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


    
    -------------------------------------------------------------------------
    Gaz Métro also announces the name of the new company that will hold the
    public investors' interest in Gaz Métro: Valener Inc.
    -------------------------------------------------------------------------
    
</pre>
<p/>
<p><span class="xn-location">MONTREAL</span>, <span class="xn-chron">Aug. 5</span> /CNW Telbec/ - Gaz Métro Limited Partnership (Gaz Métro) (TSX: GZM.UN) reports adjusted net income(1) of <span class="xn-money">$7.4 million</span>, or <span class="xn-money">$0.06</span> per unit, for the third quarter of its 2010 fiscal year, which is <span class="xn-money">$1.9 million</span>, or <span class="xn-money">$0.01</span> per unit, higher than adjusted net income for the third quarter of the previous fiscal year. For the first nine months of the current fiscal year, adjusted net income(1) is <span class="xn-money">$190.5 million</span>, or <span class="xn-money">$1.58</span> per unit, down <span class="xn-money">$5.8 million</span>, or <span class="xn-money">$0.05</span> per unit from the corresponding period of the previous fiscal year, which included a number of favourable non-recurring items.</p>
<p>"Natural gas is clearly very competitive and this has been helping the <span class="xn-location">Quebec</span> distribution activity for several quarters now. Coupled with relatively favourable economic growth, the competitiveness of natural gas continued to boost our deliveries in <span class="xn-location">Quebec</span> during the third quarter. They are 7% higher than the same period last year. This is most notable in the industrial market where volumes rose 15% during the quarter", said <span class="xn-person">Sophie Brochu</span>, President and Chief Executive Officer.</p>
<p>Gaz Métro also disclosed the name of the new company that will hold the public investors' interest in Gaz Métro. "We recently announced a strategic corporate reorganization in response to the federal government's Tax Fairness Plan. The reorganization specifically provides for the creation of a new publicly-traded entity that will henceforth hold the public investors' interest in Gaz Métro. Over the years, our objective has always been to create value for our two main groups of unitholders, namely Gaz Métro inc. and the public unitholders. We are enthusiastic about the idea of pursuing this objective with the transformation of Gaz Métro's public ownership structure into a new dividend-paying public corporation, Valener Inc., representing the combination of "value" and "energy". This proposed reorganization, which is the product of a diligent process, represents the most attractive solution because it optimizes payout, maintains stability and provides growth opportunities for public investors", stated <span class="xn-person">Ms. Brochu</span>.</p>
<p/>
<p>Income Distribution</p>
<p/>
<p>On <span class="xn-chron">June 22, 2010</span>, Gaz Métro declared a distribution of <span class="xn-money">$0.31</span> per unit, payable on <span class="xn-chron">September 30, 2010</span>, to Partners of record at the close of business on <span class="xn-chron">September 15, 2010</span>, as part of the strategic corporate reorganization announced on that date. This distribution would have been payable on <span class="xn-chron">October 1, 2010</span> without the context of this reorganization.</p>
<p/>
<p>Segment Analysis</p>
<p/>
<p><span class="xn-location">Quebec</span> Natural Gas Distribution (Gaz Métro-QDA)</p>
<p/>
<p>Gaz Métro-QDA's net income is <span class="xn-money">$3.0 million</span> for the third quarter of the 2010 fiscal year and <span class="xn-money">$158.3 million</span> for the first nine months, up <span class="xn-money">$0.8 million</span> over the third quarter of the previous fiscal year and down <span class="xn-money">$1.1 million</span> from the first nine months of the 2009 fiscal year.</p>
<p>Gaz Métro's normalized deliveries during the third quarter and the first nine months of the current fiscal year are 7.0% and 5.0% higher respectively than during the same periods the previous fiscal year. The increases are entirely in the commercial and industrial markets.</p>
<p>In the industrial market, heavier consumption in the refining, petrochemical and metallurgy sectors, higher short-term interruptible service sales and a relatively more favourable economic growth over the last few months boosted volumes by 7.8%.</p>
<p>Relatively favourable economic growth and the maturation of new sales are some of the reasons volumes were up 4.4% during the first nine months of the 2010 fiscal year in the commercial market.</p>
<p>Customers' energy efficiency initiatives are basically the reason natural gas volumes are down 2.5% in the residential market for the first nine months of this fiscal year. This is partially offset by the maturation of new sales.</p>
