Hydro One Limited · TSX:H
Hydro One — Investor Presentation (2019)
30 slides from Hydro One's investor presentation, 2019
Slide 1: Investor Overview – Post Fourth Quarter 2018
INVESTOR OVERVIEW Post Fourth Quarter 2018
Slide 2: Agenda
AGENDA • Business Update • Company Overview • Regulatory Framework • Appendix Investor Overview – Post Fourth Quarter 2018 2
Slide 3: Business Update
BUSINESS UPDATE
Slide 4: Recent Developments
RECENT DEVELOPMENTS Organization Priorities Fourth Quarter Highlights • Higher income tax expense primarily attributable to a charge to deferred tax expense contributed to earnings per share (EPS) of ($1.18) and adjusted EPS of $0.30, compared to $0.26 and $0.29, respectively, for the same period in
Slide 5: Company Overview
COMPANY OVERVIEW
Slide 6: The Value of Hydro One
THE VALUE OF HYDRO ONE ABOUT THE COMPANY HOW WE DID IN 2018 WHY INVEST Transmission Distribution Other Transmission & Distribution Stable Operations 1% 30,000 circuit KM’s of transmission Revenue Net of Stable and growing cash flows lines across 98% of Ontario Purchased Power with 99% of overall bus
Slide 7: Executive Leadership Team
EXECUTIVE LEADERSHIP TEAM A leadership team with demonstrated experience transforming organizations and growing shareholder value. Paul Dobson Acting President and CEO Jason Fitzsimmons Greg Kiraly Chris Lopez Saylor Millitz-Lee Jamie Scarlett Chief Corporate Affairs Chief Operating Officer Acting A
Slide 8: A Look at the Organization
A LOOK AT THE ORGANIZATION Corporate Structure Public Company TSX: H Hydro One Limited Public Debt Issuer Hydro One Inc. Hydro One Remote Hydro One Networks Inc. Hydro One Telecom Inc. Communities Inc. Rate-Regulated Businesses (99% of revenue) Non-Rate-Regulated Business Our transmission and distri
Slide 9: Purpose, Values & Strategy
PURPOSE, VALUES & STRATEGY Investor Overview – Post Fourth Quarter 2018 9
Slide 10: Achievements and Efficiencies
ACHIEVEMENTS AND EFFICIENCIES Paving New Paths in Productivity Savings ($M) • Generated productivity savings totaling $135.5 million in 2018 totaling $53.3 2018 135.5 million in OM&A and $82.2 million in capital and totaling a quarter of a billion dollars $249.9M since 2015 2017 89.5 • Move to Mobil
Slide 11: The Regulated Business
THE REGULATED BUSINESS Transmission & Distribution Transmission • Hydro One has filed a 3 year Custom IR application for Transmission from 2020-2022 LDC Customers 43 • Hydro One owns and operating 98% of Ontario’s transmission capacity Large Directly Connected • Transmission produces reliable cash f
Slide 12: Hydro One Telecom
HYDRO ONE TELECOM Integral role in servicing grid assets Fiber optic lines (route KMs) 6,400 Network Points of Presence 81 Customer Site Connections 1,900 Data Centres Connected 30 • Leverages Hydro One’s network fiber assets used to monitor and manage power grid circuitry • Diverse, secure, low lat
Slide 13: $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* $2,194 $2,057 $24,259 $1,917 $23,069 $1,800 $20,831 $21,982 $814
Slide 14: Infrastructure Investments
INFRASTRUCTURE INVESTMENTS Clarington Transmission Station Richview Transmission Station Estimated Total Project Cost: $2401 million Estimated Total Project Cost: $102 million Capital Cost To Date: $238 million Capital Cost To Date: $99 million Anticipated In-Service Date: 20181 Anticipated In-Servi
Slide 15: Strong Balance Sheet and Liquidity
STRONG BALANCE SHEET AND LIQUIDITY Investment grade balance sheet with one of lowest debt costs in utility sector Significant Available Liquidity ($M) Strong Investment Grade Credit Ratings (LT/ST/Outlook) Shelf Registrations 250 Hydro One Inc. (HOI) Hydro One Limited Hydro One Inc. HOL: Universal S
Slide 16: Equity Market Cap Overview
EQUITY MARKET CAP OVERVIEW Approximate Ownership of Public Float Equity Index Inclusions S&P/TSX Composite FTSE All-World 17% Index (Canada) MSCI World (Canada) S&P/TSX Composite Institutional Low Volatility Index Retail Dow Jones Canada S&P/TSX Utilities Index 83% Select Utilities S&P/TSX Composite
Slide 17: Common Share Dividends
COMMON SHARE DIVIDENDS Consecutive annual 5% increase to dividend announced on May 15th, 2018 Key Points Dividend Statistics • Quarterly dividend declared at $0.23 per share ($0.92 annualized) Yield1 4.5% • Targeted dividend payout ratio remains Annualized Dividend2,3 $0.92 / share at 70% - 80% of n
Slide 18: Regulatory Framework
REGULATORY FRAMEWORK
Slide 19: 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 20: 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 • Hydro On
Slide 21: Distribution Segment Incentive Regulatory Construct
DISTRIBUTION SEGMENT 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 • Received a decision on March 7th, 2019, under OEB’s Custom Incentive Rate Mak
Slide 22: Reducing Our Customer Bills
REDUCING OUR CUSTOMER BILLS Since 2017, Hydro One customer bills have decreased on average from $165 to $122 per month 2017 Monthly Bill- $165 2018 Monthly Bill- $122 $8 $44 $6 (5%) Sales Tax and OCEB $90 $66 (54%) Electricity Charges $6 Regulatory Charges $9 $3 (2%) $9 (7%) Transmission Charges $52
Slide 23: 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 24: 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 • Unique com
Slide 25: Appendix
APPENDIX
Slide 26: 4Q18 Financial Summary
HYDRO ONE LIMITED 4Q18 FINANCIAL SUMMARY Fourth Quarter YE (millions of dollars, except EPS) 2018 2017 % Change 2018 2017 % Change Revenue Transmission $342 $379 (9.8%) $1,686 $1,578 6.8% Distribution 1,138 1,049 8.5% 4,422 4,366 1.3% Distribution (Net of Purchased Power) 397 387 2.6% 1,523 1,491 2.
Slide 27: 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 Supply to Essex County Windsor-Essex area New transmission 2018 $561 million $54 million Transmission Reinforcement Southwestern Ontario line and station
Slide 28: Independent Board of Directors
INDEPENDENT BOARD OF DIRECTORS Tom Woods, BASc, MBA, ICD.D Timothy Hodgson, MBA, FCPA, ICD.D Former Head of Canadian Corporate Banking, CFO, CRO, Vice Chair CIBC, Director Managing Partner Alignvest Management Corporation, Former Special Advisor to Bank of America Corporation and Alberta Investment
Slide 29: 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 30: Contact
CONTACT Omar Javed Vice President, Investor Relations ojaved@HydroOne.com (416) 345-5943 HydroOne.com/InvestorRelations Investor Overview – Post Fourth Quarter 2018 30