Toronto_ le 15 novembre 2007 Notes pour une allocution de Monsieur

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Toronto_ le 15 novembre 2007 Notes pour une allocution de Monsieur Powered By Docstoc
					Toronto, le 15 novembre 2007

Notes pour une allocution de Monsieur Réal Laporte, Président d'Hydro-
Québec Équipement et président-directeur général de la Société d'énergie
de la Baie James dans le cadre du congrès de l'Association for Canadian
Studies in the United States (ACSUS)

Seule la version prononcée fait foi

Dear Colleagues,
Ladies and gentlemen,
Good morning!

It’s a great pleasure to be with you today, and I thank you very much for the invitation.

Hopefully, I won't have to talk to you about the last game between the Leafs and Habs.
This longstanding relationship — a polite way to describe hockey's greatest rivalry — is
always kind of touchy.

But anyway …

Instead, I would like to talk to you about Québec, its energy strategy, the key role Hydro-
Québec has to play in it, and the relationship between Hydro-Québec and the USA, in terms
of business opportunities and the fight against climate change.

It all starts with water. Water as a clean and renewable source of energy. Water as a
means to achieve growth. Water as a collective asset. As a matter of fact, Québec is all
about water.

Water forms an integral part of Québec's history and culture. Long before Europeans
arrived on the continent, the Aboriginal peoples settled near the most attractive bodies of
water, which supplied them with drink, food, and a means of transportation.

Water is a major component of our landscape — with over 4,500 rivers, of which only 54
have been harnessed to provide hydropower — and half a million lakes.

Before serving the multiple uses Quebecers make of it, this resource has an intrinsic
value: it is an essential contributor to the diversity of plant and wildlife species, as well as
a natural habitat and food source for many of them. Water has shaped Québec’s land,
creating the most breathtaking and diversified landscapes, each region from James Bay to
the north shore are very different..
As in the past, the uses Quebecers make of water have great socio-economic importance.
After providing mechanical power to operate sawmills and serving as a means of
transportation and communication, water now supplies paper mills, steel mills, and
aluminum smelters with electricity.

The energy aspect of water use has long been a key issue for Québec, especially within
the North American context of energy production and the more global context of efforts
to reduce greenhouse gas emissions.

In the last decades, the Québec government has asked Hydro-Québec to play a major role
in the development of the province's hydroelectric potential and economic growth.

Today, Hydro-Québec generates, transmits and distributes electricity, mainly using
renewable energy sources, in particular hydropower. It also conducts research in energy-
related fields and takes an active interest in energy efficiency. Furthermore, it works to
create value from the technologies that emerge from its research.

Hydro-Québec is the largest electricity company in Canada, with assets of 60 billion
dollars (Canadian). Its sole shareholder is the Québec government.
The company enjoys a sound and enviable financial situation. It is self-financed and
profitable. Let me give you some figures:

   •   Hydro-Québec has total assets of $63 billion
   •   generates total revenues of $11 billion
   •   in 2006, has a net income from continuing operations of $2.8 billion
   •   has over 3.7 million customers; and
   •   relies on the daily efforts of 22,000 dedicated employees.

Hydro-Québec is one of the world's largest hydropower producer. Hydro-Québec has
always been a company that relies on renewable energy. With installed capacity of nearly
41,000 MW (including Churchill Falls generating station), we use water to generate 97%
of our output. And several thousand megawatts from renewable sources will be added to
this capacity in the years to come.

This envious position is the result of initiatives which began in the 1960s.

Talking about the old days, let’s step back in time to better understand Hydro-Québec's
origins.

Electricity generation began in the late 19th Century in Quebec. It relied on initiatives
from private entrepreneurs, who delivered power to a limited number of customers.

In the 1930s, larger companies started to emerge, providing more customers with
electricity as a new service for private and industrial purposes.




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Since its creation in 1944, Hydro-Québec has provided a reliable supply of electricity to
Quebecers while contributing to their collective wealth. Among other things, the
company was mandated to supply power in remote rural areas.

At the beginning of the 1960s, one fact stood out: disparity in price. Not all Quebecers
had access to electricity according to the same terms and conditions.

To resolve that issue, the Québec government decided in 1962 to nationalize the
electricity sector. It did so by extending Hydro-Québec’s service territory to the entire
province and by establishing uniform rates for all similar types of customers, no matter
where they are located.

Hydro-Québec’s mission was to meet the needs of all the regions in a vast territory, to
provide better service, and to develop Québec’s impressive hydroelectric potential.

