Hydro One Limited · TSX:H
Hydro One — Investor Presentation (November 2023)
34 slides from Hydro One's investor presentation, November 2023
Slide 1: Investor overview: Post third quarter 2023
Investor overview Post third quarter 2023
Slide 2: Why invest in Hydro One
Why invest in Hydro One A unique low-risk opportunity to participate in the growth 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 the strong
Slide 3: Recent developments: Third Quarter 2023 Highlights
Recent developments Third Quarter 2023 Highlights • Third quarter basic earnings per share (EPS) of $0.60 was 17.6% higher compared to EPS of $0.51 for the same period in 2022. • EPS for the quarter was higher year-over-year largely due to higher revenues resulting from Ontario Energy Board (OEB)-ap
Slide 4: The value of Hydro One
The value of Hydro One About the company How we did in 2022 Why invest Transmission Distribution Other Transmission & Distribution Stable Operations Revenues, Net of Purchased Power4 Total Assets 2% Stable and growing cash flows 1% ~30,000 circuit KMs of with 99% of overall revenues fully transmissi
Slide 5: A look at the organization
A look at the organization Corporate structure Hydro One Limited Public company TSX:H Hydro One Inc. Public debt issuer Hydro One Hydro One Acronym Remote Networks Inc. Solutions Inc. Communities Inc. Rate-regulated business (99% of revenue) Non-rate-regulated business Hydro One • Investor Overview
Slide 6: Executive leadership team
Executive leadership team A leadership team with strong operational experience committed to achieving efficiencies at Hydro One David Lebeter President and CEO Teri French Chris Lopez Andrew Spencer Megan Telford EVP, Safety, Operations and EVP, Chief Financial and EVP, Capital EVP, Strategy, Energy
Slide 7: Hydro One's strategy
Hydro One’s strategy Hydro One • Investor Overview • 7
Slide 8: Achievements and efficiencies
Achievements and efficiencies Paving New Paths in Productivity Savings ($M) 2022 373.6 Generated productivity savings of $373.6 million in 2022 2021 343.9 comprised of $188.9 million in OM&A and $184.7 million in 2020 286.0 capital and totaling approximately $1.5 billion dollars since 2015 2019 202.
Slide 9: The regulated business
The regulated business Transmission Distribution • Transmission produces reliable cash flow with low • Distribution is a stable, rate-regulated business volatility under the OEB Custom IR framework operating under the OEB’s Custom IR framework • OEB-approved 5-year Custom IR application for Transmis
Slide 10: Ontario growth in electricity demand
Ontario growth in electricity demand Canada’s electricity demand expected to grow between 120% - 135% from 2021 to 2050 to achieve Net Zero target • Consumer choices, corporate ESG targets and government policies are driving the electrification of transportation, home heating and heavy industry • Te
Slide 11: Electric Local Distribution Company (LDC) consolidation
Electric Local Distribution Company (LDC) consolidation Announced transaction • Hydro One is the largest LDC in Ontario; 52 LDCs are Hydro One transmission or distribution customers Chapleau Hydro Consolidator Expected close: of Choice • Hydro One has significant scale in Ontario and serves customer
Slide 12: Growth opportunities for the telecom business
Growth opportunities for the telecom business focus on value-added services Network connectivity and access to improve the efficiency and security of Network & Client data communications Internet • Secure SD-WAN • High Performance Network Broadband Connectivity • Internet Transit • Data Centre acces
Slide 13: Sustainability at Hydro One
Sustainability at Hydro One Hydro One is committed to energizing life for people, the planet and communities across Ontario. Note: The above data and highlights are from our 2022 Sustainability Report, available on our website. KPMG has performed a limited assurance on three indicators – executive g
Slide 14: 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 • 36% of Board of Directors are women,
Slide 15: 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 Growth1,2 ($M) 2,834 2,821 2,761 2,693 31,816 2,560 ~6% 30,175 28,
Slide 16: Guidance range
Guidance range $2.26 $2.05 $1.75 $0.05 $0.03 $1.67 $0.06 $1.61 2022 EPS 2022 Gain on Sale of 2022 CDM Revenues 2022 Normalized for Normalizing for 2023 2022 Normalized EPS 2027 Surplus Property one-time items Rebase 1 1) Normalizing for 2023 rebase includes 100 basis points over-earn. 2) EPS growth
Slide 17: Capital investment driving rate base growth
