Q2 2025 Hydro One Ltd Earnings Call
Shannon: Good morning, ladies and gentlemen, and welcome to Hydro One Limited's second quarter 2025 analyst teleconference. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. As a reminder, the call is being recorded. I would now like to introduce your host for today's conference, Mr. Wassem Khalil, Director of Investor Relations at Hydro One Limited. Please go ahead.
Speaker #2: Good morning, ladies and gentlemen, and welcome to Hydro One Ltd's second quarter 2025 analyst teleconference. At this time, all participants are in a listen-only mode.
Speaker #2: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your telephone.
Speaker #2: You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. As a reminder, the call is being recorded.
Speaker #2: I would now like to introduce your host for today's conference, Mr. Wasem Khalil, Director of Investor Relations at Hydro One. Please go ahead.
Wassem Khalil: Good morning, and thank you for joining us for Hydro One's quarterly earnings call. Joining us today are our President and CEO, David Lebeter, and our Chief Financial and Regulatory Officer, Harry Taylor. On the call today, we will provide an overview of our quarterly results, and then we will answer as many questions as time permits. Today's discussion will likely touch on estimates and other forward-looking information. Listeners should review the cautionary language in today's earnings release and our MD&A, which we filed this morning regarding the various factors, assumptions, and risks that could cause our actual results to differ as they all apply to this call. With that, I turn the call over to our President and CEO, David Lebeter.
Speaker #3: Good morning, and thank you for joining us for Hydro One's quarterly earnings call. Joining us today are our President and CEO, David Lebeter, and our Chief Financial and Regulatory Officer, Henry Taylor.
Speaker #3: On the call today, we will provide an overview of our quarterly results and then will answer as many questions as time permits. Today's discussion will likely touch on estimates and other forward-looking information.
Speaker #3: Listeners should review the cautionary language in today's earnings release and our MD&A, which we filed this morning, regarding the various factors, assumptions, and risks that could cause our actual results to differ, as they all apply to this call.
Speaker #3: With that, I turn the call over to our President and CEO, David Lebeter.
David Lebeter: Thank you, Wassem. Good morning, and thank you for joining us for our second quarter 2025 earnings call. This morning, I will provide an update on our recent activities and accomplishments during the quarter. Harry will take you through the financial results. Before we start, I will touch on safety. It is at the core of our business and will always be a focus for us. This focus and commitment to safety goes beyond our day-to-day activities and includes contributions to public safety. Recently, Hydro One, in partnership with the Advanced Coronary Treatment, or ACT Foundation, and other partners, trained more than 25,000 local area high school students in Lindsay and surrounding communities with critical CPR and AED lifesaving skills that will help care for their fellow community members. To date, more than 3 million students across the province have been trained through ACT's high school CPR and AED program.
Speaker #4: Thank you, Wasem. Good morning, and thank you for joining us for our second quarter 2025 earnings call. This morning, I will provide an update on our recent activities, and accomplishments during the quarter.
Speaker #4: Then Henry will take you through the financial results. Before we start, I'll touch on safety. It is at the core of our business and will always be a focus for us.
Speaker #4: This focus and commitment to safety goes beyond our day-to-day activities and includes contributions safety. Recently, Hydro One in partnership with the Advanced Coronary Treatment, or ACT Foundation, and other partners trained more than 25,000 local area high school students in Lindsay and surrounding communities with critical CPR and AED life-saving skills.
Speaker #4: That will help care for their fellow community members. To date, more than 3 million students across the province have been trained to perform CPR through ACT's high school CPR and AED program.
David Lebeter: We are very proud to be part of this achievement and our partnership with the ACT Foundation. Established in 2000, the long-time partnership between ACT and Hydro One has provided continued access to CPR, AED, and now opiate-associated emergency training for teachers and students across Ontario. Turning to the quarter, the damage caused by the March 2025 ice storm was severe and widespread, with three days of ice accumulation causing uprooted trees, downed power lines, and more than 2,700 broken poles across the province. Hydro One crews, alongside 30 Canadian utility partners and contractors, worked safely day and night in freezing rain, snow, and wind to restore power to our communities and those impacted by the storms. The costs associated with the storm, including those incurred by third-party contractors and other local distribution companies that supported the restoration efforts, are approximately $225 million.
Speaker #4: We are very proud to be part of this achievement and our partnership with the ACT Foundation. Established in 2000, the long-time partnership between ACT and Hydro One has provided continued access to CPR, AED, and now opiate-associated emergency training for teachers and students across Ontario.
Speaker #4: Turning to the quarter, the damage caused by the March 2025 ice storm was severe and widespread. With three days of ice accumulation causing uprooted trees, downed power lines, and more than 2,700 broken poles across the province, Hydro One crews, s, alongside 30 Canadian utility partners and contractors, worked safely day and night in freezing rain, snow, and wind to restore power to our communities and those impacted by the storms.
Speaker #4: The costs associated with the storm, including those incurred by third-party contractors and other local distribution companies that supported the restoration efforts, are approximately $225 million.
David Lebeter: As noted in our prior call, given the severity of the storm, we are applying to recover the costs through a Zet Factor application with the Ontario Energy Board. This application allows utilities that experienced a significant, unforeseen event that was beyond the utility's control to apply for cost recovery. We expect to file the application shortly. To help with cleanup and recovery efforts, Hydro One announced 50 recipients that include Indigenous communities and municipalities who will each receive up to $10,000 through the Ice Storm 2025 Recovery Grant. The grants are part of our commitment to supporting recovery efforts and initiatives in local communities that were severely impacted by the storm. Energy demand in Ontario continues to grow across the province, with demand expected to grow by 70% by 2050.
Speaker #4: As noted in our prior call, given the severity of the storm, we are applying to recover the costs through a Z factor application with the Ontario Energy Board.
Speaker #4: This application allows utilities that experience a significant unforeseen event that was beyond the utility's control to apply for cost recovery. We expect to file the application shortly.
Speaker #4: To help with cleanup and recovery efforts, Hydro One announced 50 recipients that include Indigenous communities and municipalities who will each receive up to $10,000 through the Ice Storm 2025 Recovery Grant.
Speaker #4: The grants are part of our commitment to sport and recovery efforts and initiatives in local communities that were severely impacted by the storm. Energy demand in Ontario continues to grow across the province, with demand expected to grow by 70% by 2050.
David Lebeter: Hydro One Limited is pleased to be part of this growth and continues to play a critical role in meeting the increased demand and supporting the province's electrification goals. Early in June, I was pleased to see the Ontario government release its first Integrated Energy Plan, or IEP, titled Energy for Generations. The plan sets out a long-term roadmap to 2050 for delivering clean, affordable, secure, and reliable energy. It unifies planning across electricity, natural gas, hydrogen, and emerging fuels to support economic growth, jobs, and energy security to meet the growth in demand and provide Ontario with affordable, secure, reliable, and clean energy. As part of the plan, the government announced the acceleration of the development of transmission infrastructure and the modernization of the distribution grid, which will provide Hydro One Limited with additional growth opportunities.
Speaker #4: Hydro One is pleased to be part of this growth and continues to play a critical role in meeting the increased demand and supporting the province's electrification goals.
Speaker #4: Early in June, I was pleased to see the Ontario government release its first integrated energy plan, or IEP, titled "Energy for Generations." The plan sets out a long-term roadmap to 2050 for delivering clean, affordable, secure, and reliable energy.
Speaker #4: It unifies planning across electricity, natural gas, hydrogen, and emerging fuels, to support economic growth, jobs, and energy security to meet the growth in demand and provide Ontario with affordable, secure, reliable, and clean energy.
