Mr. David Lebeter reports

HYDRO ONE REPORTS FOURTH QUARTER RESULTS

Hydro One Ltd. has released its financial and operating results for the fourth quarter ended Dec. 31, 2023.

Fourth quarter highlights:

• Fourth quarter basic earnings per share (EPS) of 30 cents was comparable with EPS of 30 cents for the same period in 2022. For the full year, basic EPS of $1.81 was 3.4 per cent higher than basic EPS of $1.75 in 2022.
• EPS for the quarter was unchanged year-over-year largely due to higher average monthly peak demand and energy consumption, as well as higher revenues resulting from OEB-approved (Ontario Energy Board) 2023 transmission rates, offset by higher financing charges and depreciation expense, as well as the impact of regulatory adjustments, including the recognition of conservation and demand management (CDM) revenues in the prior year and higher earnings sharing in the current period.
• In line with incentive rate-making and for the benefit of Ontario ratepayers, Hydro One rebased productivity as part of the joint rate application (JRAP). For 2023, Hydro One achieved $114-million of annual productivity savings. These efficiencies coincide with the current rate application period to date.
• Hydro One continued to expand its network of strategic partnerships through the signing of a partnership agreement with Five Nations Development Inc., a wholly owned subsidiary of Five Nations Energy Inc., to work together to maximize indigenous participation in the energy sector.
• Hydro One was recognized as one of Canada's Best Employers for 2024 by Forbes for the ninth consecutive year.
• Hydro One and the Canadian Council for Aboriginal Business (CCAB) announced the 10 recipients of the Hydro One Indigenous Entrepreneurship Grant.
• During the quarter, Hydro One Inc., a subsidiary of the company, priced and issued $900-million aggregate principal amount of medium-term notes (MTN), under the company's sustainable financing framework.
• Subsequent to the quarter-end, Hydro One issued an additional $800-million aggregate principal amount of MTN under the framework.
• Subsequent to quarter-end, Hydro One restored power to more than 125,000 customers during a January storm.
• Subsequent to quarter-end, the company announced that Chris Lopez, chief financial and regulatory officer, intends to step down to pursue other opportunities as of June 30, 2024.
• The company's capital investments and in-service additions for the year were $2,531-million and $2,324-million, respectively, compared with $2,132-million and $2,267-million in 2022.
• Quarterly dividend declared at 29.64 cents per share, payable March 28, 2024.

"Our approach to building critical transmission infrastructure to meet the growing electricity demand in Ontario continues to be underpinned by a genuine commitment to developing strategic partnerships with first nations, communities, government and industry," said David Lebeter, president and chief executive officer of Hydro One. "This commitment remains at the heart of everything we do and demonstrates our efforts to building mutually beneficial relationships that benefit from our strategic investments in energy infrastructure."

Key financial highlights

2023 fourth quarter highlights

The company reported net income attributable to common shareholders of $181-million during the quarter, compared with $178-million in the same period of 2022. This resulted in EPS of 30 cents, which is consistent with the prior year.

Revenues of $1,979-million for the fourth quarter were $117-million higher than revenues for the fourth quarter of 2022. Revenues, net of purchased power of $989-million for the fourth quarter, were $22-million higher than revenues, net of purchased power for the fourth quarter of 2022. The increase, when adjusted for net income neutral items, is mainly attributable to higher average monthly peak demand and energy consumption, as well as higher revenues resulting from OEB-approved 2023 transmission rates, partially offset by regulatory adjustments, including the recognition of CDM revenues following receipt of the JRAP decision in the prior year and higher earnings sharing in the current period.

Operation, maintenance and administration (OM&A) costs in the fourth quarter of 2023 were slightly higher than the prior year which, once adjusted for net income neutral items, primarily results from an increase in forecast environmental expenditures provisioned in the current period, partially offset by lower corporate support costs primarily attributable to higher capitalized overheads associated with volume of capital activity.

Financing charges in the fourth quarter of 2023 were higher than the prior year primarily due to an increase in the weighted-average interest rate on long-term debt.

Depreciation, amortization and asset removal costs for the fourth quarter of 2023 were higher than the same period of the prior year, primarily due to gains on the disposal of fixed assets recognized in the prior year, as well as higher depreciation resulting from the growth in capital assets as the company continues to place new assets in service, consistent with its continuing capital investment program.

Income tax expense for the fourth quarter of 2023 was lower than the prior year which, once adjusted for net income neutral items, was primarily due to higher deductible timing differences.

