Hydro One Ltd 6-K, filed Nov 13, 2025
Hydro One Ltd (HRNNF)
6-K
2025-11-13
For: 2025-09-30
View Original
Added on
July 04, 2026
About this 6-K
Hydro One Ltd filed this 6-K on November 13, 2025.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16 under
the Securities Exchange Act of 1934
For the month of: November 2025
Commission File Number: 333-225519-01
HYDRO ONE LIMITED
(Translation of Registrant’s name into English)
483 Bay Street, South Tower, 8th Floor, Toronto Ontario M5G 2P5 Canada
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☐ Form 40-F ☒
EXHIBIT INDEX
Unaudited interim consolidated financial statements of the Registrant as at and for the three and nine months ended September 30, 2025 and 2024 | ||||||||
Management’s Discussion and Analysis of the Registrant as at and for the three and nine months ended September 30, 2025 and 2024 | ||||||||
| Certification of President and Chief Executive Officer | ||||||||
| Certification of Executive Vice President, Chief Financial and Regulatory Officer | ||||||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| HYDRO ONE LIMITED | |||||||||||
| /s/ Harry Taylor | |||||||||||
| Name: Harry Taylor | |||||||||||
| Title: Executive Vice President, Chief Financial and Regulatory Officer | |||||||||||
| Date: | November 13, 2025 | ||||||||||
HYDRO ONE LIMITED
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited)
For the three and nine months ended September 30, 2025 and 2024
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||
(millions of Canadian dollars, except per share amounts) | 2025 | 2024 | 2025 | 2024 | ||||||||||
Revenues | ||||||||||||||
Distribution (includes related party revenues of $112 and $334 (2024 - $106 and $319) for the three and nine months ended September 30, respectively) (Note 22) | 1,605 | 1,551 | 4,800 | 4,592 | ||||||||||
Transmission (includes related party revenues of $671 and $1,906 (2024 - $625 and $1,755) for the three and nine months ended September 30, respectively) (Note 22) | 680 | 628 | 1,938 | 1,764 | ||||||||||
| Other | 14 | 13 | 35 | 33 | ||||||||||
| 2,299 | 2,192 | 6,773 | 6,389 | |||||||||||
| Costs | ||||||||||||||
Purchased power (includes related party costs of $643 and $2,032 (2024 - $619 and $1,932) for the three and nine months ended September 30, respectively) (Note 22) | 1,080 | 1,047 | 3,199 | 3,083 | ||||||||||
Operation, maintenance and administration (Note 22) | 296 | 294 | 948 | 935 | ||||||||||
Depreciation, amortization and asset removal costs (Note 4) | 272 | 263 | 824 | 780 | ||||||||||
| 1,648 | 1,604 | 4,971 | 4,798 | |||||||||||
| Income before financing charges, equity income and income tax expense | 651 | 588 | 1,802 | 1,591 | ||||||||||
Financing charges (Note 5) | 172 | 158 | 504 | 463 | ||||||||||
Equity income (Notes 2 & 12) | 6 | — | 6 | — | ||||||||||
| Income before income tax expense | 485 | 430 | 1,304 | 1,128 | ||||||||||
Income tax expense (Note 6) | 60 | 56 | 189 | 164 | ||||||||||
| Net income | 425 | 374 | 1,115 | 964 | ||||||||||
| Other comprehensive income (loss) | 1 | (6) | 2 | (3) | ||||||||||
| Comprehensive income | 426 | 368 | 1,117 | 961 | ||||||||||
| Net income attributable to: | ||||||||||||||
| Noncontrolling interest | 4 | 3 | 9 | 8 | ||||||||||
| Common shareholders | 421 | 371 | 1,106 | 956 | ||||||||||
| 425 | 374 | 1,115 | 964 | |||||||||||
| Comprehensive income attributable to: | ||||||||||||||
| Noncontrolling interest | 4 | 3 | 9 | 8 | ||||||||||
| Common shareholders | 422 | 365 | 1,108 | 953 | ||||||||||
| 426 | 368 | 1,117 | 961 | |||||||||||
Earnings per common share (Note 20) | ||||||||||||||
| Basic | $0.70 | $0.62 | $1.84 | $1.60 | ||||||||||
| Diluted | $0.70 | $0.62 | $1.84 | $1.59 | ||||||||||
Dividends per common share declared (Note 19) | $0.33 | $0.32 | $0.98 | $0.93 | ||||||||||
See accompanying notes to Condensed Interim Consolidated Financial Statements (unaudited).
1 |  | |||||||
HYDRO ONE LIMITED
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS (unaudited)
As at September 30, 2025 and December 31, 2024
As at (millions of Canadian dollars) | September 30, 2025 | December 31, 2024 | ||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | 412 | 716 | ||||||
Accounts receivable (Note 7) | 984 | 911 | ||||||
| Due from related parties | 310 | 325 | ||||||
Other current assets (Note 8) | 159 | 165 | ||||||
| 1,865 | 2,117 | |||||||
Property, plant and equipment (Note 9) | 30,787 | 29,093 | ||||||
| Other long-term assets: | ||||||||
Regulatory assets (Note 11) | 3,738 | 3,503 | ||||||
| Deferred income tax assets | 132 | 127 | ||||||
Intangible assets (Note 10) | 653 | 661 | ||||||
| Goodwill | 378 | 373 | ||||||
Other assets (Note 12) | 1,212 | 808 | ||||||
| 6,113 | 5,472 | |||||||
| Total assets | 38,765 | 36,682 | ||||||
| Liabilities | ||||||||
| Current liabilities: | ||||||||
Short-term notes payable (Note 15) | 933 | 200 | ||||||
Long-term debt payable within one year (Notes 15 & 16) | 1,325 | 1,150 | ||||||
Accounts payable and other current liabilities (Note 13) | 1,803 | 1,809 | ||||||
| Due to related parties | 133 | 342 | ||||||
| 4,194 | 3,501 | |||||||
| Long-term liabilities: | ||||||||
Long-term debt (Notes 15 & 16) | 16,500 | 16,329 | ||||||
Regulatory liabilities (Note 11) | 1,825 | 1,476 | ||||||
| Deferred income tax liabilities | 1,754 | 1,452 | ||||||
Other long-term liabilities (Note 14) | 1,780 | 1,751 | ||||||
| 21,859 | 21,008 | |||||||
| Total liabilities | 26,053 | 24,509 | ||||||
Contingencies and Commitments (Notes 24 & 25) | ||||||||
Subsequent Events (Note 27) | ||||||||
Noncontrolling interest subject to redemption | 18 | 19 | ||||||
| Equity | ||||||||
Common shares (Note 18) | 5,721 | 5,713 | ||||||
| Additional paid-in capital | 25 | 28 | ||||||
| Retained earnings | 6,878 | 6,360 | ||||||
| Accumulated other comprehensive loss | (10) | (12) | ||||||
| Hydro One shareholders’ equity | 12,614 | 12,089 | ||||||
| Noncontrolling interest | 80 | 65 | ||||||
| Total equity | 12,694 | 12,154 | ||||||
| 38,765 | 36,682 | |||||||
See accompanying notes to Condensed Interim Consolidated Financial Statements (unaudited).
2 | | |||||||
HYDRO ONE LIMITED
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)
For the nine months ended September 30, 2025 and 2024
Nine months ended September 30, 2025 (millions of Canadian dollars) | Common Shares | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Hydro One Shareholders’ Equity | Non-controlling Interest | Total Equity | |||||||||||||||||||
| January 1, 2025 | 5,713 | 28 | 6,360 | (12) | 12,089 | 65 | 12,154 | |||||||||||||||||||
| Net income | — | — | 1,106 | — | 1,106 | 7 | 1,113 | |||||||||||||||||||
| Other comprehensive income | — | — | — | 2 | 2 | — | 2 | |||||||||||||||||||
| Distributions to noncontrolling interest | — | — | — | — | — | (8) | (8) | |||||||||||||||||||
| Contributions from sale of noncontrolling interest | — | — | — | — | — | 16 | 16 | |||||||||||||||||||
Dividends on common shares (Note 19) | — | — | (588) | — | (588) | — | (588) | |||||||||||||||||||
| Common shares issued | 8 | (8) | — | — | — | — | — | |||||||||||||||||||
| Stock-based compensation | — | 5 | — | — | 5 | — | 5 | |||||||||||||||||||
| September 30, 2025 | 5,721 | 25 | 6,878 | (10) | 12,614 | 80 | 12,694 | |||||||||||||||||||
Nine months ended September 30, 2024 (millions of Canadian dollars) | Common Shares | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Hydro One Shareholders’ Equity | Non-controlling Interest | Total Equity | |||||||||||||||||||
| January 1, 2024 | 5,706 | 30 | 5,947 | (3) | 11,680 | 65 | 11,745 | |||||||||||||||||||
| Net income | — | — | 956 | — | 956 | 6 | 962 | |||||||||||||||||||
| Other comprehensive income (loss) | — | — | — | (3) | (3) | — | (3) | |||||||||||||||||||
| Distributions to noncontrolling interest | — | — | — | — | — | (6) | (6) | |||||||||||||||||||
Dividends on common shares (Note 19) | — | — | (555) | — | (555) | — | (555) | |||||||||||||||||||
| Common shares issued | 7 | (7) | — | — | — | — | — | |||||||||||||||||||
| Stock-based compensation | — | 5 | — | — | 5 | — | 5 | |||||||||||||||||||
| September 30, 2024 | 5,713 | 28 | 6,348 | (6) | 12,083 | 65 | 12,148 | |||||||||||||||||||
See accompanying notes to Condensed Interim Consolidated Financial Statements (unaudited).