Speaker #4: As part of the plan, the government announced acceleration of the development of transmission infrastructure and the modernization of the distribution grid, which will provide Hydro One with additional growth opportunities.
David Lebeter: The new transmission projects include the Barry to Sudbury transmission line, a new single-circuit 500 kV line between ESSA Transformer Station and Hamner Transformer Station. There is also early development work on a second 500 kV line. Bowmanville to the greater Toronto Area Transmission Line, a new double-circuit 500 kV line from Bowmanville switching station to an existing 500 kV station in the GTA. Greenstone Transmission Line, a new 230 kV transmission line between Long Lock Transformer Station and Geraldine to Nipigon Transformer Station and connecting to the East-West Tide Transmission Line near Nipigon Bay. Windsor to Lakeshore Transmission Line, a new 230 kV transmission line from Lozan Transformer Station in Windsor to Lakeshore Transmission Station in Lakeshore.
Speaker #4: The new transmission projects include the Barrier to Sudbury transmission line, a new single-circuit 500 kV line between Essa Transformer Station and Hamner Transformer Station, there is also early development work on a second 500 kV line.
Speaker #4: Bowmanville to the Greater Toronto area transmission line, a new double-circuit 500 kV line from Bowmanville switching station to an existing 500 kV station in the GTA.
Speaker #4: Greenstone Transmission Line, a new 230 kV transmission line between Long Lock Transformer Station and Geraldton, to Nipigon Transformer Station, and connecting to the east-west tie transmission line near Nipigon Bay.
Speaker #4: The Windsor to Lakeshore transmission line is a new 230 kV transmission line from the Lausanne Transformer Station in Windsor to the Lakeshore transmission station in Lakeshore. The report also referred to the Orangeville to Barrier reconductor project, which involves reconducting Hydro One's existing 230 kV transmission lines between the Orangeville Transformer Station and the Essa Transformer Station, both in Barrier.
David Lebeter: The report also referred to the Orangeville to Barry Reconductor Project, which involves reconducting of Hydro One Limited's existing 208 kV transmission lines between the Orangeville Transformer Station and the ESSA Transformer Station, both in Barry. Subject to required approvals and a 60-day consultation period, the Ministry of Energy and Mines attempts to declare these projects as priority projects and designate the new transmission lines to Hydro One Limited. The Windsor to Lakeshore Transmission Line was previously designated to Hydro One Limited in March of 2022. However, with the declaration of this project as a priority project, it moves from early development into delivery to meet the emerging demand of the region. Our Chattabaug Lakeshore Transmission Line project, which was completed and energized at the end of 2024, represented a significant milestone as it was the first project to be completed to the industry-leading 50/50 First Nations equity partnership model.
Speaker #4: Subject to required approvals and a 60-day consultation period, the Ministry of Energy and Mines intends to declare these projects as priority projects and designate the new transmission lines to Hydro One.
Speaker #4: The Windsor to Lakeshore transmission line was previously designated to Hydro One in March of 2022; however, with the declaration of this project as a priority project, it moves from early development into delivery to meet the emerging demand of the region.
Speaker #4: Our chatting by Lakeshore transmission line project, which was completed and energized at the end of 2024, represented a significant milestone as it was the first project to be completed through the industry-leading 50/50 First Nations Equity Partnership model.
David Lebeter: We are happy to report the two First Nation partners having secured the necessary financing, enabling them to make their equity investments in the transmission line. This project represents the first that we are advancing under the 50/50 partnership model and further enables First Nation investment into the electricity system to provide generational owned source revenues for Indigenous communities. We are proud of these new partnerships and our ongoing efforts to advance reconciliation. We continue to collaborate with the remaining First Nation partners as they work to finalize their investment and financing decisions and expect to conclude this work by the end of 2025. After reaching tentative settlements of two collective agreements, the main collective agreement and the customer service of operations agreement with the Power Workers Union earlier this year, I'm happy to report these agreements were ratified by members of the Union.
Speaker #4: We are happy to report that the two First Nations partners have secured the necessary financing, enabling them to make their equity investments in the transmission line.
Speaker #4: This project represents the first time that we are advancing this project represents the first that we are advancing under the 50/50 partnership model and further enables First Nation investment into the electricity system to provide generation-owned source revenues for Indigenous communities.
Speaker #4: We are proud of these new partnerships and our ongoing efforts to advance reconciliation. We continue to collaborate with the remaining First Nation partners as they work to finalize their investment and financing decisions and expect to conclude this work by the end of 2025.
Speaker #4: After reaching tentative settlements with two collective agreements—the main collective agreement and the Customer Service and Operations Agreement—with the Power Workers Union earlier this year, I am happy to report that these agreements were ratified by members of the union.
David Lebeter: The agreements cover employees in front-line and customer-facing roles across the company's operations and will be effective from October 1st, 2025, to March 31st, 2028. Bargaining with the Society of United Professionals continues with the parties working towards reaching an agreement ahead of the September 30th, 2025 expiry of the existing contract. As is normal during bargaining and to respect the bargaining process between the teams, we won't be providing any further comments on this process. In May, we released our 2024 Sustainability Report. The report provides a balanced account of our performance across a range of sustainability measures and highlights our progress towards enabling the energy transition in Ontario, leading to a better and brighter future for all.
Speaker #4: The agreements cover employees in frontline and customer-facing roles across the company's operations and will be effective from October 1, 2025, to March 31, 2028.
Speaker #4: Bargaining with the Society of the United Professionals continues with the parties working towards reaching an agreement ahead of the September 30th, 2025 expiry of the existing contract.
Speaker #4: As is normal during bargaining, and to respect the bargaining process between the teams, we won't be providing any further comments on this process. In May, we reduced our 2024 sustainability report.
Speaker #4: The report provides a balanced account of our performance across a range of sustainability measures and highlights our progress towards enabling the energy transition in Ontario, leading to a better and brighter future for all.
David Lebeter: The 2024 report highlights accomplishments related to our long-term targets and key initiatives, including reducing our operations-driven greenhouse gas emissions, Scope 1, and Scope 2 operations-driven emissions by approximately 41% compared to the baseline year of 2018, converting approximately 44% of our sedans and SUVs to electric vehicles and hybrids since announcing the initiative in July of 2021, spending over $158 million, or 5.5% of our total sourceable spend in 2024 on materials and supplies from Indigenous businesses, ahead of our target of 5% by 2026, investing approximately $3.1 billion of capital in 2024 to expand and renew Ontario's grid and creating over 60 hectares of pollinator habitat in 2024. These achievements reflect the alignment that exists between our strategy and sustainability, leading to a better and brighter future for all. Our actions reflect our purpose and commitments, and I am pleased that our actions continue to be recognized.
Speaker #4: The 2024 report highlights accomplishments related to our long-term targets and key initiatives, including reducing our operations-driven greenhouse gas emissions, Scope 1 and Scope 2 operations-driven emissions, by approximately 41% compared to the baseline year of 2018.
Speaker #4: We are converting approximately 44% of our sedans and SUVs to electric vehicles and hybrids since announcing the initiative in July 2021. We're spending over $158 million, or 5.5% of our total sourceable spend in 2024, on materials and supplies from Indigenous businesses, ahead of our target of 5% by 2026.
Speaker #4: Investing approximately $3.1 billion of capital in 2024 to expand and renew Ontario's grid and creating over 60 hectares of pollinator habitat in 2024. These achievements reflect the alignment that exists between our strategy and sustainability, leading to a better and brighter future for all.
Speaker #4: Our actions reflect our purpose and commitments, and I am pleased that our actions continue to be recognized. For the 10th year in a row, we are part of corporate nights' annual list of 50 best corporate citizens in Canada.
