Hydro One Reports Second Quarter with Revenue, Efficiencies and Earnings all Trending Positively

Quarterly results reflect another step in the operational transformation of Hydro One

TORONTO, Aug. 12, 2016 /CNW/ - Hydro One Limited, Ontario's largest electricity transmission and distribution company, today announced its financial and operating results for the second quarter ended June 30, 2016.

  • Adjusted basic earnings per share of $0.26 up 16% compared to $0.22 last year.
  • Operating cost improvements supported by efficiencies and pension cost reductions.
  • Capital investments of $417 million in the reliability and performance of Ontario's electricity system.
  • Transmission rate application filed with the OEB reflects focus on operating cost controls and revitalization of Ontario power grid.
  • Non-dilutive secondary offering by Province doubles public float of Hydro One shares.
  • Senior management strengthened by the announcements of new Customer Service and Legal team leaders.

"These second quarter results reflect another step in the operational transformation of Hydro One, a company-wide initiative to materially enhance operating capabilities, build momentum and move towards best in class customer service and operating metrics," said Mayo Schmidt, President and Chief Executive Officer, Hydro One. "Our intensified focus on customer service, operating cost improvements and capital deployment effectiveness are beginning to take hold as we build organizational muscle and momentum and invest in the revitalization of Ontario's electric grid. The recent addition of new and proven leaders to our team build upon our operations, customer service and legal strength and are additive to our capabilities."

Consolidated Financial Highlights and Statistics



Three months ended June 30,


Six months ended June 30,

(millions of Canadian dollars, except as otherwise noted)


2016

2015


2016

2015








Revenues


1,546

1,563


3,232

3,371

Revenues, net of purchased power


743

725


1,533

1,563

Net income attributable to common shareholders


152

131


360

359








Basic earnings per common share (EPS)


$0.26

$0.27


$0.61

$0.74

Diluted EPS


$0.25

$0.27


$0.60

$0.74

Basic Adjusted EPS1


$0.26

$0.22


$0.61

$0.60

Diluted Adjusted EPS1


$0.25

$0.22


$0.60

$0.60








Net cash from operating activities


304

287


677

713

Funds from operations (FFO)


337

273


719

761








Capital investments


417

429


796

774








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


19,799

18,986


20,177

20,182

Distribution: Electricity distributed to Hydro One
customers (TWh)


6.2

6.7


13.2

15.4

1 

2015 Adjusted EPS is calculated using the number of common shares outstanding at June 30, 2016, versus a weighted
average number of shares which includes the non-comparable pre-IPO share count.

 

Common Share Dividends

In May 2016, Hydro One Limited ("the Company") announced a cash dividend to common shareholders of $0.21 per share. The dividend was paid on June 30, 2016 to shareholders of record on June 14, 2016. Following the conclusion of the second quarter, on August 11, 2016, the Company's Board of Directors declared a quarterly cash dividend to common shareholders of $0.21 per share to be paid on September 30, 2016 to shareholders of record on September 14, 2016.

Secondary Common Share Offering

On April 14, 2016, Hydro One announced the closing of a secondary offering by the Province of Ontario ("Province"), on a bought deal basis, of 72,434,800 common shares of Hydro One on the Toronto Stock Exchange. In addition, the Province granted the underwriters an over-allotment option to purchase up to an additional 10,865,200 common shares of Hydro One which was fully exercised and closed on April 29, 2016. Following completion of this secondary offering and the over-allotment, the Province directly holds approximately 70.1% of Hydro One's total issued and outstanding common shares. This non-dilutive secondary offering increased the public ownership of Hydro One to approximately 29.9% or 178.2 million common shares. Hydro One did not receive any of the proceeds from the sale of the common shares by the Province.

Key Operating and Financial Highlights

Second quarter revenues, net of power costs, were higher than last year by 2.5%, primarily reflecting changes to OEB-approved distribution rates, and higher average monthly Ontario 60-minute peak demand due to warmer weather in the second quarter of 2016, partially offset by the divestiture of Hydro One Brampton on August 31, 2015.

Year-to-date revenues, net of power costs, were lower than last year by 1.9%, reflecting lower energy consumption and overall lower average monthly Ontario 60-minute peak demand in the six month period, mainly due to unseasonably mild winter weather in the first quarter of 2016, as well as the divestiture of Hydro One Brampton in 2015, partially offset by changes to OEB-approved distribution rates.

In addition to the items impacting revenue noted above, earnings for the quarter and year-to-date were positively affected by lower bad debt costs, lower costs relating to outsourcing support services, and lower costs associated with transformer equipment refurbishments and stations maintenance.

In June 2016, Hydro One Inc. filed an actuarial valuation of its Pension Plan as at December 31, 2015. Several factors, including improved balance between employer and employee contributions to the plan, have resulted in an improved funded position and lower expected pension contributions. As lower contributions will be returned to ratepayers in future periods, the effect of the change was a reduction of $15 million in revenue for the three and six months ended June 30, 2016, with a corresponding decrease in OM&A costs, and no effect on earnings before taxes.

