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c58a93ef-6b10-4b75-af1c-9d7746901fbd

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CHAIR & CEO
MESSAGES

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FINANCIAL
HIGHLIGHTS

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Year in Review

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Sustainable Future

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Corporate Governance

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Financial Reports

Photo: Tom Woods

A message from the Chair of the Board
Tom Woods

Photo: Paul Dobson

A message from the Acting President & CEO
Paul Dobson



Graph: Total Assets and Rate Base

Graph: Total Assets and Rate Base



We aim to continue strengthening our core business in order to deliver greater value for our customers, employees, communities and shareholders.

Year in Review

icon: $1.3B

icon: 63%

icon: 8,600

icon: $2.6m

icon: $1.3m

 
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Safety Comes First
  • Through Hydro One's Journey to Zero safety initiative, we achieved our 2018 performance target rate for recordable safety incidents of 1.1 per 200,000 hours worked - a 35% improvement since 2015.




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Driving Down Costs
  • Productivity savings of $249.9 million since 2015.

  • Annual operating costs have been reduced by 4% or $41 million since 2015, resulting in savings1.

  • New approach to storm preparation has reduced the time customers are without power following a storm by one-third, compared to similar-sized events five years ago.



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Delivering Customer Satisfaction
  • Residential and small business customer satisfaction was the highest in five years at 76%, while transmission customer satisfaction reached an all-time high of 90%.

  • Billing accuracy reached an all-time high of 99.4%, while overdue accounts receivable fell to $73 million - less than half of 2015.

  • Repatriating approximately 400 Customer Contact Centre employees back into our business has improved customer service and reduced costs.




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Improving the Grid
  • Compared to 2017, we improved the overall reliability of our distribution network by 14.2%.

  • Clarington ($238 million in capital costs) and Leamington ($54 million in capital costs) stations were placed into service with strong project and cost discipline to support economic growth.

  • More than $1.8 billion of assets placed in-service in 2018.



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Leadership in Power Restoration
  • Three Edison Electric Institute (EEI) Emergency Recovery Awards for outstanding power restoration efforts in Ontario and one Emergency Assistance Award for providing restoration support in the northeast U.S.

  • Two teams of forestry technicians sent to Chico, California to support electrical system restoration efforts following devastating wildfires2.

  • Following a tornado that destroyed the company's Merivale transmission station, Ottawa-area customers were restored within 48 hours with a temporary solution. The facility was fully rebuilt in approximately 12 weeks, returning to normal operation.


At-a-Glance: Our Business

Transmission

Our transmission system transmits high-voltage electricity from nuclear, hydroelectric, natural gas, wind and solar sources to our distribution company and industrial customers across Ontario. Hydro One owns and operates approximately 30,000 circuit kilometres of high-voltage transmission lines.

Customer Segments
  • Large directly connected
    industrial customers

  • Local distribution companies

  • Large generators

Distribution

The Hydro One distribution system is the largest in Ontario. It consists of approximately 123,000 circuit kilometres of primary low-voltage power lines serving almost 1.4 million customers. As well, Hydro One Remote Communities serves customers in one grid-connected and 21 off-grid communities in Ontario's far north.

Customer Segments
  • Residential and business customers

  • Municipal utility customers

  • Small or micro generators

Other & Telecom

Consists of a telecommunications business and certain corporate activities. Hydro One Telecom offers organizations a diverse, secure and highly reliable broadband connectivity solution.



Customer Segments
  • Data centres

  • Cloud service providers

  • Telecommunications services
    and public sector entities

  • Internet service providers

  • Enterprises

Hydro One's Role in the Ontario Electric Power System

 

Our transmission and distribution systems safely and reliably serve communities throughout Ontario. Our customers are suburban, rural and remote homes and businesses across the province. We own and operate nearly $25.7 billion in assets and have annual revenues of almost $6.2 billion. Our communities are proudly and safely serviced by a team of skilled and dedicated employees.


Niagara Reinforcement Project
Image of Niagara Reinforcement Project

A new 76 kilometre transmission line in southwestern Ontario to serve the growing Niagara area.


Estimated Total Project Cost

($ millions)

$130

Capital Cost to Date ($ million)
$121

Anticipated In-Service Date 2019

Richview Transmission Station
Image of Clarington TS Towers

Replacement of 50-year-old equipment to ensure reliable power supply to the City of Toronto and surrounding communities.


Estimated Total Project Cost

($ millions)

$102

Capital Cost to Date ($ millions)
$99

Anticipated In-Service Date 2020

East-West Tie
Station Expansion
Image of Clarington TS Towers

Hydro One is performing station upgrades to our Lakehead, Marathon and Wawa transmission stations. The upgrades are necessary to support the East-West Tie Line Project, a priority project in the Province of Ontario's Long-Term Energy Plan.

