Hydro One announces second quarter net income

    TORONTO, Aug. 13 /CNW/ - Hydro One Inc. today released its second quarter
results with net income of $255 million and revenues of $2,277 million for the
six months ended June 30, 2008.
    "Continued improvements in our customer satisfaction results and our
recent top 10 ranking among Canada's best Corporate Citizens signals that
Hydro One is making the right decisions on behalf of its customers and
stakeholders," said Laura Formusa, Hydro One President and CEO.
    The following are some of the key achievements in the second quarter:

    -  We were recognized for a second time, by Corporate Knights Magazine,
       as one of Canada's Top 50 Corporate Citizens. We placed sixth among
       Canadian companies, up 20 spots from the 2007 ranking, and placed
       first in the utility category. This recognizes us as having
       successfully managed our specific environmental, social and governance

    -  In June, we saw our first phase survey results for our large
       transmission customers show overall satisfaction levels of 92%. In
       addition, our focus on customer-based initiatives saw our residential
       and small business customers give us a satisfaction score of 86%, a 5%
       increase from 2007 year-end. We made gains in the areas of
       satisfaction with rates, bill handling and providing power restoration

    -  In May, we formalized a unique agreement with the Saugeen Ojibway
       Nation regarding their participation in the ongoing environmental
       assessment and regulatory process of the Bruce to Milton Transmission
       Reinforcement project. The Ontario Energy Board (OEB) leave-to-
       construct hearing concluded on June 11, 2008 and a decision is
       anticipated in the third quarter of 2008.

    -  We recently reached the 500,000 mark in installing smart meters for
       our customers across the province, and continue to be on track to meet
       our targeted installations for the end of this year. We are also
       making advances in realizing our vision of a smart grid. Our smart
       network system is being designed to allow for two-way communications
       for emerging conservation and demand management tools, including smart
       thermostats and in-home displays.

    -  In June, we launched a new supply chain, asset, and work management
       system. This entity-wide system improvement project will revolutionize
       the way we do business and how we work with our customers. Working
       from a common platform will increase productivity by creating a more
       integrated, collaborative and transparent business environment. With
       phase I of this multi-phase project successfully placed in service, we
       have now commenced work on phase II, which will involve the
       replacement of the Finance, Human Resources and Pay modules of our

    -  On June 3, 2008, Standard & Poor's Ratings Services upgraded our long-
       term debt rating to 'A+' from 'A' and affirmed the 'A-1' short-term
       rating on the Company. Our outlook has been revised to stable from
       positive. The rating action reflects a stable energy policy in Ontario
       and consistent, independent regulation applied by the OEB.

    Net income of $98 million in the second quarter and $255 million on a
year-to-date basis was higher by $5 million, or 5%, and higher by $13 million,
or 5% respectively, compared to 2007 results. These increases in net income
were primarily due to a reduction in our payments in lieu of corporate income
taxes resulting from a lower statutory tax rate, combined with other net
temporary differences. In the year-to-date period, our net income was further
impacted by a pension asset transfer settlement with our service provider
Inergi LP following approval from the Financial Services Commission of Ontario
in the first quarter. The impact of these factors was partially offset in both
the second quarter and year-to-date period by lower transmission revenues
resulting from the August 16, 2007 OEB rate decision and lower average monthly
peak demands.
    Capital expenditures of $514 million for the first six months were higher
than in 2007 by $24 million, or 5%. A significant portion of the increase is
attributable to higher expenditures related to the entity-wide system
improvement project to replace end of life systems and increase productivity.
We continued our investments to expand and reinforce our transmission system
as we continued work on our Bruce to Milton Transmission Reinforcement Project
to connect wind generation and redeveloped nuclear sources in the 
Huron-Grey-Bruce area. We continued work on other lines and station
development projects including our Essa Transformer Station to Stayner
Transformer Station connection, which will improve the adequacy and
reliability of supply to the Southern Georgian Bay Region in recognition of
the growing needs of our customers. These increased expenditures were offset
by lower expenditures on other projects such as our Downtown Toronto Cable
Project that we completed in the fourth quarter of last year. Within our
Distribution business, significant capital investments were also made to
install 139,000 smart meters in the quarter.
    Total revenues for the six-month period were $121 million, or 5%, lower
than last year. This decrease reflects a number of factors within our
transmission and distribution businesses. Transmission revenues were impacted
by lower average monthly peak demands and the OEB's transmission rate
decision. We experienced lower distribution revenues, which mainly reflects
lower purchased power costs. Revenues were also impacted by the full recovery
of a distribution deferral account and by lower consumption. These impacts
were partially offset in the year-to-date period by the impact of the OEB's
decision on its combined smart meter proceeding, which allowed us to begin
recording revenue related to our installed smart meters, and by increased
distribution tariff rates. Net cash from operating activities was $487 million
for the first six months of 2008. During this period, we paid $114 million in
dividends to the Province of Ontario.


    (Canadian         Three months ended              Six months ended
     dollars               June 30                        June 30
     in millions,
     except as
     otherwise                        $      %                      $      %
     noted)         2008    2007 Change Change    2008    2007 Change Change
    Revenues       1,055   1,120    (65)    (6)  2,277   2,398   (121)    (5)
     power           483     522    (39)    (7)  1,079   1,163    (84)    (7)
     costs           387     388     (1)     -     738     747     (9)    (1)
    Net income        98      93      5      5     255     242     13      5
    Net cash
     operations      255     249      6      2     487     543    (56)   (10)
     peak demand
     (MW)(1)      20,786  22,414 (1,628)    (7) 21,531  22,947 (1,416)    (6)
     - units
     to customers
     (TWh)(1)        6.7    6.9    (0.2)    (3)   15.2    15.5   (0.3)    (2)
    (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 Second Quarter Consolidated Financial Statements and
Management Discussion and Analysis can be accessed through the following link:

For further information:

For further information: Laura Cooke, Director of Communications, (416)
345-5323; Ali R. Suleman, Vice President and Treasurer, (416) 345-6126; Hydro
One Investor Relations, (416) 345-6867

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