Toronto Hydro Corporation Releases its Fourth Quarter Financial Results

TORONTO, March 19, 2014 /CNW/ - Toronto Hydro Corporation (the "Corporation") announced today that it has filed with Canadian securities regulators its Consolidated Financial Statements and related Management's Discussion and Analysis for the year ended December 31, 2013, prepared in accordance with United States Generally Accepted Accounting Principles ("US GAAP"), including the application of rate-regulated accounting policies, presented in Canadian dollars.  Copies may be obtained from the Corporation or accessed through SEDAR's website www.sedar.com.

 

Selected Financial Highlights
(in millions of Canadian dollars, unaudited)
    Three months
Ended December 31
  Year
Ended December 31
    2013
$
  2012
$
  2013
$
  2012
$
                 
Net income   29.2   22.8   121.2   86.0
Net revenues   192.7   140.6   635.3   577.3
Capital Expenditures   151.6   108.5   450.3   292.4
                 
                 
  • Net income for the year ended December 31, 2013 was $121.2 million compared to $86.0 million for the same period in 2012.
  • In 2012, results were depressed by a restructuring charge of $21.9 million (after tax) while 2013 results were enhanced by a one-time recovery of smart meter revenues in the amount of $21.1 million (after tax) due to a ruling from the Ontario Energy Board ("OEB").

  • In addition, 2013 results were adversely affected by incremental operating expenses of $7.5 million ($10.2 million before tax) related to the significant ice storm that occurred in December.

  • Net revenues were higher at $635.3 million compared to $577.3 million for the same period in 2012.

  • Capital Expenditures were higher at $450.3 million compared to $292.4 million for the same period in 2012.

  • Dividends amounting to $43.0 million were paid to the City of Toronto during the year of 2013. The Corporation's Board of Directors also declared today a dividend of $41.9 million, payable by March 31, 2014.

"I am proud of our company's strong financial performance and appreciate the commitment and hard work of all our employees who contribute to our success.  Our strong performance has put us in a solid position to continue to invest in our significant capital infrastructure program to help maintain reliability and safety for our customers while maintaining reasonable electricity distribution rates," said Anthony Haines, President and Chief Executive Officer.

Corporate Developments

On December 19, 2013, the OEB approved a settlement agreement filed by LDC to allow for the entirety of LDC's requested 2014 capital program.

On January 16, 2014, the OEB approved LDC's requested disposition of the smart meter deferral account balances, permitting the recovery of $23.9 million and $9.6 million through two separate rate riders effective May 1, 2014.

In late December 2013, a severe winter storm involving freezing rain, ice pellets and snow caused damage to the above-ground infrastructure of the Corporation's electricity distribution system.  Approximately 300,000 customers lost power for periods of up to eight days, though strenuous efforts resulted in 75% power restoration within 48 hours.  As a result, the Corporation incurred incremental costs consisting of overtime of its own employees, time and equipment costs of other utilities that provided mutual aid, tree clearing services and the replacement of damaged assets.  The total costs incurred amounted to $13.8 million, of which $3.6 million were capitalized to PP&E and $10.2 million were charged to operating expenses.  In addition, potential distribution revenue of approximately $0.9 million was lost due to the power outage.  The Corporation decided not to file a special application with the OEB to seek recovery of incremental operating expenses for the Ice Storm as it was able to absorb the impact because of favourable variances.

On May 22, 2013, the Corporation celebrated the official groundbreaking of the new Copeland Station. This station will be the first transformer station built in downtown Toronto since the 1960's and will be the second underground transformer station in Canada.  When in service, the new station will provide electricity to buildings and neighbourhoods in the central-southwest region of Toronto.  Between 2006 and 2011, the population in the City's downtown increased by over 50%, and Toronto is now the fourth largest metropolitan area, by population, in North AmericaCopeland Station will provide much needed additional capacity to serve current and future load requirements in this high-density, high-growth area of Toronto.  The OEB approved the construction of Copeland station earlier in the year.   The total capital expenditures required to complete Copeland Station are expected to be approximately $194.9 million.

On December 17, 2013, the Corporation launched a commercial paper program allowing up to $400.0 million of unsecured short-term promissory notes to be issued in various maturities of no more than one year.

