Toronto Hydro Corporation Releases its Second Quarter Financial Results

TORONTO, Aug. 15, 2013 /CNW/ - Toronto Hydro Corporation (the "Corporation") announced today that it has filed with Canadian securities regulators its Interim Consolidated Financial Statements and related Management's Discussion and Analysis for the six months ended June 30, 2013, prepared in accordance with United States Generally Accepted Accounting Principles ("US GAAP"), including the application of rate-regulated accounting policies, which Interim Consolidated Financial Statements and Management's Discussion and Analysis are presented in Canadian dollars.  Copies may be obtained from the Corporation or accessed through SEDAR's website www.sedar.com.

Selected Financial Highlights (in millions of Canadian dollars, unaudited)
						Three months Ended June 30						Six months Ended June 30
						2013 $			2012 $			2013 $			2012 $
Net income						37.6			41.5			56.1			28.7
Net revenues						147.0			144.6			291.6			281.9
Capital Expenditures						105.1			49.9			186.8			115.3

• Net income for the six months ended June 30, 2013 was $56.1 million compared to $28.7 million for the same period in 2012.
  
  
• Net revenues were higher at $291.6 million compared to $281.9 million for the same period in 2012.
  
  
• Capital Expenditures were higher at $186.8 million compared to $115.3 million for the same period in 2012.
  
  
• Dividends amounting to $30.5 million were paid to the City of Toronto during the first six months of 2013. The Corporation's Board of Directors also declared today a dividend of $6.3 million, payable on September 30, 2013.

"We have had a very strong quarter financially as we continue to increase our capital spending to replace aging equipment on our grid. In May we were proud to celebrate the groundbreaking of the new Copeland Transformer Station in downtown Toronto," said Anthony Haines, President and Chief Executive Officer.

Corporate Developments

On May 10, 2012, Toronto Hydro-Electric System Limited ("LDC") filed its application to set electricity distribution rates for 2012, 2013 and 2014 under the Incentive Regulation Mechanism ("IRM") framework, including the filing of an Incremental Capital Module ("ICM") (collectively, the "IRM/ICM Application"). An update to the IRM/ICM Application was submitted by LDC on October 31, 2012 modifying the requested amounts for 2012 and 2013, respectively, and requesting that consideration for 2014 be deferred until LDC has received a decision from the Ontario Energy Board ("OEB") in respect of the 2012 and 2013 rate years.

On April 2, 2013, the OEB issued a partial decision and order for phase one of the proceeding comprising LDC's 2012 and 2013 work program proposals.  The OEB's decision determined that eligible capital funding under the ICM framework was to be calculated on an in-service basis.  This correlates to the approval of capital expenditures amounting to $203.3 million for 2012 and $484.2 million for 2013.  New rates became effective June 1, 2013. In 2015, LDC will be allowed to seek recovery for capital spent in 2012 and 2013 that has not yet been approved by the OEB in the current ICM decision due to the standard operation of the regulatory model.

On April 9, 2013, the Corporation issued $250.0 million of 2.91% senior unsecured debentures due April 10, 2023 and $200.0 million of 3.96% senior unsecured debentures due April 9, 2063.  These net proceeds together with borrowings under the Corporation's revolving credit facility were used to repay the Corporation's $225.0 million of 6.11% senior unsecured debentures and $245.1 million of 6.11% senior unsecured debentures which matured on May 7, 2013 and May 6, 2013, respectively.

On May 22, 2013, the Corporation celebrated the official groundbreaking of the new Clare R. Copeland Transformer Station ("Copeland Station"). The project is currently in the excavation phase and the construction of a new underground cable tunnel between Hydro One's transformer station and Copeland Station has commenced.  As at June 30, 2013, the life-to-date capital expenditures on the Copeland Station project amounted to $39.5 million.  The total capital expenditures required to complete Copeland Station are expected to be approximately $194.9 million.

On August 1, 2013, LDC filed an application with the OEB requesting approval for the disposition of balances in its smart meter deferral account related to smart meter installations in 2008, 2009 and 2010.  In the application, LDC requested two new rate riders effective May 1, 2014.  The first rate rider relates to the recovery of $23.9 million, which represents the cumulative revenue requirement net of recoveries from an existing smart meter rate rider. This existing smart meter rate rider would be discontinued when the new rate riders become effective.  The second rate rider relates to the recovery of $9.6 million, which represents the forecasted 2014 incremental revenue requirement until LDC may be permitted to transfer the smart meter assets out of regulatory assets.  LDC expects to apply to the OEB for both the transfer of the 2008, 2009 and 2010 smart meter costs from regulatory assets to property, plant and equipment and intangible assets, and the transfer of the net book value of the stranded meters from property, plant and equipment to regulatory assets, at the time of its next scheduled rebasing in 2015.

