Slide 1: Investor overview: Post second quarter 2022
Investor overview Post second quarter 2022 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. • One of th
Slide 3: Recent developments
Recent developments Organization Priorities Second Quarter Highlights • Second quarter basic earnings per share (EPS) of $0.43 was 7.5% higher compared to EPS of $0.40 for the same period in 2021. • EPS for the quarter was higher year over year primarily due to approved rates for the transmission an
Slide 4: The value of Hydro One
The value of Hydro One ABOUT THE COMPANY HOW WE DID IN 2021 WHY INVEST Transmission & Distribution Transmission Distribution Other Stable Operations Revenues Net of Purchased Power5 Total Assets 1% 2% Stable and growing cash flows ~30,000 circuit KMs of transmission lines with 99% of overall revenue
Slide 5: A look at the organization
A look at the organization Corporate structure Hydro One Ltd. Public company TSX:H Hydro One Inc Public debt issuer Hydro One Hydro One Acronym Remote Networks Inc. Solutions Inc. Communities Inc. Rate-regulated business (99% of revenue) Non-rate-regulated business Hydro One • Investor Overview • 5
Slide 6: Executive leadership team
Executive leadership team A leadership team with strong operational experience committed to achieving efficiencies at Hydro One William (Bill) Sheffield Interim President and CEO Brad Bowness Jason Fitzsimmons Paul Harricks David Lebeter Chris Lopez Megan Telford Chief Information Chief Corporate Af
Slide 7: Hydro One's strategy
Hydro One’s strategy Hydro One • Investor Overview • 7
Slide 8: Achievements and efficiencies
Achievements and efficiencies Paving New Paths in Productivity Savings ($M) 2021 343.9 Generated productivity savings of $343.9 million in 2021 comprised 2020 286.0 of $160.4 million in OM&A and $183.5 million in capital and totaling 2019 202.3 approximately $1.1 billion dollars since 2015 $1,082 20
Slide 9: The regulated business
The regulated business Transmission Distribution • Transmission produces reliable cash flow with low volatility • Distribution is a stable, rate-regulated business operating under the OEB Custom IR framework under OEB’s Custom IR framework • Hydro One filed a 5-year Custom IR application for • Hydro
Slide 10: Electric Local Distribution Company (LDC) consolidation
Electric Local Distribution Company (LDC) consolidation • Hydro One is the largest LDC in Ontario; 55 LDCs are Hydro One transmission or distribution customers Recently completed transactions Consolidator of Choice • Hydro One has significant scale in Ontario and serves customers through a distribut
Slide 11: Growth opportunities for the telecom business
Growth opportunities for the telecom business focus on value-added services Internet & Network connectivity and access in order to improve the efficiency and security of Client data communications Networks • Secure SD-WAN • High Performance Network Broadband Connectivity • Internet Transit • Data Ce
Slide 12: Sustainability at Hydro One
Sustainability at Hydro One At Hydro One, we are committed to operating safely in an environmentally and socially responsible manner in partnership with our customers and community stakeholders to build a brighter future for all. HydroOne.com/Sustainability Hydro One • Investor Overview • 12
Slide 13: Sustainability at Hydro One
Sustainability at Hydro One At Hydro One, we are committed to operating safely in an environmentally and socially responsible manner and to partnering with our customers, community stakeholders to build a brighter future for all. A Sustainable Future for All • 45% Board of Directors are women, 9% In
Slide 14: Capital investment driving rate base growth
Capital investment driving rate base growth Consistent and predictable organic growth profile underpinned by required replacement of aging infrastructure Projected Regulated Capital Investments* ($M) Historical and Projected Rate Base Growth* ($M) 2,766 2,846 2,789 2,757 2,690 ~6% 31,887 30,289 1,19
Slide 15: Affirmed 2022 guidance
Affirmed 2022 guidance $1.65 $1.52 $0.02 $0.11 $1.35 $1.30 $0.24 $0.08 $0.02 2019 Basic EPS 2018 Distribution Normalizing to Insurance Merger Related Lake Superior Link 2019 Normalized - 2022 Basic EPS Decision Catch-Up Distribution Allowed Costs EPS ROE • Company estimates subject to change and inc
Slide 16: Capital investment driving rate base growth
Capital investment driving rate base growth Chatham to Lakeshore Lennox Transmission Station East-West Tie Station Transmission Line1 Circuit Breaker Replacement3 Expansion2 Estimated Total Project Cost: $268 million Estimated Total Project Cost: $152 million Estimated Total Project Cost: $181 milli
Slide 17: Constructive rate regulator (OEB)
