Hydro One Releases 2013 Second Quarter Financial Results

TORONTO, Aug. 9, 2013 /CNW/ - Hydro One Inc. today released its 2013 second quarter results with net income for the quarter of $168 million and revenues of $1,403 million.

"In the wake of the Toronto flood, which disrupted power flow to the western Greater Toronto Area, power was restored to 90% of customers within the first 12 hours," said Carmine Marcello, President and CEO, Hydro One Inc. "Our crews, in conjunction with the Province, the City of Toronto, and Toronto Hydro, worked around the clock to restore power and then stabilize the system."

The following are some of our key achievements:

• Our crews and our staff at our Ontario Grid Control Centre worked quickly and safely to restore power to more than 270,000 customers during two separate storms that affected Ontario in late May and early June. In early July, our crews worked diligently to reconfigure our electricity system to restore power to over 400,000 Toronto homes after unprecedented heavy rains caused severe flooding at our Richview and Manby transmission stations, which are the primary stations serving western Toronto. A total of approximately 3,500 MW of load was interrupted when our critical equipment became completely submerged under water. Our crews proved themselves yet again in late July as they worked tirelessly to restore power to more than 180,000 customers after several severe weather systems caused damage to our distribution system across northeastern and central Ontario.
  
  
• In July, we successfully completed our certification to the Occupational Health and Safety Assessment Series (OHSAS) 18001 standard. The OHSAS 18001 standard is recognized as a world class occupational health and safety management system. The certification symbolizes our commitment to continual health and safety improvement, as nothing is more important than the health and safety of our employees.
  
  
• As part of our proactive approach to monitoring and improving our 120,000 kilometer distribution system to deliver value to our customers, we are replacing 11,000 poles this year. This investment is part of an ongoing program to continually assess the condition of our power system and make significant investments to improve overall reliability. In addition, we accomplished 8,000 kilometres of brush control and line clearing in the first half of this year. Downed trees are a major cause of line failure on our distribution system.
  
  
• In June, we held our second annual First Nations, Métis and Inuit awards ceremony to recognize the 2013 recipients of our Company's academic scholarships for post-secondary students enrolled in electricity industry-related programs. We are committed to supporting First Nations, Métis and Inuit communities and to playing a role in increasing the representation of First Nations, Métis and Inuit employees in the electricity sector.
  
  
• A new collective agreement with the Power Workers' Union (PWU) was ratified by the PWU at the end of July for a two-year term ending March 31, 2015. In April, the Society of Energy Professionals ratified a new three-year collective agreement with our Company effective April 1, 2013.

Net income was $168 million for the second quarter and $425 million for the first six months of 2013, $1 million, or 1%, lower than our comparable 2012 net income in the quarter and $46 million, or 12%, higher in the first six months. We experienced higher distribution revenues mainly reflecting increased purchased power costs, primarily related to the Ontario Energy Board's regulated price plan rate-setting process and the Independent Electricity System Operator's spot market. Our net income was also positively impacted by lower operation, maintenance and administration expense primarily resulting from a reduction to our provision for payments in lieu of transmission station property taxes in the first quarter following the finalization of the assessment of certain prior years' property tax returns.

Capital expenditures of $621 million for the first six months of 2013 were lower by $46 million, or 7%, compared to 2012. We experienced lower expenditures on our transmission development projects, mainly related to our Bruce to Milton Transmission Reinforcement Project to connect refurbished nuclear and new wind generation sources in the Huron-Grey-Bruce area, which went into service in May 2012. We completed our Commerce Way Transformer Station, earlier this year, contributing to lower expenditures compared to 2012. Within our Distribution Business, increases in year-over-year expenditures were primarily attributable to capital replacements due to storm restoration work following several storms in the first half of the year, our wood pole replacement program to improve overall system reliability and the completion of the Customer Information System phase of our entity-wide information system replacement and improvement project, which was successfully placed into service in May, 2013.

Total revenues for the first six months of $2,975 million were $148 million, or 5%, higher than the same period last year. Our distribution revenues were $2,204 million, $139 million higher than last year, primarily reflecting the recovery of higher purchased power costs. Higher energy consumption resulting from the colder weather in the first quarter also contributed to the increase. Transmission revenues of $741 million were $10 million higher than last year primarily reflecting export service revenues and other ancillary services associated with the December 20, 2012 transmission rate decision. The revenue requirement approved for 2013 resulted in no change to rates for the transmission portion of the customer bill compared to previous 2012 OEB-approved rate levels.

Net cash from operating activities was $333 million in the second quarter of 2013. 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 due to the Ontario Electricity Financial Corporation in the amount of $11 million.

CONSOLIDATED FINANCIAL HIGHLIGHTS AND STATISTICS

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 2013 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.