<p>The higher volumes translate into an excess return of <span class="xn-money">$27.0 million</span> for the first nine months of the 2010 fiscal year. However, this excess return is virtually entirely allocated to customers as a reimbursement of the advance they made to Gaz Métro-QDA in connection with the 2010 rate case in which Gaz Métro-QDA anticipated a productivity loss for the 2010 fiscal year.</p>
<p/>
<p>Energy Distribution in Vermont</p>
<p/>
<p>Net income from the energy distribution activity in Vermont is <span class="xn-money">$0.6 million</span>(2) for the third quarter of the current fiscal year and <span class="xn-money">$11.1 million</span>(2) for the first nine months of that year, down <span class="xn-money">$0.8 million</span> and <span class="xn-money">$4.2 million</span> respectively from the corresponding periods of the previous fiscal year. These decreases are mainly attributable to lower natural gas and electricity deliveries, which is a reflection, among other things, of warmer temperatures than during the first nine months of the 2009 fiscal year as well as the depreciation of the US dollar in relation to the Canadian dollar.</p>
<p/>
<p>Natural Gas Transportation</p>
<p/>
<p>Net income from the natural gas transportation sector is <span class="xn-money">$1.6 million</span> for the third quarter of the 2010 fiscal year and <span class="xn-money">$15.0 million</span> for the first nine months, down <span class="xn-money">$0.7 million</span> and <span class="xn-money">$2.7 million</span> respectively from the corresponding periods of the previous fiscal year. The decrease for the first nine months is mainly due to the recognition, during the 2009 fiscal year, of the <span class="xn-money">$6.7 million</span> favourable impact of a rate adjustment for the 2007 and 2008 fiscal years that the National Energy Board (NEB) approved in <span class="xn-chron">March 2009</span> for Trans Québec & Maritimes Pipeline Inc. (TQM) as well as interest income of <span class="xn-money">$0.8 million</span> related to that decision. This decrease was partially offset by the recognition, in the first quarter of the 2010 fiscal year, of the <span class="xn-money">$2.9 million</span> favourable impact of an interim rate adjustment for TQM for the 2009 fiscal year. <span class="xn-location">Portland</span> Natural Gas Transmission System's (PNGTS) pre-tax income is down <span class="xn-money">$0.5 million</span> for the first nine months of the current fiscal year, reflecting lower short-term sales and interruptible service sales, offset by an income tax recovery of <span class="xn-money">$2.0 million</span> paid to the State of New Hampshire in the first quarter of the current fiscal year.</p>
<p/>
<p>Energy Services and Other</p>
<p/>
<p>Adjusted net income(3) for the Energy Services and Other segment is <span class="xn-money">$2.1 million</span> for the third quarter of the 2010 fiscal year and <span class="xn-money">$5.2 million</span> for the first nine months, up <span class="xn-money">$3.3 million</span> and <span class="xn-money">$1.9 million</span> respectively over the corresponding periods of the previous fiscal year. These increases are mainly due to a favourable <span class="xn-money">$2.3 million</span> settlement during the third quarter of the current fiscal year arising from a dispute involving HydroSolution, L.P., the <span class="xn-money">$1.6 million</span> write-down of the Aqua-Rehab Inc. goodwill during the 2009 fiscal year and the sale of all the shares of Teldig Systems Inc. in the first quarter of the current fiscal year, which generated a gain of <span class="xn-money">$0.8 million</span>. These favourable items are partially offset by the recognition of <span class="xn-money">$2.0 million</span> in the 2009 fiscal year, being the last third of the gain on the sale of 50% of the units of Climatisation et Chauffage Urbains de Montréal, s.e.c. to Dalkia <span class="xn-location">Canada</span> Inc. in <span class="xn-chron">February 2006</span>.</p>
<p/>
<p>Cash and Capital Management</p>
<p/>
<p>During the first nine months of the current fiscal year, cash flows from operations of <span class="xn-money">$368.2 million</span>, before change in non-cash working capital items, were down <span class="xn-money">$50.4 million</span> compared to the corresponding period of the previous fiscal year. This decrease basically reflects the <span class="xn-money">$5.7</span> reduction in net income, higher normalization of <span class="xn-location">Quebec</span> natural gas distribution revenues on account of warmer temperatures (<span class="xn-money">$30.8 million</span>), an <span class="xn-money">$11.2 million</span> decrease in the amortization of deferred charges and credits, financing costs and intangible assets, and a <span class="xn-money">$3.9 million</span> decrease in distributions received from companies subject to significant influence.</p>