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HYDRO ONE LIMITED
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
For the three and nine months ended September 30, 2025 and 2024
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||
(millions of Canadian dollars) | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Operating activities | ||||||||||||||
| Net income | 425 | 374 | 1,115 | 964 | ||||||||||
| Environmental expenditures | (1) | (2) | (2) | (9) | ||||||||||
| Adjustments for non-cash items: | ||||||||||||||
Depreciation and amortization (Note 4) | 244 | 229 | 709 | 674 | ||||||||||
| Regulatory assets and liabilities | 3 | 2 | 74 | 17 | ||||||||||
| Deferred income tax expense | 17 | 42 | 84 | 130 | ||||||||||
| Other | (6) | (4) | 9 | (4) | ||||||||||
Changes in non-cash balances related to operations (Note 23) | 31 | (18) | (161) | 59 | ||||||||||
| Net cash from operating activities | 713 | 623 | 1,828 | 1,831 | ||||||||||
| Financing activities | ||||||||||||||
| Long-term debt issued | 1,099 | 1,216 | 1,099 | 2,016 | ||||||||||
| Long-term debt repaid | — | — | (750) | (700) | ||||||||||
| Short-term notes issued | 1,895 | 705 | 5,035 | 2,300 | ||||||||||
| Short-term notes repaid | (2,335) | (1,375) | (4,300) | (2,370) | ||||||||||
Dividends paid (Note 19) | (200) | (189) | (588) | (555) | ||||||||||
| Distributions paid to noncontrolling interest | (4) | (2) | (11) | (8) | ||||||||||
| Contributions received from sale of noncontrolling interest | 8 | — | 16 | — | ||||||||||
| Costs to obtain financing | (5) | (5) | (6) | (12) | ||||||||||
| Net cash from financing activities | 458 | 350 | 495 | 671 | ||||||||||
| Investing activities | ||||||||||||||
Capital expenditures (Note 23) | ||||||||||||||
| Property, plant and equipment | (757) | (712) | (2,165) | (2,067) | ||||||||||
| Intangible assets | (26) | (14) | (55) | (62) | ||||||||||
| Additions to future use assets | (53) | (77) | (155) | (206) | ||||||||||
Investment in equity investees (Note 12) | — | — | (261) | — | ||||||||||
| Capital contributions received | (1) | — | 3 | 2 | ||||||||||
| Other | 7 | 4 | 6 | — | ||||||||||
| Net cash used in investing activities | (830) | (799) | (2,627) | (2,333) | ||||||||||
| Net change in cash and cash equivalents | 341 | 174 | (304) | 169 | ||||||||||
| Cash and cash equivalents, beginning of period | 71 | 74 | 716 | 79 | ||||||||||
| Cash and cash equivalents, end of period | 412 | 248 | 412 | 248 | ||||||||||
See accompanying notes to Condensed Interim Consolidated Financial Statements (unaudited).
4 | | |||||||
HYDRO ONE LIMITED
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
For the three and nine months ended September 30, 2025 and 2024
1. DESCRIPTION OF THE BUSINESS
Hydro One Limited (Hydro One or the Company) was incorporated on August 31, 2015, under the Business Corporations Act (Ontario). On October 31, 2015, the Company acquired Hydro One Inc., a company previously wholly-owned by the Province of Ontario (Province). As at September 30, 2025, the Province held approximately 47.1% (December 31, 2024 - 47.1%) of the common shares of Hydro One. The businesses of Hydro One are comprised of the following three segments:
•The Transmission segment owns and operates Hydro One’s transmission system which transmits high voltage electricity across the province, interconnecting local distribution companies and certain large directly connected industrial customers throughout the Ontario electricity grid. The transmission business consists of the transmission system operated by Hydro One Inc.’s rate-regulated subsidiaries, Hydro One Networks Inc. (Hydro One Networks), Hydro One Sault Ste. Marie LP (HOSSM), and an approximate 80% (2024 - 100%) interest in Chatham x Lakeshore Limited Partnership (CLLP), an approximate 66% interest in B2M Limited Partnership (B2M LP), and an approximate 55% interest in Niagara Reinforcement Limited Partnership (NRLP). The Transmission segment also includes Hydro One Network’s approximate 48% minority interest in the East-West Tie Limited Partnership (EWT LP) which was completed on March 4, 2025.
•The Distribution segment owns and operates Hydro One’s distribution system which delivers electricity to end customers and certain other municipal electricity distributors within Ontario. The distribution business consists of the distribution systems operated by Hydro One Inc.'s rate-regulated subsidiaries, Hydro One Networks and Hydro One Remote Communities Inc. (Hydro One Remotes).
•The Other segment consists principally of Hydro One’s telecommunications business, which provides telecommunications support for the Company’s transmission and distribution businesses, as well as certain corporate activities, and is not rate-regulated. The telecommunications business is carried out by Hydro One's wholly-owned subsidiary, Acronym Solutions Inc. (Acronym). In addition to supporting Hydro One's regulated business segments, Acronym offers a comprehensive suite of Information Communications Technology solutions. Furthermore, Hydro One's other segment also includes Aux Energy Inc., a wholly-owned subsidiary that provides energy solutions to commercial and industrial clients, and Ontario Charging Network LP (OCN LP), a wholly-owned subsidiary (2024 - a joint venture) that owns and operates electric vehicle fast charging stations across Ontario under the Ivy Charging Network brand.
Earnings for interim periods are impacted by seasonal weather conditions affecting customer demand, market pricing, and the timing of regulatory decisions.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation and Presentation
These unaudited condensed interim consolidated financial statements (Consolidated Financial Statements) include the accounts of the Company and its subsidiaries. Inter-company transactions and balances have been eliminated.
Basis of Accounting
These Consolidated Financial Statements are prepared and presented in accordance with United States (U.S.) generally accepted accounting principles (GAAP) for interim financial statements and all financial information is presented in Canadian dollars.
The accounting policies applied are consistent with those outlined in Hydro One's annual audited consolidated financial statements for the year ended December 31, 2024, with the exception of the adoption of new accounting standards as described in Note 3 - New Accounting Pronouncements, and the inclusion of Equity Method Investments following Hydro One Networks’ acquisition of a minority interest in EWT LP in the first quarter of this year. These Consolidated Financial Statements reflect adjustments, that are, in the opinion of management, necessary to fairly reflect the financial position and results of operations for the respective periods. These Consolidated Financial Statements do not include all disclosures required in the annual financial statements and should be read in conjunction with Hydro One’s annual audited consolidated financial statements for the year ended December 31, 2024.
Equity Method Investments
The Company accounts for its investments in entities over which it has significant influence but not a controlling interest using the equity method of accounting. Significant influence is generally presumed to exist when the Company owns 20% to 50% of the voting stock of the investee, but can also exist when the Company owns less than 20% if it has the ability to exercise significant influence through other means. Under this method, the investment is initially recorded at cost and subsequently adjusted to recognize the Company’s share of the earnings or losses of the investee, as well as any distributions received from the investee.
5 | | |||||||
HYDRO ONE LIMITED
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
For the three and nine months ended September 30, 2025 and 2024
3. NEW ACCOUNTING PRONOUNCEMENTS
The following table presents Accounting Standard Updates (ASUs) issued by the Financial Accounting Standards Board (FASB) that are applicable to Hydro One:
Accounting Guidance To Be Adopted in 2025
| Guidance | Date issued | Description | ASU Effective Date | Impact on Hydro One | ||||||||||
| ASU 2024-02 | March 2024 | The amendments contain modifications to the codification that remove various concept statements which may be extraneous and not required to understand or apply the guidance or references used in prior statements to provide guidance in certain topical areas. | Fiscal years beginning after December 15, 2024. | No impact upon adoption | ||||||||||
| ASU 2023-09 | December 2023 | The amendments address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. | Annual periods beginning after December 15, 2024. | The adoption of the standard is not expected to have a material impact on the disclosures contained in the Company’s annual and interim consolidated financial statements | ||||||||||
Recently Issued Accounting Guidance Not Yet Adopted
| Guidance | Date issued | Description | ASU Effective Date | Impact on Hydro One | ||||||||||
| ASU 2023-06 | October 2023 | The amendments represent changes to clarify or improve disclosure or presentation requirements of a variety of subtopics in the FASB Codification. Many of the amendments allow users to more easily compare entities subject to the U.S. Securities and Exchange’s (SEC) existing disclosures with those entities that were not previously subject to the SEC’s requirements. Also, the amendments align the requirements in the Codification with the SEC’s regulations. Applicable to all entities, if by June 30, 2027 the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Codification and will not become effective for any entity. | Two years subsequent to the date on which the SEC’s removal of that related disclosure becomes effective. | Under assessment | ||||||||||
| ASU 2024-03 | November 2024 | The amendments require public business entities to disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods, which are not generally presented in the current financial statements. | Annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. | Under assessment | ||||||||||
| ASU 2025-03 | May 2025 | The amendments require entities to apply the guidance for identifying the accounting acquirer in transactions where a business that qualifies as a Variable Interest Entity is acquired through the exchange of equity interests. | Annual and interim periods beginning after December 15, 2026. | Under assessment | ||||||||||
| ASU 2025-05 | July 2025 | The amendments allow all entities to use a practical expedient when estimating expected credit losses for current accounts receivable and contract assets under Topic 606, by assuming that current conditions as of the balance sheet date remain unchanged over the asset’s life. Additionally, entities other than public business entities that elect this expedient may adopt an accounting policy to consider post–balance sheet date collection activity in their credit loss estimates. | Annual and interim periods beginning after December 15, 2025. | Under assessment | ||||||||||
| ASU 2025-06 | September 2025 | The amendments modernize accounting for internal-use software by removing outdated development stage references and introducing a capitalization threshold based on management authorization and project completion probability. | Annual periods beginning after December 15, 2027. | Under assessment | ||||||||||
6 | | |||||||
HYDRO ONE LIMITED
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
For the three and nine months ended September 30, 2025 and 2024
4. DEPRECIATION, AMORTIZATION AND ASSET REMOVAL COSTS
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||
(millions of dollars) | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Depreciation of property, plant and equipment | 220 | 206 | 641 | 606 | ||||||||||
| Amortization of intangible assets | 23 | 21 | 66 | 59 | ||||||||||
| Amortization of regulatory assets | 1 | 2 | 2 | 9 | ||||||||||
| Depreciation and amortization | 244 | 229 | 709 | 674 | ||||||||||
| Asset removal costs | 28 | 34 | 115 | 106 | ||||||||||
| 272 | 263 | 824 | 780 | |||||||||||
5. FINANCING CHARGES
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||
(millions of dollars) | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Interest on long-term debt | 184 | 169 | 543 | 496 | ||||||||||
| Interest on regulatory accounts | 6 | 6 | 19 | 20 | ||||||||||
| Interest on short-term notes | 9 | 7 | 18 | 19 | ||||||||||
Realized loss (gain) on cash flow hedges (interest-rate swap agreements) (Note 16) | 1 | (1) | 3 | (4) | ||||||||||
| Other | 6 | 6 | 14 | 15 | ||||||||||
| Less: Interest capitalized on construction and development in progress | (30) | (24) | (81) | (65) | ||||||||||
| Interest earned on cash and cash equivalents | (4) | (5) | (12) | (18) | ||||||||||
| 172 | 158 | 504 | 463 | |||||||||||
6. INCOME TAXES
As a rate-regulated utility company, the Company recovers income taxes from its ratepayers based on estimated current income tax expense in respect of its regulated business. The amounts of deferred income taxes related to regulated operations which are considered to be more likely-than-not to be recoverable from, or refundable to, ratepayers in future periods are recognized as deferred income tax regulatory assets or deferred income tax regulatory liabilities, with an offset to deferred income tax recovery or deferred income tax expense, respectively. The Company’s consolidated income tax expense or income tax recovery for the period includes all current and deferred income tax expenses for the period net of the regulated accounting offset to deferred income tax expense arising from temporary differences to be recovered from, or refunded to, customers in future rates. Thus, the Company’s income tax expense or income tax recovery differs from the amount that would have been recorded using the combined Canadian federal and Ontario statutory income tax rate.