Constructive rate regulator (OEB) Ontario Energy Board (OEB) is a consistent, independent regulator with a transparent rate-setting process • Transmission and Distribution businesses rate-regulated by the OEB • Deemed debt / equity ratio of 60% / 40% for both transmission and distribution segments •
Slide 18: JRAP – Segmented incentive regulatory construct
JRAP – 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 Updated (as of March 31, 2022)1 Updated (as of March 31,
Slide 19: JRAP – Expected next steps
JRAP – Expected next steps Notice of Technical Application Interrogatories Conference 2021 AUG SEP OCT NOV DEC 2022 * JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Evidence Update Interrogatories and Settlement Oral Hearing Written Technical Conference on (if no full settlement) Arguments Evidence
Slide 20: Reducing our customer bills
Reducing our customer bills Since 2017, typical Hydro One residential customer bills have decreased on average from $165 to $127 per month Post Ontario Energy Pre-Fair Hydro Plan Rebate 2017 Monthly Bill- $165 2021 Monthly Bill- $127 $8 $90 % of Bill2 $38 Taxes and OCEB 14% Electricity Charges 53% $
Slide 21: Strong balance sheet and liquidity
Strong balance sheet and liquidity (as at June 30, 2022) Investment grade balance sheet with one of lowest debt costs in utility sector Significant available liquidity ($M) Strong investment grade debt ratings (long-term/short-term/outlook) Shelf registrations Hydro One Ltd. (HOL) Hydro One Inc. (HO
Slide 22: Equity market cap overview
Equity market cap overview Approximate Ownership of Equity Index Inclusions Approximate Geographic Dispersion Public Float2 of Public Float 17% S&P/TSX Composite S&P/TSX Composite FTSE All-World Index Dividend Index (Canada) 26% Canada S&P/TSX 60 Index S&P/TSX Composite MSCI World US High Dividend I
Slide 23: Common share dividends
Common share dividends A Growing and Sustainable Dividend4 Key Points • Quarterly dividend declared at $0.2796 per common share ($1.1184 annualized) 0.13 • Targeted dividend payout ratio remains at 70% - 80% of net income 1.0525 1.0023 0.9545 • Attractive and growing dividend supported by stable, 0.
Slide 24: Appendix
Appendix
Slide 25: JRAP - Investments: Transmission
JRAP - Investments: Transmission Maintaining the System $M Net Transmission Capital 1,700 • Reinvesting in existing infrastructure to maintain the 1,600 1,509 1,541 1,527 1,539 38 1,524 health of the system, sustain performance and address 1,500 84 75 107 63 90 98 53 95 safety and environmental risk
Slide 26: JRAP - Investments: Distribution
JRAP - Investments: Distribution $M Net Distribution Capital New Infrastructure: 1,200 1,180 1,128 1,127 Modernize infrastructure to detect, repair & restore 1,100 1,058 1,082 power quicker (improving reliability by ~25% by 1,000 2027). 900 520 393 432 517 524 Significant investments to accommodate
Slide 27: JRAP - Cost of plan
JRAP - Cost of plan1 Hydro One’s plan will see the Investment Cost typical customer’s bill increase by Average Residential Monthly Bill less than 3.0% $-3.20 $1.89 $2.97 $3.95 0.6% $2.78 expected inflation. 2.0% 0.5% 0.4% 1.0% 0.4% 2.0% A typical residential customer’s monthly 0.9% 1.5% 1.4% bill wi
Slide 28: Current Rate Periods - Constructive rate regulator (OEB)
Current Rate Periods - Constructive rate regulator (OEB) Consistent, independent regulator with a transparent rate-setting process • Transmission and Distribution businesses rate-regulated by the OEB • Deemed debt / equity ratio of 60% / 40% for both transmission and distribution segments • Reduced
Slide 29: Current - Segmented incentive regulatory construct
Current - 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 OEB Approved 2018-2022 2020-2022 Rebasing
Slide 30: 2Q22 Financial summary
2Q22 Financial summary Second Quarter Year to Date (millions of dollars, except EPS) 2022 2021 % Change 2022 2021 % Change Revenues Transmission 516 448 15.2% 1,035 896 15.5% Distribution 1,314 1,263 4.0% 2,831 2,617 8.2% Distribution Revenues(Net of Purchased Power)2 462 425 8.7% 965 885 9.0% Other
Slide 31: 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 32: Independent board of directors
Independent board of directors Timothy Hodgson, MBA, FCPA, ICD.D Corporate Director, Chair of Hydro One Limited, Director Public Sector Pension Investment Board (PSP Investments) and Dialogue Health Technologies. Former Director Alignvest Acquisition Corporation, Alignvest Acquisition II Corporation
Slide 33: Disclaimers
Disclaimers Forward Looking Information This presentation contains “forward-looking information” within the meaning of applicable Canadian securities laws that is based on current expectations, estimates, forecasts and projections about Hydro One’s business and the industry in which Hydro One operat
Slide 34: Contact
Contact Omar Javed Vice President, Investor Relations omar.javed@HydroOne.com (416) 345-5943 HydroOne.com/InvestorRelations