Hydro One Ltd (HRNNF) Q4 2024 Earnings Call Highlights: Strong EPS Growth and Strategic Advancements

GuruFocus News

Fri, Feb 21, 2025, 12:05 AM 4 min read

Basic Earnings Per Share (EPS): $0.33 in Q4 2024, up from $0.30 in Q4 2023; $1.93 for full-year 2024, up from $1.81 in 2023.
Net Income Growth: Increased by 10.5% in Q4 2024 compared to Q4 2023; 6.5% growth for full-year 2024.
Revenue Net of Purchased Power: Increased by 4.7% year-over-year in Q4 2024.
Distribution Revenue Net of Purchased Power: Increased by 11.5% in Q4 2024.
OM&A Expenses: Decreased by approximately 6% year-over-year in Q4 2024.
Depreciation Expense: Increased by 14.9% year-over-year in Q4 2024.
Interest Expense: Increased by 7.5% year-over-year in Q4 2024.
Capital Expenditures: $799 million in Q4 2024, a 7.2% increase over Q4 2023; $3.1 billion for full-year 2024, a 21% increase over 2023.
Assets In-Service: $1.1 billion in Q4 2024, a 12.8% increase year-over-year; $2.5 billion for full-year 2024, a 6% increase over 2023.
Productivity Savings: Achieved $150 million in 2024.
Dividend: $0.3142 per share declared, payable to common shareholders on March 12, 2025.
Future EPS Outlook for 2027: Revised to $2.15 to $2.37, up from $2.05 to $2.26.

Warning! GuruFocus has detected 6 Warning Signs with HRNNF.

Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Hydro One Ltd (HRNNF) achieved a recordable injury rate of 0.55 per 200,000 hours in 2024, well below the world-class benchmark of 1.0, demonstrating a strong commitment to safety.
The company reported an increase in customer satisfaction scores, with residential and small business satisfaction at 88% and commercial and industrial satisfaction at 85%.
Hydro One Ltd (HRNNF) completed the Chatham by Lakeshore transmission project one year ahead of schedule and $30 million under budget, marking a significant milestone with a First Nations equity partnership.
The company achieved $150 million in productivity savings in 2024, focusing on reducing capital and operating costs.
Hydro One Ltd (HRNNF) raised more than $2.75 billion in medium-term notes in 2024 under its sustainable financing framework, maintaining a strong balance sheet and creditworthiness.

Negative Points

Hydro One Ltd (HRNNF) faces uncertainty regarding tariffs and trade tensions between Canada and the U.S., which could impact business operations.
Higher depreciation, amortization, and asset removal costs, along with increased interest expenses, partially offset revenue gains.
The company is experiencing lower peak demand in its transmission segment, affecting revenue growth.
There is uncertainty surrounding the outcome of the cost of capital review, with no clear indication of changes to the base ROE and equity ratio.
Hydro One Ltd (HRNNF) is undergoing executive leadership changes, including the departure of the Executive Vice President of Capital Portfolio Delivery, which may impact strategic continuity.

Q & A Highlights

Q: Can you elaborate on the EPS CAGR hike and how it relates to the upcoming JRAP and the nine projects you're building? A: Harry Taylor, Chief Financial and Regulatory Officer, explained that despite the reset that occurs with the next joint rate application, Hydro One has significant momentum with nine transmission lines coming on stream. This momentum, along with future investments, provides confidence that earnings growth will not decline. The next guidance roll forward is expected in the second half of 2026 after the JRAP is filed and approved.

Q: What are your expectations regarding the cost of capital review and potential changes to the base ROE and equity ratio? A: David Lebeter, President and CEO, stated that the cost of capital review is expected by the end of Q1 or early Q2. He has not received any indication of changes to the ROE or equity ratio, suggesting they might remain similar. However, there may be opportunities to propose changes in the next rate application due to Hydro One's growth.

Q: Beyond financial benefits, what were the strategic reasons for acquiring a stake in the East-West Tie line? A: David Lebeter highlighted that the acquisition strengthens Hydro One's transmission system and aligns with their indigenous partnership model. It fills a gap in their transmission network and supports their strategic growth in Ontario.

Q: How has the broadband outlook changed, and what are the key drivers for the $300 million investment plan? A: Harry Taylor noted that the provincial government's incremental funding announcement in October increased the number of applications from ISPs, providing confidence in achieving the $300 million investment. The range remains $300 million to $700 million, with the current plan at the low end due to a steady but not overwhelming increase in applications.

Q: With the increased CapEx through 2027, is there potential for higher rate base and earnings growth? A: Harry Taylor confirmed that the higher capital expenditures in 2025 and 2026 will translate into higher rate base and earnings potential, aligning with their growth strategy.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

Terms and Privacy Policy

Your Privacy Choices

Utah Privacy Notice

More Info