David Lebeter: For the 10th year in a row, we are part of Corporate Knights' annual list of 50 Best Corporate Citizens in Canada. This award recognizes those entities that are committed to doing business differently and are committed to sustainability and environmental stewardship. We are also proud to be recognized by the Forbes inaugural ranking of Canada's Best Employers for Company Culture. The ranking surveyed more than 40,000 Canadian-based workers employed at companies with at least 500 people and involved a range of company culture-related topics, including fairness, inclusivity, and opportunity. Lastly, Hydro One was also recognized in the Time Magazine and Statistica's first-ever list of Canadian Best Companies for 2025. The list ranks the top Canadian companies from over 2,000 eligible companies based on metrics that include employee satisfaction, sustainability transparency, and continuous revenue growth in the last three years.
Speaker #4: This award recognizes those entities that are committed to doing business differently and are dedicated to sustainability and environmental stewardship. We are also proud to be recognized by the Forbes inaugural ranking of Canada's Best Employers for Company Culture.
Speaker #4: The ranking surveyed more than 40,000 Canadian-based workers employed at companies with at least 500 people and involved a range of company culture-related topics, including fairness, inclusivity, and opportunity.
Speaker #4: Lastly, Hydro One was also recognized in the Time magazine and Statistica's first-ever list of Canadian best companies for 2025. The list ranks the top Canadian companies from over 2,000 eligible companies, based on metrics that include employee satisfaction, sustainability transparency, and continuous revenue growth in the last three years.
David Lebeter: These accolades reinforce what drives us every day and are a powerful reflection of our values, promises, and the dedication we all bring to work every day. Before I turn the call over to Harry, I want to take a moment to update you on some recent executive changes. It is my pleasure to announce that Megan Telford will take over as Chief Operating Officer and will lead the Safety, Operations, and Customer Experience, Capital Portfolio Delivery, Strategy, Growth, Planning, and Hydro One Remote Communities, Inc. Megan joined Hydro One in 2020 and previously held leadership roles that include responsibility for health and safety and environment, human resources, Indigenous relations, corporate affairs, and customer care teams. Lisa Pearson will assume the role of Executive Vice President, Corporate Affairs.
Speaker #4: These accolades reinforce what drives us every day and are a powerful reflection of our values, promises, and the dedication we all bring to work every day.
Speaker #4: Before I turn the call over to Henry, I want to take a moment to update you on some recent executive changes. It is my pleasure to announce that Megan Telford will take over as Chief Operating Officer and will lead the safety, operations, and customer experience capital portfolio delivery strategy growth planning at Hydro One Remote Communities Inc. Megan joined our Hydro One in 2020 and previously held leadership roles that include responsible for health and safety, and environment, human resources, Indigenous relations, corporate affairs, and customer care teams.
Speaker #4: These appearances will assume the role of executive vice president, corporate affairs, since joining Hydro One in 2024, Lisa has been responsible for building a trusted partnerships that deliver value for the customers and shareholders.
David Lebeter: Since joining Hydro One in 2024, Lisa has been responsible for building the trusted partnerships that deliver value for the customers and shareholders. In addition to her current mandate, she will ultimately be Indigenous Relations, Sustainability, and Energy Policy Functions at Hydro One. These changes position us for the future and help us achieve our strategic objectives while driving economic growth across Ontario. With that, I will turn it over to Harry to discuss our financial results. Harry, over to you.
Speaker #4: In addition to her current mandate, she will also lead the Indigenous relations sustainability and energy policy functions at Hydro One. These changes position us for the future and help us achieve our strategic objectives while driving economic growth across Ontario.
Speaker #4: With that, I'll turn it over to Henry to discuss our financial results. Henry, over to you.
Harry Taylor: Thank you, David. Good morning to our listeners, and thank you for joining us today. In the second quarter, we delivered basic EPS of $0.54 compared to $0.49 in the second quarter of 2024. The key drivers behind the year-over-year change included higher revenues, net of purchase power due to higher 2025 OEB-approved rates, and higher energy consumption. These were partially offset by higher depreciation, amortization, and asset removal costs resulting from storm restoration efforts and growth in our capital assets. Higher interest expense, primarily due to an increase in long-term debt outstanding, and higher income tax expense, primarily due to higher pre-tax earnings. Our second quarter revenues, net of purchase power, increased year-over-year by 7%.
Speaker #5: Thank you, David. Good morning to our listeners, and thank you for joining us today. In the second quarter, we delivered basic earnings per share of $54.
Speaker #5: Compared to $0.49 in the second quarter of 2024. The key drivers behind the year-over-year change included higher revenues, net of purchase power, due to higher 2025 OEB-approved rates, and higher energy consumption.
Speaker #5: These were partially offset by higher depreciation amortization and asset removal costs, resulting from store restoration efforts and growth in our capital assets. Higher interest expense, primarily due to an increase in long-term debt outstanding, and higher income tax expense, primarily due to higher pre-tax earnings.
Speaker #5: Our second quarter revenues net of purchase power increased year-over-year by 7%. Transmission revenues increased by 6.7% year-over-year, primarily due to changes in OEB-approved rates for 2025, coupled with contributions from our Chatham by Lakeshore transmission line, following its in-servicing in Q4 2024, and also from contributions from Hydro One's investment in the east-west tie limited partnership.
Harry Taylor: Transmission revenues increased by 6.7% year-over-year, primarily due to changes in OEB-approved rates for 2025, coupled with contributions from our Chattabaug Lakeshore Transmission Line following its in-servicing in Q4 2024, and also from contributions from Hydro One Limited's investment in the East-West Tide Limited Partnership. On the distribution side, distribution revenues, net of purchase power, increased by 7.9% year-over-year, primarily due to the changes in OEB-approved rates for 2025 and higher energy consumption. There were some net income neutral items in revenue relating to third-party storm recovery costs, which had corresponding offsets in OM&A, thus making them net income neutral. On the cost front, operating maintenance and administration expenses in the quarter were higher by 0.3%. In the transmission segment, costs were higher by 14.2%, mainly due to corporate support costs attributable to lower capitalized overheads, lower insurance proceeds received this year compared to 2024, and higher asset write-offs.
Speaker #5: On the distribution side, distribution revenues net of purchase power increased by 7.9% year-over-year, primarily due to the changes in OEB-approved rates for 2025, and higher energy consumption.
Speaker #5: There were some net income neutral items in revenue relating to third-party storm recovery costs, which had corresponding offsets in OM&A, thus making them net income neutral.
Speaker #5: On the cost front, operating maintenance and administration expenses in the quarter were higher by 0.3%. In the transmission segment, costs were higher by 14.2%, mainly due to corporate support costs attributable to lower capitalized overheads, lower insurance proceeds received this year compared to 2024, and higher asset write-offs.
Harry Taylor: In the distribution segment, costs were lower by 10.4%, mainly due to lower work program expenditures, including vegetation management, lower corporate support costs due to higher capitalized overheads, and a lower allowance for debtful accounts. Depreciation, amortization, and asset removal expenses for the second quarter were higher year-over-year by 9.5%. This was due to higher asset removal costs resulting from storm restoration efforts and higher depreciation resulting from the growth in capital assets as the company continues to place new assets in service. With respect to our financing activities, we saw a 7.6% increase in interest expense year-over-year. This was mainly due to a higher amount of long-term debt and higher weighted average interest rate on long-term debt. Having said that, we continue to be pleased with the strength of our balance sheet, along with our credit worthiness.
Speaker #5: In the distribution segment, costs were lower by 10.4%, mainly due to lower work program expenditures including vegetation management, lower corporate support costs due to higher capitalized overheads, and a lower allowance for debtful accounts.
