Q3 2025 Hydro One Ltd Earnings Call

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Harry Taylor: Ben, it's Harry. We are definitely generating earnings growth above what our guidance over the entire rate period is. This performance this year has been a very pleasant, favorable variance, driven a lot by load. We have seen in both transmission and distribution above what we had put in our own internal budget, what we used in our assumptions for the guidance. That has given us this favorable variance. Now, load comes, load giveth, and load taketh away. We have also had years where it has been the other, where weather has not been as volatile or as extreme, and we have seen the other trend as well. We are sticking with the 6% to 8% over the period so that we are not going to push expectations up and then have to come back and say, oh, load did not materialize the way it had in 2025, and end up disappointing.

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As a reminder, this call is being recorded.

I would now like to introduce your host for today's conference. Mr will <unk> director of Investor Relations at Hydro one. Please go ahead.

Good morning, and thank you for joining us for our quarterly earnings call. Joining me on the call today are president and CEO, David <unk>, 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.

As a reminder, 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'll turn the call over to our President and CEO David leader.

Thank you <unk>. Good morning, Thank you for joining us for our third quarter 2025 earnings call. This morning, I will provide an update on our recent activities and accomplishments during the quarter then Harry will take you through the financial results.

Harry Taylor: That's the cold, hard facts of why we are where we are.

John Mold: It sounds like if load doesn't at least decline through 2027, you're nicely tracking above that range, or you will be nicely tracking above that range.

Before we begin as many of you know a temporarily stepped away from my role as President and CEO on August 25, 2025 on a compassionate basis to care for a family member. During this time have continued to support the company on an advisory basis and as announced in our press release. This morning, our resume reassumed my duties effective November 12 2025.

Harry Taylor: Yeah, it's possible. I don't want to say anything more than that.

John Mold: Okay. I know, and thanks for that, Harry. I mean, the second topic I wanted to ask is on the, you think about the JRAP, the higher CapEx, and even all the priority transmission projects you have, there's a huge series of them coming ahead. A big topic amongst the industry now is human capital and access to it, and maybe just not enough of it. Is that something that is, I don't want to say concerning for you, but how do you think about managing that, and labor, and parts, and all that as you head into the next phase?

I would like to thank everyone for their understanding messages emails and words of support as my family and I navigate this difficult journey, we're very appreciative and grateful for the support that we received.

I would also like to extend my thanks to Harry Taylor, who in addition to his role as Chief financial regulatory officer assumed the role of interim President and CEO. During my absence under Harry's guidance. The company continued to execute on our stated objectives and deliver on our promise for all Ontario's. Thank you Harry.

Onto the quarter as always safety comes first at hydro one our focus on being an efficient and agile company supported by our policies and systems, the prophase workplace safety as well as public safety public health and safety.

David Lebeter: Hey, Ben, David Lebeter speaking. We obviously pay a lot of attention to the resource adequacy. Can we have access to our engineer, procure, and construct contractors? Do we have access to appropriate skills within the organization? It hasn't been a problem yet. To be honest, I don't see a problem on the horizon, but it's something we always pay attention to. We want to make sure we have the right resources available at the right time. North America is big. There's lots of talk about growth that's going on, but we've been able to secure really quality individuals to build our transmission lines, and we don't see that changing going forward.

Empowering our employees to take actions for their health and safety of our cells co workers and our communities together, we can achieve a workplace three a blip voltaren injuries and fatalities.

Ontario is facing historic growth in demand for electricity driven by continued economic growth.

Electrification of the transportation and manufacturing sectors population growth as well as industrial expansion and evolving technologies over.

Harry Taylor: Ben, I'm going to add on from both a supply chain point of view and a partner point of view. It isn't all our resources who are building, constructing, or even designing the transmission lines. We rely on internal, but also heavily on external resources, EPC contractors in particular. With the visibility we have over the next seven, eight years, we are able to bring partners in early, make it competitive, but bring them in. They can plan, do their human resource planning, and our supply chain team has good visibility. It's not like all of these are going to hit all at once. They're laddered out through the period. We have enough visibility now that we can, on the supply chain side, make commitments for the long lead time items with our vendors to ensure we've got production slots. We've got promise of supply.

Over the next 25 years, the independent electric system, operator, or the ISO anticipates electricity demand to increase 75% by 2050.

Hydro one is proud to play a pivotal role in serving the new load with our provincial indigenous municipal and industry partners. We are and will continue to build a reliable resilient sustainable and affordable energy system for generations to come.

On September <unk> of this year, alongside first nations partners and provincial and municipal leaders hydro and celebrated the groundbreaking of the St. Clair transmission line project in southwestern Ontario.

The project involves constructing a double circuit 230 kilovolt transmission line.

Spanning the existing Chatham switching station and lump in transfer station and converting the existing Wallace transfer station to 230 kv.

The total investment approach is expected to be approximately $472 million.

Harry Taylor: Pricing may still be negotiable depending on the time frame. Obviously, we'd like to lock them down as best we can, but if you're committing to something three and four years out, we may not be locking in the price, but we will lock in the supply. With the visibility we have, we're able to manage some of that risk that others may not be able to manage the same way.

With an in service date in 2028.

The transmission level support improved grid grid, resiliency and reliability as well as enhance economic growth in the region, along with powering homes businesses and industry. It will support key industries, including the agricultural sector and electric vehicle technology.

David Lebeter: It sounds a little bit counterintuitive, but actually having a pipeline of projects makes you a more attractive client, and actually makes it easier for us to secure the resources and materials we need.

Farming in food production or economic cornerstones in this region and the line will help enable the expansion of farming operations to support our reliable and affordable local food supply chain in Ontario.

John Mold: Okay, got it. Thank you.

Operator: Thank you. Our next question comes from the line of Robert Hope with Scotiabank. Your line is now open.

The project will also support electric vehicle manufacturing, providing a reliable supply of clean electricity develop a secure supply chain in Ontario.

Maurice Choy: Morning, everyone. The provincial government obviously is very focused on increasing transmission in the north. The federal government is also equally focused on expanding transmission across the country. Is this an area that you have put any work in? Could we see some incremental growth, either connecting additional northern communities or the provinces? I guess as a final point, is this even needed, or do you have enough transmission growth in hand right now?

