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

Nov 14, 2012

TORONTO, Nov. 14, 2012 /CNW/ - Hydro One Inc. today released its 2012 third quarter results with net income for the quarter of $201 million and revenues of $1,466 million.

"Delivering value to our customers is our priority," said Laura Formusa, President and CEO, Hydro One Inc. "Large investment projects continue to move forward across the province to ensure that the infrastructure needed to serve both our transmission and distribution customers is in place for today and in the future."

The following are some of our key achievements:

  • Our staff worked tirelessly this year to improve the reliability of service provided to our customers. We have achieved many work accomplishments such as completing the Bruce to Milton 500kV line seven months ahead of schedule, upgrading our Allanburg Transformer Station (TS), upgrading our switchyard at the Hearn TS, replacing the end-of-life power transformer at our Trafalgar TS, building new transformer stations in Woodstock and Burlington, replacing our assets at the Abitibi Canyon, and reconstructing the Burlington TS, among others.
  • During the first nine months of 2012, we made capital investments of $1,041 million to improve system reliability, address our aging power system, facilitate the connection of new, clean generation, and improve service to our customers. During the same period, more than $1,150 million of capital investments were placed in-service.
  • We continue to strive for efficiencies in our overall operations, as reflected by the inclusion of our subsidiary, Hydro One Brampton Networks Inc., in the Ontario Energy Board's 2011 Yearbook, as the utility with the lowest operation, maintenance and administration expense per customer of the 76 local distribution companies assessed.
  • We continue to realize the benefits of replacing multiple older applications with our new integrated SAP platform, which also provides centralized data to allow us to manage our resources more efficiently. We look forward to our next phases of this project, which will enhance the information available to develop our asset work programs.  Our SAP project has earned us the Top Innovator of Technology Award from SAP for demonstrating our commitment to meeting customer needs while working toward building the grid for the future by completing projects that span the complete chain of our business. The Best-Run Utilities Awards recognize North American SAP customers for excellence and innovation in their visionary plans and successful implementations of SAP solutions. 
  • On October 30, 2012, Ontario was impacted by storms caused by the remnants of Hurricane Sandy.  High winds and fallen trees caused significant damage to our distribution system, leaving approximately 160,000 customers without power over the course of the storm, approximately 90,000 at its peak.  More than 1,300 Hydro One staff worked safely and diligently to restore power to these customers as quickly as possible.  More than half of the affected customers had their power restored by the late afternoon and over 90% had power by the next morning. In addition, on November 2, 2012, our crews traveled to New York to help restore power to millions of residents of Long Island in the aftermath of Hurricane Sandy.  Additional crews were sent to other areas of New York and New Jersey a few days later.  This is the second time this year that we have mobilized our crews, under a mutual aid agreement, to take part in system restoration efforts in the United States.
  • During the first nine months of 2012, we successfully raised $1,035 million in cost-effective debt financing through our Medium-Term Note Program. Our actions lock in low interest rates that will benefit our customers over the longer term.

Net income of $201 million for the third quarter and $580 million for the first nine months of 2012 was higher than our comparable 2011 net income by $34 million, or 20%, and by $59 million, or 11%, respectively. These increases were primarily due to higher revenues that allowed for, among other things, the recovery of investments from prior years that are now in-service. Our rates reflect capital investments to address our aging critical infrastructure and the supply mix objectives for generation, including off-coal initiatives and investments in support of the Green Energy Act. Our net income was also positively impacted by lower operation, maintenance and administration expenditures resulting from cost-effectively managing the work program within our Transmission Business and by lower payments in lieu of corporate income taxes resulting from a lower statutory income tax rate that became effective January 1, 2012. In addition, our 2012 net income reflects higher depreciation expense resulting from our placement of new assets in service, consistent with our increased capital work program and increased financing charges reflecting our higher average level of debt.

Capital expenditures of $1,041 million for the first nine months of 2012 were higher by $19 million, or 2%, compared to 2011. Within our Transmission Business, increases in expenditures were primarily related to the refurbishment and replacement of end-of-life equipment to improve reliability at our transformer stations. We also continued to invest in a number of significant and on-going inter-area network upgrade projects to facilitate new generation, as well as local area supply and load customer connection projects. Within our Distribution Business, the net increase in expenditures was primarily attributable to the Customer Information System phase of our entity-wide information system replacement and improvement project. However, we also continued to significantly invest in the development and sustainment of our distribution system.

Total revenues for the nine-month period were $4,293 million, which were $181 million, or 4%, higher than the same period last year. Our transmission revenues were $1,134 million, or $67 million higher than last year, primarily due to the inclusion of new capital investments in our transmission rates effective January 1, 2012. Our distribution revenues were $3,112 million, $114 million higher than the comparative period. This increase mainly reflects the recovery of higher purchased power costs of $108 million, as well as revenues related to our placement of new smart grid and smart meter investments in-service.

Net cash from operating activities was $413 million in the third quarter of 2012. During the quarter, we paid dividends to the Province of Ontario of $29 million, and recorded a provision for payments in lieu of corporate income taxes to the Ontario Electricity Financial Corporation in the amount of $34 million.

  Three months ended September 30 Nine months ended September 30
(Canadian dollars in millions) 2012 2011 $
2012 2011 $
Revenues 1,466 1,384 82 6 4,293 4,112 181 4
Purchased power 695 650 45 7 2,064 1,956 108 6
Operating costs 439 439 - - 1,289 1,271 18 1
Net income 201 167 34 20 580 521 59 11
Net cash from operating activities 413 500 (87) (17) 867 1,074 (207) (19)
Average Ontario 60-minute peak
demand (MW)1
23,002 23,018 (16) - 21,581 21,765 (184) (1)
Distribution - units distributed to our
customers (TWh)1
7.3 7.1 0.2 3 21.8 22.0 (0.2) (1)

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 Third Quarter Consolidated Financial Statements and Management's Discussion and Analysis can be accessed through the following link:


SOURCE: Hydro One Inc.

For further information:

Daffyd Roderick
Director, Corporate Communications

Ali R. Suleman
Vice President and Treasurer

Hydro One Investor Relations