Hydro Quebec 18-K/A Annual report (foreign governments) (amended)

EXHIBIT 4

First Quarter 2011

	Message from the Chairman of the Board and the President and Chief Executive Officer
Summary of operations	Net income totaled $1,402 million, a slight decrease compared to the $1,439 million recorded in first quarter 2010. In the context of colder temperatures in 2011, Hydro-Québec Production reduced its net export volume somewhat in order to meet electricity demand in Québec.
Consolidated operations	Revenue totaled $3,853 million, compared to $3,821 million in 2010. In Québec, revenue from electricity sales amounted to $3,358 million, a $193-million increase over 2010 due essentially to a 2.7-TWh volume increase stemming from the fact that temperatures were close to normal in winter 2011, whereas they had been exceptionally mild in 2010. Revenue from electricity sales on markets outside Québec was $414 million, a $151-million decrease resulting from higher demand for electricity in Québec.
	Total expenditure amounted to $1,831 million, or $87 million more than in 2010. It should be mentioned that, in 2010, the mild winter temperatures led to the recognition of a $105-million regulatory asset for revenue variances related to climate conditions, namely the differences between Hydro-Québec Distribution’s actual transmission and distribution revenue and the revenue forecasts established on the basis of the climate normal for rate application purposes. Taxes decreased by $19 million following the abolition of the capital tax in 2011.
	Generation
Segmented operations	Hydro-Québec Production posted net income of $782 million, a decrease of $42 million compared to first quarter 2010. The $156-million decrease in net electricity exports was partly offset by a $136-million increase in revenue from electricity sales to Hydro-Québec Distribution on account of the colder temperatures in winter 2011.

	Transmission
	Hydro-Québec TransÉnergie’s net income amounted to $135 million, a $3-million decrease from 2010 due, among other things, to a $2-million decrease in revenue from native load transmission service following a decision by the Régie de l’énergie in May 2011.
	Distribution
	Hydro-Québec Distribution recorded net income of $477 million, which is stable compared to the same period of 2010. Revenue from electricity sales increased because of the colder temperatures in winter 2011. The increase was offset by higher electricity purchases and by the recognition, in 2010, of a regulatory asset for revenue variances related to climate conditions.
	Construction
	The Construction segment includes activities related to the projects carried out by Hydro-Québec Équipement et services partagés and Société d’énergie de la Baie James.
	The volume of activity in this segment totaled $409 million in first quarter 2011, compared to $512 million in 2010. Among the major projects under way for Hydro-Québec Production are Eastmain-1-A/Sarcelle/Rupert and Romaine-2. Work in progress for Hydro-Québec TransÉnergie mainly revolves around connecting new generating facilities and continued investment in asset sustainability projects.
Investment	As at March 31, 2011, investments in property, plant and equipment, intangible assets and the Energy Efficiency Plan totaled $749 million, compared to $825 million in 2010. As expected, a large portion of this amount was devoted to the major capital projects of Hydro-Québec Production, especially the Eastmain-1-A/Sarcelle/Rupert and Romaine-2 hydroelectric developments.
	Hydro-Québec TransÉnergie continued investing in its transmission system to integrate new hydroelectric and wind capacity in Québec. It also carried on with its investments in maintenance and improvement to ensure the reliability and long-term operability of its transmission assets and enhance service quality.
	Hydro-Québec Distribution kept up investments to handle the growth of its Québec customer base and ensure the quality of its facilities, especially those related to distribution automation. It also continued implementation of the Energy Efficiency Plan.

Page 2 First Quarter 2011

Financing	In January 2011, the reopening of the debenture issue made in January 2009 and maturing in February 2050 raised $0.5 billion at a rate of 4.60%. Hydro-Québec also issued $1.5 billion of floating-rate notes maturing in 2015. These borrowings were all contracted on the Canadian market.
	The financing program for 2011 amounts to more than $3.0 billion. The amounts raised will be used to support the investment program and to refinance debt maturing during the year, among other things.
	/s/ Michael L. Turcotte	/s/Thierry Vandal
	Michael L. Turcotte	Thierry Vandal
	Chairman of the Board	President and Chief Executive Officer
	May 20, 2011

First Quarter 2011 Page 3

CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

CONSOLIDATED STATEMENTS OF OPERATIONS

In millions of Canadian dollars (unaudited)		Three months ended March 31
	Notes		2011	2010
Revenue			3,853	3,821
Expenditure
Operations			599	631
Electricity and fuel purchases			340	333
Depreciation and amortization	4		615	617
Taxes			253	272
Regulatory deferrals			24	(109	)
			1,831	1,744
Operating income			2,022	2,077
Financial expenses	5		620	638
Net income			1,402	1,439

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

In millions of Canadian dollars (unaudited)	Three months ended March 31
		2011	2010
Balance, beginning of period		13,965	13,336
Net income		1,402	1,439
Balance, end of period		15,367	14,775

The accompanying notes are an integral part of the consolidated financial statements.