St. Clair transmission line as part of a network of projects in the region, including the Chatham. The Lakeshore line that was energized in late 2024, and along with the Lakeshore transmission line, that's being developed in collaboration with five first nation partners.

Through hydro one's 50, 51st nation equity partnership model first nation partners have been offered a 50% equity stake in the transmission line component of the project.

The integrated energy plan released in June of this year highlighted the need for additional transmission capacity in the Red Lake area in northwestern Ontario.

David Lebeter: Well, the last part of your question is interesting, Rob. Is it needed? I'm a bit greedy, so I always like to have lots of growth. Yes, we have had conversations with the federal government. I know they've got an announcement coming out later on today and some more nation-building projects, so we'll see what they decide to do there. I think there overall is a general comment. There is a focus on electrifying northern communities that for too long have been reliant on diesel generation, and that has actually hindered growth across the country, not just in Ontario. I would say both levels of government, and even municipalities at third level of government, are focused on how do we connect all the communities in Canada to the grid with reliable, affordable, and resilient energy.

These areas are key region frontier is critical minerals with several mining projects that will create large electricity demands.

In August the ISO released the northwest region integrated regional resource plan addendum that recommend the urgent development of the Red Lake transmission line. This line will be a new double circuit 230 kv transmission line that will run from the Dryden transformer station up to the Red Lake switching station along with associated station facilities to meet the growing demand.

Capacity needs after 2028.

On October 29, 2025, the government NASA proposal declared the Red Lake transmission line is a priority project and also proposed to designate hydro one of the trends better for the project.

Maurice Choy: All right. Appreciate that. Maybe just a smaller question. Broadband, it looks like there's been some puts and takes there. How are you thinking about the timing and overall size of the investment here?

The proposal is subject to required approvals and community consultation, including consultation with indigenous communities.

In response to continued uncertainty surrounding tariffs and trade hydro <unk> has been working to identify further actions to limit our exposure and the impact of tariffs. These actions have focused on the diversification of our supplier base beyond the United States, the prioritization of Canadian suppliers to reduce cost and encourage manufacturer within Canada to support it.

David Lebeter: We still think it'll be in the CAD 300 million to 700 million addition of rate base for ourselves. I'm getting a little bit more cautiously optimistic. I think this last round of negotiations between the Ministry of Energy and Mines, which now has responsibility for the broadband portfolio, and the largest of the internet service providers has finally broken the logjam, and we're going to see things start to move. Now, I know I've been optimistic before, but this is the most optimistic I've been as we've been on this journey. I think over the next six months when we're having this call, we'll be able to give you a better range estimate and an idea of how well it is moving. I feel like we finally broke the government, and the ISPs have finally reached an agreement on how to move forward.

<unk> supply chain.

Now more than ever we must focus on investing in homegrown businesses to build a strong secure and self reliance supply chain to further reduce risks.

Recently hydro was at the groundbreaking ceremony that we'll see northern transformer, a leading Canadian manufacturer of high voltage power Transformers expand its manufacturing facility in Ontario. This expansion will support the demand for high quality reliable and timely power transformers to support grid modernization and electrification initiatives across the province.

David Lebeter: That's going to allow us to get out the work we need to do.

Maurice Choy: All right. Perfect. Welcome back, David.

David Lebeter: Thank you.

Operator: Our last question comes from the line of Patrick Kinney with National Bank Financial. Your line is now open.

Either one is proud to support the growth of a Canadian supply chain and has committed to spend approximately $165 million per year to secure energy infrastructure from northern transformer, they're high voltage Transformers will support a reliable supply of electricity across the province, and like US the roots are in Ontario.

Wassem Khalil: Thank you. Good morning. Yeah, welcome back, David, and great job, Harry, over the last few months. Just wanted to touch base on I know your allowed ROE is still locked in for a couple of years, but just given the recent cost of capital update from the OEB, it looks like 2026 has shaken out to be about 25 basis points below your current 9.36. Just wondering if you've had any discussions or feedback for the OEB that might help to hold the ROE a little bit closer to where you're at today for the next JRAP period.

We congratulate northern transform run their expansion and look forward to our continued partnership to develop for the people of Ontario.

The strength of our culture and the way we support each other and our communities shine throughout the year. This particular on display during our signature power to give campaign that takes place every September this year hydro one employees once again demonstrated the generosity and community spirit raising more than $2 1 million.

Employers also logged more than 5200 volunteer hours in support of their communities.

Harry Taylor: Good morning, Pat. Thanks for those comments. You're right. I think for next year, 9.11 is the ROE for any rate applications that come through. Using forecasts for the benchmarks that are used in the formula, when we're back at this point, it would be 9.33, so three basis points below the current approved ROE. As you know, we have earned above that, and we don't have any real concerns as we go in. I think our submission, which is a public document in the cost of capital hearing, was for increased equity thickness, some other adjustments.

Is a remarkable achievement that will make a real difference in the lives of people and families across the communities, where we live and work and I'm incredibly proud of our employees for their efforts in September for the way. They gave back all year long their compassion and dedication to support and others embodies one of our key values and reflects the best of who we are at hydro one.

Our vision of building, a better and brighter future for all is also reflected in the work that our teams do we are pleased that our work and dedication continues to be recognized for the second consecutive year argument has been named company of the year with the Ontario Energy Association.

This award recognizes both our technical contributions to strengthening on share of the energy grid and a meaningful partnerships that are helping power a brighter future for the province.

We are deeply honored by this recognition of our rolling Ontario's energy transition and proud of the dedication and skill and resilience of our people.

Harry Taylor: The ruling was a generic ruling that applies to all utilities regulated by the OEB, but they were at pains mentioning over and over, if a utility feels their situation is different, they are free to bring proposals in the next rate application. That's a door that we plan on jumping through as part of the next rate application. At this point, stay tuned.

<unk> continues to grow adapt and deliver for the people of Ontario at a time when the energy system is transforming faster than ever before.

With that I will turn the call over to Harry to discuss our financial results Eric over to you.

