Hydro One Limited

Good morning, ladies and gentlemen, and welcome to the Hydro One Limited's second quarter 2021 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 on your telephone. As a reminder, the call is being recorded. I would now like to introduce your host for today's conference, Mr. Omar Javid, Vice President, Investor Relations at Hydro One. Please go ahead.

Good morning, everyone, and thank you for joining us in Hydro One's earnings call. Joining us today are our President and CEO, Mark Poeska, our Chief Financial Officer, Chris Lopez, and our Chief Regulatory Officer, Frank D'Andrea. In the call today, we will go over our recently filed joint rate application, our sustainability goals, and the quarterly results. We will then spend the majority of the call answering as many of your questions as time permits. There are also several slides that illustrate some of the points we'll address in a moment. They should be up on the webcast now, or if you're dialed into the call, you can find them on Hydro One's website in the investor relations section under events and presentations. Today's discussions will likely touch on estimates and other forward-looking information. You 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 associated 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, Mark Poeska. Thank you, Omar.

Before we begin, I'm sorry to share that in mid-June, one of our employees lost his life after being struck by a motor vehicle while working in the Cappas casing region. Our thoughts and prayers are with his family, friends, and coworkers. Along with all our employees, executives and directors, I'm devastated that we have experienced this tragic loss. Safety remains our top priority and we must eliminate serious injuries in our company. The investigation on what led to this incident is ongoing and together with the authorities, we're looking to understand the details and the cause of the accident. We're yet again reminded of the hazards our employees face and the extremely tough conditions in which they work to deliver reliable electricity and fulfill our customers' needs. To operate a safe and resilient grid, our assets need investment, and our customers are supportive of reinvesting in an electricity system that will provide them with reliable power. On August 5th, we filed our comprehensive five-year investment plan for both the transmission and distribution segments of our business with the Ontario Energy Board. Informed by extensive customer engagement, this is our first ever joint rate application. It is a strategic plan to significantly improve reliability for our distribution customers, manage risks, prepare for the impacts of climate change, support communities, and contribute to economic development. It balances the needs of customers with the impact on bills through our hard work, innovation, and continuous improvement. In 2019 and 2020, Hydro One conducted customer engagement surveys to reflect customer needs and preferences for the transmission and distribution system investment plan. The engagement was the most comprehensive in Hydro One's history. with nearly 50,000 customers participating. For the first time, investment planning and customer engagement processes were integrated over two phases and customer feedback was provided as an input into the overall plan. In addition to hardening the system to withstand the impacts of climate change and to make it more reliable for future generations, We learned just how important it is not only to Hydro One, but also to our customers that we one, proactively replace aging infrastructure to avoid more costly repair, maintenance, and emergency work. Two, make investments to improve reliability. And three, make the system more resilient. We also conducted a systemic review of our asset investment needs, driven by asset condition and system requirements. What we found was a significant portion of transmission, distribution and common assets have deteriorated to the point where they pose a risk to achieving business and customer objectives around safety, reliability and the environment. This needs to be fixed. and we are confident that our five-year plan is the right plan for all Ontarians. We have a critical need to modernize our grid, to prepare for future integrated distributed energy resources, to prepare the system for severe weather and the impacts of climate change, to prepare for the greater electrification of the economy and enhanced cybersecurity, to ultimately develop a modern, flexible grid of the future. We have seen that Ontario has continued to prosper and there is continued economic growth that requires access to safe and reliable power. Whether it's the agriculture sector in Southwest Ontario or mining in the North, electricity is the backbone of the economy and we're committed to connecting new customers and facilitating economic prosperity. As a result of our robust asset management approach, in this significant customer outreach. We are proposing capital expenditures of approximately $12.5 billion over the 2023 to 2027 period. Of this amount, approximately 67% is geared towards system renewal. The remainder represents a combination of one, non-discretionary spend driven by our obligation to connect, And two, investments ensure that we are meeting operational objectives and addressing future customer requirements. Some examples of the work that is contemplated under the extensive investment plan are as follows. For the transmission segment, we will invest approximately $3.5 billion to address station assets, including those which link major generation resources to major load centers, and those that serve local distribution companies and large industrial facilities. We've allocated approximately $1.9 billion to address lines assets which serve smaller towns, First Nations communities and businesses, pipeline compressor stations, and large load facilities such as mines and paper mills. For the distribution business, we will modernize infrastructure. to detect, repair, and restore power