Gaz Métro reports 2008 first quarter results



    
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    HIGHLIGHTS:

    - Net income of $69.6 million, down $2.2 million compared to the
      corresponding period the previous year
    - Competitive position of natural gas improves in all markets and short-
      term sales in the industrial market increase
    - Net income of $3.6 million from Green Mountain Power Corporation in the
      first quarter
    - $46.1 million investment in Vermont Transco LLC, through Green Mountain
      Power Corporation
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    MONTREAL, Feb. 6 /CNW Telbec/ - Gaz Métro Limited Partnership
(TSX: GZM.UN, Gaz Métro) reports net income of $69.6 million for the first
quarter ended December 31, 2007, which is $2.2 million lower than for the
corresponding period the previous year. Net income includes the $2.2 million
favourable non-monetary impact of the adjustment to the future income tax
liability recorded in the previous fiscal year to reflect an expected decline
in future income tax rates. This future income tax liability results from
amendments to the Income Tax Act implementing proposals in the Minister of
Finance's Tax Fairness Plan. Excluding this favourable adjustment, adjusted
net income for the first quarter of the 2008 fiscal year is $67.4 million,
down $4.4 million from the prior fiscal year's first quarter.
    The decline in net income is attributable, in part, to timing differences
in recording income from natural gas distribution activities in Quebec and
Vermont, which should reverse in the coming quarters. Additional factors
include a circumstantial decline in profitability mainly in the Water Sector
subsidiaries and a $0.9 million increase in expenditures recorded for the
Rabaska liquefied natural gas (LNG) terminal project, all of which are
partially offset by the inclusion of net income of $3.6 million from Green
Mountain Power Corporation (GMP), acquired on April 12, 2007.
    Net income per unit declined $0.02 to $0.58 compared to the corresponding
quarter last year. Adjusted net income per unit, which does not include the
previously-mentioned $2.2 million impact of the non-monetary adjustment, is
down $0.04 to $ 0.56. The average number of outstanding units during the
quarter was 120.4 million units, unchanged from the first quarter of the
previous year.
    "In recent months, the competitive position of natural gas has improved
significantly in all markets. As a result, Gaz Métro has made major strides in
its short-term sales in the industrial market, partially replacing heavy fuel
oil consumption with natural gas, a cleaner energy," commented Sophie Brochu,
President and Chief Executive Officer.
    Ms. Brochu went on to say: "Gaz Métro plans to capitalize on the Quebec
government's large scale plan, announced on October 1, 2007, to cut down on
greenhouse gas emissions in Quebec by reducing heavy fuel oil consumption. Gaz
Métro considers this challenge as an opportunity to permanently recover most
of the industrial customers who had switched to heavy fuel oil in the wake of
the 2001 natural gas price hikes. There is a potential to gain 425 million
cubic metres of natural gas, equivalent to approximately 7% of total natural
gas distributed by Gaz Métro in Quebec last year. This is a major business
opportunity for Gaz Métro."

    Consolidated Results

    Consolidated revenues for the first quarter of the 2008 fiscal year are
up $83.8 million or 15.7%, from $534.0 million in the first quarter of the
previous year to $617.8 million. Higher revenues from the Quebec distribution
activity, as a result of higher normalized deliveries and revenues from the
new Green Fund duty, and consolidation of GMP's sales since April 12, 2007,
all contributed to this increase.
    Consolidated gross margin of $205.8 million is up 11.0%, or
$20.4 million, compared to the first quarter of the previous fiscal year. This
is partially attributable to the increase in the gross margin generated by the
Quebec distribution activity, primarily as a result of including revenues from
the new Green Fund duty, amounting to $9.5 million in the first quarter of
fiscal 2008, and to the inclusion of GMP's gross margin in Gaz Métro's results
since April 12, 2007.
    It is important to indicate that Gaz Métro recorded a corresponding
expense to offset the revenues of $9.5 million from the new Green Fund duty
because, in accordance with the Regulation respecting the annual duty payable
to the Green Fund, it paid the entire amount to the government of Quebec on
December 31, 2007. This will be the case in each of the subsequent quarters.
    Consolidated cash flows from operating activities, before changes in
non-cash working capital items, are $128.4 million in the first quarter of
fiscal 2008, up $2.0 million over the same period in the previous year. The
increase is attributable, in part, to higher energy consumption by Quebec
customers on account of colder average temperatures during the first quarter
of the 2008 fiscal period than during the same period in the previous year,
partially offset by lower adjusted net income and by lower distributions from
companies subject to significant influence, compared with the prior year's
first quarter.
    Purchases of property, plant and equipment amounted to $35.6 million in
the first quarter of the 2008 fiscal year, a $1.2 million increase from the
corresponding quarter last year.