The reconciliation between the statutory and the effective tax rates is provided as follows:
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||
(millions of dollars) | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Income before income tax expense | 485 | 430 | 1,304 | 1,128 | ||||||||||
Income tax expense at statutory rate of 26.5% (2024 - 26.5%) | 129 | 114 | 346 | 299 | ||||||||||
| Increase (decrease) resulting from: | ||||||||||||||
| Net temporary differences recoverable in future rates charged to customers: | ||||||||||||||
| Capital cost allowance in excess of depreciation and amortization | (30) | (25) | (74) | (66) | ||||||||||
| Overheads capitalized for accounting but deducted for tax purposes | (22) | (22) | (46) | (42) | ||||||||||
| Interest capitalized for accounting but deducted for tax purposes | (9) | (6) | (26) | (17) | ||||||||||
| Pension and post-retirement benefit contributions in excess of expense | 1 | (3) | (2) | (5) | ||||||||||
| Environmental expenditures | (1) | (1) | (1) | (3) | ||||||||||
| Non refundable tax credit | (3) | (3) | (3) | (3) | ||||||||||
| Other | (5) | 2 | (6) | 1 | ||||||||||
| Net temporary differences attributable to regulated business | (69) | (58) | (158) | (135) | ||||||||||
| Net permanent differences | — | — | 1 | — | ||||||||||
| Total income tax expense | 60 | 56 | 189 | 164 | ||||||||||
| Effective income tax rate | 12.4 | % | 13.0 | % | 14.5 | % | 14.5 | % | ||||||
7 | | |||||||
HYDRO ONE LIMITED
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
For the three and nine months ended September 30, 2025 and 2024
7. ACCOUNTS RECEIVABLE
As at (millions of dollars) | September 30, 2025 | December 31, 2024 | ||||||
| Accounts receivable - billed | 543 | 433 | ||||||
| Accounts receivable - unbilled | 501 | 539 | ||||||
| Accounts receivable, gross | 1,044 | 972 | ||||||
| Allowance for doubtful accounts | (60) | (61) | ||||||
| Accounts receivable, net | 984 | 911 | ||||||
The following table shows the movements in the allowance for doubtful accounts for the nine months ended September 30, 2025 and the year ended December 31, 2024:
As at (millions of dollars) | September 30, 2025 | December 31, 2024 | |||||||||
| Allowance for doubtful accounts – beginning | (61) | (57) | |||||||||
| Write-offs | 16 | 18 | |||||||||
| Additions to allowance for doubtful accounts | (15) | (22) | |||||||||
| Allowance for doubtful accounts – ending | (60) | (61) | |||||||||
8. OTHER CURRENT ASSETS
As at (millions of dollars) | September 30, 2025 | December 31, 2024 | ||||||
| Prepaid expenses and other assets | 104 | 94 | ||||||
Regulatory assets (Note 11) | 25 | 42 | ||||||
| Materials and supplies | 30 | 29 | ||||||
| 159 | 165 | |||||||
9. PROPERTY, PLANT AND EQUIPMENT
As at (millions of dollars) | September 30, 2025 | December 31, 2024 | ||||||||||||
| Property, plant and equipment | 42,689 | 41,320 | ||||||||||||
| Less: accumulated depreciation | (14,853) | (14,340) | ||||||||||||
| 27,836 | 26,980 | |||||||||||||
| Construction in progress | 2,951 | 2,113 | ||||||||||||
| 30,787 | 29,093 | |||||||||||||
10. INTANGIBLE ASSETS
As at (millions of dollars) | September 30, 2025 | December 31, 2024 | ||||||||||||
| Intangible assets | 1,545 | 1,487 | ||||||||||||
| Less: accumulated depreciation | (943) | (877) | ||||||||||||
| 602 | 610 | |||||||||||||
| Development in progress | 51 | 51 | ||||||||||||
| 653 | 661 | |||||||||||||
8 | | |||||||
HYDRO ONE LIMITED
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
For the three and nine months ended September 30, 2025 and 2024
11. REGULATORY ASSETS AND LIABILITIES
Regulatory assets and liabilities arise as a result of the rate-setting process. Hydro One has recorded the following regulatory assets and liabilities:
As at (millions of dollars) | September 30, 2025 | December 31, 2024 | ||||||
| Regulatory assets: | ||||||||
| Deferred income tax regulatory asset | 3,487 | 3,263 | ||||||
| Broadband deferral | 68 | 48 | ||||||
| Post-retirement and post-employment benefits - non-service cost | 55 | 72 | ||||||
| Environmental | 42 | 44 | ||||||
| Getting Ontario Connected Act variance | 33 | 24 | ||||||
| Stock-based compensation | 19 | 24 | ||||||
| Rural and remote rate protection variance | 5 | 18 | ||||||
| Other | 54 | 52 | ||||||
| Total regulatory assets | 3,763 | 3,545 | ||||||
| Less: current portion | (25) | (42) | ||||||
| 3,738 | 3,503 | |||||||
| Regulatory liabilities: | ||||||||
| Pension benefit regulatory liability | 789 | 647 | ||||||
| Post-retirement and post-employment benefits | 376 | 376 | ||||||
| Retail settlement variance (RSVA) | 224 | 157 | ||||||
| Earnings sharing mechanism (ESM) deferral | 144 | 150 | ||||||
| External revenue variance | 62 | 31 | ||||||
| Capitalized overhead tax variance | 50 | 38 | ||||||
| Other post-employment benefits (OPEB) asymmetrical carrying charge variance | 45 | 33 | ||||||
| Tax rule changes variance | 36 | 34 | ||||||
| Asset removal costs cumulative variance | 27 | 26 | ||||||
| Pension cost differential | 27 | 21 | ||||||
| Distribution rate riders | 16 | 45 | ||||||
| Deferred income tax regulatory liability | 7 | 4 | ||||||
| Other | 39 | 36 | ||||||
| Total regulatory liabilities | 1,842 | 1,598 | ||||||
| Less: current portion | (17) | (122) | ||||||
| 1,825 | 1,476 | |||||||
Distribution Rate Riders
As part of the Joint Rate Application (JRAP) Decision, the Ontario Energy Board (OEB) approved the disposition of certain deferral and variance account balances as at December 31, 2020, including accrued interest. These approved balances, including those for RSVA, tax rule changes variance, and pension cost differential were accumulated in distribution rate riders. The amounts are being disposed of over a three-year period ending December 31, 2025. As part of Hydro One Networks’ application for 2025 distribution rates, the OEB approved the disposition of certain balances as at December 31, 2023, including accrued interest on an interim basis. This amount is being disposed of over a one-year period ending December 31, 2025. This rider, together with those approved in JRAP, make up the majority of this balance.
12. OTHER LONG-TERM ASSETS
As at (millions of dollars) | September 30, 2025 | December 31, 2024 | ||||||
Deferred pension assets | 789 | 647 | ||||||
Investments in associates1 | 301 | 46 | ||||||
| Right-of-Use assets | 44 | 55 | ||||||
| Other long-term assets | 78 | 60 | ||||||
| 1,212 | 808 | |||||||
1 On March 4, 2025, Hydro One Networks completed the acquisition of an approximate 48% interest in the EWT LP for approximately $261 million in cash, including closing adjustments.
9 | | |||||||
HYDRO ONE LIMITED
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
For the three and nine months ended September 30, 2025 and 2024
13. ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES
As at (millions of dollars) | September 30, 2025 | December 31, 2024 | ||||||
| Accrued liabilities | 900 | 794 | ||||||
| Accounts payable | 375 | 348 | ||||||
| Unearned revenue | 295 | 336 | ||||||
| Accrued interest | 185 | 180 | ||||||
Regulatory liabilities (Note 11) | 17 | 122 | ||||||
Lease obligations | 14 | 14 | ||||||
| Environmental liabilities | 11 | 11 | ||||||
Derivative liabilities (Note 16) | 6 | 4 | ||||||
| 1,803 | 1,809 | |||||||
14. OTHER LONG-TERM LIABILITIES
As at (millions of dollars) | September 30, 2025 | December 31, 2024 | ||||||
Post-retirement and post-employment benefit liability | 1,628 | 1,590 | ||||||
| Asset retirement obligations | 38 | 38 | ||||||
| Environmental liabilities | 32 | 36 | ||||||
| Lease obligations | 30 | 41 | ||||||
Derivative liabilities (Note 16) | — | 3 | ||||||
| Other long-term liabilities | 52 | 43 | ||||||
| 1,780 | 1,751 | |||||||
15. DEBT AND CREDIT AGREEMENTS
Short-Term Notes and Credit Facilities
Hydro One meets its short-term liquidity requirements in part through the issuance of commercial paper under Hydro One Inc.’s commercial paper program which has a maximum authorized amount of $2,300 million. These short-term notes are denominated in Canadian dollars with varying maturities up to 365 days. The commercial paper program is supported by Hydro One Inc.’s revolving standby credit facilities totalling $3,050 million.
As at September 30, 2025, Hydro One’s consolidated committed, unsecured, and revolving credit facilities (Operating Credit Facilities) were $3,300 million, comprised of Hydro One Inc.'s credit facilities of $3,050 million and Hydro One's credit facilities of $250 million. On June 1, 2025, Hydro One extended the maturity date of the Operating Credit Facilities from 2029 to 2030. As at September 30, 2025, no amounts have been drawn on the Operating Credit Facilities.