more quickly, thereby improving resiliency and reducing the impact of power outages on our customers by up to 25% over the application period. We will install approximately 1,200 remote operable switches and reclosers, approximately 5,000 fault indicators. We will replace 51,000 wood poles in poor condition and refurbish another 14,000 poles. We will also add 120 distribution station transformers and facilitate new load connections. And these are just some examples of the extensive work required. Combined, these transmission and distribution capital investments will result in a rate-based growth of approximately 6% per annum for the five-year period 23 to 27. This is an increase of approximately 1% from our previous rate-based growth guidance till 2022, reflecting the needs of the system and our customers. We will do this work while becoming even more efficient and more productive. The savings as a result of our combined hard work, our efficiency, and our productivity to date are already flowing to our customers. Since the IPO to the end of 2020, we generated over $738 million in productivity savings. These and future improvements allow us to reduce the rate impact for our customers. And I'm pleased to say that based on these numbers, in the first year of the new investment period, customer bills will decrease for the distribution segment by 1.8%, and decrease for transmission segment by 0.3%. Over the five-year period of the application, distribution and transmission customers will see an average increase that is less than expected inflation. Distribution and transmission bills will have an average annual increase of 0.8% and 0.3% respectively over five years. To put that into context, our typical residential customer's bill will increase by an average of $1.68 each year for the five-year period. Again, our work to drive efficiencies and continually improve productivity has helped us to keep our costs as low as possible for our customers. And as we consider the needs of the grid, we're also taking the initiative to be mindful of the environment in which we operate. I am proud to report that we have received a number of accolades on the sustainability front. We received the Environmental Excellence Award from the Electricity Distributors Association for our pollinator program. We're recognized again by corporate night as the best 50 corporate citizen in Canada. and we were designated a sustainable electricity company yet again by the CEA. So today, we are also excited to share our annual sustainability report. It highlights the important progress we have taken over the last year and sets out our new sustainability priorities centered on people, planet, and community. We have further increased our transparency by aligning with GRI and SASB standards and are on our way to alignment with the TCFD standard. For PLANET, we're including climate change considerations into decisions and plans to ensure grid resiliency through our adaptation strategies. We're also making commitments to do our part in mitigating climate change and establishing new targets. While we only account for 0.2% of Ontario's emissions, we plan to achieve a 30% reduction of greenhouse gas emissions by 2030. Furthermore, Hydro One is committed to achieving net zero GHG emissions by 2050. This means that along with many other initiatives, we're planning on converting 100% of our fleet of sedans and SUVs to electric vehicles or hybrids by 2030. For people, we are setting targets and working to identify, eliminate and prevent systemic barriers in the workplace. As signatories to the Catalyst Accord, we're committed to achieving in our workplace at least 30% of female executives while our board is already at 50%. We also signed the Black North Initiative Pledge under which we are committed to having 3.5% black executives and board of directors as well as hiring 5% Black students in our workforce by 2025. These steps will renew our promise to identify, eliminate, and prevent systemic barriers in the workplace, and build a diverse, equitable, and inclusive workforce at Hydro One. And finally, for communities. We realize that Hydro One has a critical role to play in helping Ontario emerge stronger from the COVID-19 pandemic. We are continuing to support the Ontario economy by investing in our communities, hiring locally, paying taxes and buying goods and services from local suppliers, including Indigenous suppliers. In 2020, we purchased $1.4 billion of goods and services from Ontario suppliers. Our shared success depends on our ability to build trust as a reliable partner and good neighbor for communities and the people of Ontario. We also recognize that we serve approximately 100 First Nations communities across Ontario, and we are committed to building long-term relationships with these communities. While we spent $42 million with Indigenous communities in 2020, we're excited to announce that we will increase spending to 5% of the company's purchases of materials and services on Indigenous procurement by 2026. In addition, as part of our community investment program, we will ensure that 20% of our corporate donations and sponsorships support Indigenous communities. As I've referenced in previous calls, I'm pleased to say our unions share our overall partnership mind. Recently, the members of the Society of United Professionals voted in favor of renewing the collective agreement. This collective agreement covers approximately 1,800 employees in frontline supervisory, engineering, and professional roles across the company's operations. The agreement reflects our shared commitment to working together. Notably, for the first time, wage increases included an equity component. The agreement also allows for increased productivity, enhanced flexibility, and a renewed emphasis on diverse and inclusive practices. We are now in a period of labour stability with this agreement in place for the next couple of years. And with that, I'll turn it over to Chris to discuss our positive financial results for this quarter. Over to you, Chris.