Thank you David I am happy to say on behalf of everyone at Hydro one welcome back.

And good morning to everyone on the call and thank you for joining us today in.

Wassem Khalil: Got it. Okay. Thanks for that. Maybe just back on the effective tax rate range as well. I think you mentioned, Harry, 13% to 16%. Can you just remind us what tools you might have at your disposal to achieve the lower end going forward, and perhaps extend that lower end of the level into the next JRAP as well?

In the third quarter, we delivered basic earnings per share of 70.

Third $2.62 in the third quarter of 2024.

Key drivers behind the year over year change included higher revenues net of purchased power due to higher 2025 approved or b rates and higher average monthly peak demand.

Harry Taylor: We do not have a lot of tools ourselves. What primarily drives it is the accelerated CCA and the so-called super productivity deduction in the budget. That would certainly help keep us at the low end, continue to keep us at the low end. As we continue to invest, we take advantage or we are entitled to use that. That is what keeps us at the low end. We are happy to see that proposal in the budget. It has to be turned into law so that it does continue well into our next rate period.

These were partially offset by higher depreciation amortization asset removal costs due to the growth in our capital assets.

And 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 third quarter revenues net of purchased power increased year over year by 7%.

Wassem Khalil: Okay, thanks for that. Last one, I guess, for David, maybe on the supply chain front. I appreciate the details on the domestic procurement. Can you just maybe update us on some of your commitments for transformers and other equipment and components over the next few years as you look to bring some of your transmission developments into the capital budget?

In the transmission segment revenues increased by nine 4% year over year, primarily due to a higher average monthly peak demand.

Higher revenues due to OSB approved rates for 2025, coupled with revenue from our Chatham by Lake Shore transmission line. Following its in servicing in Q4 2024, and finally equity income from hydro one's investment in the East West tie limited partnership, which we closed.

David Lebeter: Morning, Pat. Nice to hear you. At this point, we have no concerns. We've got locked-up manufacturing capacity. We anticipate no problems at all getting the materials we need, transformers, switchgear, whatever it is, for any of the projects. Our supply chain pays attention to that night and day. That is one of the big risks we pay attention to. As we're developing new suppliers in Canada, we continue to work with our existing suppliers to make sure that we don't cut off an avenue. We would actually like to have more suppliers, not fewer, and that, we believe, will help us with pricing as well. No concerns at this point in time.

In the first quarter of this year.

Distribution revenues net of purchased power increased by four 2% year over year, primarily due to the changes in OSB approved rates for 2025.

We continue to see strong energy consumption within the distribution segment, along with growth in the number of customers we support.

On the cost front operating maintenance and administration expenses in the quarter were higher by 0.7% compared to the same period last year.

Wassem Khalil: Okay. That's great. I'll leave it there. Thank you.

Operator: Thank you. That does conclude our Q&A session for today. I'd like to turn the call back over to Wassem Khalil for any further remarks.

In the transmission segment costs were lower by three 5%, mainly due to lower work program expenditures, including vegetation management expenditures.

Operator: 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 were not addressed on the call, please feel free to reach out, and we will get them answered for you. Thank you again, and enjoy the rest of your day.

Partially offset by higher corporate support costs.

Distribution revenues, net of purchase power, increased by 4.2% year-over-year, primarily due to the changes in OEB-approved rates for 2025.

In the distribution segment costs were higher by five 8%, mainly due to higher corporate support costs, resulting from lower capitalized overheads.

Operator: 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.

We continue to see strong energy consumption within the distribution. Segments along with growth in the number of customers. We support.

And higher bad debt expense.

These were partially offset by lower work program expenditures, including vegetation management expenditures.

On the cost front operating maintenance and administration. Expenses in the quarter were higher by 0.7% compared to the same period last year.

Depreciation amortization asset removal expenses for the third quarter were higher by three 4% year over year.

This was due to the growth in capital assets as the company continues to place new assets in service, partially offset by lower asset removal costs.

More work program expenditures including vegetation management expenditures, partially offset by higher corporate support costs.

And with respect to our financing activities, we saw an eight 9% increase in interest expense year over year. This was mainly due to a higher amount of long term debt and a slightly higher weighted average interest rate on our long term debt.

In the distribution. Segment costs were higher by 5.8% mainly due to higher corporate support costs resulting from lower capitalized, overheads and higher bad debt expense

These were partially offset by lower work program expenditures, including vegetation management expenses.

During the quarter Hydro one issued $1 $1 billion of medium term notes.

The issuance was comprised of $450 million of.

Of 394% notes due in 2032.

$300 million up four 3% notes due in 2035.

Depreciation amortization and asset removal expenses. For the third quarter were higher by 3.4% year-over-year. This was due to the growth in capital assets as the company continues to place. New assets and service partially offset by lower asset removal costs.

And $350 million of 495% notes due in 2055.

The issuances were completed under our sustainable financing framework.

Now, with respect to our financing activities, we saw on 8.9% increase in interest expense year-over-year. This was mainly due to a higher amount of long-term debt and a slightly higher weighted average interest rate on our long-term debt.

We continue to be one of the largest issuers of corporate debt in Canada, and Canada continues to be our primary market for that capital.

During the quarter, Hydro 1 issued 1.1 billion dollars of medium-term notes.

However, as our funding needs continue to grow we need to ensure that we have the financial flexibility to support our development and construction programs.

The issuance was comprised of $450 million of 3.94% notes, due in 2032.

To ensure we have this flexibility we filed a U S debt shelf prospectus in the quarter that will provide us with the ability to issue debt in the U S capital markets.

300 million of 4.3% notes due in 2035.

and 350 million of 4.95% notes, due in 2055,

Being able to issue debt in the U S will provide us with an additional tool in our toolbox to help finance our capital expenditure programs.

The issuances were completed under, our sustainable financing framework.

We will be responsive to market conditions, as we broadened our funding alternatives and the aim to execute our inaugural issue in 2026.

We continue to be 1 of the largest issuers of corporate debt in Canada and Canada continues to be our primary market for debt capital.

Our balance sheet continues to be in excellent shape, along with our credit worthiness, our current annualized <unk> to net debt metric.