Speaker #5: Depreciation, amortization, and asset removal expenses for the second quarter were higher year-over-year by 9.5%. This was due to higher asset removal costs resulting from storm restoration efforts and higher depreciation resulting from the growth in capital assets as the company continues to place new assets in service.
Speaker #5: With respect to our financing activities, we saw a 7.6% increase in interest expense year-over-year. This was mainly due to a higher amount of long-term debt and higher weighted average interest rate on long-term debt.
Speaker #5: Having said that, we continue to be pleased with the strength of our balance sheet along with our creditworthiness. Our current annualized FFO to net debt metric of 13.6% remains well above the threshold limits the rating agencies use in determining our credit rating.
Harry Taylor: Our current annualized FFO to net debt metric of 13.6% remains well above the threshold limits the rating agencies use in determining our credit rating. Turning to taxes, our income tax expense in the quarter was $61 million compared to $57 million in the same quarter last year. The increase was primarily due to higher pre-tax earnings, which were partially offset by higher deductible timing differences compared to last year. The effective tax rate this quarter was 15.6% versus an effective tax rate last year of 16.2%. The current rate is consistent with our effective tax rate expectations of 13% to 16% for the remainder of the JRAP period. Moving on to our capital expenditures, in the second quarter, we invested $913 million, which was an increase of 11.6% over 2024.
Speaker #5: Turning to taxes, our income tax expense in the quarter was $61 million compared to $57 million in the same quarter last year. The increase was primarily due to higher pre-tax earnings, which were partially offset by higher deductible timing differences compared to last year.
Speaker #5: The effective tax rate this quarter was 15.6%, compared to an effective tax rate of 16.2% last year. The current rate is consistent with our effective tax rate expectations of 13% to 16% for the remainder of the JRAP period.
Speaker #5: Moving on to our capital expenditures, in the second quarter, we invested $913 million which was an increase of 11.6% over 2024. The increase occurred in the distribution segment as a result of a higher spend on storm-related asset replacements and investments in Ontario's broadband initiative.
Harry Taylor: The increase occurred in the distribution segment as a result of a higher spend on storm-related asset replacements and investments in Ontario's broadband initiative. The overall increase in capital investment was partially offset by a lower volume of wood pole replacements and a lower spend on system capacity reinforcement projects within the distribution segment. In the transmission segment, we saw a slight decrease in capital expenditures, primarily due to a lower volume of station refurbishments and equipment replacement, lower spending on major development projects, a lower volume of line refurbishments and wood pole replacement, and lower spending on spare transformer purchases. These were partially offset by investments in the Wassegan Transmission Line in the quarter. Looking at in-service additions, in the second quarter, we placed $591 million of assets in service for our customers, which was an increase of 12.4% compared to the prior year.
Speaker #5: The overall increase in capital investment was partially offset by a lower volume of wood pole replacements and a lower spend on system capacity reinforcement projects within the distribution segment.
Speaker #5: In the transmission segment, we saw a slight decrease in capital expenditures, primarily due to a lower volume of station refurbishments and equipment replacement, lower spending on major development projects, a lower volume of line refurbishments and wood pole replacement, and lower spending on spare transformer purchases.
Speaker #5: These were partially offset by investments in the Wasegon transmission line in the quarter. Looking at in-service additions, in the second quarter, we placed $591,000,000 of assets in service for our customers.
Speaker #5: Which was an increase of 12.4% compared to the prior year. In the transmission segment, we saw a decrease of 49.3% year-over-year, primarily due to the timing of assets placed in service for station refurbishments and replacements, as well as a lower volume of line refurbishments.
Harry Taylor: In the transmission segment, we saw a decrease of 49.3% year-over-year, primarily due to the timing of assets placed in service for station refurbishments and replacements, as well as lower volume of line refurbishments. These were partially offset by investments placed in service for our Aurelia Distribution Warehouse. In the distribution segment, in-service additions increased by 88.4% from the prior year due to a higher volume of storm-related asset replacements, primarily related to the March ice storm and associated restoration efforts. Also contributing to the increase were investments placed in service for the same Aurelia Distribution Warehouse and investments in the advanced metering infrastructure known as AMI 2.0 system. Looking ahead, we continue to expect earnings per share to grow between 6% and 8% annually through 2027, using the normalized 2022 EPS of $1.61 as a base.
Speaker #5: These were partially offset by investments placed in service for our Arillia distribution warehouse. In the distribution segment, in-service additions increased by 88.4% from the prior year due to a higher volume of storm-related asset replacements, primarily related to the March ice storm and associated restoration efforts.
Speaker #5: Also contributing to the increase were investments placed in service for the same Arillia distribution warehouse and investments in the Advanced Metering Infrastructure, known as AMI 2.0, system.
Speaker #5: Looking ahead, we continue to expect earnings per share to grow between 6% and 8% annually through 2027, using the normalized 2022 EPS of $1.61 as a base.
Harry Taylor: Finally, I am pleased to report that our Board of Directors declared a dividend of $0.3331 per share, payable to common shareholders of record on September 10, 2025. With that, we will open the phone lines and be pleased to take your questions.
Speaker #5: Finally, I'm pleased to report that our board of directors declared a dividend of $33.31 per share payable to Common Shareholders of Record on September 10th, 2025.
Speaker #5: With that, we will open the phone lines and be pleased to take your questions.
Wassem Khalil: Thank you, David and Harry. We will now open the call to take questions. We ask the operator to explain the Q&A polling process. We ask that you limit your questions to one question and one follow-up. If you have additional questions, we request you rejoin the queue. In case we cannot address your questions today, my team and I are always available to respond to follow-up questions. Please go ahead, Shannon.
Speaker #6: Thank you, David and Henry. We will now open the call to take questions. We ask the operator to explain the Q&A polling process. We ask that you limit your questions to one question and one follow-up.
Speaker #6: If you have additional questions, we request that you rejoin the queue. In case we can't address your questions today, my team and I are always available to respond to follow-up questions.
Speaker #6: Please go ahead, Shannon.
Shannon: Thank you. As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Benjamin Pham with BMO. Your line is now open.
Speaker #7: Thank you. As a reminder, to ask a question, please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again.
Speaker #7: Please stand by while we compile the Q&A roster. Our first question comes from the line of Benjamin Sam with BMO. Your line is now open.
Benjamin Pham: Hi, thanks. Good morning, everybody. Maybe you can update us. I know last you've been talking about the potential rate for application, maybe into next year, into the next JRAP program. Maybe just update us on the timing of that. Is the intention still a combined application and also a multi-year one as well?
Speaker #8: Hi, thanks. Good morning, everybody. Maybe you can, maybe you can update us. I know a lot of lost, you've been talking about the potential regulatory application.
Speaker #8: Maybe into next year, into the next JRAP program. Could you update us on the timing of that? Is the intention still a combined application and also a multi-year one as well?
Harry Taylor: Sure, Van. It's Harry here. Thanks for the question. We continue to feverishly work away in preparing all the analysis and customer engagement to file our next joint rate application. We haven't changed our expectations of filing it in the fall of 2026 so that we have sufficient time to engage in settlement discussions and get everything done in advance of the new rate period beginning early January 1st, 2028.
Speaker #6: Sure, Ben. It's
Speaker #5: Henry Taylor here. Thanks for the question. We continue to feverishly work away in preparing all the analysis and customer engagement to file our next joint rate application.
Speaker #5: We haven't changed our expectations of filing it in the fall of 2026. So that we have sufficient time to engage in settlement discussions and get everything done in advance of the new rate period beginning early January 1st, 2028.
