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Hydro One maintains strong performance in first half of 2003

Toronto, August 6, 2003 - Hydro One Inc. today released its second quarter results, which show net income of $85 million for the second quarter and $224 million for the six months ended June 30, 2003.

Compared to the first six months in 2002, net income increased by $19 million, or 9%. Two primary factors contributed to this increase. The first was the higher demand for electricity created by Ontario's cold winter and the second was the positive impact on earnings related to the sale of the competitive retail operations in April 2002. These factors were partially offset by higher planned and corrective maintenance expenditures to the transmission and distribution systems, including an expanded forestry program.

Second quarter net income decreased by $14 million, or 14%, compared to 2002. This was due primarily to the increase in maintenance expenditures, partially offset by the sale of the competitive retail operations. Decreased net income for the second quarter over the first quarter also reflects lower demand. Demand for electricity is highest in the first and third quarters due to seasonal variations in weather.

For the six months ended June 30, 2003, total revenue increased by $165 million to $2,100 million compared to last year. Revenue was up primarily because of the increase in large customers served by Hydro One and the higher demand for electricity this winter. Net cash from operations was $477 million in the first six months of 2003. During this period, the Company has paid $125 million in dividends to the Province and invested $234 million in capital expenditures, primarily to enhance and reinforce the transmission and distribution systems.

"The financial results are consistent with expectations", said Tom Parkinson, President and Chief Executive Officer of Hydro One. "Our commitment to stable financial performance goes hand in hand with our commitment to continually improve the performance of Ontario's electricity delivery system. Investing in our core wires business is our focus," added Parkinson.

Highlights

• Effective June 4, 2003, the Province appointed Rita Burak as interim Chair of the Board of Directors. Prior to assuming the position of Chair, Ms. Burak was Vice-Chair of the Hydro One Board, and is also a member of the Board of the Equitable Life Insurance Company of Canada and the University Health Network. Ms. Burak is also a Vice-Chair of the University of Guelph and serves on the Ontario government's panel on the role of government and the federal government's External Advisory Committee on Smart Regulation.
• Hydro One successfully issued $500 million 5-year notes on June 23, 2003. The issue received strong support from investors.
  

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