Archives

Hydro One announces third quarter net income

Toronto, October 28, 2004 — Hydro One Inc. today released its third quarter results with net income of $312 million and revenues of $3,079 million for the nine months ended September 30, 2004.

Net income increased by $40 million, or 43%, in the third quarter and decreased by $5 million, or 2%, in the first nine months compared to 2003 results. The increase in quarterly net income primarily reflects lower operations, maintenance and administration costs. These costs were lower due to the reassignment of resources to support a larger capital work program. Results for the quarter also reflect a one-time impact of recognizing a regulatory asset related to distribution pension costs that were expensed during the first two quarters of 2004. For the nine-month period, the impact of lower operations, maintenance and administration costs was more than offset by higher depreciation charges, consistent with the investments made in our electricity delivery system, and lower transmission revenues. Capital expenditures of $538 million for the first nine months of 2004 increased by $156 million, or 41%, compared to 2003 levels, primarily due to projects to expand and reinforce the electricity system. These projects address the impact of growing loads and the closure of the Lakeview Generating Station on the electricity network and increase the performance and capability of the distribution system.

For the nine months to September 30, 2004, total revenues increased by $30 million, or 1%, compared to last year, primarily due to higher distribution revenues from the recovery of increased purchased power costs, partially offset by lower transmission revenues reflecting milder winter and cooler spring temperatures. Net cash from operations was $748 million for the first nine months of 2004. During this period, the Company paid $203 million in dividends to the Government of Ontario and invested $538 million in capital expenditures, primarily in the transmission and distribution systems.

"Our record of consistent financial performance is, in large part, due to a highly-skilled, experienced and dedicated workforce who maintain and optimize the performance of Ontario's electricity system. However, sometimes it takes an unfortunate situation like the recent hurricane damage in Florida to truly appreciate their dedication and expertise", said Tom Parkinson, President and Chief Executive Officer of Hydro One. "Almost 500 of our workers volunteered to go to Florida, at the request and expense of Florida Power & Light, to assist in the restoration of their electricity system. We have received numerous messages from Florida residents thanking the Hydro One line crews for their extraordinary efforts in such trying circumstances. These workers are indicative of the dedication and expertise that our customers rely on daily."

RECENT DEVELOPMENTS

• The Ontario Energy Board (OEB) has initiated a process to establish rates for electricity distributors reflecting updated revenue requirements based on cost-of-service, with the intent that these new distribution rates will be effective on May 1, 2006.
• Effective April 1, 2004, interim rates have been in place allowing us to commence recovery of certain regulatory assets in the amount of approximately $160 million over four years. A decision by the OEB with respect to recoverability of these regulatory assets is anticipated by year-end.

CONSOLIDATED FINANCIAL HIGHLIGHTS AND STATISTICS

Hydro One Inc. is a holding company that operates through its subsidiaries in the 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.

-30-

For more information, contact:
Peter Gregg,
Vice President, Corporate Communications
416-345-6072