    Income Distribution

    Gaz Métro inc., in its capacity as General Partner of Gaz Métro, declared
today a distribution of $0.31 per unit, payable on April 1, 2008, to Partners
of record at the close of business on March 17, 2008.
    This is in addition to $0.31 per unit distributions paid on October 1,
2007 and January 3, 2008 respectively. Gaz Métro expects to maintain this
distribution level for the remainder of the 2008 fiscal year.

    Energy Distribution Sector

    In Quebec - Gaz Métro-QDA

    Natural gas deliveries in Quebec (normalized for temperatures and, since
October 1, 2007, for wind) are up 4.1% to 1,891 million cubic metres during
the first quarter of the 2008 fiscal year. This increase is primarily in the
industrial market and can be explained by higher short-term sales resulting
from a particularly favourable market context during a certain period of the
first quarter and by a significant increase in consumption by an important
customer.
    Net income from the Quebec distribution activity is $58.8 million, which
is down $4.4 million from $63.2 million in the first quarter of the 2007
fiscal year. This decrease is primarily attributable, as previously explained,
to a temporary situation that should reverse during the coming quarters.
    In 2008, the authorized rate of return on common equity of 9.52% is
relatively unchanged from the previous year's authorized rate of 9.57%.
    TransCanada Energy Ltd. (TCE) in Bécancour has halted its operations and,
therefore, discontinued its consumption of natural gas since January 1, 2008
for an indefinite period of time. This estimated 654 million cubic metres
reduction in natural gas consumption for the period from January 1 to
September 30, 2008 could result in an approximate $4.1 million decrease in
industrial market distribution revenues in the current year.
    On November 26, 2007, the Partnership applied to the Régie de l'énergie
(Régie) for authorization to change its rates effective January 1, 2008, which
would offset the impact of this reduction in consumption on distribution
revenues in the current year by $1.9 million. The hearings will be held in
February 2008 and the decision should be announced in the spring of 2008.
However, it is important to outline that if the consumption drop continues,
its impact on the profitability of the Quebec distribution activity in the
coming years would be minimized since it would be reflected in rates starting
in the 2009 fiscal year.
    The government of Quebec confirmed that the Regulation respecting the
annual duty payable to the Green Fund came into force as of December 14, 2007.
In accordance with this regulation, the first of four instalments, for a total
annual duty of $38.0 million in the case of Gaz Métro, was due on December 31,
2007.
    Pending a final ruling, the Régie authorized the Partnership to
temporarily include the duty in customer billings as of January 1, 2008.

    In Vermont - VGS and GMP

    In Vermont, natural gas deliveries by Vermont Gas Systems (VGS) during
the first quarter of the 2008 fiscal year are up 10.8% over the same period in
2007 to 72 million cubic metres.
    Electricity volumes distributed by GMP, excluding volumes that generate
gross margins redistributed to customers, totalled 491.5 gigawatthours.
    Net income from the energy distribution activities in Vermont (VGS and
GMP) is up $1.3 million to $4.2 million, mainly on account of the recognition
of $3.6 million in income from GMP, acquired on April 12, 2007. The increase
is partially offset by lower earnings in VGS, primarily as a result of
applying the adjustment mechanism for the price of gas sold to its customers,
which led to a timing difference in the recording of income over the quarters
during the previous fiscal year, and by higher financing costs due to the
investment in GMP.
    At the end of December 2007, through GMP, Gaz Métro injected equity of
$46.1 million in one of its companies subject to significant influence,
Vermont Transco LLC (Transco), thereby increasing its interest from 21.9% to
33.2%. This capital investment to finance electricity transmission activities
will serve to improve sector profitability in the future.

