Gaz Métro reports strong 2008 third quarter results



    
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    HIGHLIGHTS:

    - Net income of $4.8 million, up $3.7 million over adjusted net income
      for corresponding quarter of previous year
    - Adjusted net income of $192.8 million for the first nine months of the
      fiscal year, up $15.6 million over the same period of previous year
    - Green Mountain Power Corporation (GMP): Earns $7.9 million for first
      nine months of current fiscal year
    - Wind Power Project: Firm 20-year contract signed for sale of
      electricity following award to Gaz Métro, jointly with Boralex Inc.
      (Boralex), of two wind power projects for total installed capacity of
      272 MW in connection with Hydro-Québec Distribution's call for tenders
    - Rabaska Project: Letter of intent signed with U.S. subsidiary of OAO
      Gazprom (Gazprom), which, after the final agreements have been signed,
      will become a partner in Rabaska liquefied natural gas (LNG) terminal
      and contract for terminal's entire capacity
    - Declaration of distribution of $0.31 per unit, payable October 1, 2008
      to Partners of record on September 15, 2008
    -------------------------------------------------------------------------
    

    MONTREAL, Aug. 6 /CNW Telbec/ - Gaz Métro Limited Partnership
(TSX: GZM.UN, Gaz Métro) reports net income of $4.8 million, or $0.03 per
unit, for the third quarter ended June 30, 2008, which is $3.7 million, or
$0.02 per unit, higher than adjusted net income for the third quarter the
previous year. Net income for the third quarter of the 2007 fiscal year was
adjusted to exclude an unfavourable non-monetary adjustment of $26.2 million,
or $0.22 per unit, related to future income taxes of Intragaz. While that
future income tax expense was recorded as at September 30, 2007, the
Partnership had to reclassify it as at June 30, 2007 to reflect the impact of
Bill C-52 in the period it was adopted, i.e. on June 22, 2007.
    For the first nine months of the current fiscal year, net income is
$194.5 million, or $1.61 per unit, which is $43.5 million, or $0.36 per unit,
higher than the same period the previous year. It reflects the $1.7 million
favourable non-monetary impact for the first nine months of the 2008 fiscal
year ($26.2 million unfavourable for the first nine months of the 2007 fiscal
year) related to future income taxes of Intragaz. Excluding those adjustments,
adjusted net income for the first nine months of the current fiscal year is
$192.8 million, or $1.60 per unit, which is $15.6 million, or $0.13 per unit,
higher than the first nine months of the 2007 fiscal year.
    The increase in adjusted net income for the first nine months of the 2008
fiscal year is attributable to a number of factors, including the $7.9 million
contribution, before financing costs, of GMP, acquired in April 2007, and the
$5.3 million gain recorded by Gaz Métro following the partial settlement of
the Calpine Corporation (Calpine) bankruptcy with Portland Natural Gas
Transmission System (PNGTS). Other favourable items include the results for
the Quebec natural gas distribution activity, including recognition of the
entire $4.0 million Global Energy Efficiency Plan (GEEP) performance
incentive, recording of Gaz Métro's $2.7 million ($2.3 million in 2007 fiscal
year) share of the anticipated overearnings of $10.9 million and higher
revenues mainly due to the rate increase authorized by the Régie de l'énergie
(Régie), which should be offset by higher expenses in the next quarter. These
favourable items more than offset the $2.0 million increase over the 2007
fiscal year in expenditures for the Rabaska LNG terminal and the reduction in
net income of the Energy Services and Other Sector.
    "In Quebec, natural gas continued to be less expensive than heavy fuel
oil during the last quarter in spite of higher gas prices. Since the beginning
of the fiscal year, short-term contracts have pushed Gaz Métro's interruptible
sales in the industrial market up substantially to 240 million cubic metres of
natural gas, which confirms the heightened interest in natural gas", commented
Sophie Brochu, President and Chief Executive Officer.
    "In Vermont, our successful entry into the electricity distribution
market continues to produce positive results. For the first nine months of the
2008 fiscal year, income from our electric distribution activities in Vermont
is $6 million higher than the same period last year, i.e. $0.05 per unit",
said Sophie Brochu.
    "The third quarter also marks another important milestone for our
development projects. On May 5, Gaz Métro, jointly with Boralex Inc., was
awarded two wind power projects totalling 272 MW in connection with
Hydro-Québec's call for tenders. On June 25, a firm 20-year contract for the
sale of electricity was signed with Hydro-Québec Distribution. In addition, on
May 15, Gaz Métro and its partners in Rabaska signed a preliminary agreement
with the U.S. subsidiary of Gazprom, which will become a partner in the
terminal and take up its entire regasification capacity. These diversification
projects represent attractive growth potential that may increase the return on
equity with a risk profile similar to that of our regulated activities", added
Sophie Brochu.

