Hydro One TSE: H reported higher first-quarter earnings and reaffirmed its longer-term earnings growth outlook as management highlighted rising electricity demand in Ontario, a growing transmission project pipeline and an upcoming leadership transition.
On the company’s first-quarter 2026 earnings call, Chief Financial and Regulatory Officer Harry Taylor said basic earnings per share rose to CAD 0.65 from CAD 0.60 in the first quarter of 2025. Net income attributable to common shareholders increased 9.2% from the prior-year period.
Taylor said the quarter benefited from higher volumes in both distribution and transmission, higher revenue net of purchased power from Ontario Energy Board-approved 2026 rates, and higher average monthly peak transmission demand. Lower operating, maintenance and administration costs and lower income tax expense also supported results. These gains were partly offset by higher interest expense and higher depreciation, amortization and asset removal costs.
“Looking ahead, we continue to expect earnings per share to grow between 6% and 8% annually for this rate period using the normalized 2022 earnings per share of CAD 1.61 as a base,” Taylor said.
Revenue rises as transmission demand increases
Revenue net of purchased power increased 3% year over year in the quarter. Transmission revenue rose 4.4%, which Taylor attributed mainly to higher average monthly one-hour peak demand, up 0.8%, and higher revenue from OEB-approved 2026 rates.
Distribution revenue net of purchased power increased 0.9%, mainly due to a 0.9% increase in customer count. Taylor said regulatory adjustments in both the transmission and distribution segments had offsetting entries and were neutral to net income.
Operating, maintenance and administration expenses decreased 0.9% year over year. Transmission costs increased 3.1%, mainly because of higher corporate support costs, partly offset by lower work program spending tied to facilities maintenance and information technology initiatives. Distribution costs fell 5%, primarily because of lower work program spending, including vegetation management.
Depreciation, amortization and asset removal expenses rose 3.4%, reflecting growth in capital assets as Hydro One placed new assets in service, partly offset by lower asset removal costs. Interest expense increased 8% year over year due to higher long-term debt outstanding following debt issuances in 2025, partly offset by higher capitalized interest.
Taylor said Hydro One’s balance sheet remains “in excellent shape,” noting that funds from operations to net debt stood at 13.9% as of March 31, 2026, above rating-agency thresholds that could trigger a credit rating review. Income tax expense fell to CAD 41 million from CAD 68 million a year earlier, and the effective tax rate declined to 9.4% from 15.9%.
Capital spending declines, assets placed in service increase
Hydro One invested CAD 715 million in capital expenditures during the first quarter, down 2.7% from the same period in 2025. Taylor said the decline reflected lower volumes of station refurbishments and equipment replacements, lower customer connection spending in transmission, lower spending on the St. Clair transmission line and fewer wood pole replacements in both transmission and distribution.
Those decreases were partly offset by increased investment in equipment to support long-term growth projects, the advanced metering infrastructure program known as AMI 2.0 and the Ontario Broadband Initiative.
The company placed CAD 484 million of assets in service during the quarter, up 14.4% from a year earlier. Transmission in-service additions increased 39%, mainly due to high-voltage underground cable replacement work and station refurbishment and replacement investments. Distribution in-service additions declined 4.3%, mainly because of prior-year investments tied to the Orillia operations center and lower wood pole replacement volumes, partly offset by higher broadband and AMI 2.0 investments.
Hydro One’s board declared a dividend of CAD 0.3531 per share, payable to common shareholders of record on June 10, 2026.
Transmission pipeline expands with Red Lake project
President and Chief Executive Officer David Lebeter said Ontario’s growing population, electrification and economic expansion are reshaping electricity demand across the province. He said Hydro One is positioned to support the shift through transmission and distribution infrastructure investments, partnerships with First Nations, unions and municipalities, and a focus on reliability, resilience and affordability.
Hydro One has been designated to develop and obtain approvals for the Greenstone transmission line in Northern Ontario and the Sudbury-to-Barrie transmission line in North Central Ontario. Both are expected to enter service in 2032.
Taylor said Hydro One was more recently designated to develop and construct the Red Lake Transmission Line in Northwestern Ontario, north of Dryden. The project includes a new double-circuit 230 kV transmission line extending from the Dryden Transformer Station to the Ear Falls Transformer Station, associated station facilities and a connection to the Red Lake Switching Station. It is expected to be in service by the early 2030s.
The addition brings Hydro One’s inventory to 15 transmission lines under development and construction, Taylor said. He added that the company’s 50/50 First Nation Equity Partnership Model is intended to allow proximate First Nations to share directly in the long-term value created by transmission infrastructure.
In response to an analyst question on possible interprovincial transmission development, Lebeter said stronger ties between Manitoba and Ontario and between Quebec and Ontario could make sense. He said Hydro One already has interties and rights of way with both provinces, which could position the company to be a lead developer if additional capacity or circuits are added.
Regulatory filing expected in third quarter
Management said Hydro One remains on track to file its Joint Rate Application with the OEB in the third quarter of 2026. Taylor said the company expects to file on or before Oct. 1 and that the proposal will become publicly available at that time. However, he said Hydro One will not provide specific guidance updates until the application is approved.
Taylor said the company completed an “unprecedented” customer engagement process involving more than 100,000 customers, ranging from residential customers to large transmission-connected customers. Customers were shown proposals and rate impacts and asked to weigh trade-offs around reliability, growth investments and affordability.
Lebeter said more than two-thirds of customers across segments supported the draft plan. He said customers were most interested in reliability, resilience and efforts that promote economic activity in Ontario.
Management also discussed the OEB’s denial of Hydro One’s Z-factor application related to a generational ice storm in late March 2025, which affected more than 600,000 customers. Taylor said the OEB denied recovery of CAD 69 million of incremental revenue tied to costs incurred in the storm. He said the denial does not affect Hydro One’s EPS guidance because the requested incremental revenue had not been included in that outlook.
Taylor said the decision was based on a narrow set of circumstances and that Hydro One is considering whether its upcoming rate application should include a deferral and variance account for extraordinary storm expenditures.
CEO transition set for June
Lebeter, who previously announced he will retire as president and CEO effective June 9, 2026, said the decision was made after consideration of his family’s needs and Hydro One’s future. Megan Telford, currently chief operating officer, will become president and CEO upon his retirement.
Lebeter described Telford as a “highly respected and proven leader” who has held executive responsibility across areas including health and safety, strategy, system planning, operations, human resources, labor relations, Indigenous relations, corporate affairs and customer care.
Lebeter also highlighted a safety milestone, saying employees had worked two years without a high-energy serious incident. He said that record, combined with top-quartile low reportable injury frequency, supports Hydro One’s goal of eliminating life-altering injuries and fatalities.
The company also noted labor developments, including the ratification of a collective agreement with the Society of United Professionals covering engineering, supervisory and other professional roles through March 31, 2028. Hydro One also reached a tentative agreement with the Canadian Union of Skilled Workers, subject to ratification.
In his final earnings call as CEO, Lebeter said serving in the role had been “the privilege of a lifetime” and credited Hydro One employees for storm response, safety progress, customer restoration and project delivery.
About Hydro One TSE: H
Hydro One operates regulated transmission and distribution assets in Ontario. The area's largest electricity provider serves nearly 1.5 million customers. Transmission accounts for roughly 60% of the company's rate base, with distribution accounting for the remainder. Hydro One operates a small telecom business, Acronym Solutions, with annual revenue contributing less than 1% to consolidated results. The province of Ontario holds an approximate 47% common equity stake.
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