<p>The debt/total capitalization ratio is 62.4% as at <span class="xn-chron">June 30, 2010</span>, compared to 65.1% as at <span class="xn-chron">September 30, 2009</span> and 62.6% as at <span class="xn-chron">June 30, 2009</span>.</p>
<p/>
<p>Development Projects</p>
<p/>
<p>In coming months, Gaz Métro has a number of projects that flow from its complementary and inclusive energy vision, which is counting on the compatibility of energy and environment. A few of these projects are described below.</p>
<p/>
<p>Wind power: After receiving a decree from the government of <span class="xn-location">Quebec</span>, Gaz Métro and its partner, Boralex Inc. are proceeding with the development of the two Seigneurie de Beaupré wind power projects in accordance with the planned timetable. The specific steps planned to carry out the projects are applying for construction permits, signing final agreements with Enercon <span class="xn-location">Canada</span> Inc., the supplier of turbines and maintenance services, signing a final agreement for the civil engineering work and arranging financing. The private land of the Séminaire de Québec, where the consortium's projects will be located, gives them distinct advantages. Apart from the exceptional wind resources, the site is not close to any urban or residential centres, thereby making the visual and noise impacts almost non-existent for the neighbouring communities. The projects, which will have total installed capacity of 272 megawatts, should be commissioned around <span class="xn-chron">December 2013</span>.</p>
<p>Smart electricity distribution system in Vermont: In connection with the federal government's stimulus package for businesses, Green Mountain Power Corporation (GMP) received financial assistance for a state-wide smart electricity distribution system in Vermont. The assistance will finance part of the investment GMP will make over the next three years. This three-year project involves, among other things, replacing the present customer information system, buying and installing smart meters at customers' premises and participating in dynamic rates pilot projects with other electricity utilities in Vermont. GMP and the other electricity utilities in Vermont have signed the contract and have started implementing this major project. In GMP's opinion, the success of the project could transform its relationship with its customers and the way it manages its operations by integrating state-of-the-art technology in its activities.</p>
<p>Natural gas for the transportation industry: Gaz Métro is working on expanding its commercial scope in the road transportation sector, which is responsible for 40% of greenhouse gas (GHG) emissions in <span class="xn-location">Quebec</span>. Gaz Métro is specifically targeting heavy-duty diesel fleets. Vehicles that use natural gas emit 25% less GHG than diesel and other petroleum fuels. Gaz Métro has signed an agreement in principle with a large freight carrier to supply several trucks with liquefied natural gas (LNG). Gaz Métro will have to be in a position to install the facilities required to supply trucks from three refuelling stations. The parties' intention is that the contract will have been signed and the facilities built by the end of the 2010 calendar year. As Gaz Métro already has liquefaction equipment at the LSR plant, the investments required would be limited to the refuelling stations and the tanks for transporting LNG.</p>
<p>Biomethanation: Gaz Métro believes that waste reclamation is a promising solution to Quebec's energy needs and would reduce GHG emissions. The Partnership is therefore very receptive to the government of Quebec's biomethanation program, which aims to divert organic residues from landfill sites for reclamation purposes. Gaz Métro intends to play a key role in ensuring these initiatives are economically viable, in particular by providing access to its distribution system for moving biomethane. Gaz Métro wants to facilitate the short-term development of this activity and is working with various partners to define the technical and economic modalities for injecting this new natural gas supply source into its network, while continuing to provide reliable and safe service.</p>
<p>Shale gas: Gaz Métro is presently in discussions with certain natural gas producers who operate in the St. <span class="xn-person">Lawrence Valley</span> about moving natural gas that would be extracted from wells to consumption markets. On <span class="xn-chron">May 26, 2010</span>, Gaz Métro filed an application with the Régie de l'énergie to have the rate principles applicable to the new services related to this activity approved.</p>
<p/>
<p>Strategic Corporate Reorganization</p>
<p/>