    Consolidated Results

    Consolidated revenues for the third quarter of the 2008 fiscal year are
up $20.5 million, or 5.3%, from $388.7 million in the third quarter of the
previous fiscal year to $409.2 million. For the first nine months,
consolidated revenues are $1,839.1 million, up $185.2 million, or 11.2%, from
$1,653.9 million in the same period of the 2007 fiscal year.
    Consolidated gross margin of $140.1 million is up 14.9%, or
$18.1 million, compared to the third quarter of the previous fiscal year. It
is $601.4 million after nine months, up 14.7% or $77.0 million compared to the
same period of the 2007 fiscal year.
    The main reasons for the increases in revenues and gross margin are the
consolidation of GMP's revenues since April 12, 2007, higher revenues from the
Quebec distribution activity as a result of the rate increase authorized by
the Régie, higher interruptible service sales and revenues of $9.5 million in
each of the first three quarters of the 2008 fiscal year from the Quebec
government's new Green Fund duty. As amounts collected from customers by Gaz
Métro under the Regulation respecting the annual duty payable to the Green
Fund are remitted in full to the government and included in operating
expenses, this item has no impact on the Partnership's net income.
    Consolidated cash flows from operating activities, before change in
working capital items, are $84.7 million during the third quarter of the 2008
fiscal year, which is $39.6 million higher than during the third quarter the
previous year. For the first nine months of the current year, they are up
$50.5 million to $387.8 million. Among other things, these increases are
attributable to higher distributions received from companies subject to
significant influence than in the corresponding period the previous year, the
increase in adjusted net income for the current fiscal year and heavier energy
consumption by Quebec customers because of colder than normal temperatures
during the first nine months of the 2008 fiscal year than in the first nine
months last year.
    Investments in property, plant and equipment during the third quarter of
the 2008 fiscal year are up $2.1 million to $30.4 million, compared to the
third quarter of the 2007 year fiscal year. After nine months, they are up
$6.2 million to $89.9 million. The level of capital expenditures is primarily
a reflection of extensions and improvements to the natural gas distribution
system in Quebec.
    Distributable cash, adjusted for variations in deferred charges and
credits, in the third quarter of the 2008 fiscal year is $68.6 million,
compared to $52.6 million in the corresponding quarter the previous year. For
the first nine months of the 2008 fiscal year, it is $215.7 million compared
to $253.0 million for the first nine months of the previous year. The decrease
is primarily attributable to variations in non-cash working capital items and
in deferred charges and credits.

    Income Distributions

    Gaz Métro distributed $0.31 per unit during the first three quarters of
the current fiscal year, the same amount as in the corresponding quarters last
year. Gaz Métro also distributed $0.31 per unit to its Partners on July 2,
2008.
    Through its General Partner Gaz Métro inc., Gaz Métro today declared a
distribution of $0.31 per unit payable on October 1, 2008 to Partners of
record on September 15, 2008. Gaz Métro expects to maintain this level of
distributions.

