Hydro One Limited · TSX:H
Hydro One — Debt Investor Presentation (March 2013)
22 slides from Hydro One's debt investor presentation, Mar 5, 2013
Slide 1: Investor Presentation
Investor Presentation March 5, 2013
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 • Industry Update • Regulatory 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 • $10.4B in assets • $7.3B in assets • 28,942 km network - over 97% of • 120,514 km system – spans 75%
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 & Code Conditions Proposed Merged Entity Rate Orders Licence & Code Conditions Enabling Legislation Integrated Power (OEB Act / Electricity Act) System Plan (IPSP) Market Rules Appoints Board Ownership Ministry of Energy Enabling Legislation
Slide 7: Regulatory Update
6 Regulatory Update • Transmission and Distribution Rate Settlements • Transmission project development process • Renewing of regulatory framework • The Report of the Ontario Distribution Sector Review Panel – Renewing Ontario’s Electricity Sector: Putting the Consumer First. • US GAAP
Slide 8: Capital Program - Outline
7 Capital Program - Outline • Sustaining and other investments • Asset analytics tool • Development • Capital program budget and trends • Potential changes to program
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 rela
Slide 10: Asset Analytics
Asset Analytics 9 • Hydro One has made a significant investment in SAP • Asset analytic tool developed • Real time data and asset analytic capability for prudent investment decisions
Slide 11: Capital Program: System Development
10 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 ADS (smart grid)
Slide 12: Capital Program: Capital Expenditures
11 Capital Program Capital Expenditures System investment driven by: 2000 • Sustaining and other 1500 investments $ millions • System development 1000 500 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sustaining System Development Other
Slide 13: Capital Program: Potential changes to capital expenditures
12 Capital Program Potential changes to capital expenditures • IPSP / MOE consultations • Transmission project development process • Timing of approvals • Distribution rationalization
Slide 14: 2012 Consolidated Financial Results
13 2012 Consolidated Financial Results ($M) 2012 2011 Change (%) Revenues 5,728 5,471 5 Purchased power 2,774 2,628 6 Operating costs 1,730 1,708 1 Net income 745 641 16 Dividends paid 370 168 120
Slide 15: Credit Ratings
14 Credit Ratings Long-term Credit Ratings S&P - A+ (negative outlook) Moody’s - A1 DBRS - A (high) • On April 25, 2012, S&P revised Hydro One’s outlook to negative from stable Action related to the change in outlook for the Province of Ontario • On April 27, 2012, Moody’s downgraded Hydro One’s sen
Slide 16: Stable Financial Performance
15 Stable Financial Performance • Stable regulatory environment • Continued focus on operations • Organic growth opportunities • Financial metrics supportive of credit quality Net Income FFO/ Interest Coverage 5x 700 600 4x 500 3x $ millions 400 300 2x 200 1x 100 0 2004 2005 2006 2007 2008 2009 2010
Slide 17: Financing
16 Financing • Borrowing proceeds used to: – Repay debt maturities – Fund developmental capital • $1B CP program to bridge requirements – Large CP dealer group • $3B MTN shelf main platform maturing September 2013. – Plan to renew in Q2 as a Global MTN shelf
Slide 18: Liquidity
17 Liquidity • $1.5B of liquidity supporting CP program and financing needs – $1.25B syndicated bank line maturing June 2017 – $250M Liquid Reserve Fund (LRF)
Slide 19: Funding Objectives
18 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 20: Long-term Debt Maturities
$ millions 0 100 200 300 400 500 600 700 800 2012 2014 2016 2018 2020 2022 2024 2026 $250M liquid reserve fund 2028 2030 2032 2034 2036 2038 2040 Long-term Debt Maturities 2042 2044 2046 2048 2050 2052 2054 2056 2058 2060 2062 19
Slide 21: Summary
20 Summary • Stable financial performance • Going forward: – Continued focus on core wires business in Ontario – Growth opportunities through infrastructure investments – Financing requirements for debt maturities and developmental capital – Maintain capital structure, credit quality
Slide 22: Hydro One
HYDRO ONE