The Company may use the Operating Credit Facilities for working capital and general corporate purposes. If used, interest on the Operating Credit Facilities would apply based on Canadian benchmark rates. The Operating Credit Facilities include a pricing adjustment which can increase or decrease Hydro One’s cost of borrowing based on its performance on certain sustainability performance measures, which are related to Hydro One's sustainability goals. The obligation of each lender to extend credit under its credit facility is subject to various conditions including that no event of default has occurred or would result from such credit extension.
Subsidiary Debt Guarantee
Hydro One Holdings Limited (HOHL) is an indirect wholly-owned subsidiary of Hydro One that may offer and sell debt securities. Any debt securities issued by HOHL are fully and unconditionally guaranteed by the Company. As at September 30, 2025, no debt securities have been issued by HOHL.
10 | | |||||||
HYDRO ONE LIMITED
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
For the three and nine months ended September 30, 2025 and 2024
Long-Term Debt
The following table presents long-term debt outstanding as at September 30, 2025 and December 31, 2024:
As at (millions of dollars) | September 30, 2025 | December 31, 2024 | ||||||
| Hydro One Inc. long-term debt (a) | 17,420 | 17,070 | ||||||
| Hydro One long-term debt (b) | 425 | 425 | ||||||
| 17,845 | 17,495 | |||||||
| Add: Net unamortized debt premiums | 40 | 41 | ||||||
Add: Realized mark-to-market gain1 | — | 3 | ||||||
| Less: Unamortized deferred debt issuance costs | (60) | (60) | ||||||
| Total long-term debt | 17,825 | 17,479 | ||||||
| Less: Long-term debt payable within one year | (1,325) | (1,150) | ||||||
| 16,500 | 16,329 | |||||||
1 In October 2023, Hydro One Inc. entered into a $400 million fixed-to-floating interest-rate swap agreement to convert the $400 million Medium-Term Note (MTN) Series 57 notes maturing October 20, 2025, into a variable rate debt. This swap was accounted for as a fair value hedge. In December 2023, this swap was terminated with a payment received of $6 million on settlement, which is being amortized over the term of the related note.
(a) Hydro One Inc. long-term debt
As at September 30, 2025, long-term debt of $17,420 million (December 31, 2024 - $17,070 million) was outstanding, the majority of which was issued under Hydro One Inc.’s MTN Program. In February 2024, Hydro One Inc. filed a short form base shelf prospectus in connection with its MTN Program, which expires in March 2026. During the three and nine months ended September 30, 2025, $1,100 million long-term debt was issued (2024 - $1,200 million and $2,000 million) and $nil and $750 million long-term debt was repaid (2024 - $nil and $700 million).
(b) Hydro One long-term debt
As at September 30, 2025, long-term debt of $425 million (December 31, 2024 - $425 million) was outstanding. On August 19, 2024, Hydro One filed a short form base shelf prospectus (Universal Base Shelf Prospectus) with securities regulatory authorities in Canada. The Universal Base Shelf Prospectus allows Hydro One to offer, from time to time in one or more public offerings, debt, equity or other securities, or any combination thereof, during the 25-month period ending in September 2026. As at September 30, 2025, no securities have been issued under the Universal Base Shelf Prospectus. During the three and nine months ended September 30, 2025 and 2024, no long-term debt was issued or repaid.
Principal and Interest Payments
As at September 30, 2025, future principal repayments, interest payments, and related weighted-average interest rates were as follows:
| Long-Term Debt Principal Repayments | Interest Payments | Weighted-Average Interest Rate | |||||||||
| (millions of dollars) | (millions of dollars) | (%) | |||||||||
| Year 1 | 1,325 | 741 | 3.8 | ||||||||
| Year 2 | — | 709 | — | ||||||||
| Year 3 | 1,175 | 688 | 3.6 | ||||||||
| Year 4 | 550 | 666 | 3.0 | ||||||||
| Year 5 | 1,350 | 635 | 4.4 | ||||||||
| 4,400 | 3,439 | 3.8 | |||||||||
| Years 6-10 | 4,560 | 2,581 | 4.3 | ||||||||
| Thereafter | 8,885 | 4,631 | 4.4 | ||||||||
| 17,845 | 10,651 | 4.3 | |||||||||
11 | | |||||||
HYDRO ONE LIMITED
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
For the three and nine months ended September 30, 2025 and 2024
16. FAIR VALUE OF FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Non-Derivative Financial Assets and Liabilities
As at September 30, 2025 and December 31, 2024, the Company’s carrying amounts of cash and cash equivalents, accounts receivable, due from related parties, short-term notes payable, accounts payable, and due to related parties are representative of fair value due to the short-term nature of these instruments.
Fair Value Measurements of Long-Term Debt
The carrying values and fair values of the Company’s long-term debt as at September 30, 2025 and December 31, 2024 are as follows:
| September 30, 2025 | December 31, 2024 | |||||||||||||
As at (millions of dollars) | Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||
| Long-term debt, including current portion | 17,825 | 17,699 | 17,479 | 17,364 | ||||||||||
Fair Value Measurements of Derivative Instruments
Fair Value Hedges
As at September 30, 2025 and December 31, 2024, Hydro One Inc. had no fair value hedges.
Cash Flow Hedges
As at September 30, 2025 and December 31, 2024, Hydro One Inc. had a $425 million, pay-fixed, receive-floating interest-rate swap agreement designated as a cash flow hedge. This cash flow hedge is intended to offset the variability of interest rates between December 21, 2023 and September 21, 2026.
As at September 30, 2025 and December 31, 2024, the Company had no derivative instruments classified as undesignated contracts.
Fair Value Hierarchy
The fair value hierarchy of financial assets and liabilities as at September 30, 2025 and December 31, 2024 is as follows:
As at September 30, 2025 (millions of dollars) | Carrying Value | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
| Liabilities: | |||||||||||||||||
| Long-term debt, including current portion | 17,825 | 17,699 | — | 17,699 | — | ||||||||||||
Derivative instruments (Note 13) | |||||||||||||||||
| Cash flow hedges, including current portion | 6 | 6 | — | 6 | — | ||||||||||||
| 17,831 | 17,705 | — | 17,705 | — | |||||||||||||
As at December 31, 2024 (millions of dollars) | Carrying Value | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
| Liabilities: | |||||||||||||||||
Long-term debt, including current portion | 17,479 | 17,364 | — | 17,364 | — | ||||||||||||
Derivative instruments (Notes 13 & 14) | |||||||||||||||||
| Cash flow hedges, including current portion | 7 | 7 | — | 7 | — | ||||||||||||
| 17,486 | 17,371 | — | 17,371 | — | |||||||||||||
The fair value of the interest rate swaps designated as cash flow hedges is determined using a discounted cash flow method based on period-end swap yield curves.
The fair value of the long-term debt is based on unadjusted period-end market prices for the same or similar debt of the same remaining maturities.
There were no transfers between any of the fair value levels during the nine months ended September 30, 2025 or the year ended December 31, 2024.
Risk Management
Exposure to market risk, credit risk and liquidity risk arises in the normal course of the Company’s business.
Market Risk
Market risk refers primarily to the risk of loss which results from changes in values, foreign exchange rates and interest rates. The Company is exposed to fluctuations in interest rates, as its regulated return on equity is derived using a formulaic approach that takes anticipated interest rates into account. The Company is not currently exposed to material commodity price risk or material foreign exchange risk.
12 | | |||||||
HYDRO ONE LIMITED
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
For the three and nine months ended September 30, 2025 and 2024
The Company uses a combination of fixed and variable-rate debt to manage the mix of its debt portfolio. The Company also uses derivative financial instruments to manage interest-rate risk. The Company may utilize interest-rate swaps designated as fair value hedges as a means to manage its interest rate exposure to achieve a lower cost of debt. The Company may also utilize interest-rate derivative instruments, such as cash flow hedges, to manage its exposure to short-term interest rates or to lock in interest-rate levels on forecasted financing.
A hypothetical 100 basis points increase in interest rates associated with variable-rate debt would not have resulted in a significant decrease to Hydro One’s net income for the three and nine months ended September 30, 2025 and 2024, respectively.
For derivative instruments that are designated and qualify as cash flow hedges, the unrealized gain or loss, after tax, on the derivative instrument is recorded as other comprehensive income (OCI) or other comprehensive loss (OCL) and is reclassified to net income or net loss in the same period during which the hedged transaction affects results of operations. The following table shows the amounts recorded in OCL and reclassified to financing charges for the three and nine months ended September 30, 2025 and 2024:
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||
(millions of dollars) | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Amounts recorded in OCL/OCI | ||||||||||||||
| Before tax loss | — | 8 | 2 | 2 | ||||||||||
| After tax loss | — | 5 | 1 | 1 | ||||||||||
| Amounts reclassified to financing charges | ||||||||||||||
| Before tax loss (gain) | 1 | (1) | 3 | (4) | ||||||||||
| After tax loss (gain) | 1 | (1) | 2 | (3) | ||||||||||
This resulted in an accumulated other comprehensive loss (AOCL) of $4 million related to cash flow hedges as at September 30, 2025 (December 31, 2024 - $5 million).
The Company estimates that the amount of AOCL, after tax, related to cash flow hedges to be reclassified to results of operations in the next 12 months is approximately $4 million. Actual amounts reclassified to results of operations depend on the interest rate in effect until the derivative contracts mature. For all forecasted transactions, as at September 30, 2025, the maximum term over which the Company is hedging exposures to the variability of cash flows is approximately one year.
The Pension Plan manages market risk by diversifying investments in accordance with the Pension Plan’s Statement of Investment Policies and Procedures. Interest rate risk arises from the possibility that changes in interest rates will affect the fair value of the Pension Plan’s financial instruments. In addition, changes in interest rates can also impact discount rates which impact the valuation of the pension and post-retirement and post-employment liabilities. Currency risk is the risk that the value of the Pension Plan’s financial instruments will fluctuate due to changes in foreign currencies relative to the Canadian dollar. Other price risk is the risk that the value of the Pension Plan’s investments in equity securities will fluctuate as a result of changes in market prices, other than those arising from interest risk or currency risk. All three factors may contribute to changes in values of the Pension Plan investments. See Note 17 - Pension and Post-Retirement and Post-Employment Benefits for further details.