    Energy Distribution Sector

    In Quebec - Gaz Métro-QDA

    Gaz Métro-QDA's deliveries (normalized for temperatures and, since
October 1, 2007, for wind) are down 16.6% to 1,017 million cubic metres during
the third quarter of the 2008 fiscal year compared to 1,220 million cubic
metres in the prior year's corresponding period. For the first nine months of
the 2008 fiscal year, volumes are down 3.2% to 4,955 million cubic metres
compared to 5,121 million cubic metres during the same period the previous
year. These decreases can be explained by the suspension of the electricity
generation activities of a large customer, TransCanada Energy Ltd. (TCE) in
Bécancour, for an indefinite period of time, partially offset by higher
regular and short-term interruptible service sales in the industrial market
where natural gas is less expensive than heavy fuel oil.
    Gaz Métro-QDA's net income in the third quarter of the 2008 fiscal year
is $2.3 million, which is up $3.1 million compared to the same period the
previous year. After nine months, net income is $164.0 million, up
$10.4 million from $153.6 million in the first nine months of the 2007 fiscal
year. The increase is mainly attributable to the rate increase authorized by
the Régie, which increases revenues, recognition of the entire $4.0 million
GEEP performance incentive and Gaz Métro's $2.7 million ($2.3 million in 2007
fiscal year) share of anticipated overearnings of $10.9 million. The increase
attributable to the rate increase will be mostly offset by higher expenses in
the next quarter.
    For the 2008 fiscal year, the authorized rate of return on common equity
of 9.52% is relatively unchanged from the previous year's authorized rate of
9.57%.
    On January 1, 2008, TCE suspended its electricity generation activities
in Bécancour for an indefinite period of time. The 654-million cubic metre
estimated reduction in consumption, for the period from January 1, 2008 to
September 30, 2008, will reduce industrial distribution revenues by
approximately $4.1 million in the current year.
    On November 26, 2007, Gaz Métro asked the Régie for authorization to
change, as of January 1, 2008, its rates for the current fiscal year to reduce
the impact of this reduction in consumption on distribution revenues by
$1.9 million. The hearings were held on February 28 and 29, 2008 and the Régie
rendered a decision on July 8, 2008. Although, in the opinion of the Régie, in
the current context, the rate should be modified to partially reflect higher
fixed costs, it has only authorized the Partnership to increase the portion of
the revenues arising from the fixed portion of the rate applicable as of
October 1, 2008.
    The government of Quebec fixed December 14, 2007 as the date the
Regulation respecting the annual duty payable to the Green Fund came into
force. In accordance with this Regulation, Gaz Métro's annual duty amounts to
$38.0 million. On July 8, 2008, the Régie rendered a decision approving the
provisional methodology applied by Gaz Métro since January 1, 2008.

    In Vermont - VGS (natural gas distributor) and GMP (electricity
    distributor)

    In Vermont, Vermont Gas Systems (VGS) delivered 215 million cubic metres
of natural gas during the first nine months of the 2008 fiscal year, which is
virtually unchanged from the previous fiscal year.
    Electricity volumes distributed by GMP during the first nine months of
the 2008 fiscal year, excluding volumes that generate gross margins
redistributed to customers, totalled 1,469.8 gigawatthours.
    Net income from the energy distribution activities in Vermont (VGS and
GMP) is $0.9 million in the third quarter of the current fiscal year and
$10.0 million after nine months, increases of $2.8 million and $5.8 million
respectively compared to the same periods last year. The increase after nine
months is primarily attributable to the consolidation of GMP's results, which
generated net income of $7.9 million before financing costs.

    Natural Gas Transportation Sector

    Net income for the Sector is $1.8 million in the third quarter of the
2008 fiscal year, down $0.7 million from $2.5 million in 2007. After nine
months it is up $5.1 million to $16.3 million from $11.2 million in the 2007
fiscal year. The main reason for the increase is the recording of a
$6.9 million pre-tax gain ($5.3 million after tax) in the second quarter of
the current fiscal year following the partial settlement of a PNGTS claim
against Calpine.
    PNGTS filed a rate application with its regulatory body (Federal Energy
Regulatory Commission) on April 1, 2008 to get its tolls increased. It will
maintain its current tolls until a final decision is announced.
    On December 17, 2007, TQM Pipeline and Company Limited Partnership (TQM)
filed a rate application with the National Energy Board (NEB) to have its
authorized rate of return increased so it would better reflect its economic
reality and business risk. The application covers its 2007 and 2008 fiscal
years. The hearings will be held in September and the decision should be
announced at the beginning of 2009. The impact of the decision will be
recognized when it is announced.