That’s the reason why Hydro-Québec went on to build three huge hydropower complexes,
one after the other:

   •   Manic-Outardes, on the North Shore of the St. Lawrence;
   •   Churchill Falls, in Labrador;
   •   and then, starting in the early 1970s, the La Grande complex in the James Bay
       region, the biggest construction project in Québec's history.

The abundant and low-cost electricity generated up north met Quebecers’ growing needs
and encouraged new industries. It also helped us keep electricity rates stable. Today, our
rates are still among the lowest in the world.

With the economic slowdown of the early 1980s, Hydro-Quebec faced a situation of
surplus energy. In that context, hydroelectric development came to a halt.

We then had the opportunity to export power on a long-term basis, while developing
solid relationships with neighboring markets.

During the 1990s, as surpluses were absorbed, Hydro-Québec revived its construction
program to meet the growth in demand, with phase 2 of the La Grande complex.

In 1996, the Québec government created the Régie de l’énergie, the provincial energy
board, which regulates electricity transmission and distribution. All rate increases must
be submitted to the Régie for approval.

In 1997, Hydro-Québec became part of the restructured North American market. Our
transmission system was opened up to competition, and we have become increasingly
active in energy markets in the northeastern part of North America — particularly short-
term markets.




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In this new business environment, Hydro-Québec can negotiate sales and purchases of
electricity directly, at market prices on neighboring markets, and thus make better use of its
assets and its commercial expertise in the energy field.

In 2000-2001, Hydro-Québec completed the separation of its distribution, transmission
and generation operations.

Hydro-Québec has now four divisions: the Generator (Hydro-Québec Production), the
Distributor (Hydro-Québec Distribution), the Transmission Provider (Hydro-Québec
TransÉnergie), and the Builder (Hydro-Québec Équipement which included SEBJ).
As mentioned earlier, transmission and distribution activities are regulated.

By law, the Generator supplies the Distributor with an annual heritage pool of electricity.
Above that volume, set at 165 TWh, the Distributor obtains its supplies on the open
market.

Hydro-Québec TransÉnergie operates the most extensive transmission system in North
America, with over 32,000 km (or 20,000 miles) of lines, more than 500 substations and
a large number of interconnections with the power systems of New Brunswick, Ontario
and the US Northeast.

Hydro-Québec Distribution (the Distributor) provides Quebecers with a reliable supply of
electricity. It also works to encourage its customers to make efficient use of electricity.

Hydro-Québec Équipement and the Société d’énergie de la Baie James, a subsidiary of
Hydro-Québec, are the prime contractors in construction projects for the Generator and
the Transmission Provider.

In 2006, following a broadly-based consultation process, the Québec government
released its energy strategy, defining goals and actions for the period from 2006 to 2015.
Guidelines have been set by the Government for each energy sector.

Québec’s energy strategy is primarily based on the resumption of hydroelectric
development at an increased pace. The Government intends to launch hydroelectric
projects to create an additional 4,500 MW of generating capacity, involving new
investment of around $25 billion and the creation of roughly 70,000 jobs over 10 years.

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Hydro-Québec's growth strategy is all about sustainable development and good business.
The two go hand-in-hand, as they do for many other corporations.

For Hydro-Québec, sustainable development means three things:
1-     Greater energy efficiency;
2-     Dedication to renewable energy – which involves developing large hydropower
and wind power projects, two complementary sources of energy;



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3-    Emphasis on technological innovation across the organization – as the bridge
between economic growth and the sensible use of our natural resources.

With regard to greater energy efficiency, let's say that at a time of rising energy prices
and global environmental challenges like climate change, greater energy efficiency is an
obvious responsibility for all of us.

Hydro-Québec is doing its part – by 2010, we will have invested over 1 billion dollars in
energy conservation. In homes, buildings and industrial applications, we're working with
all our customers and partners.

This approach allows each renewable kilowatt of energy saved in Québec help reduce
greenhouse gas emissions. Neighboring U.S. states use thermal generating stations —
coal, oil and natural gas — to produce most of their electricity. Consequently, each time
we export hydropower to our neighbors, GHG emissions are reduced by an equivalent
amount.

Over the last five years, our renewable energy exports across the Northeast have saved
over 30 million tons of greenhouse gas emissions. That's a “win-win” situation for the
environment, our customers and Hydro-Québec.

For Hydro-Québec, technological innovation is also key to sustainable development and a
great way to improve the company's performance. We spend about 100 million dollars a
year in this field.

Now let's talk about development of our generating facilities. Hydropower is the
cornerstone. And wind power is the perfect complement for a reservoir-based hydro fleet.
Working in tandem, they make sense from an environmental perspective.

Wind power is now joining hydropower in Québec, helping to enhance the renewable
energy portfolio. Wind farm capacity will expand at a rapid pace in the coming years.

