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Hydro One Releases 2004 Year End Financial Results

Toronto, February 11, 2005 — Hydro One Inc. today released its 2004 year-end results. Net income for the year was $407 million before a one-time regulatory recovery of $91 million, for a total $498 million. This compares to net income in 2003 of $396 million.

"Hydro One had a strong year all around," said Hydro One President and CEO Tom Parkinson. "We're seeing continued gains in worker productivity and benefits from a stable regulatory environment and our continued focus on core operations."

"We have stepped up our work programs to upgrade and maintain our delivery system. Improving customer satisfaction levels has been one of my major goals and in 2004 we continued to see improvement. Hydro One's staff are among the best in the business and I'm proud of the commitment and dedication they show every day in serving Ontario."

Hydro One's 2004 achievements include:

• Officially opening the $118 million Ontario Grid Control Centre in August 2004 on plan and under budget. This facility eliminated the need for multiple regional control centres and results in improved operating efficiencies, supply reliability and a higher level of customer service.
• Investing $727 million in capital programs, primarily to upgrade and maintain the Ontario electricity delivery network. This amount includes projects that will support the electricity demand of the Greater Toronto Area, such as the construction of the Parkway Transformer Station in York Region, as well as projects that support local requirements such as the upgrade in Northern Ontario of the distribution system in downtown Timmins.
• Releasing our 10-year plan, Transmission Solutions 2004-2013, setting out our goals and the process we intend to follow to manage the development of the transmission system. We are in the process of updating the plan, which will evolve in conjunction with the evolution of Ontario's electricity sector.
• Ongoing commitment to worker safety as a top priority in 2004, with a goal of eliminating serious injuries by 2006.
• Continuing improvement in Hydro One's financial profile in 2004, underpinning an "A" credit rating target.

2004 net income increased by $11 million, or 3%, over 2003 levels, excluding the one-time regulatory recovery, and by $102 million, or 26%, on total net income. The 26% increase substantially reflects our successful regulatory recovery of low voltage services costs previously incurred but suspended by the Electricity Pricing, Conservation and Supply Act, 2002.

Excluding this one-time amount, the impact on net income of lower OM&A costs, including the impact of reassigning resources to support a larger capital work program, and lower financing costs was substantially offset by higher depreciation charges, consistent with the investments made in our electricity delivery system, and lower transmission revenues.

Revenues increased by $95 million, or 2%, compared to 2003. This increase reflects higher distribution revenues primarily due to higher energy prices, partially offset by lower transmission revenues, which include the impact of more moderate temperatures in 2004 than in 2003. Net cash from operations was $911 million for 2004.

CONSOLIDATED FINANCIAL HIGHLIGHTS AND STATISTICS

Year ended December 31
(Canadian dollars in millions)	2004	2003	Change	% Change
Revenues	4,153	4,058	95	2
Purchased power	1,987	1,872	115	6
Operating costs	1,251	1,249	2	-
Net income	498	396	102	26
Net cash from operations	911	1,032	(121)	(12)
STATISTICS
Transmission – units transmitted (TWh)	153.4	151.7	1.7	1
Distribution – units distributed to our customers (TWh)	28.5	27.9	0.6	2

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 Province of Ontario.

Hydro One's 2004 Annual Consolidated Financial Statements and Management's Discussion and Analysis can be accessed through the following link: www.hydroone.com/2004financials.

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For further information, please contact:

Peter Gregg
Vice President, Corporate Communications
416-345-6072

Ali Suleman
Vice President and Treasurer
416-345-6126

Hydro One Investor Relations
416-345-6867