    Natural Gas Transportation Sector

    Net income for the Natural Gas Transportation Sector is $4.4 million for
the first quarter of the 2008 fiscal year, compared to $3.5 million for the
same quarter in 2007, an increase of $0.9 million. The main reason for this
increase is the recording in the first quarter of the previous fiscal year of
a non-recurring negative adjustment to Trans Québec & Maritimes Pipeline (TQM)
rates.
    On December 17, 2007, TQM filed a rate application with the National
Energy Board (NEB) regarding its 2007 and 2008 fiscal years to increase its
rate of return so that it would reflect its economic reality and business risk
exposure. It is expected that the decision will be announced at the end of
TQM's 2008 fiscal year or at the start of 2009 and its impact will be
recognized when the decision is announced.
    Portland Natural Gas Transmission System (PNGTS) is expected to file a
rate application with its regulatory body (Federal Energy Regulatory
Commission) in April 2008 for recognition of a rate increase and will maintain
its current rates until a final decision is announced.
    Within the context of the legal proceedings in the case of the bankruptcy
of Calpine Corporation, one of PNGTS' important customers, PNGTS was
successful in having a claim of US$125 million recognized by the courts. This
claim is expected to be settled on or before February 10, 2008 when creditors
are expected to receive shares in the reorganized Calpine. These shares will
be subject to market fluctuations after they begin to trade on the New York
Stock Exchange.

    Natural Gas Storage Sector

    Net income for the Natural Gas Storage Sector is up $1.9 million,
compared to the corresponding period in the previous year. The increase is
attributable to a favourable non-monetary $2.2 million adjustment recognized
in the quarter for changes in future income taxes that should normally be paid
by the parent company related to Intragaz's activities in subsequent years
after the new flow-through entity tax rules come into force, on October 1,
2010 in the case of Gaz Métro. The adjustment was recorded to reflect an
expected decline in future income tax rates.
    Net income in this sector, adjusted not to include the favourable impact
of the non-monetary $2.2 million adjustment, is $0.8 million in the first
quarter of 2008, down $0.3 million from the same period in the previous year.

    Energy Services and Other Sector

    The net loss from the sector's activities is $0.1 million, which is down
$1.2 million from the net income of $1.1 million in the first quarter of 2007.
This reduced profitability can be explained primarily by less activity in
certain companies, particularly in the Water Sector, where heavy snow falls
hampered certain construction work and impeded progress.

    Development Expenditures

    During the first quarter of the 2008 fiscal year, development
expenditures and net non-allocated expenses are $0.7 million, up by the same
amount from the same period in the previous year. This increase is primarily
attributable to $0.9 million in development expenditures included in results
and related to the Rabaska LNG terminal. Gaz Métro and its partners in the
project, Enbridge Inc. and Gaz de France, considered additional expenditures
were required to better position the project and therefore make it easier to
execute LNG supply agreements. Gaz Métro continues to work with its partners
to secure a long-term gas supply contract for the project.

    Annual Meeting

    Gaz Métro Limited Partnership's annual Partners' meeting will be held on
Wednesday, February 6, 2008 at 2:00 p.m. (Eastern time) at the Palais des
congrès de Montréal, 1001 place Jean-Paul-Riopelle, Room 511B, Montreal,
Quebec, at which time it will report on its activities and discuss results for
the 2007 fiscal year and the first quarter of the 2008 fiscal year. The annual
meeting will be Webcast live on Gaz Métro's Web
site(www.gazmetro.com/investors) in the "Webcasts" section and a recording
will be available for 90 days.

    Conference Call

    The Partnership will hold a telephone conference with financial analysts
to discuss its results for the first quarter ended December 31, 2007 on
Wednesday, February 6, 2008 at 4:00 p.m. (Eastern time). The media and other
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 416-644-3415 or toll-free
1-800-733-7560. It will also be Webcast on Gaz Métro's Web site
(www.gazmetro.com/investisseurs) in the "Webcasts" section.
    Rebroadcasts can be accessed for 30 days by telephone at 416-640-1917 or
toll-free 1-877-289-8525 (access code: 21259978#), and for 90 days on Gaz
Métro's Web site.

    Gaz Métro Overview

    With more than $3.1 billion in assets and approximately 1,300 employees
in Quebec, Gaz Métro is a leading Quebec energy company and one of Canada's
largest natural gas distributors. Gaz Métro serves about 171,000 customers in
Quebec through an underground pipeline network of almost 10,000 km.
    Through its wholly-owned subsidiary, Northern New England Energy
Corporation (NNEEC), Gaz Métro 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 subsidiaries or in partnership with other investors, Gaz Métro is
active in natural gas transportation and storage as well as energy services
and water and waste water systems and fibre optic networks. Gaz Métro also
participates in various development projects in the energy sector.