Benjamin Pham: You mentioned also in your report a number of priority transmission projects all the way through 2032. It sounds like, from your perspective, you are increasingly getting some good visibility to provide, once you file JRAP, get it approved, you can roll forward a guidance that duration might be very similar to your current one, a multi-year through 2032.
Speaker #8: And you mentioned also in your report a number of priority transmission projects all the way through 2032. So it sounds like, I guess from your perspective, you increasingly may be getting some good visibility to maybe provide once you file JRAP, get it approved, you can roll forward a guidance that the rate might be very similar to your current one, a multi-year through 2032.
Harry Taylor: Each of the transmission lines will be a separate partnership. Our joint rate application for 2028 to 2032 will be for Hydro One Networks Inc. Each of the transmission lines will have its own rate application once we are ready to go and energize it. As we provide updates on our quarterly calls, our guidance will include at a Hydro One Limited level all of the related capital expenditures, OM&A expectations, and earnings guidance that brings those in on a consolidated basis. They are separate rate applications. We will update capital guidance and timing once we get our Section 92, once we file our so-called Section 92 leave to construct applications. That is when we have a sufficient amount of engineering and cost estimates. We have a reasonable range within the capital expenditures for that base. That is when we will update our tables and update our guidance around CapEx.
Speaker #5: Well, each of the transmission lines will be a separate partnership. So, our joint rate application for 28 to 32 will be for Hydro One Networks Inc. Each of the transmission lines will have its own rate application once we are ready to go and energize it.
Speaker #5: As we provide updates on our quarterly calls, our guidance will include, at a Hydro One Limited level, all of the related capital expenditures, OM&A expectations, and earnings guidance that bring those in on a consolidated basis.
Speaker #5: But they're separate rate applications. We will update capital guidance and timing once we get our Section 92, once we file our so-called Section 92 Leave to Construct applications.
Speaker #5: That's when we have a sufficient amount of engineering and cost estimates. So we've got a reasonable range within the capital expenditures for that base, and that's when we will update our tables and update our guidance around CapEx.
Benjamin Pham: Perfect. Thanks, Harry. Maybe just to clarify the last question. What I am thinking about, I guess, you have been mentioning for some time as you get through post-2027, you can see an acceleration of EPS growth. Does that language include these potential priority transmission projects that you have put out in the earnings report?
Speaker #8: And thanks, Henry. I may just to clarify that the last question to sync in with what I'm thinking about, I guess it'd be you've been mentioned for some time as you get through post-27, you can see an SL ration of EPS growth.
Speaker #8: Is that, is that language include these potential priority transmission projects that you've put out in the earnings report?
Harry Taylor: Yes.
Speaker #5: Yes.
Benjamin Pham: Okay. Got it. Okay. Thank you.
Speaker #8: Okay, got it. Okay, thank you.
Shannon: Thank you. Our next question comes from the line of Maurice Choy with RBC Capital Markets. Your line is now open.
Speaker #7: Thank you. Our next question comes from the line of Maurice Choi with RBC Capital Markets. Your line is now open.
Benjamin Pham: Thanks, and good morning, everyone. I just want to touch on the Ontario Integrated Energy Plan. You have outlined a number of projects in that plan as part of your prepared remarks. Given the success rate in securing recent transmission projects, any reason to believe that you would not again have a high win ratio? To that end, when do you see these projects being awarded?
Speaker #8: Thanks, and good morning, everyone. Just wanted to touch on the Ontario Integrated Energy Plan. You've outlined a number of projects in that plan as part of your prepared remarks.
Speaker #8: Given the success rate in securing recent transmission projects, is there any reason to believe that you wouldn't again have a high win ratio? And to that end, when do you see these projects being awarded?
David Lebeter: Maurice, David Lebeter here. Thank you for the question. A couple of things. Some of those transmission lines I spoke about will get awarded to us. They probably, unless there is strong opposition during the consultation period, there will not be a competition on those. In the Integrated Energy Plan, the plan does speak to doing some competitive procurement of transmission lines within the province. These will be lines that have longer lead times, are not time-sensitive, are not holding back economic development. We remain really confident that if and when that occurs and a transmission line comes up, just as we did two years ago, we will be the successful proponent and able to win those. It is our backyard. We know the territory better than anybody else. We have over 92% of the transmission assets already owned and operated by us.
Speaker #4: Yeah, Maurice, David here. Thank you for the question. A couple of things. Some of those transmission lines I spoke about will get awarded to us.
Speaker #4: So they probably, unless they're strong opposition during the consultation period, there won't be a competition on those. In the Integrated Energy Plan, the plan does speak to doing some competitive procurement of transmission lines within the province.
Speaker #4: These will be lines that have longer lead times, are not time sensitive, are not holding back economic development. We remain really confident that if and when that occurs in a transmission line comes up just as we did two years ago, we'll be the successful proponent and able to win those.
Speaker #4: It's our backyard. We know the territory better than anybody else. We have over 92% of the transmission assets already, owned and operated by us.
David Lebeter: We are very confident we can compete successfully if and when that does occur.
Speaker #4: So we're very confident we can compete successfully if and when that does occur.
Benjamin Pham: Any idea when those awardings are going to occur?
Speaker #8: Any idea when those awarding is going to occur?
David Lebeter: No, no idea. That is a discussion between the Independent Electric System Operator and the Ministry of Energy and Mines. As I said, we now have 13 transmission lines designated to us, including the Chattabaug Lakeshore Transmission Line. I am concluding that the 60-day consultation period, when it closes, will not have raised any objections. Those three additional lines and the one that is early development will be awarded to us.
Speaker #4: No, no idea. That's a discussion between the independent electric system operator and the Ministry of Energy and Mines. As I said, we now have 13 transmission lines designated to us, including the Chatham by Lakeshore and I'm concluding that the 60-day consultation period when it closes won't have raised any objections to those three additional lines and the one that's early development will be awarded to us.
Benjamin Pham: Understood. My quick follow-up to that is, I suppose when you look at all of these transmission lines that you have been awarded, some of these cost estimates are not out yet. To Harry Taylor's point, the Section 92 applications will come. Are you seeing any higher cost pressures given today's environment? If so, do you anticipate that some of the projects will get pushed out in terms of timing? Or in spite of these cost pressures, do you reckon that the Ontario government will still want to stick to the current timing and make sure that timing does not slip in the name of economic growth?
Speaker #8: Understood. And my quick follow-up to that is, I suppose when you look at all these transmission lines that you have been awarded, some of these cost estimates aren't out yet.
Speaker #8: To Henry's point in Section 92 applications will come. Are you seeing any higher cost pressures given today's environment? And if so, do you anticipate that some of the projects will get pushed out in terms of timing or in spite of these cost pressures, do you reckon that the Ontario government will still want to stick to the current timing and make sure that timing doesn't slip in the name of economic growth?
David Lebeter: Yeah, I believe that the Ontario government will not want these timelines to slip. Economic growth is continuing ahead in Ontario. It is still, you know, 40% of Canada's GDP. 40% of the country's population lives there. These are priority transmission projects, so they will stick to the timelines that we have outlined there. In reference to your first part of your question, cost pressures, yes, we have seen some cost pressures coming out of the pandemic. We are seeing a little bit of pressure given tariffs, but nothing significant and nothing that we are concerned about at this point. The procurement team, which works in Harry Taylor's portfolio, has done a fantastic job of onshoring, so increasing our Canadian purchases, looking for alternatives, standardization. So we are initiating a lot of activities that we have been working on for quite a while that are offsetting those tariff impacts.