Hydro One continues to invest to improve the reliability and performance of Ontario's electricity transmission and distribution systems, address aging power system infrastructure, facilitate new generation, and improve service to customers. The Company made capital investments of $417 million during the second quarter and approximately $796 million in 2016 to date, and has placed over $523 million of new assets in-service during 2016.

On May 31, 2016, the Company filed a cost-of-service application with the Ontario Energy Board for 2017 and 2018 transmission rates. This is expected to be the Company's last cost-of-service filing, with future transmission rate applications anticipated to be filed under the Ontario Energy Board's incentive-based regulatory framework.

Subsequent to the end of the quarter, the Company announced the appointments of senior executives as follows:

  • Ferio Pugliese was appointed to the position of Executive Vice President, Customer Care and Corporate Affairs, effective September 26, 2016. Ferio is a recognized leader in customer service, and brings a wealth of expertise in building and leading a strong corporate culture focused on serving its customers and communities as demonstrated by his significant contributions at WestJet Airlines over the past decade.
  • Jamie Scarlett was appointed to the position of Executive Vice President and Chief Legal Officer, effective September 1, 2016. Jamie is a trusted and experienced legal advisor who brings a proven track record and a deep knowledge of corporate finance, cross-border mergers and acquisitions and corporate and securities law to Hydro One most recently from Torys LLP where he served as Senior Partner and a member of the firm's Executive Committee.

Supplemental Segment Information


Three months ended June 30,


Six months ended June 30,

(millions of Canadian dollars)

2016

2015


2016

2015







Revenues







Transmission

381

364


767

770


Distribution

1,152

1,185


2,438

2,574


Other

13

14


27

27


Total revenues

1,546

1,563


3,232

3,371







Revenues, net of purchased power







Transmission

381

364


767

770


Distribution

349

347


739

766


Other

13

14


27

27


Total revenues, net of purchased power

743

725


1,533

1,563







Income (loss) before financing charges and taxes







Transmission

195

172


390

385


Distribution

108

85


264

246


Other

(15)

(4)


(22)

(5)


Total income before financing charges and taxes

288

253


632

626







Capital Investments







Transmission

238

234


473

445


Distribution

178

192


321

324


Other

1

3


2

5


Total capital Investments

417

429


796

774

 

This press release should be read in conjunction with the Company's second quarter 2016 Consolidated Financial Statements and Management's Discussion and Analysis. Additional information about Hydro One, including the full year 2015 Consolidated Financial Statements and Management's Discussion and Analysis, can be accessed at www.sedar.com and www.HydroOne.com/Investors.

Quarterly Investment Community Teleconference

The Company's second quarter 2016 results teleconference with the investment community will be held on August 12, 2016 at 8:30 a.m. Eastern Time, a webcast of which will be available at www.HydroOne.com/Investors. Members of the financial community wishing to listen or ask questions during the call should dial 1-855-716-2690 prior to the scheduled start time and request access to Hydro One's second quarter 2016 results call, conference ID 36352636 (international callers may dial 1-440-996-5689). Media and other interested parties are welcome to participate on a listen-only basis. A webcast of the teleconference will be available following the call.

About Hydro One

Hydro One Limited is Ontario's largest electricity transmission and distribution company headquartered in Toronto, Ontario with approximately $24.4 billion in assets and 2015 revenues of over $6.5 billion. The company delivers electricity safely and reliably to over 1.3 million customers and to large industrial customers and municipal utilities across the province of Ontario. Hydro One owns and operates an approximately 29,000 circuit km high-voltage transmission network and an approximately 123,000 circuit km primary low-voltage distribution network in Ontario. Hydro One Limited common shares are listed on the Toronto Stock Exchange (TSX: H).

Forward-Looking Statements and Information

This press release may contain "forward-looking information" within the meaning of applicable securities laws. Such information includes, but is not limited to: statements related to strategy, operational transformation, service, performance, reliability, ongoing and planned investments, rate filings, dividends, future pension contributions, and executive appointments. Words such as "expect," "anticipate," "intend," "attempt," "may," "plan," "will", "can", "believe," "seek," "estimate," and variations of such words and similar expressions are intended to identify such forward-looking information. These statements are not guarantees of future performance or actions and involve assumptions and risks and uncertainties that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed, implied or forecasted in such forward-looking information. Some of the factors that could cause actual results or outcomes to differ materially from the results expressed, implied or forecasted by such forward-looking information, including some of the assumptions used in making such statements, are discussed more fully in Hydro One's filings with the securities regulatory authorities in Canada, which are available on SEDAR at www.sedar.com. Hydro One does not intend, and it disclaims any obligation, to update any forward-looking information, except as required by law.

SOURCE Hydro One Limited

For further information: For further information, please contact: Investors: Bruce M. Mann, Investor Relations, Bruce.mann@hydroone.com, 416-345-5722; Media: Daffyd Roderick, Corporate Communications, media.relations@hydroone.com, 416-345-6868

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