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Hydro One announces increase in first quarter net income

Toronto, May 7, 2003 - Hydro One Inc. today released its first quarter results which show net income of $139 million, an increase of $33 million or 31 per cent over the first three months of last year.

The increase in net income is primarily related to high demand for electricity this quarter and to transmission revenue which now fluctuates with demand compared to the first quarter of 2002 when, prior to market opening, transmission revenue was based on a fixed monthly amount. Net income also reflects the increase in distribution revenues attributable to demand as well as the increase in distribution rates that came into effect on March 1, 2002.

"Our results this quarter demonstrate our commitment to ensure stability in Hydro One’s operations and financial results. Our emphasis on operational efficiency has allowed us to ensure Hydro One remains on a sound commercial footing. We will continue to focus on productivity improvements like our new consolidated operating centre," said Tom Parkinson, President and Chief Executive Officer of Hydro One.

Total revenue increased by $125 million to $1,147 million compared to last year. Revenue was up primarily because of the increase in large customers served by Hydro One and the high demand for electricity this winter. Net cash from operations was $252 million in the first quarter. During the three months ended March 31, 2003, the company has paid $65 million in dividends from retained earnings to the Province and invested $94 million in capital expenditures, primarily in transmission and distribution.

Highlights

• Tom Parkinson was appointed President and Chief Executive Officer of Hydro One effective January 21, 2003, after serving as our President and Chief Operating Officer since July, 2002. On April 16, 2003, Tom was also appointed to our Board of Directors.
• Hydro One successfully issued $250 million 40 year notes on April 22, 2003, joining a short list of Canadian companies who have issued at terms longer than 30 years.

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.

Management's Discussion and Analysis

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For further information, please contact:

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