Gaz Métro reports solid results for first quarter of 2010 fiscal year

Favourable competitive position for natural gas and transportation segment contribute to good performance

MONTREAL , Feb. 11 /CNW Telbec/ - Gaz Métro Limited Partnership ("Gaz Métro") (TSX: GZM.UN) ends its first quarter of the 2010 fiscal year with adjusted net income of $79.1 million , or $0.66 per unit, which is $7.9 million , or $0.07 per unit, higher than the first quarter of the previous fiscal year(1). The main reasons for this increase are the good results for the Quebec natural gas distribution activity and the natural gas transportation segment.

"For several quarters now, natural gas has maintained its competitive advantage over all other energies in all market segments in Quebec and Vermont. Its economic appeal positions Gaz Métro favourably to sustain deliveries and attract new customers as the economic recovery will take hold. During the first quarter, natural gas deliveries were up 4% overall. In Quebec , the number of new contracts signed in the residential and commercial markets was nearly 15% higher than the same period last year, and surpassed by more than 2% the contracts signed in the first quarter of the 2008 fiscal year, which had been a record year in that regard for Gaz Métro", said Sophie Brochu , President and Chief Executive Officer.

Income Distribution

Gaz Métro today declared a distribution of $0.31 per unit, payable on April 1, 2010 , to Partners of record at the close of business on March 15, 2010 . The Partnership, which has already indicated it expected to pay distributions of $0.31 per unit in each quarter of the 2010 fiscal year, maintains this outlook.

Segment Analysis

Quebec Natural Gas Distribution (Gaz Métro-QDA)

Net income for Gaz Métro-QDA was up $3.8 million for the first quarter of the 2010 fiscal year. The main reasons for this are the 0.26% increase in the authorized rate of return for the 2010 fiscal year compared to 2009, including anticipated productivity gains, higher revenues from regular and short-term interruptible service sales because of the more favourable competitive position of natural gas in relation to heavy fuel oil, and the recognition of the entire $4.0 million performance incentive from the Global Energy Efficiency Plan, the annual objective having been achieved after only three months of operations ( $1.0 million recognized in first quarter of previous fiscal year). However, this increase should reverse in the coming quarters, as it stems from a temporary timing difference between the revenue recognition profile, which follows the customer consumption profile, and that of costs.

Gaz Métro-QDA's normalized natural gas deliveries during the first quarter of the 2010 fiscal year were 4.4% higher than the same period the previous fiscal year, the result of higher deliveries in the commercial and industrial markets. In the commercial market, the maturation of new sales and the impact of some economic recovery are the main reasons natural gas volumes were up 7.9% over the first quarter of the 2009 fiscal year. The main reason for the 3.4% increase in industrial volumes during the first quarter of the 2010 fiscal year is, among others, heavier consumption in the refinery, petrochemical and metallurgy sectors and higher short-term interruptible service sales.

Energy conservation initiatives are the main reason for the 3.0% reduction in natural gas volumes in the residential market during the first quarter of the fiscal year, partially offset by the maturation of new sales.

Energy Distribution in Vermont

Net income from the energy distribution activity in Vermont was $2.2 million (2) lower during the first quarter of the 2010 fiscal year than the corresponding quarter the previous fiscal year. This is due to, among other things, the unfavourable impact of a timing difference in the recognition of revenues and costs for Green Mountain Power Corporation (GMP), and a weakening U.S. dollar in relation to the Canadian dollar, partially offset by an increase in GMP's electricity rates.

Natural Gas Transportation

Net income from Gaz Métro's natural gas transportation segment was $4.5 million higher for the first quarter of the 2010 fiscal year. This is mainly due to the recognition in the first quarter of the 2010 fiscal year of the $2.9 million favourable impact of a rate adjustment for the 2009 fiscal year the National Energy Board approved last October 29 for Trans Québec & Maritimes Pipeline Inc. (TQM). It is also attributable to an income tax recovery in Portland Natural Gas Transmission System (PNGTS) as well as lower financing costs.