Three 6% remains well above the threshold limits the rating agencies use in determining our credit rating.

However, as our funding needs continue to grow, we need to ensure that we have the financial flexibility to support our Development and Construction programs to ensure. We have this flexibility, we filed a US debt, shelf, perspectus in the quarter, that will provide us with the ability to issue debt in the US capital markets.

Turning to taxes, our income tax expense in the quarter was $60 million compared to $56 million in the same quarter last year.

Being able to issue debt in the US, will provide us with an additional tool in our toolbox to help Finance our capital expenditure programs.

The increase was primarily due to a higher pre tax earnings which were partially offset by higher deductible timing differences compared to last year.

We will be responsive to market conditions, as we broaden, our funding Alternatives and aim to execute our inaugural issue in 2026.

The effective tax rate this quarter was 12, 4% versus an effective tax rate last year of 13%.

Our balance sheet continues to be an excellent shape along with our creditworthiness.

We continue to expect our effective tax rate to be between 13% and 16% for the remainder of this rate period.

Our current annualized ffo to net debt metric of 3.6% remains well. Above the threshold limits, the rating agencies use in determining our credit rating.

Moving onto capital expenditures in the third quarter, we invested $779 million, which was an increase of <unk>, 8% over 2024.

Turning to taxes, our income tax expense in the quarter was 60 million compared to 56 million in the same quarter last year.

The increase occurred in the transmission segment as a result of investments in the Washington transmission line and the same clearer transmission lines.

The increase was primarily due to a higher pre-tax earnings which were partially offset by higher deductible timing differences compared to last year.

These were partially offset by the overlap of investments in the really good distribution warehouse last year.

The effective tax rate, this quarter was 12.4% versus an effective tax rate last year of 13%.

In the distribution segment, we saw a decrease primarily due to a lower volume of wood pole replacements lower spend on system capability reinforcement projects lower investments in the really operations Center. The Orleans Operation Center, and they are really a distribution warehouse as well as a low.

We continue to expect our effective tax rate to be between 13% and 16% for the remainder of this rate.

Our volume of work on customer connections compared to last year.

These were partially offset by investments supporting Ontario's broadband initiatives.

Moving on to Capital expenditures in the third quarter, we invested 779 million which was an increase of 0.8% over 2024. The increase occurred in the transmission segment as a result of investments in the wasigan transmission line and the St. Clare transmission line.

Looking at our assets placed in service in the third quarter, we placed $577 million in service for our customers, which was a decrease of three 4% compared to the prior year.

These were partially offset by the overlap of investments in the Aurelia distribution warehouse last year.

In the transmission segment, we saw a decrease of 21% year over year, primarily due to the timing of assets placed in service four station Refurbishments and replacements.

These were partially offset by investments placed in service in Sault Saint Marie upgrading an existing line.

In the distribution segment. We saw a decrease primarily due to a lower volume of wood pole Replacements lower spend on system. Capability. Reinforcement, projects, lower investments in the Aurelia operations center, The Orleans Operation Center and the Aurelia distribution warehouse, as well as a lower volume of work on customer connections compared to last year.

These were partially offset by Investments supporting Ontario's Broadband initiative.

In the distribution segment in service additions increased by 18% from the prior year due to assets placed in service for our second generation advanced metering system and timing of investments placed in service for system capability reinforcement projects.

Assets placed in service in the third quarter, we placed 577 million in service for our customers which was a decrease of 3.4% compared to the prior year.

These were partially offset by a lower volume of wood pole replacements, a lower volume of work on customer connections and timing of investments placed in service for information technology initiatives.

Over a year primarily due to the timing of assets, placed in service for station, refurbishments and replacements.

Looking ahead, we continue to expect earnings per share to grow between six and 8% annually through 2027, using the normalized 2020 to EPS of $1 61 as a base.

These were partially offset, by Investments, placed in service in Sue St. Marie upgrading an existing line.

Finally, I am pleased to report that our board of directors declared a dividend of <unk> 33, <unk> three one cents per share payable to common shareholders of record on December 10, 2025.

In the distribution segment, inservice editions increased by 18% from the prior year, due to assets, placed in service for our second, generation Advanced metering system and timing of Investments placed in service for system. Capability reinforcement projects.

With that we'll open the phone lines and be pleased to take questions.

Thank you David and Henry will now open the call to take questions. The operator will explain the.

These were partially offset by a lower volume of wood pole Replacements a lower volume of work on customer connections and timing of Investments, placed in service for information technology initiatives.

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 to rejoin the queue.

Looking ahead, we continue to expect earnings per share to grow between 6 and 8% annually through 2027 using the normalized 2022. Epps of a161, as a base,

In case, we can't address your questions today, and my team and I are always available to respond to follow up questions. Please go ahead Shannon.

Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Finally, I'm pleased to report that our board of directors declared a dividend of 33.31 cents per share. Payable to Common shareholders of record on December 10th, 2025

Our first question comes from the line of John Mould with TD Cowen. Your line is now open.

With that, we'll open the phone lines and be pleased to take questions.

Hi, good morning, Thanks for taking my questions and good to have you back David.

I'd like to start with the governments.

Paul.

Handle on our broader.

Thank you, David and Harry. We'll now open the the call to take questions. The operator. Uh, will explain the Q&A polling process. We ask that you limit your questions to 1 question and 1 follow-up. If you have additional questions, we request you join, rejoin, the queue.

The broader environment for <unk> I guess that's the.

That's a fair way to characterize that.

In case we can't address your questions today. My team and I are always available to respond to follow-up questions.

Please go ahead Shannon.

Looking for an early read on that process for you.

Does that say about where LDC financing is going in Ontario.

Thank you as a reminder, to ask a question. Please press star, 1, 1 of your telephone, and wait for your name to be announced.

First blush could this create more opportunities for your organization or maybe an indication that the government's looking for alternatives to the gradual consolidation I think it's fair to say.

To withdraw your question, please press star 11 again.

Our first question comes from the line of John mold with TD calling your line is now open.

Hi uh, good morning. Thanks for taking my questions and uh good to have you back David. Um,

There has been pursued historically.