<p>Following the announcement by the federal government and subsequent enactment of the legislation with respect to the taxation of publicly traded income trusts and partnerships (the specified investment flow-through (SIFT) rules), the Board of Directors of Gaz Métro inc. (GMi), in its capacity as General Partner of Gaz Métro, created an independent committee composed solely of independent Directors to review the strategic objectives, evaluate available options and assess their implications for public unitholders.</p>
<p>After analyzing a number of alternatives, the Independent Committee determined that the proposed reorganization, represents the most attractive available alternative to address the impact of the SIFT rules, which aims to create a compelling investment vehicle for public unitholders while maintaining an efficient capital structure for Gaz Métro and its controlling partner, GMi.</p>
<p>On the recommendation of the Independent Committee, on <span class="xn-chron">June 22</span>, the independent and non-interested Directors (the other Directors abstained from voting) on the Board of Directors of GMi unanimously approved a strategic corporate reorganization to transform the public ownership structure of Gaz Métro into a new dividend-paying public company, Valener Inc. (Valener). The Valener shares will be listed on the <span class="xn-location">Toronto</span> Stock Exchange, under the symbol "VNR".</p>
<p>The reorganization involves the exchange, on a one-for-one basis, of all publicly held units of Gaz Métro, which collectively represent a 29% economic interest in Gaz Métro, for common shares of Valener. Following the exchange, Valener will become a partner of Gaz Métro along with GMi who will maintain its interest in the Partnership. Public unitholders will retain their current proportionate economic interest in Gaz Métro indirectly through Valener, and will benefit, also through Valener, from an increase in Gaz Métro distributions otherwise payable to Valener by an aggregate amount of <span class="xn-money">$20 million</span> over a three-year period. In addition to its interest in Gaz Métro, Valener will have the ability to pursue, for its own benefit, certain development and acquisition strategies, including pursuant to an option to be granted by Gaz Métro to acquire 49% of its 50% indirect interest in the Seigneurie de Beaupré wind power project, subject to obtaining all required consents.</p>
<p>S&P and DBRS have confirmed that the proposed reorganization will not affect the credit ratings of Gaz Métro and GMi.</p>
<p>On <span class="xn-chron">July 28, 2010</span>, the Superior Court of Québec granted an interim order in connection with the proposed reorganization facilitating the calling of an extraordinary unitholders' meeting scheduled on <span class="xn-chron">September 14, 2010</span> and prescribing among other matters the conduct of the meeting.</p>
<p>An information circular dated <span class="xn-chron">July 28, 2010</span> was mailed to unitholders of record at the close of business on <span class="xn-chron">July 23, 2010</span>. The circular was accompanied by a proxy or voting form for the extraordinary unitholders' meeting. Information about this reorganization is accessible on Gaz Métro's Web site (<a href="http://www.gazmetro.com/investors">www.gazmetro.com/investors</a>) or on SEDAR at <a href="http://www.sedar.com">www.sedar.com</a>. The reorganization is expected to be completed around <span class="xn-chron">September 30, 2010</span>.</p>
<p/>
<pre>
    
    ----------------------------------
    (1) Adjusted net income excludes an unfavourable non-monetary adjustment
        of $0.3 million in the third quarter of the 2010 fiscal year ($1.4
        million unfavourable for the first nine months of the 2010 fiscal
        year) and an unfavourable non-monetary adjustment of $0.2 million in
        the third quarter of the 2009 fiscal year ($1.5 million unfavourable
        for the first nine months 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          9 months ended
                                    June 30 (1)             June 30 (1)
    -------------------------------------------------------------------------
                                               Varia-                  Varia-
    (in millions of dollars)    2010    2009    tion    2010    2009    tion
    -------------------------------------------------------------------------
    Energy distribution
      Gaz Métro-QDA              3.0     2.2     0.8   158.3   159.4    (1.1)
      Vermont Gas Systems,
       Inc. and GMP              1.5     2.5    (1.0)   14.0    18.8    (4.8)
      Financing costs of
       investments in
       this segment (2)         (0.9)   (1.1)    0.2    (2.9)   (3.5)    0.6
    -------------------------------------------------------------------------
    Adjusted net income          3.6     3.6     0.0   169.4   174.7    (5.3)
    -------------------------------------------------------------------------
    Natural gas transportation
      TQM, PNGTS and Champion
       Pipe Line Corporation
       Ltd                       2.6     3.2    (0.6)   17.8    20.8    (3.0)
      Financing costs of
