Hydro One Releases 2007 Year-End Financial Results

    TORONTO, Feb. 13 /CNW/ - Hydro One Inc. today released its 2007 year-end
results with net income for the year of $399 million and revenues of
$4,655 million.
    "We are working cooperatively with communities and key stakeholders to
build powerful Ontario communities by making a number of critical system
investments," said Laura Formusa, President and CEO of Hydro One. "Through our
cost effective and productive work programs, this necessary infrastructure
renewal will ensure the people of this province can enjoy a reliable, safe and
efficient supply of electricity."

    The following are some of our key achievements in 2007:

    -   We were selected as the winner of a number of awards in the year,
        including the Edison Electric Institute's "Emergency Recovery Award"
        and a Utility Planning Networks Metering Award. We were also
        recognized by Corporate Knights Magazine as one of the
        top 50 corporate citizens in Canada and as Canada's most diverse
        utility. In addition to receiving the metering award, we exceeded our
        2007 installation target by installing over 260,000 smart meters.

    -   We achieved our 2007 customer service goals. Our focus on customer-
        based initiatives saw our large transmission customers give us an
        overall satisfaction score of 95%.

    -   We are investing in our existing infrastructure to relieve internal
        congestion points and to deliver new generation from clean and
        renewable sources into our system. Construction on a new connection
        and reinforcement line between Ontario and Québec is progressing
        well. In downtown Toronto, we have completed our underground cable
        project connecting our John and Esplanade transformer stations,
        thereby enhancing reliability in the Toronto area. We continue to
        seek necessary approvals to construct a 180-kilometre high-voltage
        line from the Bruce Power Complex to our Milton Switching Station
        that will bring clean and renewable power to Southern Ontario. In
        August, the Ontario Energy Board (OEB) granted us early access to the
        lands proposed for this proposed new line to conduct engineering and
        environmental assessments.

    -   In November we entered into a partnership with four Ontario community
        colleges to educate and attract future employees necessary to respond
        to the upcoming staff retirements in our company and across our
        industry. We will contribute up to $3 million for scholarships,
        curriculum development and equipment over four years for programs
        that will train students in technical, technology and trade
        positions, readying them to work in the electricity sector.

    -   In its August 2007 decision, the OEB approved all of our transmission
        operating and capital programs for 2007 and 2008, stating that it was
        "convinced that the Company has genuinely formed the judgment, based
        on its engineering expertise and its enhanced analytical capability,
        that increases of the nature applied for are needed to maintain a
        robust, safe, and reliable transmission system."

    Net income of $399 million was lower by $56 million, or 12%, compared to
2006 results. Net income for the year was impacted by the OEB's August 16,
2007 transmission rate decision.
    While the OEB approved all of our work program requirements for 2007 and
2008, our return on equity was reduced from 9.88% to 8.35%, effective
January 1, 2007. Our net income also reflects higher requirements to operate
and safely maintain our transmission and distribution systems, including
enhanced transmission station maintenance and forestry programs. Our net
income was further impacted by OEB decisions, including a 2006 decision
affecting our distribution-related pension expenditures, last year's property
tax settlement and a higher effective tax rate. These impacts were partially
offset by an increase in our distribution revenues resulting from OEB-approved
increases to our distribution tariff rates, as well as increased tariff
revenue in our Transmission and Distribution businesses due to increased peak
demands and energy consumption, as well as the elimination of last year's
transmission earning sharing mechanism.
    Capital expenditures of $1,091 million were higher than in 2006 by
$268 million, or 33%. Expenditures made to expand our transmission system
increased primarily as a result of three major lines and stations development
projects: our new inter-connection with Québec, construction of our Essa to
Stayner line which will improve the adequacy and reliability of supply to the
Southern Georgian Bay region in recognition of the growing needs of our
customers and the completion of our Downtown Toronto Cable Project. These
projects will allow us to further increase the reliability and flexibility of
our system, and the ability to import clean power. Expenditures on our load
and generation connections work have also increased primarily as a result of
reconfiguration work at our Lambton Transformer Station and work at our London
Talbot, Pleasant, and Holland transformer stations. The impact of these
increases was partially offset by last year's substantial completion of our
Niagara Reinforcement Project. Within our Distribution business, significant
capital investments were made to install 260,000 smart meters in 2007.
    Total revenues for 2007 were $110 million, or 2%, higher than last year.
This increase reflects a number of factors within our Distribution business.
We experienced increased distribution tariff revenues due to higher demand,
OEB approval of new distribution rates effective May 1, 2006 and 2007, the
OEB's decision on August 8, 2007 regarding the recovery of certain
expenditures to install smart meters and recovery for increased purchased
power costs. Our transmission revenues decreased marginally, primarily due to
the impact of the recent OEB transmission rate decision which reduced revenues
by about $53 million. This decrease was partially offset by the impact of a
previous OEB decision regarding an earnings sharing mechanism that ceased
effective December 31, 2006, as well as increased tariff revenues due to
higher peak demands. Net cash from operating activities was $1,141 million in
2007. During the year, the Company paid $325 million in dividends to the
Province of Ontario.


    Year ended December 31
    (Canadian dollars in millions)        2007      2006    Change  % Change

    Revenues                             4,655     4,545       110         2
    Purchased power                      2,240     2,221        19         1
    Operating costs                      1,516     1,395       121         9
    Net income                             399       455       (56)      (12)
    Net cash from operating activities   1,141       909       232        26


    Average annual Ontario 60-minute
     peak demand (MW)(1)                22,988    22,650       338         1
    Distribution - units distributed
     to our customers (TWh)(1)            30.2      29.0       1.2         4
    (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 Annual Consolidated Financial Statements and
Management's Discussion and Analysis can be accessed through the following
link: www.hydroone.com/2007financials

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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