    Natural Gas Storage Sector

    Net income from the Sector is up $27.1 million to $1.2 million for the
third quarter of the 2008 fiscal year compared to the same quarter of the
previous year. After nine months, net income is $4.2 million, up $28.2 million
compared to the same period last year.
    Net income includes a favourable non-monetary adjustment of $1.7 million
for the first nine months of the 2008 fiscal year and an unfavourable
non-monetary adjustment of $26.2 million for the first nine months of the 2007
fiscal year related to future income taxes that should normally be paid by the
parent company with respect to Intragaz' activities during the years after the
new flow-through entity tax rules come into force, i.e. on October 1, 2010 in
the case of Gaz Métro. The $26.2 million income tax expense in the third
quarter of the previous fiscal year represents the implementation of the
amendments to the Income Tax Act resulting from the adoption of Bill C-52.
This adjustment, initially recognized as at September 30, 2007, has been
reclassified to June 30, 2007 pursuant to EIC-167 of the Canadian Institute of
Chartered Accountants Handbook to reflect the impact of the bill in the period
it was adopted, i.e. on June 22, 2007.
    Excluding those adjustments, adjusted net income from the Sector is
$1.2 million in the third quarter of the current year, up $0.9 million
compared to the corresponding period for the previous fiscal year. After nine
months, it is $2.5 million, up $0.3 million compared to the corresponding
period of the previous fiscal year. This is attributable to higher rates at
the Pointe-du-Lac and St-Flavien storage sites.

    Energy Services and Other Sector

    The net loss from the Sector's activities is $0.8 million in the third
quarter of the current fiscal year compared to income of $0.4 million the
previous year, down $1.2 million. Income earned by the Sector is down
$3.8 million to $1.8 million for the first nine months of the 2008 fiscal year
compared to $5.6 million in the 2007 fiscal year. This is primarily
attributable to the recognition of a $1.4 million tax benefit in MTO Telecom
Inc. in the second quarter of the 2007 fiscal year and lower earnings in the
Gaz Métro Plus group.
    In the second quarter of the 2008 fiscal year, the second third, i.e.
$2.0 million, of the deferred gain on the sale of 50% of the units of
Climatisation et Chauffage Urbains de Montréal to Dalkia in February 2006 was
recognized following receipt of the second third of the proceeds by the entity
that sold the units to Dalkia. The first third, i.e. $2.0 million, of the gain
on the sale had been recognized in the second quarter of the 2007 fiscal year.

    Development Expenditures

    Development expenditures included in results for the Rabaska LNG terminal
amount to $0.5 million in the third quarter of the 2008 fiscal year and
$2.0 million after nine months, which are equivalent to the increases over the
respective periods last year. Gaz Métro and its partners, Enbridge Inc. and
GDF SUEZ (formerly Gaz de France), felt the expenditures were required to
better position the project and therefore make it easier to execute LNG supply
contracts, as discussed below.
    The items not allocated to a particular Sector total $0.7 million in the
third quarter of the 2008 fiscal year and $1.8 million for the first nine
months, up $1.2 million and $2.2 million respectively compared to the
corresponding periods of the 2007 fiscal year.

    Business Development

    On February 28, 2008, Rabaska received federal government authorization
to build its LNG terminal in Lévis. This was the final key authorization
expected, following receipt of the Quebec government's authorization last
October.
    On May 15, 2008, the partners of the Rabaska project signed a letter of
intent with Gazprom Marketing & Trading USA, Inc. (GMTUSA), a subsidiary of
Gazprom, for all of the terminal's regasification capacity. Under the terms of
this letter and after the final agreements have been signed, GMTUSA will
acquire an equity interest in Rabaska Limited Partnership, which will dilute
the initial partners' interest.
    On May 5, 2008, following a call for tenders by Hydro-Quebec Distribution
for 2,000 megawatts of wind power energy, Gaz Métro, jointly with Boralex, was
awarded two wind power projects for total installed capacity of 272 megawatts.
The two wind farms, located on the private property of Séminaire de Québec,
will be operational by December 1, 2013 at the latest. These two projects are
subject to regulatory approvals. On June 25, 2008, a firm 20-year electricity
supply agreement expiring on December 1, 2033 was signed by Hydro-Québec
Distribution, Boralex and 9198-5218 Québec inc., a wholly-owned subsidiary of
Gaz Métro incorporated for purposes of the project.

    Conference Call

    The Partnership will hold a telephone conference with financial analysts
to discuss its results for the third quarter ended June 30, 2008 on Wednesday,
August 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 416-644-3420 or toll-free
1-800-731-6941. It will also be webcast on Gaz Métro's website
(www.gazmetro.com/investors) in the "Webcasts" section.
    Rebroadcasts can be accessed for 30 days by dialling 416-640-1917 or
toll-free 1-877-289-8525 (access code: 21278593#), and for 90 days on Gaz
Métro's Website site.

