the act respecting guarantee fees in respect of loans obtained by government agencies.
 Sales In Quebec Rose By 3.8 Percent
 The volume of sales of firm electricity in Quebec rose to 132.0 TWh (terawatthours or billions of kilowatthours), an increase of 4.8 TWh or 3.8 percent over 1991. Lower temperatures than in 1991 and residential construction caused sales to the residential and farm sector to rise. The slower than anticipated economic recovery affected sales, especially to the industrial sector. Smelting and refining industries were an exception, however, benefiting from the commissioning of two aluminum smelters in 1992. Revenue from sales in Quebec rose by $476 million, to reach $6,382 million or 8.1 percent above 1991. The rate increases of 1991 and 1992 increased revenue by $286 million.
 Sales Outside Quebec Rose By 28.6 Percent
 In 1992, the volume of sales outside Quebec reached 12.6 TWh, a rise of 2.8 TWh compared to 1991. Revenue from sales amounted to $382 million, up $78 million or 25.7 percent. Sales of firm energy on the U.S. market accounted for most of these transactions.
 Two elements had a major impact on total expenditure in 1992. Expenditure for the year amounted to $3,629 million, a rise of $478 million or 15.2 percent over 1991. Nearly half of this increase came from two elements in particular. First, the introduction by the Quebec government in January 1992 of the act respecting guarantee fees in respect of loans obtained by government agencies affected tax expenditure by $151 million. Second, the intensification in early 1992 of exceptional measures to offset the low runoff of 1991 resulted in an increase in purchases of backup energy of $63 million and additional consumption of fuel oil at Tracy generating station costing $20 million in 1992.
 Operating expenses rose by $97 million or 5.3 percent over 1991, to reach $1,935 million at December 31, 1992. Substantial draft design write-offs represented an expense of $51 million in 1992, compared to $12 million in 1991.
 Not including the increased consumption of fuel oil mentioned earlier and draft-design write-offs, operating expenses showed a moderate growth of 2.1 percent compared to 1991, due to the utility's focus on rationalization in 1992. The increase in operating expenses is in fact the lowest since 1987.
 Increased Interest Expense
 Interest expense i.e. total interest costs less the capitalized portion and net investment income, amounted to $2,390 million in 1992, a rise of $96 million over 1991. The increase in interest expense results from the commissionings of 1992 and 1991 and the depreciation of the Canadian dollar against the American dollar. However, without the drop in interest rates on the financial markets, it would have been even higher.
 Total Investment At 1991 Levels
 Total investment in 1992 was $4,126 million and is comparable to that of 1991. With respect to generating facilities, Phase II of the La Grande complex remains the principal project, with investment in the construction of the La Grande-1, Laforge-1 and Brisay generating stations amounting to $1,139 million in 1992.
 As part of the Energy Efficiency Project, which is in its third year, the utility invested more than $118 million in its various marketing programs, compared to $52 million in 1991.
 Less Borrowing than Forecast
 Financing activities in 1992 produced a gross volume of debt issues of $3,419 million, of which $2,154 million was used to redeem debt, $589 million prior to maturity. Favorable conditions on the financial markets permitted renegotiation of borrowings of $711 million.
 On Dec. 31, 1992, total debt amounted to $31,996 million, up by $2,293 million. If redemptions are excluded, the issues represent an addition of $1,265 million to borrowings existing on Dec. 31, 1991. Moreover, depreciation of the Canadian dollar, especially against the U.S. dollar, resulted in an increase in debt of $1,028 million.
 The utility did not, however, borrow as much as it had anticipated, first because of lower investment than forecast, and second because of a decision to use cash more rapidly to redeem, prior to maturity, debt it had intended to renegotiate. It should be recalled that cash levels were particularly high at Dec. 31, 1991 because of prefinancing operations during 1991.
 Better Financial Performance Than Anticipated At The Start Of The Year
 Overall, financial ratios, decreased compared to those of 1991, mainly due to the cost of low runoff incurred in 1992. However, the financial performance of the utility was better than anticipated at the start of the year, except for the self-financing ratio.
 Return on revenue and return on equity declined in 1992 to 10.6 percent and 7.4 percent, respectively on December 31, 1992, compared to 12.2 percent and 8.4 percent on Dec. 31, 1991. It is the decline in net income which accounts for the decrease.
 The self-financing ratio remained below the minimum objective of 30 percent in 1992. It stood at 27 percent at the end of the year, while it was at 27.5 percent at Dec. 31, 1991. In fact, 1992 redemptions were higher than forecast because of redemptions prior to maturity, thus explaining the decrease in the self-financing ratio compared to the forecast 27.2 percent.
 Interest coverage fell from 1.10 in 1991 to 1.07 in 1992. This decrease is in part due to lower income from temporary investments, resulting from lower interest rates on the financial markets.
 In 1992, the capitalization ratio remained steady compared to 1991. It stood at 23.7 percent on Dec. 31, 1992. In 1992, had it not been for the increase in debt related to the depreciation of the Canadian dollar against the U.S. dollar, the capitalization ratio would have been 24.3 percent. As provided in the Hydro-Quebec Act, the Quebec government, Hydro-Quebec's sole shareholder, is not entitled to declare dividends for 1992 since the capitalization ratio is below the minimum threshold of 25 percent.
 -0- 3/9/93
 /CONTACT: Helen Mayer, press officer of Hydro-Quebec, 514-289-2313/


CO: Hydro-Quebec ST: Quebec IN: UTI SU: ERN

SM -- NY079 -- 4666 03/09/93 16:40 EST
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