Toronto Hydro Corporation Releases its Third Quarter Financial Results

TORONTO, Nov. 13, 2014 /CNW/ - Toronto Hydro Corporation (the "Corporation") has filed with Canadian securities regulators its Interim Consolidated Financial Statements and related Management's Discussion and Analysis for the nine months ended September 30, 2014.  These documents are prepared in accordance with United States Generally Accepted Accounting Principles ("US GAAP"), including the application of rate-regulated accounting policies, 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 September 30					Nine Months Ended September 30
					2014 $		2013 $			2014 $		2013 $
Net income					35.1		35.8			88.8		91.9
Distribution and Other Revenue					157.4		151.0			461.1		442.6
Capital Expenditures					178.1		110.1			420.4		298.5

• Net income for the nine months ended September 30, 2014 was $88.8 million compared to $91.9 million for the same period in 2013.
  
  
• Distribution and Other Revenue were higher at $461.1 million compared to $442.6 million for the same period in 2013.
  
  
• Capital Expenditures were higher at $420.4 million compared to $298.5 million for the same period in 2013.
  
  
• "We have achieved strong financial results in the third quarter despite a mild summer," said Anthony Haines, President and Chief Executive Officer.

Corporate Developments

On September 16, 2014, the Corporation issued $200.0 million of 4.08% senior unsecured debentures due September 16, 2044 ("Series 10").  The net proceeds were used to reduce short-term borrowing under the Corporation's Commercial Paper Program, fund a portion of capital expenditures and for general corporate purposes.

On July 31, 2014, Toronto Hydro-Electric System Limited ("LDC") filed a rate application with the Ontario Energy Board ("OEB") under the custom incentive rate-setting mechanism, seeking approval of separate and successive revenue requirements and corresponding electricity distribution rates for the five rate years commencing on May 1, 2015.  The rate application includes capital expenditures of approximately $2.5 billion and operating expenses as sufficient over the period to provide for a safe and reliable source of electricity and acceptable customer service levels for LDC's customer base.  Also included in the rate application are capital amounts spent in 2012 through 2014 that were not specifically approved by the OEB in the Incremental Capital Module ("ICM") decisions due to the standard operation of the regulatory model and recovery of the net book value of stranded meters.  Revenue for LDC over the period will be based on the existing rate base, capital expenditures and operating expenses ultimately approved by the OEB in the rate application plus cost of capital allowed by the OEB. 

On January 16, 2014, the OEB approved LDC's requested disposition of the smart meter deferral account balances related to smart meter installations in 2008, 2009 and 2010, through two separate 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 was discontinued when the new rate riders became effective.  The second rate rider relates to the recovery of $9.6 million, which represents the forecasted 2014 incremental revenue requirement.

On May 10, 2012, LDC filed an application for electricity distribution rates for 2012, 2013, and 2014 using the Incentive Regulation Mechanism framework, including the filing of an ICM application.  On April 2, 2013, the OEB approved new rates for LDC effective June 1, 2013, which reflected approved capital expenditures amounting to $203.3 million for 2012 and $484.2 million for 2013.  In a separate decision rendered on December 19, 2013, the OEB approved capital expenditures amounting to $398.8 million for 2014. 

Selected Financial Highlights Nine Months ended September 30 (in millions of Canadian dollars, unaudited)
							2014 $			2013 $
Net income							88.8			91.9
Distribution and other revenue							461.1			442.6
Operating expenses							199.6			192.7
Depreciation and amortization							119.0			106.1
Net financing charges							(46.8)			(51.2)
Income tax expense							8.4			1.8
Capital expenditures							420.4			298.5

Net income for the nine months ended September 30, 2014 was $88.8 million compared to $91.9 million for the comparable period in 2013.  The decrease in net income for the nine months ended September 30, 2014 was primarily due to higher depreciation and amortization expense ($12.9 million), higher operating expenses ($6.9 million), and higher income tax expense ($6.6 million).  These variances were partially offset by higher distribution and other revenue ($18.5 million), and lower net financing charges ($4.4 million).

Capital expenditures amounted to $420.4 million for the nine months ended September 30, 2014 compared to $298.5 million for the comparable period in 2013.  The most significant regulated capital expenditures incurred by LDC for the nine months ended September 30, 2014 related to spending on underground infrastructure ($86.4 million), overhead infrastructure ($79.0 million), the facilities consolidation program ($58.1 million), Copeland Station ($56.0 million), customer connections ($40.0 million), and reactive remediation work ($28.4 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
  
  
• 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, delivering electricity to approximately 736,000 customers located in the city of Toronto.  It is the largest municipal electricity distribution company in Canada and distributes approximately 18% of the electricity consumed in the province of Ontario.

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 "expected", "forecasted", "seek", "will", 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 the Corporation's plans and expectations regarding the current rate application under the custom incentive rate-setting mechanism.  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

Chris Tyrrell, Executive Vice-President and Chief Customer Care and Conservation Officer: 416-542-3143, [email protected]; JS Couillard, Executive Vice-President and Chief Financial Officer: 416-542-3166, [email protected]