Energy Services and Other

For the first quarter of the 2010 fiscal year, adjusted net income(3) for the energy services and other segment was up $0.3 million , mainly due to the sale of all of the shares of Teldig Systems Inc. on November 16 , which generated a gain of $0.8 million , and a reduction in financing costs, partially offset by lower profitability in Consulgaz Inc.

Development Project

After receiving a decree from the government of Québec, Gaz Métro and its partner, Boralex Inc., are proceeding with the development of the two Seigneurie de Beaupré wind farms in accordance with the planned timetable. The farms, which will have total installed capacity of 272 megawatts, will be commissioned no later than December 1, 2013 .

    
    --------------------------------------
    (1) Adjusted net income excludes an unfavourable non-monetary adjustment
        of $1.0 million for the first quarter of the 2010 fiscal year and an
        unfavourable non-monetary adjustment of $0.7 million for the first
        quarter of the 2009 fiscal year, related to future income taxes.
    (2) Net of financing costs
    (3) Adjusted net income excludes non-monetary adjustments related to
        future income taxes.
    

    
    Segment Results - Net income

                                               3 months ended December 31(1)
    -------------------------------------------------------------------------
    (in millions of dollars)                   2009        2008   Variation
    -------------------------------------------------------------------------
    Energy distribution
        Gaz Métro-QDA                          64.6        60.8         3.8
        Vermont Gas Systems, Inc. and GMP       4.8         7.3        (2.5)
        Financing costs of investments in
         this segment(2)                       (1.0)       (1.3)        0.3
    -------------------------------------------------------------------------
      Adjusted net income                      68.4        66.8         1.6
    -------------------------------------------------------------------------
    Natural gas transportation
        TQM, PNGTS and Champion Pipe Line
         Corporation Ltd                        8.7         4.5         4.2
        Financing costs of investments in
         this segment(2)                       (0.9)       (1.2)        0.3
    -------------------------------------------------------------------------
      Adjusted net income                       7.8         3.3         4.5
    -------------------------------------------------------------------------
    Natural gas storage
        Intragaz Group                          1.7         1.7         0.0
        Financing costs of investments in
         this segment(2)                       (0.5)       (0.6)        0.1
    -------------------------------------------------------------------------
      Adjusted net income                       1.2         1.1         0.1
    -------------------------------------------------------------------------
    Energy services and other
        Energy, water and fibreoptic            2.1         2.0         0.1
        Financing costs of investments in
         this segment(2)                       (0.4)       (0.6)        0.2
    -------------------------------------------------------------------------
      Adjusted net income                       1.7         1.4         0.3
    -------------------------------------------------------------------------
    Non-allocated expenses                      0.0        (1.4)        1.4
    -------------------------------------------------------------------------
    Adjusted net income                        79.1        71.2         7.9
    -------------------------------------------------------------------------
        Non-monetary impact related to
         future income taxes(3)                (1.0)       (0.7)       (0.3)
    -------------------------------------------------------------------------
    Net income                                 78.1        70.5         7.6
    -------------------------------------------------------------------------

    (1) Operating results for interim periods are not necessarily
        representative of the results that are expected for the fiscal year.
        Seasonal variations in temperatures have an impact on the
        Partnership's interim financial results, particularly in the fourth
        quarter of the fiscal year when Gaz Métro has always had a loss
        because of the normally low demand for energy during the summer
        months.
    (2) Financial expenses incurred by the Partnership to finance
        investments in the subsidiaries, joint ventures, and companies
        subject to significant influence of each segment.
    (3) Adjustment related to the future income taxes that the Partnership
        will have to pay in periods after October 1, 2010 with respect to Gaz
        Métro's subsidiaries and joint ventures that do not qualify as rate-
        regulated enterprises as defined in the Handbook of the Canadian
        Institute of Chartered Accountants.
    