Page 4 First Quarter 2011

Consolidated Balance Sheets

In millions of Canadian dollars (unaudited)	As at March 31, 2011		As at December 31, 2010
ASSETS
Current assets
Cash and cash equivalents		579		80
Short-term investments		215		1,230
Accounts receivable and other receivables		2,574		1,813
Derivative instruments		1,398		889
Regulatory assets		58		43
Materials, fuel and supplies		297		321
		5,121		4,376
Property, plant and equipment		55,659		55,512
Goodwill and intangible assets		1,238		1,235
Investments		116		114
Derivative instruments		958		952
Regulatory assets		1,112		1,144
Other assets		2,691		2,565
		66,895		65,898
LIABILITIES
Current liabilities
Borrowings		844		18
Accounts payable and accrued liabilities		1,847		2,017
Dividend payable		-		1,886
Accrued interest		504		909
Derivative instruments		435		308
Regulatory liabilities		71		58
Current portion of long-term debt		1,378		1,933
		5,079		7,129
Long-term debt		37,954		36,439
Asset retirement obligations		517		504
Derivative instruments		2,130		2,114
Regulatory liabilities		-		1
Other long-term liabilities		851		857
Perpetual debt		275		288
		46,806		47,332
EQUITY
Share capital		4,374		4,374
Retained earnings		15,367		13,965
Accumulated other comprehensive income		348		227
		15,715		14,192
		20,089		18,566
		66,895		65,898

The accompanying notes are an integral part of the consolidated financial statements.

On behalf of the Board of Directors,
/s/ Jacques Leblanc	/s/Michael L. Turcotte
Jacques Leblanc Chair of the Audit Committee	Michael L. Turcotte Chairman of the Board

First Quarter 2011 Page 5

CONSOLIDATED STATEMENTS OF CASH FLOWS

In millions of Canadian dollars (unaudited)			Three months ended March 31
	Notes		2011			2010
Operating activities
Net income				1,402			1,439
Adjustments to determine net cash flows from operating activities
Depreciation and amortization		4		615			617
Amortization of premiums, discounts and issue expenses related to debt securities		5		26			32
Regulatory deferrals				24			(109	)
Other				(52	)		(92	)
Change in non-cash working capital items		6		(1,343	)		(1,128	)
Net change in accrued benefit assets and liabilities				(122	)		(140	)
				550			619
Investing activities
Additions to property, plant and equipment				(687	)		(775	)
Additions to intangible assets				(28	)		(17	)
Cash receipts from the government reimbursement for the 1998 ice storm				2			5
Disposal of investments				1			-
Costs related to Energy Efficiency Plan				(34	)		(33	)
Net disposal of short-term investments				1,017			1,580
Other				2			1
				273			761
Financing activities
Issuance of long-term debt				1,960			534
Repayment of long-term debt				(772	)		(12	)
Cash receipts arising from credit risk management				638			90
Cash payments arising from credit risk management				(1,092	)		(259	)
Net change in short-term borrowings				830			643
Dividend paid				(1,886	)		(2,168	)
				(322	)		(1,172	)
Foreign currency effect on cash and cash equivalents				(2	)		(5	)
Net change in cash and cash equivalents				499			203
Cash and cash equivalents, beginning of period				80			472
Cash and cash equivalents, end of period				579			675
Supplementary cash flow information		6

The accompanying notes are an integral part of the consolidated financial statements.

Page 6 First Quarter 2011

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

In millions of Canadian dollars (unaudited)	Three months ended March 31
	2011			2010
Net income		1,402			1,439
Other comprehensive income
Change in deferred gains on items designated as cash flow hedges		160			25
Reclassification to operations of deferred gains on items designated as cash flow hedges		(39	)		(164	)
		121			(139	)
Comprehensive income		1,523			1,300

The accompanying notes are an integral part of the consolidated financial statements.

First Quarter 2011 Page 7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

For the three-month periods ended March 31, 2011 and 2010

Amounts shown in tables are in millions of Canadian dollars.

