Hydro One TSE: H reported a slight decline in third-quarter earnings as higher operating, depreciation and interest costs outweighed revenue gains, while management outlined a proposed CAD 27 billion investment plan for its transmission and distribution businesses from 2028 through 2032.
Basic earnings per share slipped to CAD 0.69 from CAD 0.70 a year earlier, and net income attributable to common shareholders declined 1.9%. For the first nine months of 2026, earnings per share rose to CAD 1.96 from CAD 1.84.
Chief Financial and Regulatory Officer Harry Taylor said third-quarter revenue, net of purchased power, increased 5.6% year over year. Higher Ontario Energy Board-approved rates and increased average monthly transmission peak demand helped offset rising expenses.
Higher costs temper revenue growth
Transmission revenue rose 7.6%, supported by higher approved rates and a 2.8% increase in average monthly peak demand. Distribution revenue, net of purchased power, increased 2.5%, aided by higher rates, a 2.5% rise in distributed energy and a 0.9% increase in customer numbers.
Operations, maintenance and administration expenses climbed approximately 9.8% overall. Transmission costs rose 19.3%, primarily because of increased station maintenance and vegetation management spending, along with higher asset write-offs. Distribution costs fell 0.6%, reflecting lower corporate support costs and recoveries and deferrals related to storms, although Taylor said those recoveries were offset in revenue and did not affect net income.
Depreciation, amortization and asset removal costs increased 10.7%, partly because of storm-related asset removal and growth in the capital asset base. Interest expense rose 9.3%, mainly reflecting higher outstanding long-term debt.
Hydro One invested CAD 1.1 billion in capital projects during the quarter, up 39.2% from a year earlier. Assets placed in service rose 14% to CAD 658 million. Taylor said the company’s funds from operations-to-net-debt ratio was 13.9% as of Sept. 30, above the thresholds rating agencies use to trigger a credit rating review.
Five-year investment plan awaits review
President and CEO Megan Telford said Hydro One filed its joint rate application with the Ontario Energy Board on Oct. 7. The proposal calls for approximately CAD 16.7 billion in transmission investment and CAD 10.9 billion in distribution investment over the 2028–2032 period. The spending and its timing remain subject to regulatory approval.
The transmission proposal includes about CAD 8.3 billion for new infrastructure, CAD 4.4 billion for station asset renewals and replacements, and CAD 2.7 billion to renew transmission lines. Telford said the proposed new infrastructure would enable more than 6,000 megawatts of new customer load and connect approximately 2,500 megawatts of new generation.
On the distribution side, the plan includes CAD 3.4 billion to maintain the existing system, CAD 1.6 billion for reliability and resilience, and CAD 3.8 billion for customer access and growth. Telford said the plan would connect more than 94,000 homes and businesses and deploy 5,400 residential energy storage systems for customers most affected by prolonged outages.
For a typical year-round, medium-density residential customer, the company expects transmission charges to rise approximately CAD 0.50 per month in 2028 and by an average of CAD 1.14 per month annually over the five-year period. Monthly distribution base charges are expected to fall about CAD 0.10 in 2028 and remain unchanged thereafter, largely reflecting distribution rate protection for eligible customers and a proposed refund.
Taylor said it was too early to identify regulators’ or interveners’ concerns. He expects settlement discussions to begin around February and potentially continue into May or June. If all issues are not settled, an oral hearing could follow during the summer.
Funding and growth outlook
Outside the joint rate application, Hydro One expects to invest approximately CAD 11 billion in new transmission lines that would ultimately be partnerships with First Nations and have separate rate applications. Taylor said the company’s disclosed spending estimates do not yet incorporate funding it expects to receive from First Nations partners.
The company expects to fund its investment program through a combination of operating funds, senior secured debt, hybrid debt and equity. Taylor said Hydro One expects to raise equity in the next rate period but does not anticipate funding constraints that would require it to slow spending.
Asked about the shape of future growth, Taylor said rate-base and earnings growth would accelerate, although much depends on regulatory approval. He said Hydro One would provide further guidance, including its funding plan, at an investor day following approval of the application.
For the current rate period, Hydro One maintained its expectation of annual earnings-per-share growth of 6% to 8%, using normalized 2022 earnings of CAD 1.61 per share as the base.
Project and dividend updates
During the quarter, Hydro One submitted a leave-to-construct application for the CAD 1.3 billion North Shore Link transmission line, which is expected to enter service in 2029. The company also energized the Etobicoke Greenway line, which Telford said was completed on time and under budget and will add approximately 300 megawatts of capacity.
The board declared a quarterly dividend of CAD 0.3531 per common share, payable Dec. 31 to shareholders of record on Dec. 9, 2026.
About Hydro One (TSE:H)
Hydro One Limited, through its wholly-owned subsidiaries, is Ontario's largest electricity transmission and distribution provider with 1.5 million valued customers, $39.7 billion in assets as at December 31, 2025, and annual revenues in 2025 of $9 billion. Our team of 9,600 skilled and dedicated employees proudly build and maintain a safe and reliable electricity system which is essential to supporting strong and successful communities. In 2025, Hydro One invested $3.4 billion in its transmission and distribution networks, and supported the economy through buying $3 billion of goods and services.
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