Credit Risk
Financial assets create a risk that a counterparty will fail to discharge an obligation, causing a financial loss. As at September 30, 2025 and 2024, there were no significant concentrations of credit risk with respect to any class of financial assets. The Company’s revenue is earned from a broad base of customers. As a result, Hydro One did not earn a material amount of revenue from any single customer. As at September 30, 2025 and 2024, there was no material accounts receivable balance due from any single customer.
As at September 30, 2025, the Company’s allowance for doubtful accounts was $60 million (December 31, 2024 - $61 million). The allowance for doubtful accounts reflects the Company's current expected credit loss for all accounts receivable balances, which are based on historical overdue balances, customer payments and write-offs. As at September 30, 2025, approximately 15% (December 31, 2024 - 7%) of the Company’s net accounts receivable were outstanding for more than 60 days.
Hydro One manages its counterparty credit risk through various techniques including (i) entering into transactions with highly rated counterparties, (ii) limiting total exposure levels with individual counterparties, (iii) entering into master agreements which enable net settlement and the contractual right of offset, and (iv) monitoring the financial condition of counterparties. The Company monitors current credit exposure to counterparties on both an individual and an aggregate basis. The Company’s credit risk for accounts receivable is limited to the carrying amounts on the consolidated balance sheets.
Derivative financial instruments result in exposure to credit risk since there is a risk of counterparty default. The maximum credit exposure of derivative contracts, before collateral, is represented by the fair value of contracts in an asset position at the reporting date. As at September 30, 2025 and 2024, Hydro One’s credit exposure for all derivative instruments and applicable payables was with one financial institution with investment grade credit ratings as counterparty.
13 | | |||||||
HYDRO ONE LIMITED
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
For the three and nine months ended September 30, 2025 and 2024
The Pension Plan manages its counterparty credit risk with respect to bonds by investing in investment-grade corporate and government bonds and with respect to derivative instruments by transacting only with highly rated financial institutions and by ensuring that exposure is diversified across counterparties.
Liquidity Risk
Liquidity risk refers to the Company’s ability to meet its financial obligations as they come due. Hydro One meets its short-term operating liquidity requirements using cash and cash equivalents on hand, funds from operations, the issuance of commercial paper, and the Operating Credit Facilities. The short-term liquidity under the commercial paper program, the Operating Credit Facilities, and anticipated levels of funds from operations are expected to be sufficient to fund the Company’s operating requirements.
In February 2024, Hydro One Inc. filed a short form base shelf prospectus in connection with its MTN Program, which expires in March 2026. Hydro One’s Universal Base Shelf Prospectus allows it to offer, from time to time in one or more public offerings, debt, equity or other securities, or any combination thereof, during the 25-month period ending on September 19, 2026.
On November 29, 2024, HOHL filed a short form base shelf prospectus (HOHL U.S. Debt Shelf Prospectus) with securities regulatory authorities in Canada and the U.S., that expires in December 2026. The HOHL U.S. Debt Shelf Prospectus allows HOHL to offer, from time to time in one or more public offerings, debt securities, unconditionally guaranteed by Hydro One. As at September 30, 2025, no securities have been issued under the HOHL U.S. Debt Shelf Prospectus.
On August 18, 2025, Hydro One Inc. filed a short form base shelf prospectus (HOI U.S. Debt Shelf Prospectus) with securities regulatory authorities in Canada and the U.S. The HOI U.S. Debt Shelf Prospectus allows Hydro One Inc. to offer, from time to time in one or more public offerings, U.S. debt securities, during the 25-month period ending on September 18, 2027. As at September 30, 2025, no securities have been issued under the HOI U.S. Debt Shelf Prospectus.
The Pension Plan’s short-term liquidity is provided through cash and cash equivalents, contributions, investment income and proceeds from investment transactions. In the event that investments must be sold quickly to meet current obligations, the majority of the Pension Plan’s assets are invested in securities that are traded in an active market and can be readily disposed of as liquidity needs arise.
17. PENSION AND POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS
The following table provides the components of the net periodic benefit (recovery) costs for the three and nine months ended September 30, 2025 and 2024:
Pension Benefits | Post-Retirement and Post-Employment Benefits | |||||||||||||
Three months ended September 30 (millions of dollars) | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Current service cost | 36 | 33 | 15 | 14 | ||||||||||
| Interest cost | 102 | 101 | 20 | 19 | ||||||||||
Expected return on plan assets, net of expenses1 | (166) | (151) | — | — | ||||||||||
| Amortization of prior service cost | — | — | 3 | 3 | ||||||||||
| Amortization of actuarial (gains) losses | (3) | 3 | (4) | (5) | ||||||||||
| Net periodic benefit (recovery) costs | (31) | (14) | 34 | 31 | ||||||||||
Charged to results of operations2 | 4 | 6 | 24 | 21 | ||||||||||
Pension Benefits | Post-Retirement and Post-Employment Benefits | |||||||||||||
Nine months ended September 30 (millions of dollars) | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Current service cost | 110 | 101 | 45 | 42 | ||||||||||
| Interest cost | 308 | 301 | 60 | 56 | ||||||||||
Expected return on plan assets, net of expenses1 | (498) | (453) | — | — | ||||||||||
| Amortization of prior service (credit) cost | (2) | (2) | 7 | 7 | ||||||||||
| Amortization of actuarial (gains) losses | (11) | 11 | (12) | (15) | ||||||||||
| Net periodic benefit (recovery) costs | (93) | (42) | 100 | 90 | ||||||||||
Charged to results of operations2 | 15 | 18 | 71 | 64 | ||||||||||
1 The expected long-term rate of return on pension plan assets for the year ending December 31, 2025 is 7.20% (2024 - 7.00%).
2 The Company accounts for pension costs consistent with their inclusion in OEB-approved rates. During the three and nine months ended September 30, 2025, pension costs of $14 million (2024 - $19 million) and $50 million (2024 - $54 million), respectively, were attributed to labour, of which $4 million (2024 - $6 million) and $15 million (2024 - $18 million), respectively, was charged to operations, and $10 million (2024 - $13 million) and $35 million (2024 - $36 million), respectively, was capitalized as part of the cost of property, plant and equipment and intangible assets.
14 | | |||||||
HYDRO ONE LIMITED
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
For the three and nine months ended September 30, 2025 and 2024
18. SHARE CAPITAL
Common Shares
The Company is authorized to issue an unlimited number of common shares. As at September 30, 2025, the Company had 599,781,811 (December 31, 2024 - 599,435,650) common shares issued and outstanding.
Preferred Shares
The Company is authorized to issue an unlimited number of preferred shares, issuable in series. As at September 30, 2025 and December 31, 2024, the Company had no preferred shares issued and outstanding.
19. DIVIDENDS
During the three months ended September 30, 2025, common share dividends in the amount of $200 million (2024 - $189 million) were declared and paid.
During the nine months ended September 30, 2025, common share dividends in the amount of $588 million (2024 - $555 million) were declared and paid. See Note 27 - Subsequent Events for dividends declared subsequent to September 30, 2025.
20. EARNINGS PER COMMON SHARE
Basic earnings per common share (EPS) is calculated by dividing net income attributable to common shareholders of Hydro One by the weighted-average number of common shares outstanding.
Diluted EPS is calculated by dividing net income attributable to common shareholders of Hydro One by the weighted-average number of common shares outstanding adjusted for the effects of potentially dilutive stock-based compensation plans, including the share grant plans and the Long-term Incentive Plan (LTIP), which are calculated using the treasury stock method.
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||
Net income attributable to common shareholders (millions of dollars) | 421 | 371 | 1,106 | 956 | ||||||||||
| Weighted-average number of shares | ||||||||||||||
| Basic | 599,777,420 | 599,433,448 | 599,662,826 | 599,311,097 | ||||||||||
| Effect of dilutive stock-based compensation plans | 914,591 | 1,214,523 | 1,067,793 | 1,357,100 | ||||||||||
| Diluted | 600,692,011 | 600,647,971 | 600,730,619 | 600,668,197 | ||||||||||
| EPS | ||||||||||||||
| Basic | $0.70 | $0.62 | $1.84 | $1.60 | ||||||||||
| Diluted | $0.70 | $0.62 | $1.84 | $1.59 | ||||||||||
21. STOCK-BASED COMPENSATION
Share Grant Plans
Hydro One has two share grant plans (Share Grant Plans), one for the benefit of certain members of the Power Workers’ Union (the PWU Share Grant Plan) and one for the benefit of certain members of the Society of United Professionals (the Society Share Grant Plan). A summary of share grant activity under the Share Grant Plans during the three and nine months ended September 30, 2025 and 2024 is presented below:
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||
| (number of share grants) | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Share grants outstanding - beginning | 1,071,739 | 1,434,186 | 1,407,294 | 1,782,376 | ||||||||||
| Granted | — | — | 114 | — | ||||||||||
Vested and issued1 | — | — | (335,669) | (348,190) | ||||||||||
| Share grants outstanding - ending | 1,071,739 | 1,434,186 | 1,071,739 | 1,434,186 | ||||||||||
1 During the three and nine months ended September 30, 2025, Hydro One issued nil and 335,669 (2024 - nil and 348,190) common shares from treasury to eligible employees in accordance with provisions of the PWU and the Society Share Grant Plans.
15 | | |||||||
HYDRO ONE LIMITED
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
For the three and nine months ended September 30, 2025 and 2024
Directors' Deferred Share Unit (DSU) Plan
A summary of DSU awards activity under the Directors' DSU Plan during the three and nine months ended September 30, 2025 and 2024 is presented below:
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||
| (number of DSUs) | 2025 | 2024 | 2025 | 2024 | ||||||||||
| DSUs outstanding - beginning | 102,536 | 106,189 | 107,296 | 94,624 | ||||||||||
| Granted | 5,035 | 5,223 | 16,252 | 16,788 | ||||||||||
| Settled | (10,096) | — | (26,073) | — | ||||||||||
| DSUs outstanding - ending | 97,475 | 111,412 | 97,475 | 111,412 | ||||||||||
As at September 30, 2025, a liability of $5 million (December 31, 2024 - $5 million) related to Directors' DSUs has been recorded at the closing price of the Company's common shares of $49.65 (December 31, 2024 - $44.27). This liability is included in other long-term liabilities on the consolidated balance sheets.
