Slide 1: Investor Overview Post Second Quarter 2018
INVESTOR OVERVIEW Post Second Quarter 2018
Slide 2: Agenda
AGENDA • Business Update • Company Overview • Regulatory Framework • Appendix Investor Overview – Post Second Quarter 2018 2
Slide 3: Business Update
ESS UPDATE }) <S yy, C\ be VK 4 Le ZIN SS Ty RSI l wv * rev AWAN
Slide 4: Recent Developments
RECENT DEVELOPMENTS Organization Priorities • Earnings per share (EPS) of $0.34 and adjusted EPS of $0.33, compared to $0.20 in the prior year, reflecting Ontario Energy Board’s (OEB) decision on transmission rates and favourable weather. • Hydro One and the Province of Ontario entered into an agree
Slide 5: Company Overview
COMPANY OVERVIEW
Slide 6: The Value of Hydro One
THE VALUE OF HYDRO ONE ABOUT THE COMPANY HOW WE DID IN 2017 WHY INVEST Transmission Distribution Other Transmission & Distribution Stable Operations 1% 30,000 circuit KM’s of transmission Revenue Net of Purchased Power Stable and growing cash flows lines across 98% of Ontario with 99% of overall bus
Slide 7: Executive Leadership Team
EXECUTIVE LEADERSHIP TEAM A leadership team with demonstrated experience transforming organizations and growing shareholder value. Paul Dobson Acting President and CEO Greg Kiraly Chris Lopez Judy McKellar Patrick Meneley Jason Fitzsimmons Jamie Scarlett Chief Operating Officer Acting EVP, Chief Hum
Slide 8: A Look at the Organization
A LOOK AT THE ORGANIZATION Corporate Structure Public Company TSX: H Hydro One Limited Public Debt Issuer Hydro One Inc. Hydro One Networks Hydro One Remote Hydro One Telecom Inc. Communities Inc. Inc. Rate-Regulated Businesses (99% of revenue) Non-Rate-Regulated Business Our Role in the Electricity
Slide 9: Purpose, Values & Strategy
PURPOSE, VALUES & STRATEGY Investor Overview – Post Second Quarter 2018 9
Slide 10: Achievements and Efficiencies
ACHIEVEMENTS AND EFFICIENCIES Paving New Paths in Productivity Savings ($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 43 • Transmission produces reliable cash flow with low volatility under Ontario Energy Board (OEB) cost of service regulation and will Large Directly Co
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 $1,968 $1,993 $24,082 $22,918 $21,807 $1,651 $719 $19,724 $2
Slide 14: Infrastructure Investments
INFRASTRUCTURE INVESTMENTS Clarington Transmission Station Richview Transmission Station Estimated Total Project Cost: $2451 million Estimated Total Project Cost: $102 million Capital Cost To Date: $232 million Capital Cost To Date: $92 million Anticipated In-Service Date: 2018 Anticipated In-Servic
Slide 15: Pending Avista Acquisition
PENDING AVISTA ACQUISITION Growing regulated business with a geographically diverse customer base, supported by one of the lowest electricity rates in the US Avista Business Overview Service Area (C$ in mm)3 2016A Service territories across WA, OR, ID, AK, and MT Revenue $1,824 Vancouver BC EBITDA $
Slide 16: Pending Avista Acquisition
PENDING AVISTA ACQUISITION Hydro One will become a Top 20 North American investor owned utility with an attractive growth profile Strategic Rationale & Transaction Details Allowed ROE Equity Capitalization Diversification • Increases geographic, economic, regulatory and asset class ON 9.00% 40.00% A
Slide 17: Pending Avista Acquisition
PENDING AVISTA ACQUISITION (C$ in mm) Diversification across multiple geographies, economies, regulatory jurisdictions and utility businesses enhances stability and strategic positioning ’16 Rate Base ’16 Rate Base by Geography ’16 Net Income Ontario, Ontario, 100% 100% $17,831 $721 Hydro One $17,83
Slide 18: Ontario Business Development
ONTARIO BUSINESS DEVELOPMENT Finding growth opportunities in Ontario Lake Superior Link Key points • Applied to the OEB to construct a new transmission line between Lakehead and Wawa • Project cost to be roughly $636 million, which is over $100 million lower than other proponents • Annual OM&A costs
Slide 19: Strong Balance Sheet and Liquidity
STRONG BALANCE SHEET AND LIQUIDITY Investment grade balance sheet with one of lowest debt costs in utility sector Significant Available Liquidity ($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 20: Equity Market Cap Overview
EQUITY MARKET CAP OVERVIEW Approximate Ownership of Public Float Equity Index Inclusions S&P/TSX Composite Index FTSE All-World (Canada) 37% MSCI World (Canada) S&P/TSX Composite Institutional Low Volatility Index 63% Retail Dow Jones Canada Select S&P/TSX Utilities Index Utilities S&P/TSX Composite
Slide 21: 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 4.6% • Targeted dividend payout ratio Annualized Dividend2,3 $0.92 / share remains at 70% - 80% of
Slide 22: Regulatory Framework
REGULATORY FRAMEWORK
Slide 23: 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 24: 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 25: 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 26: 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 $52
Slide 27: Delivering Clean and Sustainable Energy
DELIVERING CLEAN AND SUSTAINABLE ENERGY Transmitting and delivering some of the cleanest energy in North America • Ontario was the first North American jurisdiction to fully eliminate coal electricity generation and leads Canada in wind and solar capacity • Recent five year Ontario Climate Change Ac
Slide 28: Why Invest in Hydro One
WHY INVEST IN HYDRO ONE A unique low-risk opportunity to participate in the transformation of a premium, large scale regulated electric utility • One of the largest electric utilities in North America with significant scale and leadership position across Canada’s most populated province • Unique com
Slide 29: Appendix
APPENDIX
Slide 30: 2Q18 Financial Summary
HYDRO ONE LIMITED 2Q18 FINANCIAL SUMMARY Second Quarter YTD ($ millions) 2018 2017 % Change 2018 2017 % Change Revenue Transmission $430 $361 19.1% $851 $728 16.9% Distribution 1,036 998 3.8% 2,181 2,277 (4.2%) Distribution (Net of Purchased Power) 362 349 3.7% 756 739 2.3% Other 11 12 (8.3%) 21 24
Slide 31: 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 $561 million $53 million Transmission Reinforcement Southwestern Ontario line and station
Slide 32: 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. Previously, Management Corporation, Providence St. Joseph’s St. Michael’s Health Care (Board Chair) and Special
Slide 33: 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 34: Contact
CONTACT Omar Javed Vice President, Investor Relations ojaved@HydroOne.com (416) 345-5943 HydroOne.com/InvestorRelations Investor Overview – Post Second Quarter 2018 34