Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hydro One Ltd (HRNNF, Financial) reported a year-over-year increase in basic earnings per share from $0.44 to $0.49.
- The company achieved significant cost savings and accelerated project timelines, notably completing the Chatham electric transmission line a year ahead of schedule and $31 million under budget.
- Hydro One Ltd (HRNNF) has a strong focus on safety, achieving an annual recordable injury rate of 0.56, well below the industry benchmark of 1.0.
- The company continues to invest heavily in modernizing and expanding its transmission and distribution systems, with $818 million invested in the second quarter alone.
- Hydro One Ltd (HRNNF) has been recognized for its sustainability efforts, including reducing Scope 1 greenhouse gas emissions by approximately 24% compared to its 2018 baseline.
Negative Points
- Higher income tax expenses and increased depreciation, amortization, and asset removal costs partially offset the revenue gains.
- The pace of broadband orders has not accelerated as expected, potentially impacting future revenue from this segment.
- Financing charges increased by 9% year-over-year due to higher interest rates on long-term debt and more long-term debt issuances.
- The company faces uncertainties in the regulatory environment, particularly concerning the Ontario Energy Board's cost of capital proceedings.
- Hydro One Ltd (HRNNF) has not yet secured federal loan guarantees for its First Nations partnerships, which could impact the financing of future projects.
Q & A Highlights
Q: Can you discuss the cost savings on the Chatham to Lakeshore line and what this might mean for other lines, including St. Clair and Waasigan lines?
A: The savings were due to partnerships with indigenous communities and municipalities, streamlined environmental legislation, and experienced contractors. Each project is unique, but we will apply these learnings to future projects.
Q: Is there an expectation that the St. Clair $472 million project might also see some savings?
A: Each project is unique, but we will apply our learnings from previous projects to the St. Clair project and keep investors updated on progress.
Q: Can you discuss the status of other projects where Section 92 applications haven't been filed yet?
A: The timelines for Section 92 applications depend on progress in engineering, route selection, and public consultation. We will provide updates as these processes advance.
Q: When might you start preparing your balance sheet for the CapEx requirements of these projects?
A: We do not anticipate needing to issue equity before the end of this rate period, absent any significant LDC acquisition. We have increased our credit facilities to $3.3 billion to support our liquidity.
Q: Any changes in your funding plan or timing of raising debt?
A: No changes are planned. We will continue to be tactical in issuing debt to keep our weighted average rate down and maturity up.
Q: Any updates on the OEB proceedings around cost of capital?
A: The proceedings are ongoing, and we remain optimistic that Ontario will continue to be a favorable jurisdiction for investors while protecting ratepayers.
Q: Any changes in your role as CFO and Regulatory Officer?
A: No significant changes are planned. The business fundamentals are strong, and we will continue to build on our track record of success.
Q: Can you provide an update on the broadband work and its impact on the distribution business?
A: We are ready to proceed but are waiting for increased orders from Internet service providers. The pace of orders has not accelerated as expected.
Q: How are you addressing potential labor union tensions?
A: We have good relationships with our unions and do not anticipate any labor disputes. We work closely with them throughout the period between bargaining sessions.
Q: Do you see lower financing costs pushing forward LDC consolidation deals?
A: Increased interest from LDCs is driven more by their financing needs rather than lower interest rates. We remain optimistic about delivering on our consolidation plan.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