In 2005, Hydro-Québec Distribution signed contracts for an initial block of 990 MW of
wind power. That power was sourced at about 7¢/kWh — a reasonable price.

The same year, we issued a second call for tenders for the purchase of an additional 2,000
MW. This fall, Hydro-Québec Distribution received 66 bids for a combined total of 7,724
MW. The results should be announced next spring.
Water and wind are two excellent sources of energy. We see them taking us very far into
the future.

On the subject of wind power, let me assure you that Hydro-Québec is committed to
becoming a world reference for the successful and reliable integration of large-scale wind
power on a transmission grid. It's one thing to integrate wind power; it's another thing to
do it efficiently and without compromising grid reliability. We want the best from wind
and water. And we're developing the expertise to lead the world in this area.



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But as I said, hydroelectricity is our core business. At the moment, we are planning to
add more than 2,800 MW to our peak generating capacity, with an average annual output
of 15.8 TWh.

To achieve this goal and in keeping with Québec's energy strategy, Hydro-Québec
intends to continue developing hydropower projects.

As a matter of fact, in the past two years, we commissioned two important facilities:
   • in August 2005, Toulnoustuc powerhouse, adding 526 MW in capacity and 2.7
      TWh in annual output; and
   • Eastmain-1 powerhouse in December 2006, providing capacity of 480 MW and
      generating 2.7 TWh annually.

As well, we have two major projects under construction:
   • Péribonka, from which the first unit will be commissioned at the end of 2007.
       This 385-MW generating station will produce 2.2 TWh annually; and
   • A second project, which we consider to be the hydropower project of the decade
       in Québec:
       Eastmain-1-A/La Sarcelle/Rupert.

We began construction on this project in the first months of this year.

The partial diversion of the Rupert River and the associated generation facilities will
come on line in stages between 2009 and 2012. Ultimately, the project will add 893 MW
in capacity and 8.5 TWh in annual output.

Eastmain-1-A/La Sarcelle/Rupert is a very sound project, both economically and
environmentally. This project is being carried out in cooperation with the Crees of the
James Bay territory, who are actively involved. Right now, 2,300 people are working on
the project, including 250 Crees.

These two projects (Péribonka and Eastmain-1-A/La Sarcelle/ Rupert) represent about 6
billion dollars of investment in generation alone.

Some of this power will be transmitted to Ontario via the new Outaouais interconnection
substation, due to be commissioned in spring 2009. We are building this 1,250-MW
interconnection to increase our capacity for future energy interchange — a 700 million dollar
investment. For Hydro-Québec, it’s like entering a new era, since we built our last
interconnection in the early 1980s.

Commissioning of the interconnection in 2009, combined with new generating capacity,
will certainly help the Ontario government carry out its plan to reduce GHG emissions.

Meanwhile, Hydro-Québec is continuing its efforts to identify other hydroelectric projects
totaling 4,500 MW.


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These 4,500 MW of additional capacity should be sufficient to meet Québec’s long-term
demand, promote wealth-creating industrial development, and support exports.

The Romaine project is the farthest along at the moment. This 1,500-MW complex is at
the draft-design stage and would have an annual output of 7.7 TWh.

A similar 1,500-MW project is being considered on the Petit Mécatina River, about 300
kilometers east of the Romaine River, on the Lower North Shore of the St. Lawrence.

The balance of the project portfolio totaling 1,500 MW remains to be finalized, but we
have a very good idea of how we will enhance our portfolio.

To summarize, we plan to invest approximately 10 billion dollars in new generation
capacity over the next five years.

Meanwhile, Hydro-Québec TransEnergie will be investing about 5 billion dollars to bring
this new output onto its grid and to improve the transmission system.

As you can see, hydroelectric development in Québec is still going strong, with some
very substantial projects.

Over 23 TWh will be available for export markets, all of which will be backed by total
generating capacity in excess of 41,000 MW. In other words, all of our sales are system
power and not unit contingent, which offers much greater reliability.

For example, our reservoirs can store the equivalent of the State of New York's annual
electricity consumption. What’s more, there is a natural fit between Hydro-Québec's
supply situation and the peaking requirements of Ontario and the US Northeast. Given
the size and flexibility of Hydro-Québec's generating capacity, combined with the fact
that it is a winter-peaking system, Hydro-Québec can offer a significant volume of clean
and renewable energy to neighboring markets.

This is especially true in the critical summer months, when there is an economic
incentive to provide such supplies.

Hydro-Québec will be in a position to meet neighboring customers' need for short,
medium and long-term power supply.

To conclude, renewable energy is available in Québec. It is supported by a large
generating fleet and access to markets.

Thank you very much for your attention.




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