Conference Call

The Partnership will hold a telephone conference with financial analysts on Thursday, February 11, 2010 , at 3:00 p.m. (Eastern time ) to discuss its results for the first quarter ended December 31, 2009 . Sophie Brochu , President and Chief Executive Officer, and Pierre Despars, Executive Vice President, Corporate Affairs 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 647-427-7450 or toll-free 1-888-231-8191. 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 416-849-0833 or toll-free at 1-800-642-1687 (access code: 52430915), and for 90 days on Gaz Métro's Web site.

Gaz Métro Overview

With over $3.5 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 and showing 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 2009 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 quarter ended December 31, 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 regulatory 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 quarter ended December 31, 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.

    
    HIGHLIGHTS

                                                 3 months ended December 31
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (in millions of dollars, except for
     unit data which is in dollars)                2009                2008
    -------------------------------------------------------------------------
                                             (unaudited)         (unaudited)
    CONSOLIDATED INCOME AND CASH FLOWS
    Revenues                                  $   603.0           $   715.8
    Gross margin                              $   222.6           $   226.7
    Income before interest and financial
     expenses, income taxes and
     amortization                             $   156.3           $   153.9
    Net income                                $    78.1           $    70.5
    Adjusted net income(1)                    $    79.1           $    71.2
    Cash flows related to operating
     activities (before working capital)      $   149.1           $   157.4
    Additions to property, plant and
     equipment                                $    38.3           $    36.6
    Changes in deferred charges and
     credits and intangible assets            $    26.8           $    37.0
    Net income per unit (basic and
     diluted)                                 $    0.65           $    0.59
    Adjusted net income per unit (basic
     and diluted)(1)                          $    0.66           $    0.59
    Distributions paid per unit to
     Partners of record on September 15       $    0.31           $    0.31
    Weighted average number of units
     outstanding (in millions)                    120.5               120.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CONSOLIDATED NORMALIZED NATURAL GAS
     VOLUMES (in millions of cubic metres)
    MARKETS
    Industrial                                      748                 725
    Commercial                                      705                 656
    Residential                                     222                 229
                                            -------------      --------------
    Total                                         1,675               1,610
    -------------------------------------------------------------------------
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    OTHER INFORMATION
    Authorized rate of return on deemed
     common equity
     (Quebec distribution activity)(2)             9.20 %              8.94 %
    Credit and Stability ratings
      First mortgage bonds
       (S&P/DBRS)(3)                                A/A                 A/A
      Commercial paper (S&P/DBRS)(3)   A-1(low)/R-1(low)   A-1(low)/R-1(low)
      Stability of distributions
       (S&P/DBRS)                     SR-2/STA-2(middle)  SR-2/STA-2(middle)
    Market prices on Toronto Stock
     Exchange (in dollars):
      High                                    $   16.61           $   14.77
      Low                                     $   15.46           $   10.63
      Close                                   $   16.40           $   13.15
    Public ownership in the
     Partnership (non-controlling
     Partners)                                     29.0 %              29.0 %
    Interest coverage on long-term
     debt over a period of
     12 months (times)                             2.64                2.51
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CONSOLIDATED BALANCE SHEETS
                                            December 31,       September 30,
                                                   2009                2009
                                            -------------      --------------
                                             (unaudited)           (audited)

    Total assets                              $ 3,529.8           $ 3,306.8
    Total debt                                $ 1,784.3           $ 1,769.8
    Partners' equity                          $   986.5           $   949.6
    Partners' equity per unit                 $    8.19           $    7.88
    -------------------------------------------------------------------------

    (1) Adjusted to exclude an unfavourable non-monetary adjustment of
        $1.0 million for the first quarter of fiscal 2010 and an unfavourable
        non-monetary adjustment of $0.7 million for the first quarter of
        fiscal 2009, related to future income taxes.
    (2) Including a sharing of productivity gains and excluding the Global
        Energy Efficiency Plan (GEEP) incentive.
    (3) Through its General Partner, Gaz Métro inc.
    

For further information: Investors and analysts: Caroline Warren, Investor Relations, [phone]; Media: Marie-Noëlle Cano, Media and Public Relations, [phone]