Mr. David Lebeter reports

HYDRO ONE REPORTS THIRD QUARTER RESULTS

Hydro One Ltd. has released its financial and operating results for the third quarter ended Sept. 30, 2023.

Third quarter highlights:

• Third quarter basic EPS (earnings per share) of 60 cents was 17.6 per cent higher compared with EPS of 51 cents 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) approved 2023 transmission rates, higher average monthly peak demand and lower income tax expense, partially offset by higher financing charges.
• Hydro One employees raised a record amount of approximately $2-million in donations for more than 800 registered Canadian charities through the Power to Give campaign in September.
• Hydro One was awarded the gold-level certification from the Canadian Council for Aboriginal Business (CCAB) recognizing its commitment and efforts to build a strong, lasting and mutually beneficial relationship with indigenous communities;
• Subsequent to quarter-end, the company was awarded the construction of three new priority transmission lines to meet the growing electricity demand in Northeastern Ontario and Eastern Ontario.
• Hydro One and the Power Workers' Union (PWU) ratified two collective agreements covering employees in front line and customer-facing roles across the company's operations. The company and the Society of United Professionals also ratified a collective agreement covering employees in engineering, supervisory and administrative roles.
• The company priced an offering of $425-million aggregate principal amount of floating-rate medium-term notes under its sustainable financing framework. Subsequent to the quarter, the company issued an additional $400-million medium-term notes under the framework.
• The company's capital investments and in-service additions for the quarter were $638-million and $699-million, respectively, compared with $501-million and $401-million in 2022.
• The company declared a quarterly dividend at 29.64 cents per share, payable Dec. 29, 2023.

"During the quarter, we were honoured with the gold-level certification from the CCAB, which demonstrates the strong commitment and efforts to build mutually beneficial relationships with indigenous partners. Also in the quarter, our employees answered the challenge and raised a record amount in donations through our Power to Give campaign in September, which will benefit various charities," said David Lebeter, president and chief executive officer of Hydro One. "Lastly, the awarding of the three new transmission lines further supports our commitment to enabling economic growth and a clean energy future in Ontario."

Key financial highlights

2023 third quarter highlights

The company reported net income attributable to common shareholders of $357-million during the quarter, compared with $307-million in the same period of 2022. This resulted in EPS of 60 cents, compared with EPS of 51 cents in the prior year.

Revenues, net of purchased power of $1.08-billion for the third quarter, were $12-million higher than revenues, net of purchased power, for the third quarter of 2022. The increase is mainly due to revenues resulting from OEB-approved 2023 transmission rates and higher average monthly peak demand. Revenue also increased year over year as a result of the OEB-approved recovery of historical cost deferrals recognized as regulatory assets in prior periods, which are offset by higher OM&A (operating, maintenance and administrative) and income tax expense and net income neutral in the period. These increases were partially offset by the cessation of the OEB-approved recovery of deferred tax asset amounts previously shared with rate payers on June 30, 2023, and regulatory adjustments, including those associated with the capitalized overhead tax variance, both of which are offset by a decrease in income tax expense and net income neutral in the period.

OM&A costs in the third quarter of 2023 were slightly lower than the prior year, which, once adjusted for net income neutral items, were slightly higher year over year as a result of higher work program expenditures, including information technology initiatives and emergency restoration.

Financing charges in the third quarter of 2023 were higher than the prior year resulting from higher weighted-average interest rates on long-term debt and short-term notes, partially offset by higher capitalized interest due to a higher average balance of assets under construction.

Depreciation, amortization and asset removal costs for the third quarter of 2023 were higher than the same period of the prior year, primarily due to 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 third quarter of 2023 was lower than the prior year primarily due to the cessation of the deferred tax asset (DTA) recovery period and regulatory adjustments associated with capitalized overhead tax variance, which are offset in revenue and net income neutral and higher deductible timing differences. These impacts are partially offset by higher pretax income year over year when adjusted for the net income neutral items.

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 $638-million during the third quarter of 2023 and placed $699-million of new assets in service.

Selected operating highlights

Hydro One was awarded the gold-level certification from the CCAB, recognizing its commitment and efforts to build a strong, lasting and mutually beneficial relationship with indigenous communities. The company advanced from its silver-level certification in 2020.

Subsequent to quarter-end, Hydro One was awarded the right to develop and construct three new priority transmission lines to meet growing electricity demand in Northeastern Ontario and Eastern Ontario. Hydro One and first nations have been collaborating on early planning and will advance the development and construction phases of the projects together. First nations have the opportunity to invest in a 50-per-cent equity stake in the transmission line component of the projects once complete through Hydro One's equity partnership model. The three priority transmission lines will meet the needs of new and growing industries and help attract future jobs in these regions.

Hydro One and the PWU ratified two collective agreements covering employees in front line and customer-facing roles. The company and the Society of United Professionals also ratified a collective agreement covering employees in engineering, supervisory and administrative roles. All three agreements will be in effect until Sept. 30, 2025.

The company's wholly owned subsidiary, Hydro One Inc., raised $425-million of floating-rate medium-term notes, Series 56, due 2026. They bear interest at daily compounded CORRA (Canadian overnight repo rate average) plus 0.50 per cent, payable quarterly in arrears. The offering represents the company's second issuance of medium-term notes in 2023 under its sustainable financing framework. The issuance is also the first green floating-rate notes by a corporate issuer in Canada. Subsequent to the quarter, the company raised $400-million from 5.54 per cent medium-term notes, Series 57, due 2025. The offering is the third issuance under the framework and second issuance of green bonds. The company intends to use its sustainable financing framework to finance and/or refinance, in whole or in part, new and/or existing eligible green projects that meet the eligibility criteria under the framework.

Common share dividends

Following the conclusion of the third quarter, on Nov. 7, 2023, the company declared a quarterly cash dividend to common shareholders of 29.64 cents per share to be paid on Dec. 29, 2023, to shareholders of record on Dec. 13, 2023.

This press release should be read in conjunction with the company's third quarter 2023 unaudited consolidated financial statements and MD&A (management discussion and analysis). These financial statements and MD&A, together with additional information about Hydro One, including the audited consolidated financial statements and MD&A for the year ended Dec. 31, 2022, can be accessed on Hydro One's website and on SEDAR+.

Quarterly investment community teleconference

The company's third quarter 2023 results teleconference with the investment community will be held on Nov. 8, 2023, at 8 a.m. ET, a webcast of which will be available on Hydro One's website. Members of the financial community wishing to ask questions during the call should access Hydro One's third quarter 2023 results call on-line prior to the scheduled start time. Media and other interested parties are welcome to participate on a listen-only basis. A webcast of the teleconference will be available on-line 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 $31.5-billion in assets as at Dec. 31, 2022, and annual revenues in 2022 of approximately $7.8-billion.

The company's team of approximately 9,300 skilled and dedicated employees proudly build and maintain a safe and reliable electricity system, which is essential to supporting strong and successful communities. In 2022, Hydro One invested approximately $2.1-billion in its transmission and distribution networks and supported the economy through buying approximately $1.9-billion of goods and services.

The company is committed to the communities where it lives and works through community investment, sustainability and diversity initiatives. Hydro One is designated as a sustainable electricity leader by Electricity Canada.

Hydro One's common shares are listed on the Toronto Stock Exchange and certain of Hydro One's medium-term notes are listed on the New York Stock Exchange.

We seek Safe Harbor.