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Hydro One Reports Second Quarter Results

by ahnationtalk on August 9, 2023562 Views

Hydro One Reports Second Quarter Results

The Company continues to execute on its strategy to support economic growth and a clean energy future in Ontario with the filing of the leave to construct application for the Waasigan Transmission Line Project, groundbreaking of the Chatham to Lakeshore Transmission Line, and route selection of the St. Clair Transmission Line.

TORONTO, Aug. 8, 2023 – Hydro One Limited (Hydro One or the Company) today announced its financial and operating results for the second quarter ended June 30, 2023. 

Second Quarter Highlights

  • Second quarter basic earnings per share (EPS) of $0.44 was 2.3% higher compared to EPS of $0.43 for the same period in 2022.
  • EPS for the quarter was higher year-over-year largely due to higher revenues resulting from Ontario Energy Board (OEB)-approved 2023 transmission rates and lower asset removal costs resulting from fewer storm-related asset replacements, partially offset by higher operation, maintenance and administrative (OM&A) costs and higher financing charges.
  • Subsequent to the quarter end, the Company announced that it filed an application with the OEB to seek approval to construct both phases of the Waasigan Transmission Line Project. The total project is expected to cost approximately $1,200 million and be in service close to the end of 2025 and 2027 for Phase 1 and Phase 2, respectively.
  • The Company broke ground on its Chatham to Lakeshore Transmission Line which will provide clean electricity to support growth in the agri-food and manufacturing industries. The Company also announced the preferred route for the St. Clair Transmission Line that maximizes existing infrastructure while improving reliability.
  • Hydro One and the Power Workers’ Union (PWU) reached a tentative settlement for two collective agreements covering employees in front-line and customer facing roles across the Company’s operations.
  • Subsequent to the quarter, Hydro One released its annual sustainability report (www.hydroone.com/sustainability) that demonstrates continued progress in setting and meeting its sustainability goals.
  • Hydro One and the Coaches Association of Ontario announced Hydro One has provided grants to 38 Indigenous coaches to boost representation in sports leadership.
  • Hydro One received its 14th Emergency Response Award from the Edison Electric Institute (EEI) for restoration efforts after Winter Storm Elliot.
  • Hydro One was recognized as one of the Best 50 Corporate Citizens in Canada by Corporate Knights.
  • Hydro One announced that Brian Vaasjo, Helga Reidel and Mitch Panciuk have been appointed to the Company’s Board of Directors.
  • The Company’s capital investments and in-service additions for the quarter were $649 million and $413 million, respectively, compared to $612 million and $547 million in 2022.
  • Quarterly dividend declared at $0.2964 per share, payable September 29, 2023.

“The significant progress on our capital projects including the Waasigan Transmission Line, the Chatham to Lakeshore Transmission Line and the St. Clair Transmission Line, demonstrates our continued commitment to enable economic growth and a clean energy future in Ontario,” said David Lebeter, President and CEO of Hydro One. “Today, we also released our sustainability report, that outlines our goals and the progress we are making in standing up for our people, our planet and our communities across Ontario.”

Selected Consolidated Financial and Operating Highlights 

Three months ended June 30

Six months ended June 30

(millions of Canadian dollars, except as otherwise noted)

2023

2022

2023

2022

Revenues

1,857

1,840

3,931

3,887

Purchased power

798

852

1,808

1,866

Revenues, net of purchased power1

1,059

988

2,123

2,021

Net income attributable to common shareholders

265

255

547

565

Basic EPS

$0.44

$0.43

$0.91

$0.94

Diluted EPS

$0.44

$0.42

$0.91

$0.94

Net cash from operating activities

652

621

1,002

1,064

Capital investments

649

612

1,148

1,061

Assets placed in-service

413

547

650

776

Transmission: Average monthly Ontario 60-minute peak demand (MW)

19,932

20,167

20,080

20,422

Distribution:    Electricity distributed to Hydro One customers (GWh)

6,811

6,754

15,353

15,649

1 “Revenues, net of purchased power” is a non-GAAP financial measure. Non-GAAP financial measures do not have a standardized meaning under United States (US) generally accepted accounting principles (US GAAP) used to prepare the Company’s financial statements and might not be comparable to similar measures presented by other entities. See the section “Non-GAAP Financial Measures”.

Key Financial Highlights        

2023 Second Quarter Highlights

The Company reported net income attributable to common shareholders of $265 million during the quarter, compared to $255 million in the same period of 2022. This resulted in EPS of $0.44, compared to EPS of $0.43 in the prior year.

Revenues, net of purchased power[1] of $1,059 million for the second quarter were $71 million higher than revenues, net of purchased power1 for the second quarter of 2022. The increase is mainly due to revenues resulting from OEB-approved 2023 transmission rates as well as higher revenues related to the OEB-approved recovery of historical cost deferrals recognized as regulatory assets in prior periods. The impacts of the recovery of regulatory assets are offset by a net increase in OM&A and income tax expense and are net income neutral in the period.

