Hydro One Releases 2008 Year-End Financial Results



    TORONTO, Feb. 11 /CNW/ - Hydro One Inc. today released its 2008 year-end
results with net income for the year of $498 million and revenues of $4,597
million.
    "2008 represented a year of important progress on several key strategic
initiatives aimed at renewing Ontario's electricity system," said Laura
Formusa, President and CEO of Hydro One. "Through our capital expansion
program, we have embarked on an aggressive infrastructure renewal program and
continued to deliver on a number of complex, large-scale projects."

    
    The following are some of our key achievements for 2008:

    -   In September, the Ontario Energy Board (OEB) approved our application
        for leave to construct our Bruce to Milton Transmission Reinforcement
        Project (Bruce to Milton Project). In its decision, the OEB found the
        project to be in the public interest in regard to its impact on
        price, reliability and quality of electricity service to consumers.
        In addition to obtaining this important approval, we signed landmark
        protocol agreements with two First Nation and Métis communities that
        ensure their continued involvement in the project's regulatory
        process.

    -   In December, the OEB issued its decision approving our subsidiary
        Hydro One Networks Inc.'s application for its 2008 distribution
        revenue requirement and customer rates. As part of the decision, the
        OEB approved substantially all of our work program requirements and
        approved recovery of our smart meter expenditures made prior to the
        end of 2007. Subsequent expenditures will continue to be tracked in
        deferral accounts for future recovery.

    -   We reached important targets in our effort to support the Province of
        Ontario's goal to have a smart meter in every home and business by
        2010. By the end of 2008, we had installed more than 780,000 smart
        meters in our service territories since the beginning of the program.

    -   Our overall residential and small business customer satisfaction
        scores increased from 82% satisfied in 2007 to 86% satisfied in 2008.
        These results recognize the positive impact of our reliability
        programs and our involvement in our communities.

    -   In December, back-to-back winter storms knocked out power to about
        260,000 of our customers. We deployed 1,300 workers from our company
        and from 23 local utilities, representing as many workers as
        responded to the 1998 Ice Storm. We also assisted two U.S. utilities
        following significant weather events in the latter part of the year.

    -   We made advances in our aggressive Workforce Renewal Program,
        strengthening our long and productive association with the
        engineering faculties at the Universities of Western Ontario and
        Waterloo and providing new partnerships with Ryerson and McMaster
        universities.

    -   We were again recognized as one of Canada's Top 50 Corporate Citizens
        by Corporate Knights Magazine. We placed 6th in the annual ranking,
        moving 20 spots up from our 2007 ranking, and placed first in the
        utility category. We were also named one of Canada's Top 10 Most
        Diverse Companies in Corporate Knights' annual Leadership Diversity
        Index. This is the second consecutive year the Company was named to
        the top ten list.

    -   During the year, we raised $1,050 million through the issuance of
        medium term notes and increased our committed revolving credit
        facility with a syndicate of banks to $1,000 million from $750
        million. We issued $500 million in medium term notes in the final
        quarter of last year and $300 million in the first month of this year
        at cost-effective rates, despite the ongoing turmoil in the financial
        markets.
    

    Net income of $498 million was higher by $99 million, or 25%, compared to
2007 results. This increase was primarily due to a reduction in our payments
in lieu of corporate income taxes resulting from a lower effective tax rate
and other net temporary differences. Also favourably impacting our net income
were lower operation, maintenance and administration expenses, including the
pension asset transfer settlement with our service provider Inergi LP
following approval from the Financial Services Commission of Ontario in the
first quarter. These impacts were partially offset by reduced transmission
revenues resulting from lower average monthly peak demands and higher
depreciation expense.
    Capital expenditures of $1,284 million were higher by $193 million, or
18%, compared to the prior year. Expenditures to expand our transmission
system increased primarily as a result of a number of significant inter-area
network upgrade projects facilitating new generation or increased transfer
capability from other jurisdictions. These projects include our Bruce to
Milton Project; our Southwestern Ontario Capacitor Banks Project; and work on
our Cherrywood to Claireville Transformer Station connection. Our Bruce to
Milton Project, to connect wind generation and redeveloped nuclear sources in
the Huron-Grey-Bruce area, demonstrates our commitment to connect clean and
renewable generation. Expenditures to sustain our transmission system
increased primarily as a result of spare transformer purchases and
refurbishment and replacement of end-of-life equipment at our Claireville
Transformer Station. Within our Distribution Business, significant capital
investments were made to install smart meters in 2008. Further increases were
attributable to higher information technology expenditures related to an
entity-wide information system improvement project to replace end-of-life
systems and enhance productivity.
    Total revenues for 2008 were $4,597 million, which were $58 million, or
1%, lower than last year. This reduction reflects lower transmission revenues
resulting from lower average monthly peak demands, partially offset by higher
revenues associated with export and wheeling fees to transfer power to other
jurisdictions. Distribution revenues were lower due to a reduction in our
purchased power costs as a result of lower demand and the completion of
recovery of a distribution-related deferral account effective March 31, 2008.
These reductions were partially offset by revenue recorded as a result of the
OEB distribution rate decision on December 18, 2008. Net cash from operating
activities was $1,055 million in 2008. During the year, we paid $259 million
in dividends to our shareholder, the Province of Ontario and $145 million in
payments in lieu of corporate income taxes to the Ontario Electricity
Financial Corporation.

    
    CONSOLIDATED FINANCIAL HIGHLIGHTS AND STATISTICS

    Year ended December 31
    (Canadian dollars in millions)        2008      2007    Change  % Change
    -------------------------------------------------------------------------
    Revenues                             4,597     4,655       (58)       (1)
    Purchased power                      2,181     2,240       (59)       (3)
    Operating costs                      1,513     1,516        (3)        -
    Net income                             498       399        99        25
    Net cash from operations             1,055     1,141       (86)       (8)

    STATISTICS

    Average annual Ontario
     60-minute peak demand (MW)(1)      21,820    22,988    (1,168)       (5)
    Distribution - units distributed
     to our customers (TWh)(1)            29.9      30.2      (0.3)       (1)
    -------------------------------------------------------------------------
    (1) System-related statistics are preliminary
    

    Hydro One Inc. is a holding company that operates through its
subsidiaries in electricity transmission and distribution and telecom
businesses. One of its subsidiaries, Hydro One Networks Inc., operates one of
the largest transmission and distribution systems in North America. Hydro One
Inc. is wholly owned by the Province of Ontario.
    Hydro One's 2008 Annual Consolidated Financial Statements and
Management's Discussion and Analysis can be accessed through the following
link:
    www.hydroone.com/financials





For further information:

For further information: Peter Gregg, Vice President, Corporate
Communications, (416) 345-6072; Ali R. Suleman, Vice President and Treasurer,
(416) 345-6126; Hydro One Investor Relations, (416) 345-6867


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