Hydro One Reports Third Quarter Results

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Hydro One Reports Third Quarter Results

by pmnationtalk on November 13, 2022179 Views

Hydro One Reports Third Quarter Results

Hydro One Reports Third Quarter Results

The Company filed a settlement agreement on the Joint Rate Application (JRAP) that will enable investment in infrastructure to meet the needs of our customers, build a grid for the future, and support Ontario’s economic growth.

TORONTO, Nov. 11, 2022 – Hydro One Limited (Hydro One or the Company) today announced its financial and operating results for the third quarter ended September 30, 2022

Third Quarter Highlights

  • Third quarter basic earnings per share (EPS) of $0.51 was 2.0% higher compared to EPS of $0.50 for the same period in 2021.
  • EPS for the quarter was higher year over year primarily due to approved rates for the transmission and distribution segments as well as higher demand, which were partially offset by higher work program expenditures, higher income tax and higher depreciation, amortization and asset removal costs.
  • Hydro One launched an industry-leading 50-50 equity model with First Nations on new large-scale transmission line projects.
  • Hydro One employees raised record-breaking donations of approximately $1.6 million for more than 855 registered Canadian charities during the “Power to Give” month in September.
  • Hydro One storm responders helped restore power in Nova Scotia and Prince Edward Island following post-tropical storm Fiona.
  • Subsequent to the quarter, on October 24, 2022, the Company, on behalf of parties in the JRAP Settlement Conference, filed a settlement agreement with the Ontario Energy Board (OEB) for approval.
  • Subsequent to the quarter, demonstrating its financial stability and flexibility, the Company’s wholly-owned subsidiary, Hydro One Inc. successfully issued $750 million of Medium-Term Notes (MTN).
  • The Company’s capital investments and in-service additions for the quarter were $501 million and $401 million, respectively, compared to $513 million and $514 million in 2021.
  • Quarterly dividend declared at $0.2796 per share, payable December 30, 2022.

“I am extremely proud to be part of an organization that is setting the standard in First Nations partnerships to an industry-leading 50-50 equity model.” said Bill Sheffield, Interim President and CEO of Hydro One. “With the new partnership model, and the settlement agreement on the Joint Rate Application, Hydro One is well positioned to facilitate economic prosperity in Ontario.”

Selected Consolidated Financial and Operating Highlights 

Three months ended September 30

Nine months ended September 30

(millions of Canadian dollars, except as otherwise noted)

2022

2021

2022

2021

Revenues

2,031

1,913

5,918

5,446

Purchased power

963

933

2,829

2,665

Revenues, net of purchased power1

1,068

980

3,089

2,781

Net income attributable to common shareholders

307

300

872

806

Basic EPS

$0.51

$0.50

$1.46

$1.35

Diluted EPS

$0.51

$0.50

$1.45

$1.34

Net cash from operating activities

594

550

1,658

1,479

Capital investments

501

513

1,562

1,593

Assets placed in-service

401

514

1,177

971

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

21,609

21,137

20,818

20,174

Distribution:    Electricity distributed to Hydro One customers (GWh)

7,328

7,329

22,977

22,235

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

2022 Third Quarter Highlights

The Company reported net income attributable to common shareholders of $307 million during the quarter, compared to $300 million in the same period of 2021. This resulted in EPS of $0.51, compared to EPS of $0.50 in the prior year.

Revenues, net of purchased power1 of $1,068 million for the third quarter were $88 million higher than revenues, net of purchased power1 for the third quarter of 2021. The increase is mainly due to revenues resulting from OEB-approved 2022 rates, higher peak demand, and the adjustment to transmission revenue requirement and base distribution rates effective January 1, 2022 to remove any further allocation of deferred tax amounts pursuant to the April 2021 OEB decision regarding the deferred tax asset (DTA) (DTA Implementation Decision). The impacts of the DTA Implementation Decision are offset by a higher tax expense, and therefore net income neutral in the period.

Operation, maintenance and administration costs in the third quarter of 2022 were higher than last year as higher work program expenditures and higher corporate support costs were partially offset by a lower allowance for doubtful accounts in the period.