       investments in
       this segment (2)         (1.0)   (0.9)   (0.1)   (2.8)   (3.1)    0.3
    -------------------------------------------------------------------------
    Adjusted net income          1.6     2.3    (0.7)   15.0    17.7    (2.7)
    -------------------------------------------------------------------------
    Natural gas storage
      Intragaz Group             2.0     1.7     0.3     5.1     4.9     0.2
      Financing costs of
       investments in
       this segment (2)         (0.5)   (0.3)   (0.2)   (1.3)   (1.4)    0.1
    -------------------------------------------------------------------------
    Adjusted net income          1.5     1.4     0.1     3.8     3.5     0.3
    -------------------------------------------------------------------------
    Energy services and other
      Energy, water and
       fibreoptic                2.4    (0.8)    3.2     6.3     4.7     1.6
      Financing costs of
       investments in
       this segment (2)         (0.3)   (0.4)    0.1    (1.1)   (1.4)    0.3
    -------------------------------------------------------------------------
    Adjusted net income (loss)   2.1    (1.2)    3.3     5.2     3.3     1.9
    -------------------------------------------------------------------------
    Non-allocated expenses      (1.4)   (0.6)   (0.8)   (2.9)   (2.9)    0.0
    -------------------------------------------------------------------------
    Adjusted net income          7.4     5.5     1.9   190.5   196.3    (5.8)
    -------------------------------------------------------------------------
      Non-monetary impact
       related to future
       income taxes (3)         (0.3)   (0.2)   (0.1)   (1.4)   (1.5)    0.1
    -------------------------------------------------------------------------
    Net income                   7.1     5.3     1.8   189.1   194.8    (5.7)
    -------------------------------------------------------------------------
    (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 Gaz Métro'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 Gaz Métro 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 Gaz Métro will
        have to pay in periods after September 30, 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 (CICA).
    
</pre>
<p/>
<p>Conference call</p>
<p/>
<p>Gaz Métro will hold a telephone conference with financial analysts on <span class="xn-chron">Thursday, August 5, 2010</span>, at <span class="xn-chron">3:00 p.m. (Eastern time</span>) to discuss the results for its third quarter ended <span class="xn-chron">June 30, 2010</span>. <span class="xn-person">Sophie Brochu</span>, President and Chief Executive Officer, and Pierre Despars, Executive Vice President, Corporate Affairs, and Chief Financial Officer, will be the speakers. This will be followed by a question period. Media and other interested individuals are invited to listen in.</p>
<p>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 (<a href="http://www.gazmetro.com/investors">www.gazmetro.com/investors</a>) in the "Webcasts" section.</p>
<p>Rebroadcasts can be accessed for 30 days by telephone at 416-849-0833 or toll-free at 1-800-642-1687 (access code: 88759445), and for 90 days on Gaz Métro's Web site.</p>
<p/>
<p>Gaz Métro Overview</p>
<p/>
<p>With over <span class="xn-money">$3.6 billion</span> 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 <span class="xn-location">Quebec</span> 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 <span class="xn-location">Quebec</span>. 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 <span class="xn-location">Toronto</span> Stock Exchange under the symbol GZM.UN.</p>
<p><a href="http://www.gazmetro.com">www.gazmetro.com</a></p>
<p/>
<p>Cautionary note regarding forward-looking statements</p>
<p/>
<p>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, the evolution of development projects, SIFT rules and the announced strategic corporate reorganization 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 fiscal year ended <span class="xn-chron">September 30, 2009</span>. A description of factors, risks and assumptions related to the announced strategic corporate reorganization is provided in Gaz Métro's <span class="xn-chron">July 28, 2010</span> information circular on the reorganization. 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 <span class="xn-location">Quebec</span> and the New England states 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 <span class="xn-chron">June 30, 2010</span>, 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.</p>
<p/>
<p>Non-GAAP financial measures</p>
<p/>
<p>In management's view, 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.</p>
<p/>
<pre>
    
    HIGHLIGHTS
                                        3 months              9 months
                                      ended June 30         ended June 30
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (in millions of dollars,