    FORWARD-LOOKING STATEMENTS

    To enable investors to better understand the Partnership's outlook for
the future and make more informed decisions, the matters discussed in this
release may contain forward-looking information about Gaz Métro's objectives,
strategies, financial condition, operating results and activities. Such
information expresses, as of the date hereof, the estimates, forecasts,
projections, expectations or opinions of the Partnership concerning future
events or results. Actual results may differ materially from the results
anticipated herein and, consequently, we cannot guarantee that any
forward-looking statement will materialize. Forward-looking information does
not take account of the impact transactions or non-recurring matters,
announced or arising after the statements have been made, might have on the
Partnership's activities.
    Significant risks and uncertainties could cause actual results and future
events to differ materially from current expectations. For additional
information on these and other factors, see the reports filed by Gaz Métro
with Canadian securities regulators. Gaz Métro therefore cautions readers not
to place too much reliance on forward-looking information.
    Gaz Métro intends to update forward-looking information to the extent
provided under applicable securities legislation.

    ADJUSTED INDICATORS NOT STANDARDIZED IN ACCORDANCE WITH GAAP

    In the view of Gaz Métro's management, certain "adjusted" indicators,
such as adjusted net income, adjusted net income per unit and others provide
readers with information they consider useful for analyzing its financial
results. However, they are not standardized by 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
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    (in millions of dollars,
     except for unit data which is in dollars)           2007           2006
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                                                   (unaudited)    (unaudited)
    CONSOLIDATED INCOME AND CASH FLOWS

    Revenues                                        $   617.8      $   534.0
    Gross margin                                    $   205.8      $   185.4
    Income before interest, taxes and
     amortization                                   $   142.1      $   137.3
    Net income                                      $    69.6      $    71.8
    Adjusted net income(1)                          $    67.4      $    71.8
    Cash flows related to operating activities
     (before working capital)                       $   128.4      $   126.4
    Capital expenditures                            $    35.6      $    34.4
    Changes in deferred charges and credits         $    47.4      $    46.5
    Net income per unit (basic and diluted)         $    0.58      $    0.60
    Adjusted net income per unit
     (basic and diluted)(1)                         $    0.56      $    0.60
    Distributions paid per unit to Partners
     of record on September 15                      $    0.31      $    0.31
    Weighted average number of outstanding units
     (in millions)                                  $   120.4      $   120.4
    Interest coverage on long-term debt
     over a period of 12 months (times)                  2.44           2.74
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    CONSOLIDATED NORMALIZED NATURAL GAS VOLUMES(2)
     (in millions of cubic metres)

    MARKETS
    Industrial                                          1,126          1,045
    Commercial                                            611            598
    Residential                                           226            239
                                                   ------------   -----------
    Total                                               1,963          1,882
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    OTHER INFORMATION

    Authorized rate of return on deemed common
     equity (Quebec distribution activity)               9.52%          9.57%

    Credit and stability ratings

      Long-term bonds (S&P/DBRS)(3)                       A/A            A/A

      Commercial paper (S&P/DBRS)(3)                 A-1(low)/      A-1(low)/
                                                     R-1(low)       R-1(low)

      Stability of distributions (S&P/DBRS)              SR-2/          SR-2/
                                                 STA-2(Middle)  STA-2(Middle)

    Market prices on Toronto Stock Exchange
     (in dollars):
      High                                          $   16.40      $   18.50
      Low                                           $   13.77      $   15.30
      Close                                         $   16.34      $   15.58
    Public ownership in Partnership
     (non-controlling Partners)                          29.0%          29.0%
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    CONSOLIDATED BALANCE SHEETS
                                                     December      September
                                                     31, 2007       30, 2007
                                                   ------------  ------------
                                                   (unaudited)      (audited)

    Total assets                                    $ 3,312.5      $ 3,142.5
    Total debt                                      $ 1,762.8      $ 1,684.8
    Partners' equity                                $   953.7      $   921.9
    Partners' equity per unit                       $    7.92      $    7.65

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    (1) Adjusted to exclude, for the first quarter of 2008, recording of a
        $2.2 million favourable non-monetary adjustment relating to future
        income taxes, which is described in detail above.

    (2) Estimated volumes at normal temperature, and since October 1, 2007 at
        normal wind velocity, in Quebec only.

    (3) Through its General Partner, Gaz Métro inc.
    

    Gaz Métro's consolidated financial report for the first quarter is posted
in the "Investors" section on the Partnership's Website at:
www.gazmetro.com/investors as well as on the www.sedar.com Website operated by
the Canadian Securities Administrators.




For further information:

For further information: Investors and Analysts: Caroline Warren,
Investor Relations, (514) 598-3324; Media: Frédéric Krikorian, Public and
Governmental Affairs, (514) 598-3656


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