Speaker #4: Yeah, I believe that the Ontario government will not want these timelines to slip, economic growth is continuing to head in Ontario. It's still, you know, 40% of Canada's GDP, 40% of the country's population, lives there.
Speaker #4: These are priority transmission projects, so they will stick to the timelines that we've outlined there. Regardless of the first part of your question, cost pressures—yes, we have seen some cost pressures coming out of the pandemic.
Speaker #4: We're seeing a little bit of pressure given tariffs, but nothing significant and nothing that we're concerned about at this point. The procurement team, which works in Harry's portfolio, has done a fantastic job of onshoring and increasing our Canadian purchases.
Speaker #4: Looking for U.S. alternatives, standardization. So we're initiating a lot of activities, not that we've been working on for quite a while, that are offsetting those tariff impacts.
Benjamin Pham: That's great comment. Thank you.
Speaker #8: That's great color. Thank you.
Shannon: Thank you. Our next question comes from the line of Mark Jarvi with CIBC. Your line is now open.
Speaker #7: Thank you. Our next question comes from the line of Mark Jarvey with CIBC. Your line is now open.
Benjamin Pham: Thanks. Just following up on the Integrated Energy Plan, I think it is fairly evident and obvious on how the transmission business can benefit from what was laid out. What about on the distribution side? Is there anything inside of that plan or conversations you think are forming the outlook on the distribution, I guess, through the next phase and then into the 2030s?
Speaker #8: Thanks. Just following up on the IEP, I think it's fairly evident and obvious how the transmission business can benefit from what was laid out.
Speaker #8: What about the distribution side? Is there anything inside of that plan or conversations you think are sort of forming the outlook on the distribution?
Speaker #8: I guess through the JRAP next phase and then into the 2030s?
David Lebeter: Yeah, good morning, Mark. How are you doing today? It's David. The Integrated Energy Plan was pretty important from our perspective. It's the first time that the Ministry has acknowledged that the distribution system needs investments. It talks about the distribution system operator. It talks about integrated planning with natural gas. Those are aimed directly at the distribution sector. We anticipate that this is going to allow us to move forward with modernization of the distribution grid and recognize the importance of the distribution grid in supporting economic growth. It's not good enough just to have the transmission system solid backbone, but you need to have the arteries that feed it out to those businesses and industries and homes and restaurants that people rely on for their day-to-day existence.
Speaker #4: Yeah, good morning. Mark, how are you doing today? It's David. The Integrated Energy Plan was pretty important from our perspective. It's the first time that the ministry has acknowledged that the distribution system needs investments.
Speaker #4: It talks about the distribution system operator, it talks about integrated planning with natural gas. Those are aimed directly at the distribution sector. So we anticipate that this is going to allow us to move forward with modernization of the distribution grid and recognize the importance of the distribution grid in supporting economic growth.
Speaker #4: It's not good enough to set up the transmission system. Solid backbone, but you need to have the arteries that feed it out to those businesses, industries, homes, and restaurants that people rely on for their day-to-day existence.
Benjamin Pham: David, is there anything then from that and how the framework's been laid out that opens up some new investment opportunities for distribution? Or is it largely just, you know, confirming your views in terms of where you thought the opportunities were?
Speaker #8: So, David, is there anything then from that and how the framework's been laid out that opens up some new investment opportunities for distribution? Or is it largely just confirming your views in terms of where you thought the opportunities were?
David Lebeter: It does speak to innovation. So, there should be some opportunities there. We are looking to see what those might be. But mostly what it does, it sets the stage very nicely for us when we go in front of the Ontario Energy Board with JRAP 28, which is our next five-year filing. It sets the stage nicely to say, look, the investments we are planning on making are consistent with the Integrated Energy Plan, consistent with the direction the government would like us to take, and consistent with economic growth, supporting economic growth in the province. So, it is an important document. It lays a foundation.
Speaker #4: It does speak to innovation. So there should be some opportunities there. We're looking to see what those might be, but mostly what it does, it sets the stage very nicely for us when we go in front of the Ontario Energy Board with JRAP 28, which is our next five-year filing.
Speaker #4: It sets the stage nicely to say, look, the investments we are planning on making are consistent with the Integrated Energy Plan, consistent with the direction the government would like us to take, and consistent with economic growth support and economic growth in the province.
Speaker #4: So, it is an important document that lays a foundation. It specifically doesn't identify any new investments because, of course, we're already making our advanced metering infrastructure investment and we're already upgrading our distribution automation system.
David Lebeter: It specifically doesn't identify any new investments because, of course, we are already making our AMI 2.0 investment, and we are already upgrading our distribution automation system. So, we had already started down this path towards being a DSO, but this provides additional evidence, as I said, before we file our rate application.
Speaker #4: So we'd already started down this path towards being a DSO, but this provides additional evidence, as I said before when we file our rate application.
Benjamin Pham: Got it. Just a follow-up for Harry Taylor. In your comments around the timing of the joint rate application next fall, you will provide a CapEx plan around that. Just curious, at that point, would you be sharing a little bit more in terms of financing needs, timing of equity, or is there something you think you could provide between now and then in terms of just updated views on equity needs, or do we wait until the fall of 2026?
Speaker #8: Got it. And then just a follow-up for Harry. In your comments around the timing of the joint rate application next fall, you'll provide sort of a CapEx plan around that.
Speaker #8: Just curious, at that point, would you be sharing a little bit more in terms of financing needs, timing of equity, or is there something you think you could provide between now and then in terms of just updated views on equity needs?
Speaker #8: Or do we wait until the fall of 2026?
Harry Taylor: Mark, I am afraid you will have to wait until the fall of 2026. Once we file the rate application, there is a lot of communication that we will do. There is no question we see CapEx accelerating. We will be proposing an acceleration in CapEx and assets placed in service, which will drive incremental funding needs. It is no secret that in the next rate period, we will need to issue equity in addition to continue issuing debt. We are already thinking through and working on that right now, but I cannot give any specifics at this point, and that will come together. We do want to be careful. We do not want to prejudge the outcome or prejudice the discussion. We have to be as fulsome as we can in our communication without creating any challenges for us in the settlement discussions as we go.
Speaker #5: Mark, I'm afraid you will have to wait until the fall of 2026 once we file the rate application. There's a lot of communication that we will do.
Speaker #5: There's no question we see CapEx accelerating. We'll be proposing an acceleration in CapEx and assets placed in service. Which will drive incremental funding needs and it's no secret that in the next rate period, we will need to issue equity in addition to continue issuing debt and we're already thinking through and working on that right now.
Speaker #5: But I can't give any specifics at this point and that will come together we do want to be careful. We don't want to pre-judge the outcome or prejudice the discussion.
Speaker #5: So we have to be as fulsome as we can in our communication without creating any challenges for us in the settlement discussions as we go.
Harry Taylor: We are going to kind of thread a needle here in terms of expectations for the 2028 through 2032 period.
Speaker #5: So, we're going to kind of thread a needle here in terms of expectations for the 2028 through 2032 period.
Benjamin Pham: Understood. Okay. Thanks, Harry Taylor. Thanks, David Lebeter.
Speaker #8: Understood. Okay, thanks, Harry. Thanks, David.
Shannon: Thank you. Our next question comes from the line of John Mould with TD Cowan. Your line is now open.
Speaker #7: Thank you. Our next question comes from the line of John Mold with TD Cowan. Your line is now open.
Mark Jarvi: Good morning, everybody. Maybe just one more on the Integrated Energy Plan. You know, you flagged the specific transmission initiatives that have been identified, you know, that are relevant, excuse me, for Hydro One Limited and touched on some of the competitive transmission procurement elements and your broader distribution implications. I am just wondering if there are any other takeaways or broader strategic implications that you saw for the company coming out of that plan.
