Slide 1: Vancouver Investor Luncheon
Vancouver Investor Luncheon September 14th, 2011
Slide 2: Forward Looking Statements
1 Forward Looking Statements This presentation may contain forward-looking statements, including statements regarding the business and anticipated financial performance of Hydro One Inc. Although Hydro One believes that such statements are based on reasonable assumptions, such statements are subject
Slide 3: Outline
2 Outline • Overview of Hydro One • Regulatory / Industry Update • Capital Program • Financial Performance and Financing • Summary
Slide 4: Hydro One at a Glance
3 Hydro One at a Glance • One of the largest electricity delivery systems in North America • Wholly owned by the Province of Ontario • No commodity (electricity) exposure Transmission Distribution • $9.8B in assets • $6.9B in assets • 28,951 km network - over 96% of • 123,552 km system – spans 75% o
Slide 5: Hydro One – Strategic Plan
4 Hydro One – Strategic Plan MISSION AND VISION We will be an innovative and trusted company delivering electricity safely, reliably, and efficiently to create value for our customers VALUES ● Health & Safety ● Stewardship ● Excellence ● Innovation STRATEGIC OBJECTIVES ● Injury-Free ● Satisfying our
Slide 6: Regulatory Structure
5 Regulatory Structure Licence & Rate Orders Code Conditions Integrated Power System Plan (IPSP) Market Rules Legislation & Regulation Ministry of Energy
Slide 7: Regulatory / Industry Update
6 Regulatory / Industry Update • Recent rate decisions • US GAAP • Major projects • Transmission project development process
Slide 8: Capital Program – Capital Expenditures
7 Capital Program Capital Expenditures System investment driven by: 2,000 • Sustaining and other investments 1,500 $ millions • System development 1,000 • Long-term Energy Plan 500 0 2007 2008 2009 2010 2011 2012 2013 Reduction from budgeted capital
Slide 9: Capital Program – Sustaining and Other Investments
8 Capital Program Sustaining and Other Investments • Increasing sustaining capital expenditures – Aging asset base – Maintain reliability of the system – Examples of sustainment programs include • Wood pole replacement • Station refurbishments • Circuit breaker replacement • Other expenditures relat
Slide 10: Capital Program – System Development
9 Capital Program System Development • System growth and reliability • New and retiring generation • Examples of system development programs include – Load connections – Reliability improvements – Area supply • Smart meter and smart grid
Slide 11: Bruce to Milton Transmission Project
Bruce to Milton Transmission Project 10
Slide 12: Capital Program – Potential changes to capital expenditures
11 Capital Program Potential changes to capital expenditures • Long-term Energy Plan • Transmission project development process • Timing of approvals
Slide 13: 2011 Second Quarter Financial Results
12 2011 Second Quarter Financial Results ($M) Six months ended June 30 2011 2010 Revenues 2,728 2,484 Purchased power 1,306 1,197 Operating costs 832 807 Net income 354 274 Dividends Paid 84 19
Slide 14: Stable Financial Performance
13 Stable Financial Performance • Stable regulatory environment • Continued focus on operations • Organic growth opportunities • Financial metrics supportive of credit quality Net Income FFO/ Interest Coverage 700 5x 600 4x 500 $ millions 3x 400 300 2x 200 1x 100 0 2004 2005 2006 2007 2008 2009 2010
Slide 15: Financing
14 Financing • Borrowing proceeds used to: – Repay debt maturities – Fund developmental capital • $3B MTN shelf main platform maturing September 2013 • $1B CP program to bridge requirements Long-term Credit Ratings S&P - A+ Moody’s - Aa3 DBRS - A (high)
Slide 16: Liquidity
15 Liquidity Liquidity supporting CP program and financing needs • $1.25B syndicated bank line maturing June 2014 • $250M liquid reserve fund available to 2014
Slide 17: Funding Objectives
16 Funding Objectives • Cost effectiveness • No foreign exchange risk – fully hedged • Average term • Maturity smoothing • Execution objectives – Full yield curve – Fair pricing – Sized for liquidity – Dealer group support
Slide 18: Long-term Debt Maturities
$ millions 0 100 200 300 400 500 600 700 800 2011 2013 2015 2017 2019 2021 2023 $250M liquid reserve fund 2025 2027 2029 2031 Long-term Debt Maturities 2033 2035 2037 2039 2041 2043 2045 17
Slide 19: Summary
18 Summary • Stable financial performance • Going forward: – Continued focus on core wires business – Organic growth opportunities through infrastructure investments – Financing requirements for debt maturities and developmental capital – Maintain capital structure, credit quality
Slide 20: Hydro One
HYDRO ONE