Hydro One Releases 2012 Second Quarter Financial Results (US GAAP)

Aug 9, 2012

TORONTO, Aug. 9, 2012 /CNW/ - Hydro One Inc. today released its 2012 second quarter results with net income for the quarter of $169 million and revenues of $1,359 million.

"The successful completion of the Bruce to Milton Transmission Reinforcement Project, a new 500 kV line to facilitate the connection of new, clean electricity for our customers, is the largest expansion of Ontario's transmission system in more than two decades and is a proud achievement for our Company," said Laura Formusa, President and CEO, Hydro One Inc. "I am especially pleased by the way this line was built, in close coordination with communities all along the line, including First Nations and Métis."

The following are some of our key achievements:

  • In May, our Bruce to Milton Transmission Reinforcement Project was placed in-service. The new line will allow our customers to receive over 3,000 MW of refurbished nuclear and new, renewable power generated in the Huron-Grey-Bruce area.

  • During the first six months of 2012, we have made capital investments of $667 million to improve system reliability, address an aging power system, facilitate the connection of new, clean generation, and improve service to our customers. During the same period, more than $955 million of investments were placed in-service. 

  • In early July, our crews were mobilized, under a mutual aid agreement, to take part in system restoration efforts to quickly and safely restore power to approximately 3 million homes and businesses in the Baltimore, Virginia, and Washington areas, after severe storms caused widespread outages in the eastern United States.

  • In May, we launched a mobile application for smartphones and tablet devices - the first of its kind among Canadian utilities. The application allows customers to check the status of power outages anywhere within our service area, and also provides the latest news from Hydro One.

  • We delivered our planned maintenance work program, while keeping our overall operation, maintenance and administration expenditures to a marginal year-over-year increase of approximately 1%, which is less than the rate of inflation, while substantially increasing our work accomplishments in some areas, including our forestry program.

  • During the first six months of 2012, we successfully raised $725 million in cost-effective debt financing through our Medium-Term Note Program, and on July 31, 2012, we raised an additional $75 million through the same program.

  • We were recognized once again by Corporate Knights Magazine as one of Canada's Top 50 Corporate Citizens, having successfully managed our specific environmental, social and governance performance. This year, we also ranked first in Canada for corporate citizenship among utilities.

Net income of $169 million for the second quarter of 2012 and $379 million for the first six months of 2012 was higher than our comparable 2011 net income by $27 million, or 19%, and by $25 million, or 7%, respectively. These increases were primarily due to higher revenues resulting from the addition of recent capital investments to our rate base in support of our aging critical infrastructure and the supply mix objectives for generation, including off-coal initiatives and investments in support of the Green Energy Act. Second quarter transmission revenues were further impacted by a higher average Ontario 60-minute peak demand. Increased revenues for the first six months of 2012 were partially offset by lower distribution energy consumption resulting from the mild winter in 2012. Our net income was also positively impacted by lower payments in lieu of corporate income taxes resulting from a lower statutory income tax rate that became effective January 1, 2012, as well as changes in net temporary differences. These increases to net income were partially offset by higher depreciation and amortization costs resulting from our placement of new assets in service, consistent with our increased capital work program.

Capital expenditures of $667 million for the first six months of 2012 were higher by $27 million, or 4%, compared to 2011. Within our Transmission Business, increases in expenditures were primarily related to the refurbishment and replacement of end-of-life equipment at our transformer stations to improve reliability. We also continued to invest in a number of significant and on-going inter-area network upgrade projects to facilitate new generation. Within our Distribution Business, increases in expenditures were primarily attributable to the Customer Information System phase of our entity-wide information system replacement and improvement project. This was partially offset by reduced expenditures related to our Smart Meter Project and storm restoration work, compared to 2011.

Total revenues of $2,827 million for the first six months of 2012 were $99 million, or 4%, higher than the same period in 2011. Our transmission revenues of $731 million for the first six months of 2012 were $43 million higher than the same period in 2011, primarily due to the inclusion of new capital investments in our transmission rates effective January 1, 2012. This increase was partially offset by a reduction of revenues associated with lower average monthly Ontario 60-minute peak demand experienced in 2012. Our distribution revenues of $2,065 million for the first six months of 2012 were $57 million higher than the same period in 2011. This increase reflects the recovery of higher purchased power costs of $63 million, partially offset by lower energy consumption resulting from milder weather during the winter of 2012.

Net cash from operating activities was $217 million in the second quarter of 2012. During the quarter, we paid dividends to the Province of Ontario of $30 million, and recorded a provision for payments in lieu of corporate income taxes to the Ontario Electricity Financial Corporation in the amount of $24 million.

CONSOLIDATED FINANCIAL HIGHLIGHTS AND STATISTICS

  Three months ended June 30 Six months ended June 30
(Canadian dollars in millions) 2012 2011 $ Change % Change 2012 2011 $ Change % Change
Revenues 1,359 1,268 91 7 2,827 2,728 99 4
Purchased power 640 587 53 9 1,369 1,306 63 5
Operating costs 436 426 10 2 850 832 18 2
Net income 169 142 27 19 379 354 25 7
Net cash from operating activities 217 334 (117) (35) 454 574 (120) (21)
                 
Average Ontario 60-minute peak demand (MW)1 21,029 20,519 510 2 20,870 21,138 (268) (1)
Distribution - units distributed to our customers (TWh)1 6.7 6.5 0.2 3 14.5 14.8 (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 Inc.'s 2012 Second Quarter Consolidated Financial Statements and Management's Discussion and Analysis can be accessed through the following link:


www.hydroone.com/financials

SOURCE: Hydro One Inc.

For further information:

Daffyd Roderick
Director, Corporate Communications
416-345-5828

Ali R. Suleman
Vice President and Treasurer
 416-345-6126

Hydro One Investor Relations
416-345-6867


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