TORONTO, May 15, 2002 — Hydro One Inc, on Tuesday released its first quarter results, which show net income of $106 million for the first three months of the year.
Net income is according to plan and reflects the expected decrease of $28 million or 21% compared to the first quarter of 2001.
“The decrease in net income from a year ago is in line with our expectation and is a result of the rate mitigation plan that we introduced last year to help offset other energy cost pressures that our customers were facing,” said Eleanor Clitheroe, President and CEO, Hydro One.
Following direction from the Minister of Energy to the Ontario Energy Board to put the customer first, Hydro One Networks limited its application for a distribution rate increase to 4.1 per cent in October, 2001 and 2.8 per cent in March, 2002. The rate mitigation plan will affect net income in fiscal 2002 and 2003, however, the phased in approach of the plan means that the 2002 first quarter results are the most negatively impacted.
Also contributing to the quarterly decline in net income was the rescheduling of various work programs, historically undertaken later in the year, to the first three months of 2002. This change reflects improved asset management practices, which have positioned the company to more effectively release and execute work, thereby leveling related expenditures throughout the year.
“Although net income is expected to be down this year, we have maintained stable financial ratios including debt capitalization and interest coverage,” Clitheroe added. “We are confident that our financial fundamentals will remain sound going forward.”
Overall, total revenue increased $206 million to $1,022 million, an increase of 25% over 2001. The largest share of the increase came from distribution revenue, which increased by $196 million or 39% to $701 million, reflecting a higher volume of sales because of the larger distribution customer base due to the acquisition of 88 local utilities and the recent rate increases. Transmission revenue was up $5 million to $309 million.
Total operations, maintenance and administration costs increased by $9 million or five per cent to $180 million, primarily reflecting additional costs associated with the company’s competitive retail subsidiary, Ontario Hydro Energy (OHE). On April 30, 2002, Hydro One concluded an agreement to sell OHE’s electricity, natural gas and water heater customer contracts and rental agreements to Union Energy Inc., a wholly-owned subsidiary of EPCOR Utilities Inc. The agreement reaffirms Hydro One’s focus on its core wires business and ends any commodity risk for the company.
Hydro One Inc. is a holding company that operates through its subsidiaries in electricity transmission and distribution and telecom businesses. Its objective is to be one of the top electricity delivery companies in North America through a strategic focus on its core wires business.