Hydro One (TSE:H) executives pointed to improving earnings, continued capital investment, and a growing slate of large-scale transmission projects during the company’s fourth-quarter 2025 analyst call. Management also highlighted strong safety performance, storm response efforts, and customer satisfaction results, while reiterating its earnings growth outlook for the current rate period.
Ontario demand growth and a growing transmission build
President and CEO David Lebeter said the company is planning around a long-term increase in electricity demand forecast for Ontario over the next 25 years, driven by factors such as new housing, new businesses, electric vehicle manufacturing and charging, mining, agriculture, and advanced manufacturing. Lebeter framed this as both a responsibility and an opportunity for Hydro One, emphasizing the need to build “in a safe and fiscally prudent manner.”
- Bowmanville to the Greater Toronto Area: In November, Hydro One was designated to develop and seek approvals for a priority 500 kV double-circuit transmission line. Lebeter said it is expected to be in service in the early 2030s and will support delivery of clean electricity from the first four small modular reactors at Darlington.
- Niagara region (Thorold to Welland): The company filed a Leave to Construct (Section 92) application with the Ontario Energy Board for a 230 kV double-circuit line. Lebeter described it as an approximately CAD 311 million project expected to be completed by 2029.
- Greenstone Transmission Line (Northern Ontario): Designated after the quarter, this project is described as a 230-kilometer single-circuit line designed for future expansion, expected to be in service in 2032.
- Barrie to Sudbury Transmission Line: Also designated after the quarter, Lebeter said this will be an approximately 290-kilometer, single-circuit, 500 kV line expected to be in service in 2032, with development work on a second single-circuit 500 kV line also to be carried out to support new generation opportunities in Northern Ontario.
Lebeter said Hydro One’s 50/50 First Nations Equity Partnership Model is intended to ensure First Nations “share directly in the value created” by transmission line components. He also highlighted the Chatham to Lakeshore Transmission Line, placed in service in 2024, as the first project completed under that model, and said that as of earlier this month all five partner First Nations had secured financing and are now equity partners.
Safety, storms, and customer satisfaction
Lebeter said Hydro One delivered “another strong year for safety” in 2025. He reported 20 consecutive months without a high injury, high-energy serious injury, or fatality, and said the 2025 recordable injury rate was 0.68 per 200,000 hours, “well below” a benchmark of one.
He also addressed operational performance during extreme weather in December, when two back-to-back storms affected more than 250,000 customers. Lebeter said crews mobilized to restore power “under exceptionally challenging conditions” and continued until all customers were restored.
On customer satisfaction, Lebeter said 2025 results remained strong, reporting 88% satisfaction among residential and small business customers, 82% for commercial and industrial customers, and 79% for transmission customers.
Fourth-quarter and full-year results
Chief Financial and Regulatory Officer Harry Taylor reported fourth-quarter basic earnings per share of CAD 0.39, up from CAD 0.33 in the fourth quarter of 2024. For the full year, earnings per share were CAD 2.23 compared with CAD 1.93 in 2024. Taylor said quarterly net income rose 16.5% year-over-year, while full-year net income increased 15.8%.
Taylor said the quarter’s performance was driven by revenue growth from volume growth in transmission and distribution and Ontario Energy Board (OEB)-approved 2025 rates, as well as lower OM&A costs “primarily due to the lower corporate support costs.” He said results were partially offset by regulatory adjustments affecting revenue net of purchased power, higher interest expense due to increased long-term debt outstanding, and higher income tax expense from higher pre-tax earnings.
Despite the earnings growth, Taylor noted fourth-quarter revenue net of purchased power decreased 5.2% year-over-year. Transmission revenue declined 2.8% and distribution revenue net of purchased power fell 10.1%, with Taylor attributing both declines primarily to regulatory adjustments including higher earnings sharing. He said distribution revenues were also affected by “lower revenue associated with mutual storm assistance costs recovered from third parties.”
Cost trends, productivity savings, and customer sharing
Hydro One emphasized cost discipline and productivity. Lebeter said the company generated approximately CAD 254 million in savings across capital and operating expenditures in 2025. Taylor reiterated that figure, describing the savings as “absolute reductions in spending, reduced unit costs or greater non-customer revenue,” and said they flow back to customers through reduced rates in the next rate period.
Taylor said OM&A expenses in the fourth quarter decreased about 30.8% year-over-year. He cited lower corporate support costs, lower work program expenditures in areas such as facilities maintenance and vegetation management, reduced mutual storm assistance costs, and lower fuel costs at Hydro One Remotes, partially offset by higher work program expenditures including emergency restoration and vegetation management.
Taylor also said the company was “pleased to share approximately CAD 166 million with our customers through the reduction in future rates,” tied to performance in both transmission and distribution segments.
Capital investment, financing, and outlook
On capital deployment, Hydro One invested CAD 939 million in the fourth quarter, up 17.5% from the prior year. Taylor said the increase was driven by transmission investments including the Waasigan Transmission Line, the St. Clair Transmission Line, and other major development projects, along with higher spending on distribution customer connections. Full-year capital expenditures totaled approximately CAD 3.4 billion, up 9.9% year-over-year.
Assets placed in service totaled CAD 1.3 billion in the quarter (up 19.1%) and approximately CAD 2.9 billion for the full year (up 17.8%), which Taylor attributed mainly to higher distribution in-service additions.
Hydro One’s interest expense increased 10.8% year-over-year, which Taylor said was mainly due to higher long-term debt outstanding. During the quarter, the company issued CAD 1.6 billion of medium-term notes, including CAD 1.2 billion of 3.9% notes due 2033 and CAD 400 million of 4.8% notes due 2056. For 2025, Hydro One issued approximately CAD 2.7 billion in medium-term notes, which Taylor said were completed under the company’s Sustainable Financing Framework.
Taylor reported an FFO-to-net-debt ratio of 14.2% as of December 31, which he said remained “well above” thresholds that could trigger a credit rating review. He also said the company expects its effective tax rate to remain between 13% and 16% for the remainder of the JRAP 2023 period.
Looking ahead, Taylor said Hydro One continues to expect earnings per share to grow between 6% and 8% annually for the rate period, using normalized 2022 EPS of CAD 1.61 as a base. The board declared a quarterly dividend of CAD 0.3331 per share, payable to shareholders of record on March 11, 2026.
During Q&A, management also addressed Ontario’s emerging competitive transmission procurement process. Lebeter said Hydro One has been providing input and expects criteria that may exclude time-constrained projects and those on existing rights-of-way, while potentially applying to greenfield projects with a longer runway. He also discussed the province’s “Pulse” expert panel on local electric distribution, saying the goal is to ensure local distribution companies are adequately financed for needed investments, and that while consolidation could occur, it was not the government’s stated intent.
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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