OM&A costs in the second quarter of 2023 were higher than the prior year as a result of higher corporate support costs, primarily attributable to lower capitalized overheads associated with the timing and volume of capital activity, the aforementioned recovery of historical cost deferrals which are offset in revenues and higher work program expenditures, including emergency restoration, information technology initiatives and stations maintenance.

1 Revenues, net of purchased power, is a non-GAAP financial measure. Non-GAAP financial measures do not have a standardized meaning under US GAAP used to prepare the Company’s financial statements and might not be comparable to similar measures presented by other entities. See the section “Non-GAAP Financial Measures”.

Financing charges in the second quarter of 2023 were higher than the prior year resulting from higher weighted-average interest rates on long-term debt and short-term notes.

Depreciation, amortization and asset removal costs for the second quarter of 2023 were lower than the same period of the prior year primarily due to lower asset removal costs resulting from fewer storm-related asset replacements which was partially offset by higher depreciation and amortization expense related to the growth in capital assets as the Company continues to place new assets in-service, consistent with its ongoing capital investment program.

Income tax expense for the second quarter of 2023 was slightly lower than the prior year primarily due to higher deductible timing differences compared to the prior year.

Hydro One continues to invest in the reliability and performance of Ontario’s electricity transmission and distribution systems by addressing aging power system infrastructure, facilitating connectivity to new load customers and generation sources, and improving service to customers. The Company made capital investments of $649 million during the second quarter of 2023 and placed $413 million of new assets in-service.

Selected Operating Highlights 

The Company announced that it filed with the OEB a leave to construct application under Section 92 of the Ontario Energy Board Act, 1998, for its Waasigan Transmission Line Project. The project is expected to cost $1,200 million. The first phase is a proposed new double-circuit 230 kilovolt transmission line from Lakehead Transformer Station (TS) in the Municipality of Shuniah to Mackenzie TS in the Town of Atikokan to be in service as close to the end of 2025 as possible. Phase two is a proposed new single-circuit 230 kilovolt transmission line from Mackenzie TS to Dryden TS in the City of Dryden, which is expected to be in service by the end of 2027. The project is being built in partnership with nine First Nation communities.

The Company broke ground on its Chatham to Lakeshore Transmission Line. This $268 million investment will drive the province of Ontario’s clean energy value chain and help make Southwestern Ontario the hub for agri-food and manufacturing. The Company has offered five First Nations in the region a 50% equity stake in the transmission line component of the project. The line is expected to be in service by the end of 2025.

The Company announced Route 2 as the preferred route for the proposed St. Clair Transmission Line after a thorough evaluation of five options. This option was selected as 80% of the route uses existing transmission corridors and upgrades an existing transmission line. The Company will offer proximate First Nations impacted by the project a 50% equity stake in the transmission line component of the project. The line is expected to be in service in 2028.

Hydro One reached tentative settlements for two collective agreements with the PWU which includes front-line staff and customer facing roles. Once ratified, these agreements will be in effect until September 30, 2025.

Hydro One released its sustainability report which provides a balanced account of its environmental, social and governance (ESG) performance against the sustainability targets released last year. Hydro One is committed to producing an annual sustainability update to continuously increase the transparency and accountability of our ESG disclosures. The sustainability report is available at www.hydroone.com/sustainability.

Hydro One received its 14th Emergency Response Award from EEI for restoration efforts after Winter Storm Elliot. The Company restored power to approximately 525,000 customers. The Emergency Response Awards are presented to EEI member companies for recovery and assistance efforts of electric companies following service disruptions caused by extreme weather or other natural events.

Hydro One announced that Brian Vaasjo, Helga Reidel and Mitch Panciuk were appointed to the Company’s Board of Directors effective June 2, 2023. Brian Vaasjo recently retired from his position as President and CEO of Capital Power, a power generation company on which he has served since its initial public offering in 2009. Helga Reidel is a corporate director, who most recently served as President and Chief Executive Officer of ENWIN Utilities Ltd. from 2016 to 2022. Before that, she served as Chief Administrative Officer for the Corporation of the City of Windsor from 2009 to 2016. Mitch Panciuk is the managing partner of Boston Pizza in Belleville, Ontario, and previously served as the Mayor of the City of Belleville from 2018 to 2022. He also previously served on the board of Elexicon Corporation from 2018 to 2022 where he chaired the Audit, Finance and Risk Management Committee.

Common Share Dividends

Following the conclusion of the second quarter, on August 8, 2023, the Company declared a quarterly cash dividend to common shareholders of $0.2964 per share to be paid on September 29, 2023 to shareholders of record on September 13, 2023.