On April 9, 2013, the Corporation issued $250.0 million of 2.91% senior unsecured debentures due April 10, 2023 ("Series 8") and $200.0 million of 3.96% senior unsecured debentures due April 9, 2063 ("Series 9").  The net proceeds of the above debentures, together with borrowings under the Corporation's revolving credit facility, were used to repay the Corporation's $225.0 million of 6.11% senior unsecured debentures ("Series 1") and $245.1 million of 6.11% senior unsecured debentures ("Series 5") which matured on May 7, 2013 and May 6, 2013, respectively.

Selected Financial Highlights

                 
            2013
$
  2012
$
                 
Net income           121.2   86.0
Net revenues           635.3   577.3
Operating expenses           272.0   245.2
Depreciation and amortization           172.8   141.6
Net financing charges           66.3   74.0
Restructuring costs           -   27.8
Gain on disposals of PP&E           1.3   1.8
Income tax expense            4.3   4.6
Capital expenditures           450.3   292.4
                 

Net income for the year ended December 31, 2013 was $121.2 million compared to $86.0 million for the comparable period in 2012.  The increase was primarily due to higher net revenues ($58.0 million), restructuring costs recognized in the first quarter of 2012 ($27.8 million) related to the cost reduction initiatives at LDC, lower net financing charges ($7.7 million), and lower income tax expense ($0.3 million).  These favourable variances were partially offset by a higher depreciation expense ($31.2 million), higher operating expenses ($26.8 million), and lower gains on disposals of surplus properties ($0.5 million).

Capital expenditures amounted to $450.3 million for the year ended December 31, 2013 compared to $292.4 million for the comparable period in 2012.  The most significant regulated capital expenditures incurred by LDC during the year of 2013 related to planned spending on overhead infrastructure ($78.2 million), underground infrastructure ($65.9 million), customer connections ($52.0 million), Copeland Station ($45.3 million), and reactive remediation work ($35.0 million).

About Toronto Hydro Corporation

The Corporation is a holding company which wholly-owns two subsidiaries:

  • LDC — which distributes electricity and engages in Conservation and Demand Management activities; and
  • Toronto Hydro Energy Services Inc. — which provides street lighting services.

The principal business of the Corporation and its subsidiaries is the distribution of electricity by LDC.  LDC owns and operates an electricity distribution system, which delivers electricity to approximately 730,000 customers located in the City of Toronto.

Non-GAAP Financial Measures

This press release includes references to "net revenues", which is a non-GAAP financial measure.  The definition of net revenues is revenue minus the cost of purchased power.  This measure does not have any standard meaning prescribed by US GAAP and is not necessarily comparable to similarly titled measures of other companies.  The Corporation uses this measure to assess its performance and to further make operating decisions.

Forward-Looking Information

The Corporation includes forward-looking information in its news release within the meaning of applicable securities laws in Canada ("forward-looking information").  The purpose of the forward-looking information is to provide management's expectations regarding the Corporation's future results of operations, performance, business prospects and opportunities and may not be appropriate for other purposes.  All forward-looking information is given pursuant to the "safe harbour" provisions of applicable Canadian securities legislation. The words "expects", "expected", "seek", and similar expressions are often intended to identify forward-looking information, although not all forward-looking information contains these identifying words.  The forward-looking information reflects management's current beliefs and is based on information currently available to the Corporation's management.

The forward-looking information in the news release includes, but is not limited to, statements regarding the Corporation's plans to borrow funds to repay maturing debentures and to finance the investment in LDC's infrastructure.  The statements that make up the forward-looking information are based on assumptions that include, but are not limited to, the future course of the economy and financial markets, the receipt of applicable regulatory approvals and requested rate orders, the level of interest rates and the Corporation's ability to borrow.

The forward-looking information is subject to risks, uncertainties and other factors that could cause actual results to differ materially from historical results or results anticipated by the forward-looking information.  The factors which could cause results or events to differ from current expectations include, but are not limited to, market liquidity and the quality of the underlying assets and financial instruments, the timing and extent of changes in prevailing interest rates, inflation levels, legislative, judicial and regulatory developments that could affect revenues and the results of borrowing efforts.

All forward-looking information in the news release is qualified in its entirety by the above cautionary statements and, except as required by law, the Corporation undertakes no obligation to revise or update any forward-looking information as a result of new information, future events or otherwise after the date hereof.

SOURCE Toronto Hydro Corporation

For further information:

Chris Tyrrell,
Executive Vice-President, Customer Care and Chief Conservation Officer:
416-542-3143; ctyrrell@torontohydro.com 

JS Couillard,
Chief Financial Officer:
416-542-3166; jcouillard@torontohydro.com