Hydro One Limited · TSX:H
Hydro One — Investor Presentation (May 2012)
21 slides from Hydro One's investor presentation, May 14, 2012
Slide 1: Montreal Luncheon
Montreal Luncheon May 14, 2012
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: Industry Update
5 Industry Update • Blue Ribbon Panel – Distribution rationalization – Benchmarking • Merging OPA & IESO Proposed Merged Entity Rate Orders Licence & Code Conditions Market Rules Integrated Power System Plan (IPSP) Legislation & Regulation Ministry of Energy
Slide 7: Regulatory Update
6 Regulatory Update • Transmission and Distribution Rate Applications • Transmission project development process • Renewing of regulatory framework • US GAAP
Slide 8: Capital Program: Capital Expenditures
7 Capital Program Capital Expenditures System investment driven by: 2000 • Sustaining and other 1500 investments $ millions 1000 • System development • Long-term Energy Plan 500 0 2007 2008 2009 2010 2011 2012 2013 2014 Sustaining System Development Other
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 ADS (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 • IPSP / MOE consultations • Transmission project development process • Timing of approvals
Slide 13: 2012 First Quarter Financial Results
12 2012 First Quarter Financial Results ($M) three months ended March 31 2012 2011 Revenues 1,468 1,460 Purchased power 729 719 Operating costs 414 406 Net income 210 212 Dividends Paid 281 42
Slide 14: Credit Ratings
13 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. • On April 27, 2012, Moody’s downgraded Hydro One’s senior unsecured rating to A1 from Aa3.
Slide 15: Stable Financial Performance
14 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 16: Financing
15 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
Slide 17: Liquidity
16 Liquidity Liquidity supporting CP program and financing needs • $1.25B syndicated bank line maturing June 2017 • $250M liquid reserve fund available to 2014
Slide 18: Funding Objectives
17 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 19: Long-term Debt Maturities
$ millions 0 100 200 300 400 500 600 700 800 2012 2014 2016 2018 2020 2022 $250M liquid reserve fund 2024 2026 2028 2030 2032 2034 Long-term Debt Maturities 2036 2038 2040 2042 2044 2046 2048 2050 18
Slide 20: Summary
19 Summary • Stable financial performance • Going forward: – Continued focus on core wires business – Growth opportunities through infrastructure investments – Financing requirements for debt maturities and developmental capital – Maintain capital structure, credit quality
Slide 21: Hydro One
HYDRO ONE