Hydro One Limited · TSX:H
Hydro One — Investor Presentation (November 2018)
30 slides from Hydro One's investor presentation, November 2018
Slide 1: Investor Overview Post Third Quarter 2018
INVESTOR OVERVIEW Post Third Quarter 2018
Slide 2: Agenda
AGENDA • Business Update • Company Overview • Regulatory Framework • Appendix Investor Overview – Post Third Quarter 2018 2
Slide 3: Business Update
BUSINESS UPDATE
Slide 4: Recent Developments
RECENT DEVELOPMENTS Organization Priorities • Hydro One and Avista mutually agree to terminate merger agreement. • As required by the merger agreement, Hydro One will pay Avista a US$103 million termination fee as a result of the termination of the merger agreement. • Favourable weather coupled with
Slide 5: Company Overview
COMPANY OVERVIEW
Slide 6: The Value of Hydro One
THE VALUE OF HYDRO ONE ABOUT THE COMPANY HOW WE DID IN 2017 WHY INVEST Transmission Distribution Other Transmission & Distribution Stable Operations 1% 30,000 circuit KM’s of transmission Revenue Net of Purchased Power Stable and growing cash flows lines across 98% of Ontario with 99% of overall bus
Slide 7: Executive Leadership Team
EXECUTIVE LEADERSHIP TEAM A leadership team with demonstrated experience transforming organizations and growing shareholder value. Paul Dobson Acting President and CEO Jason Fitzsimmons Greg Kiraly Chris Lopez Judy McKellar Patrick Meneley Jamie Scarlett Chief Corporate Affairs Chief Operating Offic
Slide 8: A Look at the Organization
A LOOK AT THE ORGANIZATION Corporate Structure Public Company TSX: H Hydro One Limited Public Debt Issuer Hydro One Inc. Hydro One Remote Hydro One Networks Inc. Hydro One Telecom Inc. Communities Inc. Rate-Regulated Businesses (99% of revenue) Non-Rate-Regulated Business Our Role in the Electricity
Slide 9: Purpose, Values & Strategy
PURPOSE, VALUES & STRATEGY Investor Overview – Post Third Quarter 2018 9
Slide 10: Achievements and Efficiencies
ACHIEVEMENTS AND EFFICIENCIES Paving New Paths in Productivity Savings ($M) • Generated productivity savings totaling $89.5 million in 2017 ($43.6 million in 2017 89.5 OM&A and $45.9 million in capital) $114.4M • Move to Mobile transformed work 2016 24.9 processes and implemented technology that aut
Slide 11: The Regulated Business
THE REGULATED BUSINESS Transmission & Distribution Transmission • Hydro One owns and operating 98% of Ontario’s transmission capacity LDC Customers • Transmission produces reliable cash flow with low volatility under 43 Ontario Energy Board (OEB) cost of service regulation and will transition to inc
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
$10B OF CAPITAL INVESTMENT DRIVING RATE BASE GROWTH Consistent and predictable organic growth profile underpinned by required replacement of aging infrastructure Projected Capital Investments* ($M) Projected Rate Base Growth* $2,205 $2,209 $1,993 $24,082 $1,810 $22,918 $20,697 $21,807 $1,651 $719 $8
Slide 14: Infrastructure Investments
INFRASTRUCTURE INVESTMENTS Clarington Transmission Station Richview Transmission Station Estimated Total Project Cost: $2401 million Estimated Total Project Cost: $104 million Capital Cost To Date: $235 million Capital Cost To Date: $96 million Anticipated In-Service Date: 2018 Anticipated In-Servic
Slide 15: Strong Balance Sheet and Liquidity
STRONG BALANCE SHEET AND LIQUIDITY Investment grade balance sheet with one of lowest debt costs in utility sector Significant Available Liquidity ($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 (Canada) 17% Index MSCI World (Canada) S&P/TSX Composite Institutional Low Volatility Index Retail Dow Jones Canada Select S&P/TSX Utilities Index 83% 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 increased to $0.23 per share ($0.92 annualized) Yield1 4.7% • Targeted dividend payout ratio remains Annualized Dividend2,3 $0.92 / share at 70% - 80% of
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 • Filed March 31, 2017 under OEB’s Custom Incentive Rate Making model for 2018
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 $52
Slide 23: Delivering Clean and Sustainable Energy
DELIVERING CLEAN AND SUSTAINABLE ENERGY Transmitting and delivering some of the cleanest energy in North America • Ontario was the first North American jurisdiction to fully eliminate coal electricity generation and leads Canada in wind and solar capacity • Recent five year Ontario Climate Change Ac
Slide 24: Why Invest in Hydro One
WHY INVEST IN HYDRO ONE A unique low-risk opportunity to participate in the transformation of a premium, large scale regulated electric utility • One of the largest electric utilities in North America with significant scale and leadership position across Canada’s most populated province • Unique com
Slide 25: Appendix
APPENDIX
Slide 26: 3Q18 Financial Summary
HYDRO ONE LIMITED 3Q18 FINANCIAL SUMMARY Third Quarter YTD ($ millions) 2018 2017 % Change 2018 2017 % Change Revenue Transmission $493 $471 4.7% $1,344 $1,199 12.1% Distribution 1,103 1,040 6.1% 3,284 3,317 (1.0%) Distribution (Net of Purchased Power) 370 365 1.4% 1,126 1,104 2.0% Other 10 11 (9.1%
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 $551 million $54 million Transmission Reinforcement Southwestern Ontario line and station
Slide 28: Independent Board of Directors
INDEPENDENT BOARD OF DIRECTORS Tom Woods Currently a Director of Bank of America Corporation, Alberta Investment Timothy Hodgson Currently Managing Partner of Alignvest Capital Management. Management Corporation, Providence St. Joseph’s St. Michael’s Health Care (Board Chair) Previously, Special Adv
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 Third Quarter 2018 30