Hydro One Limited · TSX:H
Hydro One — Investor Presentation (November 2021)
35 slides from Hydro One's investor presentation, November 2021
Slide 1: Investor overview: Post third quarter 2021
Investor overview Post third quarter 2021 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 Third Quarter Highlights • Third quarter earnings per share (EPS) was $0.50, compared to EPS of $0.47 for the same period in 2020. The increase in EPS was primarily due to approved rates for the transmission and distribution segments as well as the redempt
Slide 4: The value of Hydro One
The value of Hydro One ABOUT THE COMPANY HOW WE DID IN 2020 WHY INVEST Transmission & Distribution Transmission Distribution Other Stable Operations Revenue Net of Purchased Power Total Assets 1% 4% Stable and growing cash flows ~30,000 circuit KMs of transmission lines with 99% of overall business
Slide 5: A look at the organization
A look at the organization Corporate structure Hydro One Ltd. Public company TSX:H Hydro One Inc Public debt issuer Hydro One Hydro One Acronym Remote Networks Inc. Solutions Inc. Communities Inc. Rate-regulated business (99% of revenue) Non-rate-regulated business Hydro One • Investor Overview • 5
Slide 6: Executive leadership team
Executive leadership team A leadership team with strong operational experience committed to achieving efficiencies at Hydro One Mark Poweska President and CEO Brad Bowness Jason Fitzsimmons Lyla Garzouzi Paul Harricks David Lebeter Chris Lopez Megan Telford Chief Information Chief Corporate Affairs
Slide 7: Hydro One’s strategy
Hydro One’s strategy Hydro One • Investor Overview • 7
Slide 8: Achievements and efficiencies
Achievements and efficiencies Paving New Paths in Productivity Savings ($M) 2020 286.0 Generated productivity savings of $286.0 million in 2020 comprised 2019 202.3 of $143.2 million in OM&A and $142.8 million in capital and totaling approximately three quarters of a billion dollars since 2015 2018
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 Managed & Outsourced consultative and operative processes and functions that simplify operations and reduce expenses by leveraging the knowledge and professional resources of industry experts telecommunications • Telecommuni
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 and to partnering with our customers and community stakeholders to build a brighter future for all. Approach to sustainability As a transmission and distribution compa
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 and community stakeholders to build a brighter future for all. A Sustainable Future for All • 50% Board of Directors are women 10%
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) 2,599 2,646 2,646 2,526 2,562 ~6% 31,234 29,795 2,06
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 Leamington Area East-West Tie Station 4 Transmission Reinforcement1,2 Ontario Grid Control Centre Expansion3 Estimated Total Project Cost: $525 million Estimated Capital Investment: $85 million for 2021 Estimated Total Project Cost: $181 million Capital Co
Slide 17: Hydro One responds to COVID-19
Hydro One responds to COVID-19 How our customers are being supported We announced a Pandemic Relief Fund to assist customers affected by the COVID-19 pandemic and offer financial assistance as well as increased payment flexibility to customers. Support with a Small Business Pandemic Relief Program t
Slide 18: Joint Rate Application (JRAP) – 2023-2027
Joint Rate Application (JRAP) – 2023-2027 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 se
Slide 19: 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 Proposed1 Proposed1 2023-2027 2023-2027 Rebasing Year 202
Slide 20: JRAP – Expected next steps
JRAP – Expected next steps Notice of Application Technical Interrogatories Conference 2021 AUG SEP OCT NOV DEC 2022 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Oral Hearing Argument Decision Final Rate Order in Chief & Reply Issued Submission Hydro One • Investor Overview • 20
Slide 21: 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 Rebate 2020 Monthly Bill- $127 % of Bill2 Taxes and OCEB 16% Electricity Charges 56% Regulatory 2% Transmission 7% Distribution 20% Pre-Fair
Slide 22: Strong balance sheet and liquidity
Strong balance sheet and liquidity (as at September 30, 2021) Investment grade balance sheet with one of lowest debt costs in utility sector Significant available liquidity ($M) Strong investment grade debt ratings (long-term/short-term/outlook) Shelf registrations Hydro One Ltd. (HOL) Hydro One Inc
Slide 23: Equity market cap overview
Equity market cap overview Approximate Ownership of Equity Index Inclusions Approximate Geographic Dispersion Public Float2 of Public Float S&P/TSX Composite FTSE All-World Index (Canada) 21% 24% Canada MSCI World S&P/TSX Composite (Canada) Low Volatility Index US 52% Dow Jones Canada S&P/TSX Utilit
Slide 24: Common share dividends
Common share dividends A Growing and Sustainable Dividend4 Key Points • Quarterly dividend declared at $0.2663 per common 0.13 share ($1.0652 annualized) • Targeted dividend payout ratio remains at 70% - 80% of net income 1.0023 0.9545 • Attractive and growing dividend supported by stable, 0.84 0.87
Slide 25: Appendix
Appendix
Slide 26: JRAP - Investments: Transmission
JRAP - Investments: Transmission Maintaining the System $M Net Transmission Capital 1,600 • Reinvesting in existing infrastructure to maintain the 1,500 1,434 1,464 71 1,450 1,462 37 1,448 60 50 health of the system, sustain performance and address 1,400 79 102 86 93 90 91 safety and environmental r
Slide 27: JRAP - Investments: Distribution
JRAP - Investments: Distribution $M Net Distribution Capital New Infrastructure: 1,200 1,121 Modernize infrastructure to detect, repair & restore 1,100 1,072 1,071 1,028 power quicker (improving reliability by ~25% by 1,000 1,005 227 213 204 2027). 900 240 241 Significant investments to accommodate
Slide 28: JRAP - Cost of plan
JRAP - Cost of plan Hydro One’s plan will see the Investment Cost typical customer’s bill increase by Average Residential Monthly Bill $-3.20 $1.89 $2.97 $3.95 $2.78 less than 3.0% 0.6% 2.0% expected inflation. 0.4% 0.5% 0.4% 1.0% 2.0% A typical residential customer’s monthly 0.9% 1.5% 1.4% bill wil
Slide 29: Current - Constructive rate regulator (OEB)
Current - 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 regulatory la
Slide 30: 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 31: 3Q21 Financial summary
3Q21 Financial summary Third Quarter Year-to-Date (millions of dollars, except EPS) 2021 2020 % Change 2021 2020 % Change Revenue Transmission 507 483 5.0% 1,403 1,342 4.5% Distribution 1,395 1,410 (1.1)% 4,012 4,050 (0.9)% Distribution (Net of Purchased Power) 462 417 10.8% 1,347 1,242 8.5% Other 1
Slide 32: 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 33: Independent board of directors
Independent board of directors Timothy Hodgson, MBA, FCPA, ICD.D Corporate Director, Chair of Hydro One Ltd, Chair of Sagicor Financial Company Limited, Director Public Sector Pension Investment Board (PSP Investments), Director Dialogue Health Technologies, Former Director Alignvest Acquisition II
Slide 34: 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 35: Contact
Contact Omar Javed Vice President, Investor Relations ojaved@HydroOne.com (416) 345-5943 HydroOne.com/InvestorRelations