Management DSU Plan
A summary of DSU awards activity under the Management DSU Plan during the three and nine months ended September 30, 2025 and 2024 is presented below:
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||
(number of DSUs) | 2025 | 2024 | 2025 | 2024 | ||||||||||
| DSUs outstanding - beginning | 87,425 | 149,487 | 85,690 | 134,370 | ||||||||||
| Granted | 577 | 565 | 13,737 | 15,995 | ||||||||||
| Paid | (2,570) | (64,435) | (13,995) | (64,748) | ||||||||||
| DSUs outstanding - ending | 85,432 | 85,617 | 85,432 | 85,617 | ||||||||||
As at September 30, 2025, a liability of $4 million (December 31, 2024 - $4 million) related to Management DSUs has been recorded at the closing price of the Company's common shares of $49.65 (December 31, 2024 - $44.27). This liability is included in other long-term liabilities on the consolidated balance sheets.
LTIP
Performance Share Units (PSU) and Restricted Share Units (RSU)
A summary of PSU and RSU awards activity under the LTIP during the three and nine months ended September 30, 2025 and 2024 is presented below:
| PSUs | RSUs | |||||||||||||
Three months ended September 30 (number of units) | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Units outstanding - beginning | 418,969 | 273,093 | 431,719 | 323,056 | ||||||||||
| Granted | 9,470 | 16,222 | 9,645 | 5,856 | ||||||||||
| Forfeited | (18,275) | (2,125) | (34,235) | (5,931) | ||||||||||
| Vested | (10,983) | (636) | (17,276) | (852) | ||||||||||
| Units outstanding - ending | 399,181 | 286,554 | 389,853 | 322,129 | ||||||||||
| PSUs | RSUs | |||||||||||||
Nine months ended September 30 (number of units) | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Units outstanding - beginning | 286,554 | 142,925 | 322,925 | 186,971 | ||||||||||
| Granted | 179,731 | 189,104 | 150,759 | 156,638 | ||||||||||
| Forfeited | (45,655) | (24,918) | (58,435) | (20,377) | ||||||||||
| Vested | (21,449) | (20,557) | (25,396) | (1,103) | ||||||||||
| Units outstanding - ending | 399,181 | 286,554 | 389,853 | 322,129 | ||||||||||
The total grant date fair value of the awards granted during the three and nine months ended September 30, 2025 was $1 million and $16 million, respectively (2024 - $1 million and $14 million, respectively). The compensation expense related to these awards during the three and nine months ended September 30, 2025 was $5 million and $13 million, respectively (2024 – $3 million and $7 million, respectively).
16 | | |||||||
HYDRO ONE LIMITED
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
For the three and nine months ended September 30, 2025 and 2024
22. RELATED PARTY TRANSACTIONS
The Province is a shareholder of Hydro One with approximately 47.1% (2024 - 47.1%) ownership as at September 30, 2025. The Ministry of Infrastructure (MOI) is a related party to Hydro One because it is controlled by the Province. The Independent Electricity System Operator (IESO), Ontario Power Generation Inc. (OPG), Ontario Electricity Financial Corporation (OEFC), and the OEB are related parties to Hydro One because they are controlled or significantly influenced by the Ministry of Energy and Mines. Hydro One also has transactions in the normal course of business with various government ministries and organizations in Ontario that fall under the purview of the Province. The following is a summary of the Company’s related party transactions during the three and nine months ended September 30, 2025 and 2024:
| (millions of dollars) | Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
| Related Party | Transaction | 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Province | Dividends paid | 94 | 89 | 276 | 262 | ||||||||||||
| MOI | Broadband subsidy1 | 9 | — | 28 | — | ||||||||||||
| IESO | Power purchased | 638 | 616 | 2,012 | 1,917 | ||||||||||||
| Revenues for transmission services | 671 | 625 | 1,905 | 1,754 | |||||||||||||
| Amounts related to electricity rebates | 244 | 301 | 752 | 908 | |||||||||||||
| Distribution revenues related to rural rate protection | 64 | 64 | 191 | 190 | |||||||||||||
| Distribution revenues related to Wataynikaneyap Power LP | 34 | 29 | 100 | 89 | |||||||||||||
| Distribution revenues related to supply of electricity to remote northern communities | 12 | 12 | 37 | 36 | |||||||||||||
| Funding received related to Conservation and Demand Management programs | — | — | — | 1 | |||||||||||||
| OPG | Power purchased | 4 | 3 | 18 | 14 | ||||||||||||
| Transmission revenues related to provision of services and supply of electricity | — | — | 1 | 1 | |||||||||||||
| Distribution revenues related to provision of services and supply of electricity | 2 | 1 | 6 | 4 | |||||||||||||
| Other revenues related to provision of services and supply of electricity | — | — | 1 | 1 | |||||||||||||
| Capital contribution received from OPG | 1 | 1 | 17 | 2 | |||||||||||||
| Costs related to the purchase of services | 1 | 1 | 2 | 1 | |||||||||||||
| OEFC | Power purchased from power contracts administered by the OEFC | 1 | — | 2 | 1 | ||||||||||||
| OEB | OEB fees | 4 | 3 | 10 | 9 | ||||||||||||
1 On October 31, 2024, the Ministry of Infrastructure announced that it has developed a program to deliver up to $400 million in subsidies to internet service providers (ISPs) for work associated with designated broadband projects. The program is intended to enable ISPs to successfully and safely attach their material and equipment to the Company’s poles to bring connectivity to rural communities as part of a designated broadband project as defined under Building Broadband Faster Act (Ontario). A portion of these subsidies is used to reimburse Hydro One Networks on behalf of ISPs for their share of enablement costs incurred to facilitate the program to date.
Sales to and purchases from related parties are based on the requirements of the OEB’s Affiliate Relationships Code. Outstanding balances as at period end are interest-free and settled in cash. Invoices are issued monthly, and amounts are due and paid on a monthly basis.
23. CONSOLIDATED STATEMENTS OF CASH FLOWS
The changes in non-cash balances related to operations consist of the following:
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||
(millions of dollars) | 2025 | 2024 | 2025 | 2024 | ||||||||||
Accounts receivable | (2) | (83) | (70) | (48) | ||||||||||
| Due from related parties | 64 | 32 | 15 | (14) | ||||||||||
| Materials and supplies | 3 | 2 | — | 5 | ||||||||||
Prepaid expenses and other assets (Note 8) | (8) | (19) | (10) | (56) | ||||||||||
| Other long-term assets | — | (1) | (19) | (2) | ||||||||||
Accounts payable (Note 13) | 20 | (34) | 27 | (2) | ||||||||||
| Accrued liabilities | (11) | 5 | 85 | 108 | ||||||||||
Unearned revenue (Note 13) | (40) | 56 | (41) | 128 | ||||||||||
| Due to related parties | (25) | (11) | (209) | (136) | ||||||||||
Accrued interest (Note 13) | 5 | 18 | 5 | 24 | ||||||||||
| Long-term accounts payable and other long-term liabilities | — | 5 | 1 | 5 | ||||||||||
| Post-retirement and post-employment benefit liability | 25 | 12 | 55 | 47 | ||||||||||
| 31 | (18) | (161) | 59 | |||||||||||
17 | | |||||||
HYDRO ONE LIMITED
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
For the three and nine months ended September 30, 2025 and 2024
Capital Expenditures
The following tables reconcile investments in property, plant and equipment and intangible assets and the amounts presented in the consolidated statements of cash flows for the three and nine months ended September 30, 2025 and 2024. The reconciling items include net change in accruals, transfers, and capitalized depreciation.
| Three months ended September 30, 2025 | Nine months ended September 30, 2025 | ||||||||||||||||||||||
(millions of dollars) | Property, Plant and Equipment | Intangible Assets | Total | Property, Plant and Equipment | Intangible Assets | Total | |||||||||||||||||
| Capital investments | (752) | (27) | (779) | (2,374) | (53) | (2,427) | |||||||||||||||||
| Reconciling items | (5) | 1 | (4) | 209 | (2) | 207 | |||||||||||||||||
| Cash outflow for capital expenditures | (757) | (26) | (783) | (2,165) | (55) | (2,220) | |||||||||||||||||
| Three months ended September 30, 2024 | Nine months ended September 30, 2024 | ||||||||||||||||||||||
(millions of dollars) | Property, Plant and Equipment | Intangible Assets | Total | Property, Plant and Equipment | Intangible Assets | Total | |||||||||||||||||
| Capital investments | (758) | (15) | (773) | (2,199) | (65) | (2,264) | |||||||||||||||||
| Reconciling items | 46 | 1 | 47 | 132 | 3 | 135 | |||||||||||||||||
| Cash outflow for capital expenditures | (712) | (14) | (726) | (2,067) | (62) | (2,129) | |||||||||||||||||
Supplementary Information
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||
(millions of dollars) | 2025 | 2024 | 2025 | 2024 | ||||||||||
| Net interest paid | 187 | 161 | 545 | 463 | ||||||||||
| Income taxes paid | 13 | 2 | 35 | 27 | ||||||||||
24. CONTINGENCIES
Hydro One is involved in various lawsuits and claims in the normal course of business. In the opinion of management, the outcome of such matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.
25. COMMITMENTS
The following table presents a summary of Hydro One’s commitments under outsourcing and other agreements due in the next five years and thereafter:
As at September 30, 2025 (millions of dollars) | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Thereafter | ||||||||||||||
Outsourcing and other agreements | 52 | 51 | 50 | 38 | 31 | 13 | ||||||||||||||
| Long-term software/meter agreement | 11 | 2 | 2 | 2 | 2 | — | ||||||||||||||
Outsourcing and Other Agreements
On July 31, 2025 Hydro One renewed the agreement for information technology services with Capgemini Canada Inc., which expires on August 1, 2028, and includes an option to extend for two additional one-year terms.
Other Commitments
The following table presents a summary of Hydro One’s other commercial commitments by year of expiry in the next five years and thereafter:
As at September 30, 2025 (millions of dollars) | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Thereafter | ||||||||||||||
Operating Credit Facilities1 | — | — | — | — | 3,300 | — | ||||||||||||||
Letters of credit2 | 168 | — | — | — | — | — | ||||||||||||||
Guarantees3 | 540 | — | — | — | — | — | ||||||||||||||
1 On June 1, 2025, the maturity date for the Operating Credit Facilities was extended to June 1, 2030.
2 Letters of credit consist of $153 million letters of credit related to retirement compensation arrangements, an $8 million letter of credit provided to the IESO for prudential support, and $7 million in letters of credit for various operating purposes.