Supplemental Segment Information

Three months ended June 30

Six months ended June 30

(millions of Canadian dollars)

2023

2022

2023

2022

Revenues

    Transmission

559

516

1,114

1,035

    Distribution

1,285

1,314

2,794

2,831

    Other

13

10

23

21

    Total revenues

1,857

1,840

3,931

3,887

Revenues, net of purchased power1

    Transmission

559

516

1,114

1,035

    Distribution

487

462

986

965

    Other

13

10

23

21

    Total revenues, net of purchased power1

1,059

988

2,123

2,021

Operation, maintenance and administration costs

    Transmission

124

97

247

196

    Distribution

188

173

373

344

    Other

24

16

44

34

    Total operation, maintenance and administration costs

336

286

664

574

 Income before financing charges and taxes

    Transmission

309

289

613

584

    Distribution

181

163

373

385

    Other

(14)

(8)

(26)

(17)

    Total income before financing charges and taxes

476

444

960

952

Capital investments

    Transmission

373

311

671

588

    Distribution

269

294

465

461

    Other

7

7

12

12

    Total capital investments

649

612

1,148

1,061

Assets placed in-service

    Transmission

213

295

328

415

    Distribution

193

251

315

356

    Other

7

1

7

5

    Total assets placed in-service

413

547

650

776

1 Revenues, net of purchased power, is a non-GAAP financial measure. Non-GAAP financial measures do not have a standardized meaning under US GAAP used to prepare the Company’s financial statements and might not be comparable to similar measures presented by other entities. See the section “Non-GAAP Financial Measures”.

This press release should be read in conjunction with the Company’s second quarter 2023 unaudited consolidated financial statements and MD&A. These financial statements and MD&A together with additional information about Hydro One, including the audited consolidated financial statements and MD&A for the year ended December 31, 2022 can be accessed at www.HydroOne.com/Investors and www.sedarplus.com.

Quarterly Investment Community Teleconference

The Company’s second quarter 2023 results teleconference with the investment community will be held on August 9, 2023 at 8 a.m. ET, a webcast of which will be available at www.HydroOne.com/Investors. Members of the financial community wishing to ask questions during the call should go to this link (https://register.vevent.com/register/BIba4c15b3a8634412b63efcd1f5c2f452) prior to the scheduled start time to access Hydro One’s second quarter 2023 results call. Media and other interested parties are welcome to participate on a listen-only basis. A webcast of the teleconference will be available at the same link following the call. Additionally, investors should note that from time to time Hydro One management presents at brokerage sponsored investor conferences. Most often, but not always, these conferences are webcast by the hosting brokerage firm, and when they are webcast, links are made available on Hydro One’s website at www.HydroOne.com/Investors and are posted generally at least two days before the conference.

Hydro One Limited (TSX: H)

Hydro One Limited, through its wholly-owned subsidiaries, is Ontario’s largest electricity transmission and distribution provider with approximately 1.5 million valued customers, approximately $31.5 billion in assets as at December 31, 2022, and annual revenues in 2022 of approximately $7.8 billion.

Our team of approximately 9,300 skilled and dedicated employees proudly build and maintain a safe and reliable electricity system which is essential to supporting strong and successful communities. In 2022, Hydro One invested approximately $2.1 billion in its transmission and distribution networks, and supported the economy through buying approximately $1.9 billion of goods and services.

We are committed to the communities where we live and work through community investment, sustainability and diversity initiatives. We are designated as a Sustainable Electricity Leader™ by Electricity Canada.

Hydro One Limited’s common shares are listed on the TSX and certain of Hydro One Inc.’s medium term notes are listed on the NYSE. Additional information can be accessed at www.hydroone.com, www.sedarplus.com or www.sec.gov.

For More Information

For more information about everything Hydro One, please visit www.hydroone.com where you can find additional information including links to securities filings, historical financial reports, and information about the Company’s governance practices, corporate social responsibility, customer solutions, and further information about its business.

Non-GAAP Financial Measures

Hydro One uses a number of financial measures to assess its performance. The Company presents “revenues, net of purchased power” to reflect revenues net of the cost of purchased power, which is a non-GAAP financial measure. Non-GAAP financial measures do not have a standardized meaning under GAAP used to prepare the Company’s financial statements and might not be comparable to similar measures presented by other entities. They should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under US GAAP.

Revenues, Net of Purchased Power

Revenues, net of purchased power is defined as revenues less the cost of purchased power. Revenues, net of purchased power is used internally by management to assess the impacts of revenue on net income and is considered useful because it excludes the cost of power that is fully recovered through revenues and therefore net income neutral.

The following table provides a reconciliation of GAAP (reported) Revenues to non-GAAP (adjusted) Revenues, Net of Purchased Power on a consolidated basis.

Three months ended June 30

Six months ended June 30

(millions of dollars)

2023

2022

2023

2022

Revenues

1,857

1,840

3,931

3,887

Less: Purchased power

798

852

1,808

1,866

Revenues, net of purchased power

1,059

988

2,123

2,021

For further information: Investors: Omar Javed, VP, Communications, Marketing & Investor Relations, investor.relations@hydroone.com, 416-345-5943; Media: media.relations@hydroone.com, 416-345-6868

NT5

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