Hydro One Limited · TSX:H
Hydro One — Investor Presentation (February 2020)
29 slides from Hydro One's investor presentation, February 2020
Slide 1: Investor Overview Post Fourth Quarter 2019
INVESTOR OVERVIEW Post Fourth Quarter 2019 One of North America’s largest electric utilities TSX:H
Slide 2: Why Invest in Hydro One
WHY INVEST IN HYDRO ONE A unique low-risk opportunity to participate in the transformation of a premium, large scale regulated electric utility • One of the largest electric utilities in North America with significant scale and leadership position across Canada’s most populated province. ~5% ~5% Rat
Slide 3: Recent Developments
RECENT DEVELOPMENTS Organization Priorities Fourth Quarter Highlights • Fourth quarter earnings per share (EPS) was $0.35 and adjusted EPS was $0.35, compared to a loss per share of $1.18 and adjusted EPS of $0.30, respectively, for the same period in 2018. For the full year, EPS was $1.30 and adjus
Slide 4: The Value of Hydro One
THE VALUE OF HYDRO ONE ABOUT THE COMPANY HOW WE DID IN 2019 WHY INVEST Transmission & Distribution Stable Operations Transmission Distribution Other ~30,000 circuit KM’s of transmission lines Stable and growing cash flows with Revenue Net of Purchased Power Total Assets 1% 99% of overall business fu
Slide 5: A Look at the Organization
A LOOK AT THE ORGANIZATION Corporate Structure Public Company TSX: H Hydro One Limited Public Debt Issuer Hydro One Inc. Hydro One Networks Inc. Hydro One Remote Communities Inc. Hydro One Telecom Inc. Rate-Regulated Businesses (99% of revenue) Non-Rate-Regulated Business 5 7 5
Slide 6: Executive Leadership Team
EXECUTIVE LEADERSHIP TEAM A leadership team with strong operational experience committed to achieving efficiencies at Hydro One Mark Poweska President and CEO Brad Bowness Darlene Bradley Jason Fitzsimmons Paul Harricks David Lebeter Chris Lopez Saylor Millitz-Lee Chief Information Officer Chief Saf
Slide 7: Hydro One's New Strategy
HYDRO ONE’S NEW STRATEGY Plan, design and build a Be the safest and most Be a trusted partner Advocate for our customers Innovate and grow the Strategic Priorities grid for the future efficient utility and help them make business informed decisions We will plan, design and build a We will transform
Slide 8: Hydro One's New Strategy
HYDRO ONE’S NEW STRATEGY An Ontario focus, and plan to enhance value Strategic Priorities Business Outcomes Plan, design and build a grid for the future Improved safety culture where Hydro One employees go home safely every single day Be the safest and most efficient utility Improved reliability abo
Slide 9: Achievements and Efficiencies
ACHIEVEMENTS AND EFFICIENCIES Paving New Paths in Productivity Savings ($M) 2019 202.3 Generated productivity savings of $202.3 million in 2019 comprised of $84.6 million in OM&A and $117.7 million in capital and totaling a 2018 135.5 nearly half a billion dollars since 2015 $452.2 2017 89.5 Move to
Slide 10: The Regulated Business
THE REGULATED BUSINESS Transmission & Distribution Transmission 98% OF ONTARIO’S TRANSMISSION CAPACITY1 • Hydro One has filed a 3-year Custom IR application for Transmission from 2020-2022 LDC Customers 38 • Hydro One owns and operates 98% of Ontario’s transmission capacity1 Large Directly Connected
Slide 11: Growth Opportunities for the Telecom Business
GROWTH OPPORTUNITIES FOR THE TELECOM BUSINESS FOCUS ON VALUE-ADDED SERVICES Managed & Managed & Professional Telecommunications Services: Outsourced consultative and operative processes and functions that simplify operations and reduce expenses by leveraging the knowledge and resources of industry e
Slide 12: Sustainability at Hydro One
SUSTAINABILITY AT HYDRO ONE Hydro One conducted a formal materiality assessment to identify the sustainability issues that matter most to our business, stakeholders and partners Approach to Sustainability A Matrix of 10 Material Issues Identified1 A Sustainable Future for All We focused on developin
Slide 13: Delivering Clean and Sustainable Energy
DELIVERING CLEAN AND SUSTAINABLE ENERGY Transmitting and delivering some of the cleanest energy in North America • Ontario was the first North American jurisdiction to fully eliminate coal electricity generation and leads Canada in wind and solar capacity • Recent five year Ontario Climate Change Ac
Slide 14: $10B of Capital Investment Driving Rate Base Growth
$10B OF CAPITAL INVESTMENT DRIVING RATE BASE GROWTH Consistent and predictable organic growth profile underpinned by required replacement of aging infrastructure Projected Regulated Capital Investments* ($M) Projected Rate Base Growth* $26,250 $25,091 $2,116 $2,130 $23,792 $1,973 $1,991 $22,676 $1,8