Good morning, John.

Hear you on the line this morning.

I expected a question on pulse and you are right. It is very early to actually.

Definitively say what is going to happen there, but ultimately what the government wants to do is ensure that all of the distribution companies and Ontario have a good plan they understand the investments they need to make going forward and they're adequately financed and understand where that financing will come from so they can make those investments to support the growth that I talked about by the ISO to 75% increase in demand.

I'd like to start with the the government's uh pulse panel on, you know, a broader uh broader environment for ldcs. I guess that's the fair way to characterize that just

And for energy in the province by 2050 that is the ultimate goal. If it was to result in further consolidation we would certainly be open to that we're certainly going to be participating, but we'll have to wait and see where it goes and haven't actually had a chance to meet with the minister of energy on that topic, yet and I look forward to that meeting. So I can have a better understanding myself of where theyre going.

You know, looking for an early read on that process from you. Uh, you know, what does that say about where LDC financing is going in Ontario? And, you know, at first blush could this create more opportunities for your organization? Or is it maybe an indication that the government's looking for alternatives to the gradual consolidation? I think, you know, it's fair to say, uh, you know, who's been pursued historically.

Good morning John and uh nice to hear you on the line this morning. Um, I expected a question on pulse and you're right. It is very early to actually

Okay. Thanks, Thanks for that color and then maybe just one on you.

U S debt shelf when you think about the next J ramp period and I. Appreciate you don't want to get ahead of your of your filings, but just what what range of debt financing do you think you might consider.

Drawing from U S markets, considering the deeper liquidity EBIT.

You can see that in the first place.

John.

This is Harry answering the question.

Our first issue needs to be large enough to be meaningful we need to build both awareness and our brand for lack of a better term with the U S. Fixed income investors. So we will not be small.

Definitively say what is going to happen there. But ultimately with the government wants to do is ensure that all the distribution companies in Ontario, have a good plan, they understand the Investments. They need to make going forward and they're adequately financed and understand where that Financial will come from. So they can make those Investments to support the growth that I talked about by the iso. The 75% increase in demand for energy in the province by 2050, so that is the ultimate goal. If it was to result in further consolidation, you know, we would certainly be open to that. We're certain going to be participating, but that we'll have to wait and see where it goes. I haven't actually had a chance to meet with the minister of energy on that topic yet and I look forward to that meeting so I can have a better understanding myself of where they're going.

<unk>.

As I mentioned in the prepared remarks, Canada is always going to be our primary market, but as we look ahead and see the funding needs that.

We have to support not only our investments in the current period, but as we think the accelerating investments into the next period, we need to have a substantial U S program as well we.

We do need to.

Make sure that we're being prudent and so we're not just going to slay virtually dry van and take a third of our program and put it into the market if on a swapped back basis, it's more expensive to do so so the market conditions need to be right. It will be meaningful, but we don't have a specific target or allocation.

Okay, thanks. Uh, thanks for that color. And then maybe just 1 on the on the US debt shelf. You know, when you think about the next jrat period and I appreciate you, you don't want to get ahead of your of your filings, but just, you know what, what range of of debt financing do you think you might consider, um, drawing from us markets just considering the, you know, deeper liquidity. That's that's, you know, might be considered that in the first place. Well, John, um, this is Harry, uh, answering the question. Uh, it, our first issue needs to be large enough to be meaningful. Uh, we need to

And we will see.

Certainly as we've studied other utilities as they've gone into other markets you clearly see them doing two things one building in awareness being the new Kid in town in a new market, but ensuring that on a swap back basis. It is still.

Attractive from a financial point of view and hopefully accretive ultimately.

Versus what could otherwise be there in terms of interest expense.

Okay. Thanks, very much for that detail I'll get back in the queue.

Thank you. Our next question comes from the line of Maurice Choy with RBC capital markets. Your line is now open.

Thank you and good morning, everyone.

I just wanted to come back to a comment about financial flexibility.

Given the rising growth capital expenditures companies experiencing.

And the ability to issue USD denominated debt what are the options that you're exploring and perhaps you were looking in the past.

Prudent. And so we're not just going to slavishly drive in and take a third of our program and put it into the market. If on a swap back basis, it's more expensive to do so. So the market conditions need to be right. It will be meaningful, but we don't have a specific Target or allocation. Um, and we'll see uh as certainly as we've studied uh other utilities as they've gone into other markets, you clearly see them doing 2. Things 1 building, an awareness being the new kid in town and a new market. But ensuring that on a swap back basis, it is still um attractive from a financial point of view and hopefully a creative ultimately uh versus what could otherwise be there in terms of interest expense.

Good morning Maurice.

Everything is on the table. If you will there is nothing urgent.

Okay, thanks very much for that detail. I'll get back in the queue.

Through the next couple of years, we are comfortably able to fund our capital expenditure program through funds from operation and continued borrowing as we look ahead, we're assembling our.

You. Our next question comes from the line of Maurice Choy with RBC Capital Markets. Your line is now open.

Our rate application and preparing the financial projections that support that and we will need to supplement that with equity investments and or.

Thank you and good morning everyone. Um just want to come back to uh a comment earlier about financial flexibility uh given the rising growth Capital expenditures that you accompanies experiencing um beyond the ability to issue USD dominated that what are the options that you exploring and perhaps you were looking in the past?

Something like a hybrid or a convertible as well so we're looking at the range of options could include.

Bringing a financial partner in some specific projects if that is ultimately lowest cost of capital more attractive. So we are not constraining ourselves to just one lane, but looking for the best alternative where alternatives available to us to keep our.

Overall cost of capital as low as possible and support the investment profile.

But I do want to reiterate through the next couple of years, we have no need for anything beyond the funds that we generate from our operations and.

Financing dependent on where we what happens through the right application will have clarity around the capital spending program in the next rate period, and we'll be doing the work behind the scenes to get ready. So that there is never an issue in terms of funding our Capex program.