Hydro One continues to invest in the reliability and performance of Ontario's electricity transmission and distribution systems by addressing aging power system infrastructure, facilitating connectivity to new load customers and generation sources, and improving service to customers. The company made capital investments of $745-million during the fourth quarter of 2023 and placed $975-million of new assets in service.

2023 annual highlights

For the 12 months ended Dec. 31, 2023, the company reported net income attributable to common shareholders of $1,085-million compared with $1,050-million in 2022, an increase of $35-million compared with the prior year. This resulted in EPS for the period of $1.81 compared with EPS of $1.75 in 2022. Annual results were primarily impacted by the same factors as noted above.

For the full year, the company placed $2,324-million of assets into service in 2023 compared with $2,267-million in 2022.

Selected operating highlights

Hydro One and Five Nations Development, a wholly owned subsidiary of Five Nations Energy, announced the signing of an initial partnership agreement to work together to meet the growing electricity demands in Northeastern Ontario while increasing indigenous participation in the energy sector. A partnership between the two Ontario-based utilities further connects Hydro One and First Nation interests in the planning, development and building of future transmission line projects. It is an innovative approach targeting specific areas for economic advancement with an initial focus in Northeastern Ontario.

Hydro One and the CCAB announced the 10 recipients of the Hydro One Indigenous Entrepreneurship Grant. Grant recipients include indigenous businesses from across Ontario, providing services such as housing, construction, virtual reality and Web development, cultural awareness training, graphic and commercial art, and family reunification.

Hydro One restored power to more than 125,000 customers affected by the damaging high winds that affected parts of western, Southern, Central and Eastern Ontario in January, 2024. The outages were largely caused by severe winds bringing down trees and branches onto distribution lines.

During the fourth quarter, the company's wholly owned subsidiary, Hydro One raised $400-million aggregate principal amount of 5.54 per cent MTN, Series 57, due 2025. Hydro One also issued $500-million aggregate principal amount of 4.85 per cent MTN, Series 58, due 2054. Subsequent to the quarter-end, the company issued $800-million aggregate principal amount of MTN consisting of $550-million aggregate principal amount of 4.39 per cent MTN, Series 59, due 2034, and $250-million aggregate principal amount of 3.93 per cent MTN, Series 53, due 2029. Each of the offerings represented additional issuances of MTN pursuant to the framework. The company intends to allocate an amount equal to the net proceeds from the issuances to finance and/or refinance, in whole or in part, new and/or existing eligible green and social projects that meet the eligible criteria described in the framework.

In January, 2024, Hydro One published its inaugural sustainable bond allocation report outlining the use of proceeds from its $1.05-billion of sustainable bonds issued in 2023 under its sustainable finance framework. The report details the full allocation of proceeds to eligible projects in the clean energy, energy efficiency, clean transportation and biodiversity conservation green categories and the socio-economic advancement of indigenous peoples social categories. A copy of the report is available on Hydro One's website.

Common share dividends

Following the conclusion of the fourth quarter, on Feb. 12, 2024, the company declared a quarterly cash dividend to common shareholders of 29.64 cents per share to be paid on March 28, 2024, to shareholders of record on March 13, 2024.

This press release should be read in conjunction with the company's 2023 consolidated financial statements and management discussion and analysis. These financial statements and MD&A, together with additional information about Hydro One, can be accessed on the Hydro One website and on SEDAR+.

Quarterly investment community teleconference

The company's fourth quarter 2023 results teleconference with the investment community will be held on Feb. 13, 2024, at 8 a.m. ET, a webcast of which will be available on the Hydro One website. Members of the financial community wishing to ask questions during the call should go on-line prior to the scheduled start time to access Hydro One's fourth quarter 2023 results call. Media and other interested parties are welcome to participate on a listen-only basis. A webcast of the teleconference will be available following the call. Additionally, investors should note that, from time to time, Hydro One management presents at brokerage sponsored investor conferences. Most often, but not always, these conferences are webcast by the hosting brokerage firm, and when they are webcast, links are made available on Hydro One's website and are posted generally at least two days before the conference.

About Hydro One Ltd.

Hydro One, through its wholly owned subsidiaries, is Ontario's largest electricity transmission and distribution provider with approximately 1.5 million valued customers, approximately $32.8-billion in assets as at Dec. 31, 2023, and annual revenues in 2023 of approximately $7.8-billion.

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