3 Guarantees consist of $475 million prudential support provided to the IESO by Hydro One Inc. on behalf of its subsidiaries, as well as $60 million guarantees provided by Hydro One to ONroute relating to OCN LP (OCN Guarantee), and $5 million relating to Aux Energy Inc.
18 | | |||||||
HYDRO ONE LIMITED
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
For the three and nine months ended September 30, 2025 and 2024
26. SEGMENTED REPORTING
The Company has three reportable segments: Transmission, Distribution, and Other. The composition of these segments is described in Note 1 to the consolidated financial statements.
The designation of segments has been based on a combination of regulatory status and the nature of the services provided. Operating segments of the Company are determined based on information used by the Chief Operating Decision Maker (CODM) in deciding how to allocate resources and evaluate the performance of each of the segments. Hydro One’s CODM consists of its Chief Executive Officer and certain members of the executive leadership team. The CODM evaluates segment performance based on income before financing charges, equity income, and income tax expense from continuing operations (excluding certain allocated corporate governance costs) (EBIT). The CODM considers the key components of EBIT to understand the variances to prior period on a quarterly basis and measures them against the Company’s budget and forecast across each of the three segments on a monthly basis in order to properly allocate resources between and within the operating segments.
Three months ended September 30, 2025 (millions of dollars) | Transmission | Distribution | Other | Consolidated | ||||||||||
| Revenues | 680 | 1,605 | 14 | 2,299 | ||||||||||
| Purchased power | — | 1,080 | — | 1,080 | ||||||||||
| Operation, maintenance and administration | 109 | 164 | 23 | 296 | ||||||||||
| Depreciation, amortization and asset removal costs | 140 | 129 | 3 | 272 | ||||||||||
| Income (loss) before financing charges, equity income, and income tax expense | 431 | 232 | (12) | 651 | ||||||||||
| Capital investments | 519 | 257 | 3 | 779 | ||||||||||
Three months ended September 30, 2024 (millions of dollars) | Transmission | Distribution | Other | Consolidated | ||||||||||
| Revenues | 628 | 1,551 | 13 | 2,192 | ||||||||||
| Purchased power | — | 1,047 | — | 1,047 | ||||||||||
| Operation, maintenance and administration | 113 | 155 | 26 | 294 | ||||||||||
| Depreciation, amortization and asset removal costs | 137 | 125 | 1 | 263 | ||||||||||
| Income (loss) before financing charges, equity income, and income tax expense | 378 | 224 | (14) | 588 | ||||||||||
| Capital investments | 461 | 309 | 3 | 773 | ||||||||||
Nine months ended September 30, 2025 (millions of dollars) | Transmission | Distribution | Other | Consolidated | ||||||||||
| Revenues | 1,938 | 4,800 | 35 | 6,773 | ||||||||||
| Purchased power | — | 3,199 | — | 3,199 | ||||||||||
| Operation, maintenance and administration | 367 | 508 | 73 | 948 | ||||||||||
| Depreciation, amortization and asset removal costs | 419 | 397 | 8 | 824 | ||||||||||
| Income (loss) before financing charges, equity income, and income tax expense | 1,152 | 696 | (46) | 1,802 | ||||||||||
| Capital investments | 1,468 | 949 | 10 | 2,427 | ||||||||||
Nine months ended September 30, 2024 (millions of dollars) | Transmission | Distribution | Other | Consolidated | ||||||||||
| Revenues | 1,764 | 4,592 | 33 | 6,389 | ||||||||||
| Purchased power | — | 3,083 | — | 3,083 | ||||||||||
| Operation, maintenance and administration | 347 | 517 | 71 | 935 | ||||||||||
| Depreciation, amortization and asset removal costs | 404 | 369 | 7 | 780 | ||||||||||
| Income (loss) before financing charges, equity income, and income tax expense | 1,013 | 623 | (45) | 1,591 | ||||||||||
| Capital investments | 1,384 | 872 | 8 | 2,264 | ||||||||||
19 | | |||||||
HYDRO ONE LIMITED
NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
For the three and nine months ended September 30, 2025 and 2024
Total Assets by Segment:
As at (millions of dollars) | September 30, 2025 | December 31, 2024 | ||||||
| Transmission | 23,260 | 21,630 | ||||||
| Distribution | 14,768 | 14,040 | ||||||
| Other | 737 | 1,012 | ||||||
| Total assets | 38,765 | 36,682 | ||||||
Total Goodwill by Segment:
As at (millions of dollars) | September 30, 2025 | December 31, 2024 | ||||||
| Transmission | 157 | 157 | ||||||
| Distribution | 216 | 216 | ||||||
| Other | 5 | — | ||||||
| Total goodwill | 378 | 373 | ||||||
All revenues, assets and substantially all costs are earned, held or incurred in Canada.
27. SUBSEQUENT EVENTS
Dividends
On November 12, 2025, common share dividends of $200 million ($0.3331 per common share) were declared.
20 | | |||||||
HYDRO ONE LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the three and nine months ended September 30, 2025 and 2024
The following Management’s Discussion and Analysis (MD&A) of the financial condition and results of operations should be read together with the unaudited condensed interim consolidated financial statements and accompanying notes thereto (Consolidated Financial Statements) of Hydro One Limited (Hydro One or the Company) for the three and nine months ended September 30, 2025, as well as the Company’s audited consolidated financial statements and MD&A for the year ended December 31, 2024. The Consolidated Financial Statements have been prepared in accordance with United States (U.S.) generally accepted accounting principles (GAAP). All financial information in this MD&A is presented in Canadian dollars, unless otherwise indicated.
The Company has prepared this MD&A in accordance with National Instrument 51-102 - Continuous Disclosure Obligations of the Canadian Securities Administrators. Under the U.S./ Canada Multijurisdictional Disclosure System, the Company is permitted to prepare this MD&A in accordance with the disclosure requirements of Canadian securities laws and regulations, which can vary from those of the U.S. This MD&A provides information as at and for the three and nine months ended September 30, 2025, based on information available to management as of November 12, 2025.
CONSOLIDATED FINANCIAL HIGHLIGHTS AND STATISTICS
| Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||||||||
(millions of dollars, except as otherwise noted) | 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||
| Revenues | 2,299 | 2,192 | 4.9 | % | 6,773 | 6,389 | 6.0 | % | |||||||||||||||
| Purchased power | 1,080 | 1,047 | 3.2 | % | 3,199 | 3,083 | 3.8 | % | |||||||||||||||
Revenues, net of purchased power1 | 1,219 | 1,145 | 6.5 | % | 3,574 | 3,306 | 8.1 | % | |||||||||||||||
| Operation, maintenance and administration (OM&A) costs | 296 | 294 | 0.7 | % | 948 | 935 | 1.4 | % | |||||||||||||||
| Depreciation, amortization and asset removal costs | 272 | 263 | 3.4 | % | 824 | 780 | 5.6 | % | |||||||||||||||
| Financing charges | 172 | 158 | 8.9 | % | 504 | 463 | 8.9 | % | |||||||||||||||
| Income tax expense | 60 | 56 | 7.1 | % | 189 | 164 | 15.2 | % | |||||||||||||||
| Net income attributable to common shareholders of Hydro One | 421 | 371 | 13.5 | % | 1,106 | 956 | 15.7 | % | |||||||||||||||
| Basic earnings per common share (EPS) | $0.70 | $0.62 | 12.9 | % | $1.84 | $1.60 | 15.0 | % | |||||||||||||||
| Diluted EPS | $0.70 | $0.62 | 12.9 | % | $1.84 | $1.59 | 15.7 | % | |||||||||||||||
| Net cash from operating activities | 713 | 623 | 14.4 | % | 1,828 | 1,831 | (0.2 | %) | |||||||||||||||
Funds from operations (FFO)1 | 678 | 639 | 6.1 | % | 1,978 | 1,764 | 12.1 | % | |||||||||||||||
Annualized FFO to Net Debt1 | 13.6 | % | 13.4 | % | 0.2 | % | 13.6 | % | 13.4 | % | 0.2 | % | |||||||||||
| Capital investments | 779 | 773 | 0.8 | % | 2,427 | 2,264 | 7.2 | % | |||||||||||||||
| Assets placed in-service | 577 | 597 | (3.4 | %) | 1,591 | 1,363 | 16.7 | % | |||||||||||||||
Transmission: Average monthly Ontario 60-minute peak demand (MW) | 23,080 | 22,694 | 1.7 | % | 21,699 | 21,080 | 2.9 | % | |||||||||||||||
Distribution: Electricity distributed to Hydro One customers (GWh) | 7,937 | 7,691 | 3.2 | % | 24,492 | 23,274 | 5.2 | % | |||||||||||||||
As at | September 30, 2025 | December 31, 2024 | ||||||
Net Debt to capitalization ratio1 | 59.3 | % | 58.4 | % | ||||
1 See section “Non-GAAP Financial Measures”.
OVERVIEW
The Company's transmission business consists of the electricity transmission system operated by subsidiaries of Hydro One Inc. (a wholly-owned subsidiary of the Company), which include Hydro One Networks Inc. (Hydro One Networks), Hydro One Sault Ste. Marie LP, an approximate 80% (2024 - 100%) interest in Chatham x Lakeshore Limited Partnership (CLLP), an approximate 66% interest in B2M Limited Partnership (B2M LP) and an approximate 55% interest in Niagara Reinforcement Limited Partnership (NRLP). The Transmission segment also includes Hydro One Networks’ approximate 48% minority interest in the East-West Tie Limited Partnership (EWT LP) (see section “Other Developments - EWT LP”).
Hydro One’s distribution business consists of the electricity distribution system operated by Hydro One Inc.'s subsidiaries, Hydro One Networks and Hydro One Remote Communities Inc. (Hydro One Remotes).
The other segment consists primarily of Hydro One's subsidiary, Acronym Solutions Inc., which provides telecommunications support for the Company’s transmission and distribution businesses, as well as a comprehensive suite of Information Communication Technology solutions. The other segment also includes Aux Energy Inc., a wholly-owned subsidiary that provides energy solutions to commercial and industrial clients, and a wholly-owned subsidiary (2024 - a joint venture) that owns and operates electric vehicle fast charging stations across Ontario under the Ivy Charging Network brand, as well as certain corporate activities, and is not rate-regulated.