 

Estimated Total Project Cost
($ millions)
$157

Capital Cost to Date ($ millions)
$16

Anticipated In-Service Date 20223


Image of a family of three standing infront of their home


Customer Satisfaction:
Distribution Customers

Increased to 76 per cent in 2018, an increase of 5 per cent since 2017, largely due to strong operational performance in all functional areas, including billing, contact centre, collection and conservation.

Image of business workers in a warehouse doing a quality check


Customer Satisfaction:
Transmission Customers

Increased to 90 per cent in 2018, an increase of 2 per cent since 2017, partially attributed to enhanced customer reporting and a renewed commitment to customer advocacy.




Building a Sustainable Future

Photo of a Hydro One right-of-way

At Hydro One, we understand that our long-term performance depends on incorporating sustainability into all aspects of our business. In 2018, we continued building our sustainability strategy, and remain committed to setting up a corporate-wide vision and program that builds value for all stakeholders.

Butterfly


Environmental Management

Partnerships have helped further our biodiversity goals. We established approximately three hectares of new pollinator planting in Ottawa with the Canadian Wildlife Federation as part of a multi-stakeholder project to assess species value resulting from restoration of monarch butterfly habitats. We also collaborated with the Briarbrook Brookside Morgan's Grant Community Association.

photo of Hydro One staff holding a sign supporting community


People and Potential

Hydro One pursues a culture of inclusion because it makes us stronger, more innovative and helps ensure we have the right skill set and perspectives to succeed in the future.

To better support our employees and pensioners, we enhanced The Power to Give, a refresh of our charitable giving program. Last year, our employees and pensioners generously donated almost $1.3 million.

image of a Hydro One worker of First Nations descent


Powering Economies

We support Ontario by buying goods and services from businesses across the province. In 2018, approximately $1.3 billion was injected into the Ontario economy through procurement. This includes a 63% increase in spend with Indigenous businesses, the largest amount to date, and supports our goal to become the primary business partner of Indigenous communities in Ontario by 2021.

Community Investment

Since 2003, Hydro One has been a proud sponsor of the Little Native Hockey League tournament, which hosts over 200 teams from First Nations across Ontario. The largest event of its kind in the province, the tournament promotes respect, citizenship, sportsmanship and education with Indigenous youth.


Photo of a hockey tournament sponsored by Hydro One              

Corporate Governance Overview

STRONG CORPORATE GOVERNANCE PRACTICES ARE THE HEART OF HOW WE MANAGE OUR DAY-TO-DAY OPERATIONS IN THE INTEREST OF ALL STAKEHOLDERS.

Board Diversity image



Hydro One and its independent Board of Directors recognize the importance of corporate governance in the effective management of the Company. Independence, integrity and accountability are the foundation of Hydro One’s approach to corporate governance. It is in the long-term best interests of shareholders, and promotes and strengthens relationships with our customers, employees, the communities where we operate and other stakeholders of the Company. The Board of Directors is firmly supported in these commitments by a governance agreement between Hydro One and the Province of Ontario, which was executed in advance of the November 2015 Initial Public Offering of the Company and assures that the Province’s role is limited to that of a shareholder and not a manager of the business



Table: Board of Directors and Committees





Why Invest in Hydro One?

Investing in Hydro One offers a unique opportunity to participate in the transformation of a large-scale regulated electric utility.

Number 1

Performance-based Culture

Transformation into a commercially-oriented, customer-focused performance culture under Ontario’s emerging incentive-based regulation.





Number 2

Stable Operating Environment

  • Business is predominately (99%) rate-regulated in a constructive, stable, transparent and collaborative regulatory environment.

  • Resilient workforce in challenging environments.

  • Fully independent Board.

number 3

Predictable Growth

Pure play electric transmission and local distribution company with an aging infrastructure that requires investment and no commodity price exposure.


number 4

Attractive Dividend

Stable and growing dividend with a 70–80% target payout ratio4 that is underpinned by strong cash flows from predictable rate base growth.

4Payout ratio was 67% of Adjusted EPS in 2018.
 

number 5

Strong Balance Sheet

Solid investment grade balance sheet.





Credit Profile

Rating
Agency

Long Term
Debt Rating

Short Term
Debt Rating

Outlook

DBRS

A (high)

R-1(low)

stable

Moody's

Baa1

Prime 2

stable

S & P

A-

A-1 (low)

negative


Financial Reports

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Download this section of the 2018 Annual Report here.

Download PDF

1 Based on Hydro One Limited’s total Operation, Maintenance & Administration costs (OM&A) excluding $31 million in OM&A costs for Avista in 2017 and 2018. No costs related to the Avista transaction or the termination of the merger agreement have been paid for by Ontario ratepayers. See section “Non-GAAP Measures” in the Management’s Discussion and Analysis for more information.


2 All costs incurred during mutual assistance operations are paid by the local utility receiving support.

The majority of the project will be in-service in 2021, enabling the connection and energization of the new East-West Tie transmission line. Additional work to complete the upgrades will be in-service in 2022.

4 Payout ratio was 67% of Adjusted EPS in 2018.