Uh, good morning, Maurice. Everything is on the table. If you will, there's nothing urgent, uh, through the next couple of years. We can we are comfortably, uh, able to fund our capital expenditure program through, uh, funds from operation and continued borrowing. As we look ahead, we're assembling our um, uh, rate application and preparing the financial projections that support that, and we will need to, uh, supplement debt with, uh, Equity Investments and or, um, something like a hybrid or a convertible, uh, as well. So, we're, we're looking at the range of options could include, uh, bringing a, uh, a financial partner in in some specific projects if that is ultimately the lowest cost of capital more attractive. So, we are not constraining ourselves to just 1 Lane but

Just as a quick follow up has there been any change in the timing of when you filed the application I think false claims.

Looking for the best alternative or Alternatives available to us to keep our, uh, overall cost of capital as low as possible and support the investment profile.

Sure.

Still planning on fall of 2026, we want to make sure. We've got sufficient time to work through the process and not run up against the end of 2020.

Understood.

And if I could just finish off with.

Hockey entity expert panel that was launched by the government.

Yields like this review was something that was done in the past recall back in 2018 and 2022 I think.

But I do want to reiterate through the next couple of years. We have no need for anything beyond the funds that we generate from our operations. And uh, that that financing dependent on where we what happens through the rate application will have Clarity around the capital spending program in the next rate period. And we'll be doing the work behind the scenes to get ready, so that there's never an issue in terms of funding our capex program.

Similarly with <unk>.

<unk> done that.

It seemed like.

We saw a lot of consolidation after even though it was recommended.

Any thoughts about what may change this time around to come.

Come up with a different outcome for report or be even a different outcome.

This is a quick follow-up. Have there been any changes in the timing of when you file the application? I think it was fall 2020. Are you still planning on fall of 2026? We want to make sure we've got sufficient time to work through the process and not run up against the end of 2027.

Action to behave as from <unk>.

Cynthia the LDC.

Yes, good morning, Morris its David speaking.

As I said earlier.

To a previous question I don't believe the panel actually joined to drive consolidation and wanted to make sure that the electricity sector in Ontario can support the growth in demand that is going to be coming over the next 25 years. So from that perspective, it's a little bit different than those other reviews that we've done in the past that we are strictly focused on consolidation that is not the focus of this panel.

Thank you.

Thank you as a reminder to ask a question at this time. Please press star one one you touched on telephone. Our next question comes from the line of Benjamin Pham with BMO. Your line is now open.

Understood. And if we could just finish off with, um, uh, the Bacci Entity Expert Panel that was launched by the government. Um, it feels like this review was something that was done in the past, uh, recall back in 2018 and 2022. I think, uh, there's a similar review being done, and it doesn't seem like, um, we saw a lot of consolidation after even though it was recommended. Uh, any thoughts about what may change this time around to either come up with a different outcome of a report or be even a different outcome in terms of actions and behaviors from the 50 LBCs?

Hi, Good morning, just wanted to go back to your guidance of 6% to 8%.

Yeah, good morning Morris, it's David speaking. Um, as I said earlier, my

And.

I hope I get your comments on year to date earnings per share, it's been well above that so it looks like it's 14%.

Year to date.

Just curious really.

Your thoughts on.

On that outperformance in and how do you think about the outlook going forward or is there. Some some puts to think about as you think but guide through 2027.

To a previous question. I don't believe the panel's actually trying to drive consolidation. They want to make sure that the electricity sector in Ontario can support the growth in demand that is going to be coming over the next 25 years. So from that perspective it's a little bit different than those other reviews that were done in the past that were strictly focused on consolidation. That is not the focus of this panel.

Thank you.

But then.

It's Harry.

We are definitely.

Generating earnings growth above what our guidance over the entire rate period is.

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 Benjamin Fam with BMO. Your line is now open.

And this performance this year has been.

A pleasant favorable variance driven a lot by load.

Sure, it's been a while but that looks like it's 14%.

And so we've seen in both transmission and distribution above what we had put in her own internal budget.

We used in our assumptions for the guidance that's given us this favorable variance.

Or so year to date and just just curious. Really the your thoughts on on that outperformance. And and how do you think about the Outlook going forward? Is there some some puts to think about as you think about that that guy through 2027.

Now load comes low given us and take US away. We've also had years, where it's been the other where weather hasnt been as volatile or is extreme and we've seen the other trend as well so we're sticking with.

The six to eight over the period.

So we're not going to push expectations up and then have to come back and say.

Hello didn't materialize the way it had in 2025 and end up disappointing.

So that's the cold hard facts.

Where we are.

Sure.

It sounds like it blow it doesn't at least decline to a 2027 there.

You're nicely tracking above that range.

Or you will get a nice attractive about that range.

Yes.

It's possible.

I don't want to say anything more than that.

Okay.

Thanks Robert.

Uh, been it's uh, it's hairy. Um, the uh, we are definitely generating Ernie's growth above what, our guidance over the entire rate is, uh, and this performance, this year has been, uh, a very pleasant, uh, favorable variance driven a lot by load. Um, and so we've seen in both transmission and distribution above. What we had put in our own internal budget, uh what we used in our assumptions for the guidance that's given us this favorable variance. Um, now load comes uh load giveth and low take its away. We've also had years where it's been the other where weather hasn't been as volatile or as extreme and we've seen the other Trend as well. So we're sticking with oh uh the 6 to 8 over the period. Um so that we're not uh going to push expectations up. And then have to come back and say

Our second topic I wanted to SaaS is on the you think about the J wrap the higher capex and even all the priority of transmission projects do you have like theirs.

Uh, low didn't materialize the way it had in 2025 and end up disappointing.

Huge series of them coming ahead like how do you.

So that's the cold hard facts of why we're Where We Are.

A big topic, Montana, She now has as human capital and access to it and maybe just not enough of it does that.

Is that something that.

It sounds like if low doesn't at least decline through 2027, they're nicely tracking above that range.

That is I don't want say concerning for you is how do you how do you about managing that and labor and parts.

Or you will be nice to track above that range.

And all of that as you head into the next phase.

Hey, Ben David leaving to speaking, we obviously pay a lot of attention to the resource adequacy, Ken we have access to our engineered procure and construct contractors do we have access to the appropriate skills in the organization. It hasnt been a problem yet and to be honest I don't see a problem on the horizon, but it's something we always pay attention to and we want to make sure we have the right reason.

