Hydro One announces second quarter net income



    TORONTO, Aug. 10 /CNW/ - Hydro One Inc. today released its second quarter
results with net income of $242 million and revenues of $2,398 million for the
six months ended June 30, 2007.
    "Our strong financial and operational performance in the second quarter
continues to highlight Hydro One's commitment to the safe and reliable
delivery of electricity to our customers and the stable financial performance
expected by our debt holders," said Laura Formusa, Acting Hydro One President
and CEO. "In addition to strong financial performance, the company has been
recognized for its corporate, social and environmental performance by
Corporate Knights magazine as one of Canada's top corporate citizens."

    The following are some of the key achievements in the second quarter:

    
    -   Hydro One has been recognized as one of Canada's top 50 corporate
        citizens by Corporate Knights magazine based on corporate social and
        environmental performance. Our work leading the smart meter program
        in Ontario and our success in drawing 880,000 customers to our
        conservation and demand management programs contributed to our
        ranking of third among utilities.

    -   In support of the Province's goal of creating a conservation culture
        in Ontario, and to have a smart meter in every Ontario home and small
        business, the company surpassed its first milestone of 100,000 meters
        deployed. We are on track to meet the 240,000 interim target for 2007
        and are confident we will reach the end goal of 1.3 million meters
        installed by 2010.

    -   In April 2007, we commenced early bargaining for the next collective
        agreement with the Society of Energy Professionals (Society) and on
        May 31, 2007, we successfully reached a tentative agreement with a
        five-year term effective April 1, 2008. In June 2007, the collective
        agreement was ratified by our Board of Directors and the Society.

    -   The summer's first violent summer storm that cut a swath across the
        province on June 8, saw more than 130,000 Hydro One customers lose
        power. Restoration crews were able to restore power to 90% of
        affected customers within 24 hours of the commencement of the storm.

    -   Customer satisfaction continued to climb, with 94% of Hydro One's
        Large Transmission Customers saying they were satisfied with levels
        of service.
    

    Net income of $93 million was lower by $6 million, or 6%, in the second
quarter, and lower by $9 million, or 4%, in the first six months compared to
2006 results. These reductions reflect increased expenditures within our
distribution work program to maintain system reliability and the impact of a
2006 Ontario Energy Board (OEB) decision on our distribution-related pension
expenditures. In addition, our effective tax rate was higher in the
year-to-date period due to a recovery of payments in lieu of corporate income
taxes in the first quarter of last year. These increases were partially offset
by increased tariff revenues within our transmission and distribution
businesses.
    Capital expenditures of $490 million for the first six months were higher
than in 2006 by $115 million, or 31%. Expenditures made to expand our
transmission system increased primarily as a result of four major initiatives:
load and generation connections projects at our Whitby and London transformer
stations, the reconfiguration of our Lambton Transformer Station, construction
on our new inter-connection with Quebec, and the continuation of our Downtown
Toronto Cable Project. These projects will allow us to further increase the
reliability and flexibility of our system. In addition, the inter-connection
with Quebec will increase access to emission-free hydroelectric power. Within
our Distribution business, significant capital investments were made to
install smart meters, consistent with our planned installation of 240,000
meters in 2007.
    Total revenues for the six-month period were $160 million, or 7%, higher
than last year. Within our transmission business, we experienced increased
tariff revenues as a result of higher peak demands and an OEB decision
removing the earnings sharing mechanism effective December 31, 2006. Within
our distribution business, we experienced increased tariff revenues due to
higher demand and the approval of new distribution rates. We also recovered
increased purchased power costs. As a result of the OEB's decision on
August 8, 2007 regarding the combined smart meter proceeding, we recognized an
additional $10 million in revenue and an equivalent amount of costs which we
incurred in support of this program. Net cash from operating activities was
$537 million for the first six months of 2007. During this period, we paid
$180 million in dividends to the Province of Ontario.

    
    CONSOLIDATED FINANCIAL HIGHLIGHTS AND STATISTICS

                                                Three months     Six months
                                                   ended           ended
    (Canadian dollars in millions)                June 30         June 30
    (except as otherwise noted)                 2007    2006    2007    2006
    -------------------------------------------------------------------------
    Revenues                                   1,120   1,078   2,398   2,238
    Purchased power                              522     505   1,163   1,103
    Operating costs                              388     361     747     664
    Net income                                    93      99     242     251
    Net cash from operating activities           238     218     537     364
    Average Ontario 60-minute
     peak demand (MW)(1)                      22,414  22,596  22,947  22,489
    Distribution - units distributed
     to customers (TWh)(1)                       6.9     6.6    15.5    14.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (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 2007 Second Quarter Consolidated Financial Statements and
Management Discussion and Analysis can be accessed through the following link:
www.hydroone.com/2007Q2financials.





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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