Depreciation, amortization and asset removal costs for the third quarter were higher than last year primarily due to 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 third quarter of 2022 was higher than the prior year primarily due to income tax expense pursuant to the DTA Implementation Decision, lower deductible timing differences, and higher pre-tax earnings compared to the third quarter of 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 $501 million during the third quarter of 2022 and placed $401 million of new assets in-service.

Selected Operating Highlights

Hydro One launched its new industry-leading equity partnership model with First Nations on new capital transmission line projects with a value exceeding $100 million. Hydro One’s equity model will offer First Nations a 50 per cent equity stake in all future large scale capital transmission line projects.

On October 24, 2022, Hydro One, on behalf of parties in the JRAP Settlement Conference, filed a settlement agreement with the OEB on its JRAP, which includes its 2023-2027 Investment Plan for the company’s transmission and distribution systems. The OEB will now review the settlement and issue a final decision, which is anticipated by the end of the year.

In October, the Company’s wholly-owned subsidiary, Hydro One Inc. raised $750 million of 4.91% MTN (series 52 notes), due 2028. Hydro One Inc. expects to use the net proceeds of this offering to repay and/or prepay maturing long-term and short-term debt and for general corporate purposes.

Common Share Dividends

Following the conclusion of the third quarter, on November 10, 2022, the Company declared a quarterly cash dividend to common shareholders of $0.2796 per share to be paid on December 30, 2022 to shareholders of record on December 14, 2022.

Supplemental Segment Information

Three months ended September 30

Nine months ended September 30

(millions of Canadian dollars)

2022

2021

2022

2021

Revenues

    Transmission

562

507

1,597

1,403

    Distribution

1,458

1,395

4,289

4,012

    Other

11

11

32

31

    Total revenues

2,031

1,913

5,918

5,446

Revenues, net of purchased power1

    Transmission

562

507

1,597

1,403

    Distribution

495

462

1,460

1,347

    Other

11

11

32

31

    Total revenues, net of purchased power1

1,068

980

3,089

2,781

Operation, maintenance and administration costs

    Transmission

106

95

302

294

    Distribution

173

153

517

497

    Other

17

14

51

42

    Total operation, maintenance and administration costs

296

262

870

833

 Income before financing charges and taxes

    Transmission

326

296

910

754

    Distribution

215

200

600

536

    Other

(9)

(5)

(26)

(17)

    Total income before financing charges and taxes

532

491

1,484

1,273

Capital investments

    Transmission

311

304

899

1,017

    Distribution

185

206

646

566

    Other

5

3

17

10

    Total capital investments

501

513

1,562

1,593

Assets placed in-service

    Transmission

229

287

644

482

    Distribution

171

225

527

481

    Other

1

2

6

8

    Total assets placed in-service

401

514

1,177

971

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 third quarter 2022 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, 2021 can be accessed at www.HydroOne.com/Investors and www.sedar.com.

Quarterly Investment Community Teleconference

The Company’s third quarter 2022 results teleconference with the investment community will be held on November 11, 2022 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/BIe604796c0d2d4fcc9562e8e557ea7097) prior to the scheduled start time to access Hydro One’s third quarter 2022 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 $30.4 billion in assets as at December 31, 2021, and annual revenues in 2021 of approximately $7.2 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 2021, Hydro One invested approximately $2.1 billion in its transmission and distribution networks, and supported the economy through buying approximately $1.7 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 Company by the Canadian Electricity Association.

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.sedar.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 September 30

Nine months ended September 30

(millions of dollars)

2022

2021

2022

2021

Revenues

2,031

1,913

5,918

5,446

Less: Purchased power

963

933

2,829

2,665

Revenues, net of purchased power

1,068

980

3,089

2,781

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”.

For further information: Investors: Omar Javed, Vice President, Investor Relations, investor.relations@hydroone.com, 416-345-5943; Media: Jay Armitage, Vice President, Communications and Marketing, media.relations@hydroone.com, 416-345-6868

NT5

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