    Gaz Métro Overview

    With more than $3.3 billion of 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 some 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 about 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.
    The significant risks and uncertainties that could cause actual results
and future events to differ materially from current expectations include
factors related to the economy and markets, competition, commercial risk,
regulation, energy supply, continuity of activities and the financing and
value of investments owned as explained in detail in the Partnership's annual
report. 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 distributable
cash provide readers with information they consider 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.

    
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    HIGHLIGHTS                3 months ended June 30  9 months ended June 30
    -------------------------------------------------------------------------
    (in millions of dollars,
     except for unit data
     which is in dollars)           2008        2007        2008        2007
    -------------------------------------------------------------------------
                              (unaudited) (unaudited) (unaudited) (unaudited)
    CONSOLIDATED INCOME
     AND CASH FLOWS
    Revenues                    $  409.2    $  388.7   $ 1,839.1   $ 1.653.9
    Gross margin                $  140.1    $  122.0   $   601.4   $   524.4
    Income before interest,
     taxes and amortization     $   73.5    $   67.4   $   415.7   $   374.6
    Net income (loss)           $    4.8    $  (25.1)  $   194.5   $   151.0
    Adjusted net income(1)      $    4.8    $    1.1   $   192.8   $   177.2
    Cash flows related to
     operating activities
     (before working capital)   $   84.7    $   45.1   $   387.8   $   337.3
    Capital expenditures        $   30.4    $   28.3   $    89.9   $    83.7
    Changes in deferred
     charges and credits        $   29.9    $   15.7   $   139.8   $    91.6
    Net income (loss) per unit
     (basic and diluted)        $   0.03    $  (0.21)  $    1.61   $    1.25
    Adjusted net income per
     unit (basic and
     diluted)(1)                $   0.03    $   0.01   $    1.60   $    1.47
    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 outstanding units
     (in millions)                 120.5       120.4       120.5       120.4
    Interest coverage on
     long-term debt over a
     period of 12 months (times)                            2.61        2.65
    -------------------------------------------------------------------------
    CONSOLIDATED NORMALIZED NATURAL
     GAS VOLUMES(2)
     (in millions of cubic metres)
    -------------------------------------------------------------------------
    MARKETS
    Industrial                       695         874       2,804       2,925
    Commercial                       266         284       1,701       1,718
    Residential                       97         107         665         693
                               ----------  ----------  ----------  ----------
    Total                          1,058       1,265       5,170       5,336
    -------------------------------------------------------------------------
    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/STA-2  SR-2/STA-2
                                                         (middle)    (middle)
    Market prices on
     Toronto Stock Exchange:
      High                      $  16.30    $  17.58   $   16.40   $   18.50
      Low                       $  14.35    $  16.50   $   13.77   $   15.30
      Close                                            $   15.19   $   16.86
    Public ownership in
     Partnership
     (non-controlling
     Partners)                                              29.0%       29.0%
    -------------------------------------------------------------------------
    CONSOLIDATED BALANCE SHEETS
                                                            June   September
                                                        30, 2008    30, 2007
                                                      ----------- -----------
                                                      (unaudited)   (audited)

    Total assets                                       $ 3,251.2   $ 3,142.5
    Total debt                                         $ 1,637.3   $ 1,684.8
    Partners' equity                                   $ 1,009.9   $   921.9
    Partners' equity per unit                          $    8.38   $    7.65


    ---------------------------
    (1)Adjusted to exclude the $1.7 million favourable non-monetary
       adjustment to future income taxes for the first nine months of the
       2008 fiscal year ($26.2 million unfavourable in 2007). While this
       $26.2 million future income tax expense was recorded as at
       September 30, 2007, the Partnership had to reclassify this adjustment
       as at June 30, 2007 pursuant to the requirements of EIC-167 of the
       Canadian Institute of Chartered Accountants Handbook to reflect the
       impact of Bill C-52 in the period it was adopted, i.e. on
       June 22, 2007.

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

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

    Gaz Métro's third quarter consolidated financial report can be accessed in
the Investors Section of the Partnership's website at:
www.gazmetro.com/investors and is also available on Sedar's website
www.sedar.com 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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