Speaker #8: Good Good morning, everybody. Maybe just one more on the Integrated Resource Plan. You know, you flagged the specific transmission initiatives that have been identified.
Speaker #8: You know, that are relevant, excuse me, for Hydro One and touched on some of the competitive transmission procurement elements and you sort of broader distribution implications.
Speaker #8: I guess I'm just wondering if there are any other takeaways or broader strategic implications that you saw for the company coming out of that plan.
David Lebeter: Good morning, John. Thanks for joining us on the call today. The one that I forgot to mention in my earlier response was the plan does acknowledge LBC consolidation, that there would be advantages to the consumer in terms of lower rates. It would allow modernization of the grid to move forward at a faster pace. So we're watching and waiting for an opportunity to participate in that process in terms of shaping how that might be brought about. But that's the one additional area that I didn't mention.
Speaker #4: Good morning, John. Thanks for joining us in the call today. The one that I forgot to mention in my earlier response was the plan does acknowledge LVC consolidation and that there would be advantages to the consumer in terms of lower rates.
Speaker #4: It would allow modernization of the grid to move forward at a faster pace. So we're watching and waiting for an opportunity to participate in that process in terms of shaping how that might be brought about.
Speaker #4: But that's the one additional area that I didn't mention.
Mark Jarvi: Okay, got it. Thanks for that. Last quarter, you flagged the challenge of securing manufacturing slots for equipment. I am just curious how that dynamic has evolved over the last three months. If you could also touch on your efforts to continue to diversify, excuse me, your suppliers.
Speaker #8: Okay, got it. Thanks for that. And then last quarter you flagged the challenge of securing manufacturing slots for equipment. Just curious how that dynamics evolved over the last three months.
Speaker #8: And if you could also touch on your efforts to continue to diversify your suppliers.
Harry Taylor: John, I will cover that off. Our procurement team has been working hard with not only our vendor base, but also other Canadian utilities as we look to shift, in some cases, sources of supply and reduce exposure to U.S. dollars, certainly reduce exposure to U.S. suppliers where we can, and there are credible alternatives. We have not had issues in terms of securing manufacturing slots for long lead time items, particularly transformers. We are very happy with the early benefits from finding Canadian sources, particularly for things like wood poles, which is a natural, if you will. We are seeing some real benefits from shifting some sources of supply there. It is early days. As David Lebeter mentioned, we have not seen any significant cost increases. We have been working through inventory and being proactive.
Speaker #5: John, I'll cover that off. Our procurement team has been working hard with not only our vendor base but also other Canadian utilities as we look to shift, in some cases, sources of supply and reduce exposure to U.S. dollars, certainly reducing exposure to U.S. suppliers.
Speaker #5: Where we can and there's credible alternatives. We have not had issues in terms of securing manufacturing slots for long lead time items, particularly transformers.
Speaker #5: And we have are very happy with the early benefits from finding Canadian sources, particularly for things like wood poles, which is kind of a natural if you will, and we are seeing some real benefits from shifting some sources of supply there.
Speaker #5: It's early days. As David mentioned, we haven't seen any significant cost increases. We've been working through inventory and being proactive. So we don't have any concerns, but it is something the team is working on pretty aggressively with other our partner utilities around the country to ensure that we've got diversified supply base.
Harry Taylor: We do not have any concerns, but it is something the team is working on pretty aggressively with other partner utilities around the country to ensure that we have got diversified supply base.
Mark Jarvi: I will leave it there. Thanks very much for taking my questions.
Speaker #8: Okay, I'll leave it there. Thanks very much for taking my questions.
Shannon: Thank you. As a reminder, to ask a question at this time, please press star one one on your touchtone telephone. Our next question comes from the line of Patrick Kenny with National Bank Financial. Your line is now open.
Speaker #7: Thank you. As a reminder, to ask a question at this time, please press *11 on your touchtone telephone. Our next question comes from the line of Patrick Kinney with National Bank Financial.
Speaker #7: Your line is now open.
Mark Jarvi: Thank you. Good morning, guys. Just curious if we can get a quick update on the Ring of Fire development opportunity in the province. Maybe what key milestones we should be looking out for, whether it be on the policy front or industry activity related. Then, perhaps you could just refresh us on what the critical minerals opportunity for the province in general could mean for your growth outlook.
Speaker #8: Thank you. Good morning, guys. I'm just curious if we can get a quick update on the Ring of Fire development opportunity in the province. Maybe what key milestones we should be looking out for, whether it be on the policy front or industry activity related.
Speaker #8: And then, you know, perhaps you could just refresh us on what the critical minerals opportunity for the province in general could mean for your growth outlook.
David Lebeter: Good morning, Pat, and thanks for getting up early to join us on the call this morning. Ring of Fire is really interesting. Our approach towards the Ring of Fire has been to meet with the Indigenous Nations that are going to be impacted by that project or the development of that area, understand their needs, and get to build a relationship with them. That has been very successful for us so far. I am quite pleased with the progress we have made there. Unfortunately, the passing of Bill 5 in Ontario and Bill C5 federally have created a bit of a wrinkle in that some of the nations feel that their rights and their ability to be adequately consulted and have influence and participate in these projects might be impacted by those bills.
Speaker #4: Good morning, Pat, and thanks for getting up early to join us on the call this morning. Ring of Fire is really interesting. Our approach towards the Ring of Fire has been to meet with the indigenous nations that are going to be impacted by that project or the development of that area.
Speaker #4: Understand their needs, and get to build a relationship with them. That has been very successful for us so far. I'm quite pleased with the progress we've made there.
Speaker #4: Unfortunately, the passing of Bill 5 in Ontario and Bill C5 federally have created a bit of a wrinkle in that the nations some of the nations feel that their rights and their ability to be adequately consulted and have influence and participate in these projects might be impacted by those bills.
David Lebeter: I remain confident and optimistic that both the federal government and provincial government with the nations can work through those challenges, but that will take some time. I would expect things to move forward a little bit more slowly than perhaps some people might have liked earlier on. It is a very rich mineral area. There are lots of critical minerals up there. I am not a miner, so I am not going to try to say how rich and how important it is. From everything I read and when I talk to the mining companies that are interested in there, it is a world-class mineral resource up there, and everybody wants to get in there. I will say people recognize this has to be done in the right way.
Speaker #4: So I remain confident and optimistic that both the federal government, provincial government, with the nations can work through those challenges but that will take some time.
Speaker #4: So I would expect things to move forward a little bit more slowly than perhaps some people might have liked earlier on. It is a very rich mineral area.
Speaker #4: There's lots of critical minerals up there. I'm not a miner, so I'm not going to try to say how rich and how important it is, but from everything I read and when I talk to the mining companies that are interested in there, it is a world-class mineral they're world-class mineral reserves up there and everybody wants to get in there.
Speaker #4: I will say people recognize this has to be done in the right way. It has to be done in partnership with the communities and the people that live in that area.
David Lebeter: It has to be done in partnership with the communities and the people that live in that area, and it has to be done in a way that respects the environment. It will be perhaps different than developments we have seen in the past. As I said, I remain optimistic it will move forward, but there is some work that has to be done to build those bridges as a result of Bill C5 and Bill 5 in Ontario.
Speaker #4: And it has to be done in a way that respects the environment. So it will be perhaps different than developments we've seen in the past.
Speaker #4: As I said, I remain optimistic we'll move forward, but there is some work that has to be done to build those bridges as a result of Bill C5 and Bill 5 in Ontario.