Selected Financial Highlights

Selected Financial Highlights Six Months ended June 30 (in millions of Canadian dollars, unaudited)
						2013 $				2012 $			Change $			Change %
Net income						56.1				28.7			27.4			95.5
Net revenues						291.6				281.9			9.7			3.4
Operating expenses						132.8				117.8			15.0			12.7
Depreciation and amortization						70.0				70.6			(0.6)			(0.8)
Net financing charges						(35.9)				(36.8)			0.9			2.4
Restructuring costs						-				(27.8)			27.8			100.0
Income tax expense (recovery)						(3.3)				0.2			(3.5)			n.m.^1
Capital expenditures						186.8				115.3			71.5			62.0

¹ n.m. - not meaningful.

Net income for the six months ended June 30, 2013 was $56.1 million compared to $28.7 million for the comparable period in 2012.  The increase was primarily due to restructuring costs recognized in the first quarter of 2012 ($27.8 million) related to cost reduction initiatives at LDC, higher net revenues ($9.7 million), and lower income tax ($3.4 million).  These favourable variances were partially offset by higher operating expenses ($15.0 million).

Capital expenditures amounted to $186.8 million for the six months ended June 30, 2013 compared to $115.3 million for the comparable period in 2012.  The most significant regulated capital expenditures incurred by LDC during the first six months of 2013 related to the upgrade of customer connections ($27.8 million), the construction of Copeland Station ($24.3 million) and the replacement of overhead ($20.6 million) and underground infrastructure ($17.7 million).

About Toronto Hydro Corporation

The Corporation is a holding company which wholly-owns two subsidiaries:

• LDC — which distributes electricity and engages in Conservation and Demand Management activities; and
  
  
• Toronto Hydro Energy Services Inc. — which provides street lighting services.

The principal business of the Corporation and its subsidiaries is the distribution of electricity by LDC.  LDC owns and operates an electricity distribution system, which delivers electricity to approximately 723,000 customers located in the City of Toronto.

Forward-Looking Information

The Corporation includes forward-looking information in its news release within the meaning of applicable securities laws in Canada ("forward-looking information").  The purpose of the forward-looking information is to provide management's expectations regarding the Corporation's future results of operations, performance, business prospects and opportunities and may not be appropriate for other purposes.  All forward-looking information is given pursuant to the "safe harbour" provisions of applicable Canadian securities legislation. The words "expects", "expected", "seek", and similar expressions are often intended to identify forward-looking information, although not all forward-looking information contains these identifying words.  The forward-looking information reflects management's current beliefs and is based on information currently available to the Corporation's management.

The forward-looking information in the news release includes, but is not limited to, statements regarding LDC's distribution revenue and the outcome of outstanding rate applications and other proceedings before the OEB, the Corporation's strategy and plans to finance the investment in LDC's infrastructure.  The statements that make up the forward-looking information are based on assumptions that include, but are not limited to, the future course of the economy and financial markets, the receipt of applicable regulatory approvals and requested rate orders, the level of interest rates and the Corporation's ability to borrow.

The forward-looking information is subject to risks, uncertainties and other factors that could cause actual results to differ materially from historical results or results anticipated by the forward-looking information.  The factors which could cause results or events to differ from current expectations include, but are not limited to, market liquidity and the quality of the underlying assets and financial instruments, the timing and extent of changes in prevailing interest rates, inflation levels, legislative, judicial and regulatory developments that could affect revenues and the results of borrowing efforts.

All forward-looking information in the news release is qualified in its entirety by the above cautionary statements and, except as required by law, the Corporation undertakes no obligation to revise or update any forward-looking information as a result of new information, future events or otherwise after the date hereof.

SOURCE: Toronto Hydro Corporation

Blair Peberdy,
Vice-President, Marketing, Communications and Public Affairs:
416-542-2515; [email protected] 

JS Couillard,
Chief Financial Officer:
416-542-3166; [email protected]