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Hydro One Releases 2002 Year End Financial Results

Toronto, February 14, 2003 - Hydro One Inc. today released its 2002 year end results, which show net income of $344 million and revenues of $4,044 million.

Revenue increased $578 million or 17%, over last year, to $4,044 million for the year ended December 31, 2002. The increase in revenue was primarily due to the growth in Hydro One's service territory and high electricity consumption resulting from the unusually hot weather conditions experienced last spring and summer. Acquisitions of local distribution companies in 2001 and a requirement to serve customers previously billed by Ontario Power Generation resulted in the growth of Hydro One's service territory.

The extreme weather conditions in 2002 resulted in unusually high costs for corrective maintenance on the company's transmission system and the larger distribution system. Hydro One incurred other one time costs including those for a recent staff reduction program and for the 2002 portion of the amalgamation of regional operating centres. The one time events in 2002 contributed to the increase of $8 million or 1% in total operating, maintenance and administration costs of $832 million.

"We restructured the organization and streamlined management to ensure a greater emphasis on day-to-day operations and finding efficiencies. The changes we've made to become more efficient allowed us to partially overcome the cost pressures we faced this year due to weather and our lower distribution rates. We're focussed on delivering Ontario's electricity safely and reliably," said Tom Parkinson, President, Hydro One Inc.

As part of electricity industry restructuring in Ontario, the Ontario Energy Board approved lower distribution rates for Hydro One to help offset other energy cost pressures customers were facing. This initiative, which affects net income for 2002 and 2003, significantly contributed to the year over year decrease in 2002 net income of $30 million, or 8%, to $344 million. In addition, the recent rate cap implemented by the Government of Ontario means that Hydro One will continue to collect lower distribution revenues until at least 2006. Hydro One's new organizational changes and cost cutting will continue to mitigate this impact on net income. Higher transmission and distribution revenues also partially offset the decrease in net income in 2002.

Hydro One made dividend payments to the Government of Ontario of $192 million in 2002.

Hydro One Inc. is a holding company that operates through its subsidiaries in electricity transmission and distribution and telecom businesses. One of its subsidiaries, Hydro One Networks Inc., operates one of the largest transmission and distribution systems in North America. Hydro One Inc. is wholly-owned by the Ontario government.

Hydro One's Annual Consolidated Financial Statements and Management Discussion and Analysis can be accessed through the following link: http://www.hydroone.com/en/investor_centre/annual_reports/

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For further information, please contact:

Anne Creighton,
Director, Corporate Communications
416-345-6072