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Hydro One announces third quarter financial results

Toronto, November 5, 2003 - Hydro One Inc. today released its third quarter results, which show net income of $93 million for the third quarter and $317 million for the nine months ended September 30, 2003.

Compared to the first nine months of 2002, net income was unchanged even though a rate cap has been in place since November of last year. There has been a positive impact on earnings from the higher demand for electricity as a result of Ontario's cold winter and the sale of the competitive retail operations in April 2002. This has been offset by the effect of this summer's cooler temperatures compared to the abnormally hot temperatures of the summer of 2002, as well as a larger work program and related costs. In 2003, investments increased in transmission lines and stations maintenance programs, as well as in the distribution forestry program. This work is being done to maintain the reliability of the systems.

On August 14th, a major loss of electric load occurred in the Mid-west and Northeast US and eastern Canada, including most of Ontario. We did not experience any significant damage to our equipment or system infrastructure as a result of the outage. Our efforts were focused on restoring power on a priority basis.

Third quarter net income decreased by $19 million, or 17 per cent, compared to the same period in 2002. The cooler summer temperatures relative to last year have resulted in lower transmission revenues.

For the nine months ended September 30, 2003, total revenue increased by $17 million, or 1 per cent, compared to last year. Revenue was higher primarily due to an increase in large customers served by the distribution business, partially offset by lower prices for purchased power and the reduction in transmission revenues. Net cash from operations was $815 million in the first nine months of 2003.

"Maintaining consistent financial performance is a top priority for Hydro One and we have achieved that in the first three quarters of this year. We met this goal while continuing to deliver a high level of service to our customers," said Tom Parkinson, President and Chief Executive Officer of Hydro One. "The August 14th power outage tested the resiliency of our system and the skill and dedication of our staff, and both came through with flying colours. Our people played an instrumental role in the timely restoration of the power grid and they should be commended for a job well done."

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