Note 1 Basis of Presentation

The consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles as set forth in Part V of the Canadian Institute of Chartered Accountants (CICA) Handbook, “Pre-changeover Accounting Standards,” and reflect the decisions of the Régie de l’énergie (the “Régie”). These decisions affect the timing of the recognition of certain transactions in the consolidated operations, resulting in the recognition of regulatory assets and liabilities, which Hydro-Québec considers it is likely to recover or settle subsequently through the rate-setting process. The quarterly consolidated financial statements, including the present notes, do not contain all the required information regarding the audited annual consolidated financial statements and should therefore be read in conjunction with the consolidated financial statements and accompanying notes in Hydro-Québec’s Annual Report 2010.

The accounting policies used to prepare the quarterly consolidated financial statements are consistent with those presented in Hydro-Québec’s Annual Report 2010.

Hydro-Québec’s quarterly results are not necessarily indicative of results for the year on account of seasonal temperature fluctuations. Because of higher electricity demand during winter months, revenue from electricity sales in Québec is higher during the first and fourth quarters.

Note 2 Change in Accounting Policy

Future Change

In February 2008, the Canadian Accounting Standards Board (AcSB) confirmed that publicly accountable enterprises would be required to apply International Financial Reporting Standards (IFRS) in their interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. In September 2010, the AcSB authorized rate-regulated entities to defer the adoption of IFRS to January 1, 2012. Since Hydro-Québec is entitled to exercise this deferral right, it will present its 2011 financial statements in accordance with Part V of the CICA Handbook, “Pre-changeover Accounting Standards.”

Note 3 Effects of Rate Regulation on the Consolidated Financial Statements

Transmission

In decision D-2011-061 of May 5, 2011, the Régie set Hydro-Québec’s power transmission rates for 2011. The new rates take into account a 7.21% return on the rate base, assuming a capitalization with 30% equity.

Distribution

In decision D-2011-036 of March 31, 2011, the Régie imposed an across-the-board reduction of 0.41% in Hydro-Québec’s electricity rates, effective April 1, 2011. This reduction takes into account a 7.26% return on the rate base, assuming a capitalization with 35% equity.

In decision D-2011-028 of March 9, 2011, the Régie authorized the amortization of an amount of $33 million in 2011 for the 2010 revenue variances related to climate conditions, stipulating that the balance of these variances must be amortized over five years as of 2012, in compliance with decision D-2009-016. An amortization expense of $8 million was recorded in this regard for the three months ended March 31, 2011.

In decisions D-2011-039 and D-2011-028, the Régie also asked the Transmission Provider and the Distributor to recognize in a separate account the variances between the recognized pension cost and the cost authorized in the rate decisions. The amortization terms and conditions for this account have not yet been determined. As at March 31, 2011, an amount of $12 million had been recognized as a regulatory liability.

Page 8 First Quarter 2011

Note 4    Depreciation and Amortization

	Three months ended March 31
	2011		2010
Property, plant and equipment		542		538
Intangible assets		27		24
Regulatory assets and liabilities		45		55
Write-offs		1		-
		615		617

Note 5    Financial Expenses

	Three months ended March 31
	2011		2010
Interest
Interest on debt securities		619		615
Amortization of premiums, discounts and issue expenses related to debt securities		26		32
		645		647
Net exchange loss		8		10
Guarantee fees related to debt securities		47		46
		55		56
Less
Capitalized financial expenses		76		63
Net investment income		4		2
		80		65
		620		638

Note 6    Supplementary Cash Flow Information

	Three months ended March 31
	2011			2010
Change in non-cash working capital items
Accounts receivable and other receivables		(764	)		(548	)
Materials, fuel and supplies		24			9
Accounts payable and accrued liabilities		(188	)		(175	)
Accrued interest		(415	)		(414	)
		(1,343	)		(1,128	)
Investing activities not affecting cash
Increase in property, plant and equipment		13			62
Interest paid		944			928

First Quarter 2011 Page 9

Note 7 Employee Future Benefits

					Three months ended March 31
	Pension Plan				Other plans
	2011		2010		2011		2010
Accrued benefit cost recognized		30		5		31		29

Note 8 Segmented Information

The following tables contain information related to operations and assets by segment:

