Manitoba Hydro released its 2021-22 annual report today showing a total consolidated net loss of $248 million for the fiscal year ended March 31, 2022, compared to consolidated net income of $119 million the previous year.
Manitoba Hydro also released its first quarter report for the 2022-23 fiscal year today, showing a consolidated net income of $37 million so far this year compared to a $19 million consolidated net loss for the same period last year. The report covers April 1 to June 30.
“Obviously, the impact of last year’s drought is significant,” said Jay Grewal, President and CEO of Manitoba Hydro. “The drought was one of the worst on record. It not only weakened our ability to generate and sell surplus energy on spot markets in the United States and Canada, but we also had to import energy to serve our customers.
“The financial results of record-high water flows this year show how much the corporation’s net income is subject to water flow conditions as well as weather, interest rates and export prices,” Grewal said. “All of these factors can be unpredictable and out of our control.”
The consolidated net loss of $248 million last fiscal year was comprised of net loss of $249 million in the electric segment, a net loss of $8 million in the natural gas segment and $9 million net income from subsidiaries.
The decreases to net income were partially offset by higher domestic electric revenues largely due to the impact of the Dec. 1, 2020, and Jan. 1, 2022, electric rate increases and the impacts of colder winter weather and customer growth.
Besides the drought, the deterioration from the prior year’s earnings was due to the remaining six units of the Keeyask Generating Station coming into service, resulting in higher financing and depreciation expenses.
For the first quarter of 2022-23, the $37 million in net income was comprised of a $47 million net income in the electric segment, a $12 million net loss in the gas segment, and $2 million in net income in the other segment, which includes subsidiary operations.
The turnaround from last year’s results is partially offset by higher operating and administrative costs, finance expense and depreciation. The net income was $88 million higher than the forecast net loss of $51 million outlined in the utility’s approved budget. Manitoba Hydro often incurs a loss in the first quarter of each fiscal year which is generally made up in subsequent quarters.
As of June 30, Manitoba Hydro is now forecasting a consolidated net income of $585 million for the fiscal year, based primarily on enhanced hydraulic generation and significantly higher net export revenues due to higher prices in those export markets. This compares to the net income of $120 million in the approved budget outlined in the corporation’s 2021-22 annual report.
“The change from the drought last year to high water conditions this year is extraordinary,” Grewal said. “Any time we have above-average water flows, we run as much water as we can through our turbines and sell that excess energy on the opportunity market. That helps keep rates for our customers here in Manitoba lower than they would be otherwise, while providing needed revenue to reinvest in our existing electric system to ensure reliability into the future.”
Grewal said significant uncertainty remains around future export prices for the rest of the fiscal year. More than 50 per cent of the increase to net export revenue, and accordingly net income, is driven by higher projected energy market prices. Under a range of energy price forecasts, net income could vary by up to $300 million in either direction from the current forecast of $585 million.
Grewal said the unpredictability of export market prices and the impact of precipitation and water flow on Manitoba Hydro’s revenues highlight the need for moderate, steady, and predictable rate increases.
“For example, our first quarter forecasts last year – a drought year – predicted a net income of approximately $120 million. That turned into a $248 million net loss, a variance of almost $370 million, as water conditions did not improve,” Grewal said.
“Being able to generate enough net income to begin paying down some of our debt, while continuing to invest in our system, is critical,” she said. “Moderate, predictable rate increases also help our customers budget for their energy costs ahead of time while ensuring Manitoba Hydro will be able to continue to focus on becoming the province’s energy utility of the future.”