     except for unit data,
     which is in dollars)             2010       2009       2010       2009
    -------------------------------------------------------------------------
                                       (un-       (un-       (un-       (un-
                                   audited)   audited)   audited)   audited)
    CONSOLIDATED INCOME AND
     CASH FLOWS
    Revenues                     $   367.8  $   388.3  $ 1,709.7  $ 1,958.8
    Gross margin                 $   152.7  $   161.3  $   635.5  $   672.1
    Income before interest and
     financial expenses, income
     taxes and amortization      $    76.1  $    83.3  $   411.4  $   441.6
    Net income                   $     7.1  $     5.3  $   189.1  $   194.8
    Adjusted net income (1)      $     7.4  $     5.5  $   190.5  $   196.3
    Cash flows related to
     operating activities
     (before change in non-cash
     working capital items)      $    54.2  $    61.5  $   368.2  $   418.6
    Purchases of property, plant
     and equipment               $    26.4  $    38.0  $    94.1  $    99.6
    Changes in deferred charges
     and credits and intangible
     assets                      $    18.1  $    40.1  $    83.9  $    86.5
    Net income per unit (basic
     and diluted)                $    0.06  $    0.05  $    1.57  $    1.62
    Adjusted net income per unit
     (basic and diluted) (1)     $    0.06  $    0.05  $    1.58  $    1.63
    Distributions paid per unit
     to Partners of record on
     September 15, December 15
     and March 15                $    0.31  $    0.31  $    0.93  $    0.93
    Weighted average number of
     units outstanding
     (in millions)                   120.5      120.5      120.5      120.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CONSOLIDATED NORMALIZED
     NATURAL GAS VOLUMES (in
     millions of cubic metres)
    MARKETS
    Industrial                         597        521      2,148      1,999
    Commercial                         374        380      2,004      1,928
    Residentiel                         92         98        625        646
                                  ---------  ---------  ---------  ---------
    Total                            1,063        999      4,777      4,573
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    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)/  A-1(low)/
                                                         R-1(low)   R-1(low)
      Stability of distributions
       (S&P/DBRS)                                        SR-2/STA-  SR-2/STA-
                                                         2(middle)  2(middle)
    Market prices on Toronto
     Stock Exchange:
      High                       $   16.40  $   15.18  $   17.17  $   15.46
      Low                        $   15.25  $   13.70  $   15.25  $   10.63
      Close                                            $   16.10  $   14.91
    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)                                   2.51       2.50
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    CONSOLIDATED BALANCE SHEETS
                                                                     Septem-
                                                         June 30,    ber 30,
                                                            2010       2009
                                                        ---------  ---------
                                                             (un-
                                                         audited)  (audited)

    Total assets                                       $ 3,632.2  $ 3,306.8
    Total debt                                         $ 1,702.9  $ 1,769.8
    Partners' equity                                   $ 1,026.2  $   949.6
    Partners' equity per unit                          $    8.52  $    7.88
    -------------------------------------------------------------------------
    (1) Adjusted to exclude a $0.3 million unfavourable non-monetary
        adjustment related to future income taxes for the third quarter of
        fiscal 2010 ($1.4 million unfavourable adjustment for the first nine
        months of fiscal 2010) and an unfavourable adjustment of $0.2 million
        for the third quarter of fiscal 2009 ($1.5 million unfavourable
        adjustment for the first nine months of fiscal 2009).
    (2) Including the sharing of productivity gains and excluding the Global
        Energy Efficiency Plan (GEEP) incentive.
    (3) Through its General Partner, Gaz Métro inc.
    

For further information: For further information: Media: Marie-Noëlle Cano, Media and Public Relations, 514-598-3449, www.gazmetro.com/pressroom (Photos, videos (B-Roll) and logos of Gaz Métro are available online in the Multimedia library); Investors and analysts: Caroline Warren, Investor Relations, 514-598-3324, www.gazmetro.com/investors


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