			Three months ended March 31, 2011
	Generation		Transmission		Distribution		Construction		Corporate and Other Activities		Intersegment eliminations and adjustments			Total
Revenue
External customers		454		16		3,376		—		7		—			3,853
Intersegment		1,523		746		20		409		323		(3,021	)		—
Net income		782		135		477		—		5		3			1,402
Total assets as at March 31, 2011		30,911		18,188		13,292		452		4,321		(269	)		66,895

	Three months ended March 31, 2010
	Generation		Transmission		Distribution		Construction		Corporate and Other Activities			Intersegment eliminations and adjustments			Total
Revenue
External customers		614		17		3,177		—		13			—			3,821
Intersegment		1,447		768		19		512		323			(3,069	)		—
Net income (loss)		824		138		476		—		(2	)		3			1,439
Total assets as at March 31, 2010		29,960		17,787		12,740		431		4,233			(308	)		64,843

Note 9 Comparative Information

Some corresponding period data of the previous year have been reclassified to conform to the presentation adopted in the current period, or restated in accordance with the changes to accounting policies described in Note 2 to the consolidated financial statements published in Hydro-Québec’s Annual Report 2010.

Page 10 First Quarter 2011

CONSOLIDATED FINANCIAL HIGHLIGHTS

In millions of Canadian dollars (unaudited)	Three months ended March 31
Summary of Operations	2011		2010		Change (%)
Revenue		3,853		3,821		0.8	é
Expenditure		1,831		1,744		5.0	é
Financial expenses		620		638		2.8	ê
Net income		1,402		1,439		2.6	ê

First Quarter 2011 Page 11

	Highlights
Generation	A model for environmental integration In its twelfth annual inventory of global electricity production from renewable sources, the Observatoire des énergies renouvelables (Observ’ER) noted that the Eastmain-1-A/ Sarcelle/Rupert project constitutes “a prime example of how to incorporate environmental constraints.” Based in France, Observ’ER is a world reference in the fields of renewable energy and sustainable development.
Transmission	Decisions of the Régie de l’énergie In February, the Régie de l’énergie authorized Hydro-Québec TransÉnergie to build Lachenaie substation north of Montréal, to connect it to the grid by looping an existing 315-kV circuit and to perform related work. This $51-million project will help meet long-term demand in the Mille-Îles Est–Lanaudière area. The facilities are scheduled to come on stream in October 2013. Also in February, the Régie gave its approval to the project to rebuild 315/120/25-kV Bélanger substation, to build a 315-kV tap line for this facility, to modify Duvernay, Montréal-Nord and Bout-de-l’Île substations, and to carry out related work on the distribution system. The total cost of the project is $190 million and commissioning is planned for April 2014. In March, the Régie authorized Hydro-Québec TransÉnergie to build 315/120-kV Pierre-Le Gardeur substation. This $87-million project will help meet Hydro-Québec Distribution’s regional load growth. Commissioning is scheduled for October 2014. In May, the Régie set Hydro-Québec TransÉnergie’s power transmission rates and conditions of service for 2011. Among other things, the decision calls for a decrease in revenue from native load transmission service, down to $2,645 million from $2,651 million.
Distribution	Decision of the Régie de l’énergie The Régie de l’énergie’s decision for the 2011–2012 rate year calls for an across-the-board reduction of 0.41% in Hydro-Québec Distribution’s rates, effective April 1, 2011. Energy efficiency Hydro-Québec has reached the milestone of 300,000 energy-hungry fridges and freezers collected under the RECYC-FRIGO Environnement™ program. Given the great public response, the program has been extended until the end of 2011.

Page 12 First Quarter 2011

Technological innovation

Partner in excellence L’École de technologie supérieure (ÉTS) paid tribute to Hydro-Québec with an award for its excellence as a partner in research and innovation. Hydro-Québec’s researchers have collaborated with those at the engineering school on numerous projects in such fields as electric grid simulation, atmospheric icing and dielectric materials. In addition, Hydro-Québec Production and Hydro-Québec’s research institute are among the six cofounders of the ÉTS-led Consortium de recherche en fabrication et réparation des roues d’eau [research consortium on runner manufacturing and repair], which was launched in 2011.

Environment

Ten years of commitment to the environment Created on March 1, 2001, the Fondation Hydro-Québec pour l’environnement is celebrating 10 years of commitment to the environment in all of Québec’s administrative regions. Over the past decade, it has allocated $9.7 million to 160 projects designed to protect natural environments that are crucial to sustaining plants and wildlife.

Hydro-Québec, 75, boul. René-Lévesque Ouest, Montréal (Québec) H2Z 1A4

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