Slide 1: Investor Presentation Q1 2011
Investor Presentation Q1 2011
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 • Regulatory Developments • Capital Program • Financial Performance and Financing • Summary
Slide 4: Who is Hydro One?
3 Who is Hydro One? • Own and operate one of the largest electricity transmission and distribution systems in North America • Essential service regulated utility • Cost of service regulatory regime • No generation exposure • Wholly owned by the Province of Ontario • $7.8B long-term debt outstanding
Slide 5: Ontario Facts
4 Ontario Facts • Half a trillion dollar economy • 13.2 million people • About 40% of Canada’s nominal GDP • Canada’s industrial and financial centre Province of Ontario Long-term Credit Ratings: S&P AA- Moody’s Aa1 DBRS AA(L)
Slide 6: Corporate Structure
5 Corporate Structure Hydro One Hydro One Brampton Hydro One Remote Comm. Hydro One Telecom Networks • Regulated urban • Operates and • Markets excess • Plans, constructs, operates and distribution utility in maintains fibre optic capacity maintains the transmission and Greater Toronto generation an
Slide 7: Corporate History
6 Corporate History April 1, 1999, Ontario Hydro was reorganized into three major successor companies. Up until then, it had a vertically-integrated monopoly as it generated, transmitted and distributed substantially all of the electricity required in Ontario and was also a leading retailer of elect
Slide 8: Regulatory Structure
7 Regulatory Structure Licence & Rate Orders Code Conditions Integrated Power System Plan (IPSP) Market Rules Legislation & Regulation Ministry of Energy
Slide 9: Hydro One at a Glance
8 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 • $9.8B in assets • $6.9B in assets • 28,951 km network - over 96% of • 123,552 km system – spans 75% o
Slide 10: Hydro One – Strategic Plan
9 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 11: Electricity Regulation
10 Electricity Regulation • Cost of service regime – Recent rate decisions • Major projects – leave to construct • Transmission project development process
Slide 12: Capital Program: Capital Expenditures
11 Capital Program Capital Expenditures System investment driven by: • Sustaining and other 2,000 investments 1,500 $ millions • System development 1,000 • Long-term Energy Plan 500 0 2007 2008 2009 2010 2011 2012 2013
Slide 13: Capital Program: Sustaining and Other Investments
12 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 14: Capital Program: System Development
13 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 smart grid
Slide 15: Capital Program: Potential changes to capital expenditures
14 Capital Program Potential changes to capital expenditures • Long-term Energy Plan • Transmission project development process • IFRS • Timing of approvals
Slide 16: 2010 Financial Results
15 2010 Financial Results ($M) Year ended December 31 2010 2009 Revenues 5,124 4,744 Purchased power 2,474 2,326 Operating costs 1,661 1,594 Net income 591 470 Dividends Paid 28 188
Slide 17: Stable Financial Performance
16 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 18: Financing
17 Financing • Borrowing proceeds used to: – Repay debt maturities – Fund developmental capital • $3B MTN shelf main platform maturing August 2011 – $975M remaining • $1B CP program to bridge requirements Long-term Credit Ratings S&P - A+ Moody’s - Aa3 DBRS - A (high)
Slide 19: Liquidity
18 Liquidity Liquidity supporting CP program and financing needs • On June 1, 2010, finalized $1.25B syndicated bank line maturing June 2013 • $250M liquid reserve fund available to 2014
Slide 20: Funding Objectives
19 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 21: Long-term Debt Maturities
20 Long-term Debt Maturities 800 700 $250M liquid reserve fund 600 500 $ millions 400 300 200 100 0 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045 (As at March 8, 2011)
Slide 22: Summary
21 Summary • Stable financial performance • Going forward: – Continued focus on core wires business – Organic growth opportunities through infrastructure investments – Financing requirements for debt maturities and developmental capital – Maintain capital structure, credit quality
Slide 23: Hydro One
HYDRO ONE