Mark Jarvi: Understood, that's helpful. When it comes to potential opportunities that might come up outside the province, I am not sure if anything has changed just in terms of how you are thinking about bolt-on acquisitions within, say, adjacent jurisdictions that might have a net positive impact on customer affordability for Ontarians or perhaps other strategic benefits for your platform. I am just curious if you had an update on the current market dynamic outside the province.
Speaker #8: Understood. That's helpful. And then I guess when it comes to potential opportunities that might come up, you know, outside the province, not sure if anything has changed just in terms of how you're thinking about bolt-on acquisitions within say adjacent jurisdictions.
Speaker #8: That might have a, you know, a net positive impact on customer affordability for Ontarians or perhaps other strategic benefits for your platform. Yeah, just curious if you had an update on the current market dynamic outside the province.
Harry Taylor: Pat, it's Harry here. I will start. David can clean up if I have any omissions or errors. The good news is our domestic, for lack of a better term, or Ontario growth opportunities are pretty significant. That is our primary focus. But we are open to other opportunities for us that will give us new and diversified avenues of growth as long as it does not detract from what we are doing in Ontario. So it has to serve Ontarians' interests, which it could, to your point about helping with affordability in terms of spreading costs over bigger bases, et cetera.
Speaker #5: Pat, it's Harry here. I'll start, David can clean up if I have any omissions or errors. It's the good news is our domestic, for lack of a better term, or Ontario growth opportunities are pretty significant.
Speaker #5: And so that's our primary focus, but we are open to other opportunities for us that will give us new and diversified avenues of growth as long as it doesn't detract from what we are doing in Ontario.
Speaker #5: So it has to serve Ontarians' interests, which it could to your point about helping with affordability in terms of spreading costs over bigger bases, et cetera.
Harry Taylor: With both federal and, the First Minister's priority about nation-building projects, we are certainly interested to see what can come from that, where we can add some value and create some value for our shareholders and for our customers, if you will, without detracting from the agenda that we have in front of us. So as long as it is an adder and we can do it and feel we have the capabilities where we can add some value, we are certainly open to it and will look and evaluate the opportunities.
Speaker #5: With the both federal and well, the first minister's priority about nation-building projects, we're certainly interested to see what can come from that, where we can add some value.
Speaker #5: And create some value for our shareholders and for our customers, if you will, without detracting from the agenda that we have in front of us.
Speaker #5: So as long as it's an adder and we can do it and feel we have the capabilities where we can add some value, we're certainly open to it and we'll look and evaluate the opportunities.
David Lebeter: To build on Harry's answer there, our largest shareholder, the province of Ontario, is supportive of us going outside Ontario, providing and using big providings so we do not damage any of the work we are doing within the province, which is critical, as Harry just outlined. Providing it allows us to repatriate some additional profit back into the province of Ontario. So we have support from our largest shareholder, and the opportunities might exist out there, but we are not going to do anything to compromise the great growth rate that we see in Ontario and the responsibility that has been placed on us to develop and deliver those priority projects to sustain economic growth in Ontario.
Speaker #4: Pat, just to build on Harry's answer there, our largest shareholder, the province of Ontario, is supportive of us going outside Ontario, providing, and these would be providing we don't damage any of the work we're doing within the province, which is critical, as Harry just outlined.
Speaker #4: And providing it allows us to repatriate some additional profit back into the province of Ontario. So we have support from our largest shareholder. And the opportunities might exist out there, but we're not going to do anything to compromise the great growth rate that we see in Ontario and the responsibilities been placed on us to develop those develop and deliver those priority projects to sustain economic growth in Ontario.
Mark Jarvi: Okay, that's great. I appreciate the clarity. I'll leave it there, guys. Thanks.
Speaker #8: Okay, that's great. I appreciate the clarity. I'll leave it there, guys. Thanks.
Shannon: Thank you. Our last question comes from the line of Robert Hope with Scotiabank. Your line is now open.
Speaker #7: Thank you. Our last question comes from the line of Robert Hope with Scotiabank. Your line is now open.
Benjamin Pham: Morning, everyone, and congrats Megan and Lisa on the new roles. Maybe to start with the kind of longer-term Ontario transmission outlook and regulatory framework, regarding your prior comments on achieving most of the transmission assets, even if they come up for a competitive bid, could we see in a scenario where increased competitions could potentially weigh on some returns on those projects on a longer-term basis?
Speaker #8: Morning, everyone. And congrats to Megan and Lisa on the new roles. Maybe to start about with the kind of longer-term Ontario transmission outlook and regulatory framework, you know, regarding your prior comments on achieving most of the transmission assets, even if they come up for a competitive bid, you know, could we see in a scenario where increased competitions could potentially weigh on some returns on those projects on a longer-term basis?
Harry Taylor: Rob, good morning. We are happy to compete if and when the ISO or the province wants to put something out for competition. We think we can measure up well and compete well. I do not know that a competitive process would result in lower returns. The competitive process is designed to ensure the lowest cost is achieved for the customers, and then the returns will be based on the formula and the metrics supporting the ROE formula in place at the time the application is brought. I think for us, it is about making sure we put our best foot forward if and when there is a competitive process and bring all the expertise and capabilities that we have to it to ensure that we are bringing the most value to the province and the customers.
Speaker #5: Rob, I don't good morning. We're happy to compete if and when the ISO or the province wants to put something out for competition. We think we can measure up well and compete well.
Speaker #5: I don't know how the competitive process would result in lower returns. The competitive process is designed to ensure the lowest cost is achieved for the customers, and then the returns will be based on the formula and the metrics supporting the ROE formula in place at the time the application is brought.
Speaker #5: So I think for us, it's about making sure we put our best foot forward if and when there is a competitive process. And bring all the expertise and capabilities that we have to it to ensure that we're that bringing the most value to the province and the customers.
Benjamin Pham: I appreciate that. Then maybe just a clean-up question. The MD&A notes that work programs were a little lower in Q2. How does that look for the rest of the year, especially given the fact that it has been a very warm start to the summer, as well as some vegetation crews may be tied up with prior work?
Speaker #8: I appreciate that. And then maybe just a cleanup question. The MD&A notes that work programs were a little lower in Q2. You know, how does that look for the rest of the year, especially given the fact that it's been a very warm start to the summer, as well as kind of some vegetation crews may be tied up with prior work?
Harry Taylor: I think the biggest reason for the delta in Q2 was so much storm restoration work, which detracted from normal course. It replaced some work, but it was in a concentrated area relative to across the province. We will return to more normal levels now that the storm restoration work has been completed and go from there.
Speaker #5: Well, I think the biggest reason for the delta in Q2 was so much storm restoration work, which detracted from normal course. It replaced some work, but it was in a concentrated area relative to across the province.
Speaker #5: We'll return to more normal levels now that the storm restoration work has been completed. And go from there.
Benjamin Pham: Thank you.
Speaker #8: Thank you.
Shannon: Thank you. That does conclude our Q&A session for today. I would like to turn the call back over to Wassem Khalil for any further remarks.
Speaker #7: Thank you. And that does conclude our Q&A session for today. I'd like to turn the call back over to Waseem Khalil for any further remarks.
Wassem Khalil: Thanks, Shannon. The management team at Hydro One thanks everyone for their time with us this morning. We appreciate your interest and your continued support. If you have any questions that weren't addressed on the call, please feel free to reach out, and we'll get them answered for you. Thank you again and enjoy the rest of your day.
Speaker #8: Thanks, Shannon. The team the management team at Hydro One, thanks everyone for their time with us this morning. We appreciate your interest and your continued support.
Speaker #8: If you have any questions that weren't addressed on the call, please feel free to reach out and we'll get them answered for you. Thank you again and enjoy the rest of your day.
Shannon: Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Have a great day.