Hydro One (H) Q2 2024 earnings summary

Executive summary

• Q2 2024 basic EPS rose to $0.49, up 11.4% year-over-year, driven by higher OEB-approved rates, increased demand, and productivity gains, partially offset by higher taxes, depreciation, and financing charges.

• Revenues increased 9.4% year-over-year to $2,031 million, with 99% of revenues fully rate-regulated, providing stable and predictable cash flows.

• OM&A expenses decreased by 5.1% year-over-year, aided by productivity initiatives and one-time insurance proceeds.

• Major transmission projects, such as Chatham to Lakeshore and St. Clair, are progressing ahead of schedule and under budget, with the latter filed for OEB approval and expected in service by 2028.

• The company continues to focus on sustainability, reducing Scope 1 GHG emissions by 24% since 2018 and issuing $3.2 billion in sustainable and green bonds.

Financial highlights

• Q2 2024 net income attributable to common shareholders: $292 million, up 10.2% year-over-year.

• Revenues: $2,031 million in Q2 2024, up from $1,857 million in Q2 2023.

• Basic EPS: $0.49 in Q2 2024, up from $0.44 in Q2 2023.

• Capital investments in Q2: $818 million, up 26% year-over-year; assets placed in service: $526 million, up 27.4%.

• OM&A expenses down 5.1% year-over-year; depreciation expense up 6.5%; financing charges increased 9%.

• Effective tax rate: 16.2% in Q2 2024, down from 19.6% in Q2 2023.

• Quarterly dividend declared at $0.3142 per share, payable September 11 or 27, 2024.

Outlook and guidance

• Targeting 5–7% EPS growth through 2027, based on normalized 2022 EPS baseline of $1.61.

• Rate base expected to grow at ~6% CAGR from 2022 to 2027, reaching $31.8 billion by 2027.

• Annualized dividend of $1.2568 per share, with a 70–80% payout ratio and ~6% average annual dividend growth.

• No equity issuance anticipated for planned capital investments; growth is self-funded.

• Effective tax rate expected to remain between 13%–16% for the remainder of the JRAP period.