It's yeah, it's it, it's possible. Uh, I don't want to say anything more than that.

Okay, um, I know, I know and thanks for that. I mean, that's the second, uh, or the second topic I wanted to ask is on the, you think what? The, the JRP, the higher capex. And even all the priority transmission projects. You have like, there's a huge series of them coming ahead. Like, how do you

Source available the right time.

North America's Big there's lots of talk about growth, that's going on but we've been able to secure really quality individuals to build our transmission lines and we don't see that changing going forward.

Is that something that?

And I'm going to add on from.

That is, I don't want to say concerning for you. Is it? How do you, how do you think about managing that and labor and parts and and all that as you head into the next phase?

Both the supply chain point of view and a partner point of view it isn't all our resources who are building are constructing design.

Transmission lines, we rely on internal but also heavily on external resources EPC contractors in particular.

With the visibility we have over the next seven to eight years, we are able to bring.

Hey, Ben, David Lear speaking. We obviously pay a lot of attention to the resource attitude, because we can we have access to our engineer, procure and construct contractors. Do we have access to the appropriate skills within the organization? It hasn't been a problem yet. And to be honest, I don't see a problem on the horizon, but it's something we always pay attention to. We want to make sure we have the right resources to be able to write time.

Bringing partners in early May make it competitive but to bring them in and they can plan do their human resource planning and our supply chain team has good visibility it's not like all of these are going to hit all at once they're laggard out through that period, and we have enough visibility now that we can on the supply chain.

North America is big. Uh, there's lots to talk about growth that's going on uh but we've been able to secure really quality individuals to build our transmission lines and we don't see that changing going forward.

<unk> aside make commitments for the long lead time items with our vendors to ensure we've got production slots we've got.

Promise of supply pricing may still be negotiable, depending on the timeframe, obviously, we'd like to lock them down as best we can but if you are committing to something three and four years out we may not be locking in the price, but we will lock in the supply. So we are with the visibility we have we're able to manage.

Some of that risk that others may not be able to manage the same way it sounds a little bit counterintuitive, but actually having a pipeline of projects makes you more attractive client and actually makes it easier for us to secure the resources and materials we need.

Okay got it thank you.

Thank you. Our next question comes from the line of Robert Hope with Scotiabank. Your line is now open.

And but I'm going to add on from a both a supply chain point of view and a partner point of view. It isn't all our resources who are building or constructing uh or even designing the uh, transmission lines. We rely on internal but also heavily on external resources EPC contractors and particular uh with the visibility. We have over the next 7 8 years. We are able to uh, uh, bring Partners in early may make it competitive, but bring them in. They can plan do their human resource planning. And our supply chain team has good visibility, it's not. Like, all of these are going to hit all at once, their laddered out through uh, the period. And we have enough visibility. Now that we can on the supply chain sign aside, make commitments for the long lead, time items with our vendors to ensure. We've got production slots. We've got uh promise of Supply pricing May

Good morning, everyone. So the provincial government, obviously is very focused on increasing transmission in the north the federal government is also equally focused on expanding transmission across the country.

Is this an area that you have put any work and could we see some incremental growth either connecting additional northern communities or the provinces and I guess as a final point is this even needed or do you have enough transmission growth in hand right now.

Still be negotiable depending on the time frame. Obviously we'd like to lock them down as best we can, but if you're committing to something 3 and 4 years out, we may not be locking in the price, but we will lock in the supply. So, we are with the visibility. We have, we're able to manage, uh, some of that risk that others may not be able to manage the same way. It sounds a little bit counterintuitive, but actually having a pipeline of projects makes you a more attractive client and actually makes it easier for us to secure the resources and materials. We need

Okay, got it. Thank you.

Well the last part of your question is interesting Rob is it needed.

Thank you. Our next question comes from the line of Robert. Hope with Scotia Bank, your line is now open

I'm a bit greedy, so I always like to have lots of growth, but yes, we have had conversations with the federal government I know they have got an announcement coming out later on today and some more nation building projects. So we'll see what they decide to do there I think they are overall as a general comment there is a focus on electrifying northern communities, if there was to longer than rely.

On diesel generation is that is actually hindered growth across the country not just in Ontario, So I would say both levels of government and municipalities that third level are focused on how do we connect all of the grid all the communities in Canada to the grid with reliable affordable and resilient energy.

Put any work in you know, could we see some some incremental growth either connecting, you know, additional Northern Communities or the provinces and I guess as a final point you know is this even needed or or do you have enough transmission growth in hand right now?

Alright, I appreciate that and then maybe just a smaller question broadband there it looks like there's been some puts and takes there how are you thinking about the timing and overall size of the investment here.

We still think it will be in the $300 million to $700 million addition of rate base for ourselves.

I'm getting a little bit more cautiously optimistic I think this last round of negotiations between the ministry of energy and mines, which now has responsibility for the broadband portfolio and the largest of the Internet service providers has finally broken the log Jim we're going to see things start to move on.

The last part of your question is interesting. Uh, Rob. Is it needed? Um, I'm a big greedy, so, I always like to have lots of growth. But, yes, we have had conversations, uh, with the federal government. Um, I know they've got an announcement coming out later on today and some more nation building projects. So we'll see what they decide to do there. I think their overall is a general comment. There is a focus on electrifying Northern Communities. If there are too long have been reliant on diesel generation and that has actually hindered growth across the country, not just in Ontario. So I would say both levels of government and even municipalities at third level of the government are focused on. How do we connect all the grid, all the communities in Canada to the grid with reliable, affordable, and resilient energy,

Been optimistic before but this is the most optimistic I've been as we've been on this journey and I think over the next six months. We're having this call we'll be able to give you a better range estimate and an idea of how well it is moving but feel like we funded the government and the Isps are finally reached an agreement how to move forward and Thats, what theyre going to allow us to get off of work we need to do.

I appreciate that and then maybe just to a smaller question, um, Broadband, you know, there looks like there's been some. Put some takes their, how are you thinking about the timing and overall size of the investment here?

Um, we still think it'll be in the 300 million to 700 million edition of rate based for ourselves.