Capital investment driving rate base growth Chatham by Lakeshore Waasigan Transmission Lennox Transmission Station East-West Tie 1 2 3 4 Transmission Line Line Circuit Breaker Replacement Station Expansion Estimated Total Project Cost: $253 million Estimated Total Project Cost: $1.2 billion Estimate
Slide 18: Constructive rate regulator
Constructive rate regulator 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 segments • Reduc
Slide 19: JRAP Expenditure
JRAP Expenditure Agreement on ~$11.8 billion in capital expenditure reflects a balanced settlement for all stakeholders1 2023- 2027 Capital ($M) 2023 Operating, Maintenance, and Administrative ($M) -5% +3% -2% -10% -8% +3% -12% -2% 7,258 7,639 598 629 616 6,877 5,297 5,575 443 434 4,894 421 Transmis
Slide 20: JRAP – Segmented incentive regulatory construct
JRAP – Segmented incentive regulatory construct Distribution Transmission OEB Approved1 OEB Approved1 2023-2027 2023-2027 Rebasing Year 2023 2023 Custom Revenue Cap Index (RCI) by Component (%) Custom Revenue Cap Index (RCI) by Component (%) (A) Inflation Adjustment Factor (A) Inflation Adjustment F
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 $133 per month Pre-Fair Hydro Plan 2017 Monthly Bill- $165 Post Ontario $90 $8 Energy Rebate 2022 Monthly % of Bill $32 Bill- $133 Taxes and OCEB1 14% Electricity Charges 52% $
Slide 22: Strong balance sheet and liquidity
Strong balance sheet and liquidity (as at September 30, 2023) 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 250 Hydro One Limited (HOL) Hydro
Slide 23: Hydro One Sustainable Financing Framework Overview
Hydro One Sustainable Financing Framework Overview Under the Framework, Hydro One may issue Sustainable, Green or Social bonds, loans or commercial paper 1. Use of Proceeds 3. Management Of Proceeds • Clean Energy Process for the evaluation and selection of • Net proceeds will be deposited to Hydro
Slide 24: Equity market cap overview
Equity market cap overview Approximate Ownership Equity Index Inclusions Approximate Geographic of Public Float1 Dispersion of Public Float1 S&P/TSX Composite S&P/TSX Composite FTSE All-World Index Dividend Index (Canada) Canada 38% 36% S&P/TSX 60 Index S&P/TSX Composite MSCI World (Canada) High Div
Slide 25: Common share dividends
Common share dividends Key Points A Growing and Sustainable Dividend4 • Quarterly dividend declared at $0.2964 per common share ($1.1856 annualized) • Targeted dividend payout ratio remains at 70% - 80% of net income 0.13 • Attractive and growing dividend supported by stable, 1.1051 regulated cash f
Slide 26: Appendix
Appendix
Slide 27: JRAP - Investments: Transmission
JRAP - Investments: Transmission Transmission Capital Maintaining the System $M Net 1,600 • Reinvesting in existing infrastructure to maintain 1,500 1,362 1,389 1,373 1,382 38 1,370 the health of the system, sustain performance and 1,400 75 63 53 84 98 107 90 95 address safety and environmental risk
Slide 28: JRAP - Investments: Distribution
JRAP - Investments: Distribution $M Net Distribution Capital New Infrastructure: 1,100 1,040 Modernize infrastructure to detect, 1,000 949 993 991 repair & restore power. 900 921 439 800 Significant investments to accommodate 315 357 437 442 increase in regional load demand 700 (e.g. in the Leamingt
Slide 29: JRAP - Cost of plan
JRAP - Cost of plan1 Investment Cost Average Residential Monthly Bill 3.5% 3.0% 0.7% A typical residential 2.5% customer’s monthly bill will increase by an average of 2.0% 0.7% 0.4% $3.12 1.5% 0.6% 2.5% 1.0% 0.3% 1.6% 1.7% each year over the 0.5% 0.9% 0.8% five-year period. 0.0% 2023 2024 2025 2026
Slide 30: 3Q23 Financial summary
3Q23 Financial summary Third Quarter Year to Date (millions of dollars, except EPS) 2023 2022 % Change 2023 2022 % Change Revenues Transmission 594 562 5.7% 1,708 1,597 7.0% Distribution 1,329 1,458 (8.8%) 4,123 4,289 (3.9%) Distribution Revenues (Net of Purchased Power)1 475 495 (4.0%) 1,461 1,460
Slide 31: 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 32: Independent board of directors
Independent board of directors Timothy Hodgson Cherie Brant David Hay Stacey Mowbray Mitch Panciuk Chair of the Board Director since 2018 Chair of the Indigenous Peoples, Chair of the Audit Committee Director since 2023 Director since 2018 Safety & Operating Committee Director since 2020 Director si
Slide 33: 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 Limited’s (Hydro One or the Company) business and the
Slide 34: Contact
Contact Omar Javed Vice President, Communications, Marketing, & Investor Relations omar.javed@HydroOne.com (416) 345-5943 HydroOne.com/InvestorRelations