Hydro One Reports Positive Fourth Quarter Results
- Adjusted earnings per share (EPS) was $0.29, and EPS was $0.26, compared to $0.22 in the prior year
- Federal Energy Regulatory Commission (FERC) approves the Hydro One and Avista Corporation (Avista) merger; other approvals are pending
- 2018 allowed regulated return on equity (ROE) reset to 9.00% from 8.78% for both transmission and distribution businesses
- Improved management and efficiency programs generated $89.5 million in productivity savings in 2017
- Customer-focused initiatives targeting better communication, convenience and affordability resulted in improved customer satisfaction levels, and the largest reduction in overdue accounts receivable in the Company’s history
- $733 million worth of assets placed in-service during the fourth quarter of 2017 compared to $699 million last year, representing an increase of 4.9%
- Recognition by the Edison Electric Institute (EEI) with an Emergency Assistance Award for Hydro One’s outstanding restoration efforts following Hurricane Irma in September 2017
- New Chief Financial Officer appointed subsequent to the end of the fourth quarter
Our fourth quarter results show that focusing on our long-term strategic objectives of operational excellence and improved customer service is generating strong results as we continue to enhance productivity, as well as reduce costs through the implementation of innovative initiatives. The Federal Energy Regulatory Commission’s approval of the Avista transaction was a good start to 2018, a year in which we expect to continue improving our execution capabilities on all fronts.” – Mayo Schmidt, President and CEO, Hydro One
Key Financial Highlights
In the final quarter of 2017, the Company reported net income attributable to common shareholders of $155 million (2016 – $128 million), a 21.1% increase from last year, and EPS of $0.26 (2016 – $0.22). Adjusted EPS, which exclude the impact of $15 million costs related to the Avista acquisition, were $0.29 for the quarter.
Revenues, net of purchased power, for the fourth quarter were higher than last year by 2.8%. This increase reflects higher transmission revenues driven by the OEB’s decision on the 2017-2018 transmission rates filing, and higher energy consumption due to colder weather, partially offset by a reduction in the 2017 allowed return on equity from 9.19% to 8.78%.
The comparability of fourth quarter earnings was positively impacted by lower support services costs, reduced vegetation management costs, a reduction of provision for payments in lieu of property taxes following a favourable reassessment of the regulations, insurance proceeds received on failed equipment at two transformer stations, and a tax recovery of previous year’s expenses. These factors were partially offset by higher depreciation expense due to an increase in rate base and increased financing charges primarily due to interest on Convertible Debentures issued in August 2017.
For the year, the Company reported net income of $658 million (2016 – $721 million), an 8.7% reduction from last year, and EPS of $1.11 (2016 – $1.21). Adjusted EPS are $1.17 for the year. In addition to the factors noted above, net income for the year was also impacted by lower revenues due to milder weather during the first three quarters of 2017, higher consulting costs related to the acquisition of Avista, and a significantly lower bad debt expense in the first quarter of 2016 due to revised estimates of uncollectible accounts as a result of stabilization of the customer information system.
Hydro One continues to invest in the reliability and performance of Ontario’s electricity transmission and distribution systems, address aging power system infrastructure, facilitate connectivity to new generation sources, and improve service to customers. The Company made capital investments of $431 million during the fourth quarter, and placed $733 million worth of new assets in-service.
Common Share Dividends
Following the conclusion of the fourth quarter, on February 12, 2018, the Company declared a quarterly cash dividend to common shareholders of $0.22 per share to be paid on March 29, 2018 to shareholders of record on March 13, 2018.
Summary of Fourth Quarter Results of Operations
Net income attributable to common shareholders for the quarter ended December 31, 2017 of $155 million is an increase of $27 million or 21.1% from the prior year. Excluding the impact of costs related to the Avista acquisition, net income for the quarter increased by 32.8%.
The quarterly increase of $6 million or 1.6% in transmission revenues was primarily due to higher revenues driven by the OEB’s decision on the 2017-2018 transmission rates filing, partially offset by lower OEB-approved transmission rates.
The quarterly increase of $17 million or 4.6% in distribution revenues, net of purchased power, was primarily due to higher energy consumption mainly resulting from colder weather in the fourth quarter of 2017; and higher external revenues related to CDM incentive bonus; partially offset by reduction in 2017 allowed ROE for the distribution business.
For more information about everything Hydro One, please visit www.HydroOne.com where you can find additional information including links to securities filings, historical financial reports, and information about the Company’s governance practices, corporate social responsibility, customer solutions, and further information about its business.
SOURCE Hydro One Inc.