Slide 15: 2022 Guidance
2022 GUIDANCE $1.65 $1.52 $0.02 $1.35 $1.30 $0.11 $0.24 $0.08 $0.02 2019 Basic EPS 2018 Distribution Normalizing to Insurance Merger Related Costs Lake Superior Link 2019 Normalized EPS Blank 2022 Basic EPS Decision Catch-Up Distribution Allowed ROE • Company estimates subject to change and include
Slide 16: Infrastructure Investments
INFRASTRUCTURE INVESTMENTS Leamington Area Transmission Integrated System Operating Niagara Reinforcement Project Reinforcement Centre Richview Transmission Station Estimated Total Project Cost: $135 million Estimated Total Project Cost: $325 million Estimated Total Project Cost: ~$150 million Estim
Slide 17: Constructive Rate Regulator (OEB)
CONSTRUCTIVE RATE REGULATOR (OEB) Consistent, independent regulator with a transparent rate-setting process • Transmission and Distribution businesses rate-regulated by the Ontario Energy Board (OEB) • Deemed debt / equity ratio of 60% / 40% for both transmission and distribution segments • Reduced
Slide 18: Segmented Incentive Regulatory Construct
SEGMENTED INCENTIVE REGULATORY CONSTRUCT The transition from cost of service to incentive based regulatory model coincident with transformation of business will create value for both customers and shareholders Distribution Transmission OEB Approved Subject to OEB Approval 2018-2022 2020-2022 Rebasin
Slide 19: Reducing Our Customer Bills
REDUCING OUR CUSTOMER BILLS Since 2017, Hydro One customer bills have decreased on average from $165 to $127 per month Pre-Fair Hydro Plan Post Ontario Energy 2017 Monthly Bill- $165 Rebate 2020 Monthly Bill- $127 $8 $90 $38 % of Bill2 Taxes and OCEB 16% Electricity Charges 56% $6 $52 $9 Regulatory
Slide 20: Strong Balance Sheet and Liquidity
STRONG BALANCE SHEET AND LIQUIDITY Investment grade balance sheet with one of lowest debt costs in utility sector Significant Available Liquidity ($M) Strong Investment Grade Credit Ratings (LT/ST/Outlook) Shelf Registrations 250 Hydro One Limited Hydro One Inc. (HOI) Hydro One Inc. HOL: Universal S
Slide 21: Equity Market Cap Overview
EQUITY MARKET CAP OVERVIEW Approximate Ownership of Public Float Equity Index Inclusions Approximate Geographic Dispersion of Public Float S&P/TSX Composite FTSE All-World Index (Canada) 23% 24% Canada MSCI World (Canada) S&P/TSX Composite Low Volatility Index 49% US Dow Jones Canada S&P/TSX Utiliti
Slide 22: Common Share Dividends
COMMON SHARE DIVIDENDS Consecutive annual 5% increase announced on May 9th, 2019 Key Points Dividend Statistics • Quarterly dividend declared at $0.2415 per common share ($0.966 annualized) Yield1 3.9% • Targeted dividend payout ratio remains at 70% - 80% of net income Annualized Dividend2,3 $0.966
Slide 23: Appendix
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Slide 24: 4Q19 Financial Summary
HYDRO ONE LIMITED 4Q19 FINANCIAL SUMMARY Fourth Quarter Year End (millions of dollars, except EPS) 2019 2018 % Change 2019 2018 % Change Revenue Transmission $407 $342 19.0% $1,652 $1,686 (2.0%) Distribution 1,298 1,138 14.1% 4,788 4,422 8.3% Distribution (Net of Purchased Power) 384 397 (3.3%) 1,67
Slide 25: Top Transmission Capital Projects Underway
TOP TRANSMISSION CAPITAL PROJECTS UNDERWAY Anticipated Estimated Capital Cost Development Project Name Location Type In-Service Date Cost To-Date Niagara Reinforcement Project Niagara area New transmission line 20191 $135 million $135 million Southwestern Ontario Wataynikaneyap Power LP Line Pickle
Slide 26: Regulatory Stakeholders
REGULATORY STAKEHOLDERS Who: Provincial Government, Ministry of Energy What: Policy, legislation, regulations Who: Ontario Energy Board (OEB) What: Independent electric utility price and service quality regulation Who: Independent Electricity System Operator What: Wholesale power market rules, inter
Slide 27: Independent Board of Directors
INDEPENDENT BOARD OF DIRECTORS Timothy Hodgson, MBA, FCPA, ICD.D Jessica McDonald, ICD.D Corporate Director, Chair of Hydro One Ltd, Chair of Sagicor Financial Corporation Limited, Director Public Corporate Director, Chair, Canada Post Corporation, Former President & CEO BC Hydro & Power Sector Pens
Slide 28: Disclaimers
DISCLAIMERS DISCLAIMERS In this presentation, all amounts are in Canadian dollars, unless otherwise indicated. Any graphs, tables or other information in this presentation demonstrating the historical performance of the Company or any other entity contained in this presentation are intended only to
Slide 29: Contact
CONTACT Omar Javed Vice President, Investor Relations ojaved@HydroOne.com (416) 345-5943 HydroOne.com/InvestorRelations 29 29 29