Alright, perfect and welcome back David Thank.

Thank you.

Our last question comes from the line of Patrick Kenny with National Bank. Your line is now open.

Thank you good morning, Yeah welcome back David.

Great job here over the last few months.

Just wanted to touch base on.

I know Youre allowed ROE is still locked in for a couple of years, but.

Just given the recent cost of capital update from the OSB looks like.

2026, this is shaking out to be about 25 basis points below.

936, so just wondering if you've had any discussions or feedback for the OSB that.

Um, I'm getting a little bit more cautiously optimistic. I think this last round of negotiations between the ministry of energy and Minds, which now, has responsibility for the Broadband portfolio and the largest of the internet service providers has finally broken The Log Jam. We're going to see things start to move. Now, I know I've been optimistic before, but this is the most optimistic I've been, as we've been on this journey and I think over the next 6 months, we're having this call will be able to give you a better range estimate and have an idea of how well it is moving. But I feel like, we finally broke the government and the isps have finally reached an agreement on how to move forward and that's going to allow us to get out to work. We need to do.

All right. Perfect. And welcome back David.

Thank you.

Help to hold the ROE a little bit closer to where youre at today for the next <unk> period.

Hi, Good morning, Pat Thanks for those comments Youre right I think care for next year to add 911 is the ROE for any rate applications that come through using forecasts for.

Our last question comes from the line of Patrick Kenney with National Bank. Your line is now open,

Thank you, good morning. Uh yeah, welcome back David and and great job Harry over the last few months. Um,

The benchmarks that are used in the formula when we're back at this point it would be 933, so three basis points below the <unk>.

Current.

Just wanted to uh touch base on. Uh, I know you're allowed Roe is still locked in for a couple of years but just given the recent cost of capital update from the oeb. Looks like um 2026 says shaking out to be about 25 basis points below.

Approved ROE, but as you know.

We.

Your current 936. So just wondering, you know, if you've had any discussions or feedback for the oeb that

Have earned above that and so we don't have any real concerns as we go in I think our submission which is a public document in the cost of capital hearing.

You know might help to hold the Roe a little bit closer to where you're at today for the next jrat. Period.

Was for increased equity thickness some other adjustments.

The ruling was a generic rule that applies to all utilities regulated by the <unk>, but they were at pains mentioning over and over if a utility feels their situation is different they are free to bring proposals in the next rate application. So thats a door that we planned on jumping through August <unk>.

The next rate application. So at this point stay tuned.

Got it okay. Thanks for that and then.

Maybe just back on the effective tax rate range as well I think you mentioned.

13% to 16%.

Can you just remind us what tools you might have.

At your disposal to achieve the lower end going forward.

Perhaps extend that lower ended the level into the next year App as well.

Uh, good morning, Pat. Uh, thanks for those comments. Uh, you're right. I think for next year, 9.11 is the Roe for any rate applications that come through using forecast for, uh, the, uh, benchmarks that are used in the formula. When we're back at this point, it would be 9.33. So, 3 basis points below the uh current um uh approved Roe. But as you know, uh, we um, have earned above that. And, uh, so we don't have any real concerns as we go in. I think uh, our submission which is public document in the uh cost of capital hearing uh was for increased Equity thickness, some other adjustments. The uh the ruling was a generic ruling that uh, applies to all utilities regulated by the oeb, but they were at pains mentioning over and over if a utility feels

We don't have a lot of tools are self what primarily drives it is the accelerated CCA and the so called Super productivity.

The deduction in the budget that would certainly help keep us at the low end continue to keep us at the low end as we continue to invest invest we take advair.

We are entitled to use that and that's what keeps us at the low end.

There are situation, that's different. They are free to uh, bring proposals in the next rate application. So that's a door that uh we plan on jumping through as part of the uh, the next rate application. So at this point, stay tuned. Got it. Okay, thanks for that. And then maybe just back on the uh, effective tax rate range as well. I think you mentioned, um, Area 13 to 16%.

And we're happy to see that proposal and the budget that has to be turned into law. So that it does continue well into the next our next rate period.

Just remind us, what tools you might have at your disposal to achieve the lower end going forward? And perhaps, you know, extend that lower end of the level into the next Junior app as well.

Okay. Thanks for that.

Last one I guess for David maybe on the supply chain front. So I appreciate it.

The details on the domestic procurement.

Could you just maybe.

Date us on.

Some of your commitments for Transformers, and other equipment and components over the next few years as you know.

Look to bring some of your transmission developments into the capital budget.

Good morning patent nice to hear you.

At this point, we have no concerns you've got locked up manufacturing capacity.

Anticipate no problems at all getting the materials, we need transformers switchgear whatever it is for any of the projects in our supply chain.

Pays attention to that night and day that is one of the big risk we pay attention to.

Okay, thanks for that. Um, last 1, I guess for David maybe on the uh, supply chain front so I appreciate

The details on the, uh, domestic procurement. Um,

As we're developing new suppliers in Canada, we continue to work with our existing suppliers to make sure that we don't cut off an avenue, we would actually have more suppliers not fewer and.

Leave us with pricing as well, but no concerns at this point in time.

Can you just maybe, uh, update us on, you know, some of your commitments for transformers and other equipment and components over the next few years as you, you know, look to bring some of your transmission developments into the capital budget?

Okay, that's great I'll leave it there thank you.

Thank you and that does conclude our Q&A session for today I'd like to turn the call back over to <unk> for any further remarks.

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.

Um, good morning, Pat, and I see here we're not. We at this point, we have no concerns. We've got locked up manufacturing capacity. Uh, we anticipate no problems at all getting the materials. We need Transformers, switch gear, whatever it is for any of the projects and our supply chain.

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.

Pays attention to that night and day. That is 1 of the big risks. We pay attention to, um, as we're developing new suppliers in Canada, we continue to work with our existing suppliers to make sure that we don't cut off an Avenue. We would actually like to have more suppliers, not fewer and that we please help us with the pricing as well, but no concerns at this point in time.

Okay, that's great. I'll leave it there. Thank you.

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.

Thanks Shannon, the management team at Hydro 1. 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.

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.