1 |  | |||||||
HYDRO ONE LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
For the three and nine months ended September 30, 2025 and 2024
For the nine months ended September 30, 2025 and 2024, Hydro One's segments accounted for the Company's total revenues, as follows:
Nine months ended September 30 | 2025 | 2024 | ||||||
| Transmission | 28 | % | 28 | % | ||||
| Distribution | 71 | % | 71 | % | ||||
| Other | 1 | % | 1 | % | ||||
When adjusted for the recovery of purchased power costs, Hydro One’s segments accounted for the Company’s total revenues, net of purchased power,1 for the nine months ended September 30, 2025 and 2024 as follows:
Nine months ended September 30 | 2025 | 2024 | ||||||
| Transmission | 54 | % | 53 | % | ||||
| Distribution | 45 | % | 46 | % | ||||
| Other | 1 | % | 1 | % | ||||
As at September 30, 2025 and December 31, 2024, Hydro One’s segments accounted for the Company’s total assets as follows:
As at | September 30, 2025 | December 31, 2024 | ||||||
| Transmission | 60 | % | 59 | % | ||||
| Distribution | 38 | % | 38 | % | ||||
| Other | 2 | % | 3 | % | ||||
RESULTS OF OPERATIONS
Net Income
Net income attributable to common shareholders of Hydro One for the quarter ended September 30, 2025 of $421 million is an increase of $50 million, or 13.5%, compared to the same period in 2024. Significant influences on the change in net income attributable to the common shareholders include:
•higher revenues, net of purchased power,1 primarily resulting from an increase in transmission and distribution revenues due to Ontario Energy Board (OEB)-approved 2025 rates, and higher average monthly peak demand.
•higher depreciation, amortization and asset removal costs primarily due to higher depreciation due to the growth in capital assets, partially offset by lower asset removal costs compared to the prior year.
•higher financing charges attributable to an increase in long-term debt outstanding, partially offset by higher capitalized interest.
•higher income tax expense primarily resulting from higher pre-tax earnings, partially offset by higher deductible timing differences.
Net income attributable to common shareholders of Hydro One for the nine months ended September 30, 2025 of $1,106 million is $150 million, or 15.7%, higher than the same period in 2024. Year-to-date results were impacted by similar factors as noted above, as well as higher energy consumption.
EPS
EPS of $0.70 and $1.84 for the three and nine months ended September 30, 2025, respectively, compares to EPS of $0.62 and $1.60 in the same periods of 2024. The increase in EPS was primarily driven by higher earnings year-over-year, as discussed above.
1 See section “Non-GAAP Financial Measures”.
2 | | |||||||
HYDRO ONE LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
For the three and nine months ended September 30, 2025 and 2024
Revenues
| Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||||||||
(millions of dollars, except as otherwise noted) | 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||
| Transmission | 680 | 628 | 8.3 | % | 1,938 | 1,764 | 9.9 | % | |||||||||||||||
| Distribution | 1,605 | 1,551 | 3.5 | % | 4,800 | 4,592 | 4.5 | % | |||||||||||||||
| Other | 14 | 13 | 7.7 | % | 35 | 33 | 6.1 | % | |||||||||||||||
| Total revenues | 2,299 | 2,192 | 4.9 | % | 6,773 | 6,389 | 6.0 | % | |||||||||||||||
| Transmission | 680 | 628 | 8.3 | % | 1,938 | 1,764 | 9.9 | % | |||||||||||||||
Distribution revenues, net of purchased power1 | 525 | 504 | 4.2 | % | 1,601 | 1,509 | 6.1 | % | |||||||||||||||
| Other | 14 | 13 | 7.7 | % | 35 | 33 | 6.1 | % | |||||||||||||||
Total revenues, net of purchased power1 | 1,219 | 1,145 | 6.5 | % | 3,574 | 3,306 | 8.1 | % | |||||||||||||||
Transmission: Average monthly Ontario 60-minute peak demand (MW) | 23,080 | 22,694 | 1.7 | % | 21,699 | 21,080 | 2.9 | % | |||||||||||||||
Distribution: Electricity distributed to Hydro One customers (GWh) | 7,937 | 7,691 | 3.2 | % | 24,492 | 23,274 | 5.2 | % | |||||||||||||||
1 See section “Non-GAAP Financial Measures”.
Transmission Revenues
Transmission revenues increased by 8.3% compared to the quarter ended September 30, 2024, primarily due to:
•higher average monthly peak demand;
•higher revenues resulting from OEB-approved 2025 rates; and
•CLLP revenues following the in servicing of the transmission line in the fourth quarter of 2024.
Transmission revenues increased by 9.9% compared to the nine months ended September 30, 2024, primarily due to similar factors noted above.
Distribution Revenues
Distribution revenues increased by 3.5% compared to the quarter ended September 30, 2024, primarily due to:
•higher purchased power costs, which are fully recovered from ratepayers and thus net income neutral;
•higher revenues resulting from OEB-approved 2025 rates; and
•higher external revenues related to the recovery of storm-related costs incurred on behalf of third parties, which are offset by a corresponding increase to OM&A and therefore net income neutral.
Distribution revenues increased by 4.5% compared to the nine months ended September 30, 2024, primarily due to similar factors noted above as well as higher energy consumption.
Distribution revenues, net of purchased power,2 increased by 4.2% and 6.1% compared to the three and nine months ended September 30, 2024, primarily due to the reasons noted above.
2 See section “Non-GAAP Financial Measures”.
3 | | |||||||
HYDRO ONE LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
For the three and nine months ended September 30, 2025 and 2024
OM&A Costs
| Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||||||||
(millions of dollars, except as otherwise noted) | 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||
| Transmission | 109 | 113 | (3.5 | %) | 367 | 347 | 5.8 | % | |||||||||||||||
| Distribution | 164 | 155 | 5.8 | % | 508 | 517 | (1.7 | %) | |||||||||||||||
| Other | 23 | 26 | (11.5 | %) | 73 | 71 | 2.8 | % | |||||||||||||||
| 296 | 294 | 0.7 | % | 948 | 935 | 1.4 | % | ||||||||||||||||
Transmission OM&A Costs
Transmission OM&A costs were 3.5% lower than the quarter ended September 30, 2024, primarily due to:
•lower work program expenditures, including vegetation management expenditures; partially offset by
•higher corporate support costs.
Transmission OM&A costs were 5.8% higher than the nine months ended September 30, 2024, primarily due to:
•higher corporate support costs; and
•lower insurance proceeds received in the second quarter compared to the prior year; partially offset by
•lower work program expenditures, including vegetation management expenditures.
Distribution OM&A Costs
Distribution OM&A costs were 5.8% higher than the quarter ended September 30, 2024, primarily due to:
•higher corporate support costs attributable to lower capitalized overheads;
•higher bad debt expense; and
•costs related to the storm in March that were recovered from third parties and are offset in revenue, therefore net income neutral; partially offset by
•lower work program expenditures, mainly due to vegetation management expenditures.
Distribution OM&A costs were 1.7% lower than the nine months ended September 30, 2024, primarily due to:
•lower work program expenditures, mainly due to vegetation management expenditures; and
•lower fuel costs of Hydro One Remotes, which are fully recovered through revenue and therefore net income neutral; partially offset by
•costs related to the storm in March that were recovered from third parties and are offset in revenue, therefore net income neutral; and
•higher corporate support costs attributable to lower capitalized overheads.
Depreciation, Amortization and Asset Removal Costs
Depreciation, amortization and asset removal costs increased by $9 million for the three months ended September 30, 2025, compared to the same period in 2024, primarily due to the growth in capital assets as the Company continues to place new assets in-service, partially offset by lower asset removal costs.
Depreciation, amortization and asset removal costs increased by $44 million for the nine months ended September 30, 2025, compared to the same period in 2024, primarily due to the growth in capital assets as the Company continues to place new assets in-service, and higher assets removal costs resulting from storm restoration efforts in the second quarter of 2025, partially offset by lower amortization of regulatory assets.
Financing Charges
Financing charges increased by $14 million and $41 million for the three and nine months ended September 30, 2025, respectively, primarily due to an increase in outstanding long-term debt and higher weighted-average interest rates, partially offset by higher capitalized interest.
4 | | |||||||
HYDRO ONE LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
For the three and nine months ended September 30, 2025 and 2024
Income Tax Expense
Income tax expense of $60 million for the three months ended September 30, 2025 compares to $56 million for the same period in 2024. The $4 million year-over-year increase was primarily due to:
•higher pre-tax earnings; partially offset by
•higher deductible timing differences compared to the prior year.
Income tax expense of $189 million for the nine months ended September 30, 2025 compares to $164 million for the same period in 2024. The $25 million year-over-year increase was primarily due to similar factors to those noted above.
The Company realized an effective tax rate of approximately 12.4% and 14.5% for the three and nine months ended September 30, 2025, respectively, compared to approximately 13.0% and 14.5% in the same periods of 2024. The effective tax rate for the three-month period decreased by 0.6%, primarily attributable to the factors noted above, while the nine-month period rate remained unchanged.
SHARE CAPITAL
The common shares of Hydro One are publicly traded on the Toronto Stock Exchange (TSX) under the trading symbol "H". Hydro One is authorized to issue an unlimited number of common shares. The amount and timing of any dividends payable by Hydro One is at the discretion of Hydro One's Board of Directors (Board) and is established on the basis of Hydro One’s results of operations, maintenance of its deemed regulatory capital structure, the Company’s financial condition and forecast cash requirements, the satisfaction of solvency tests imposed by corporate laws for the declaration and payment of dividends, and other factors that the Board may consider relevant. As at November 12, 2025, Hydro One had 599,781,811 issued and outstanding common shares.
The Company is authorized to issue an unlimited number of preferred shares, issuable in series. As at November 12, 2025, the Company had no preferred shares issued and outstanding.
The number of additional common shares of Hydro One that would be issued if all outstanding awards under the share grant plans and the Long-term Incentive Plan were vested and exercised as at November 12, 2025 was 1,470,920.
Common Share Dividends
In 2025, the Company declared and paid cash dividends to common shareholders as follows:
Date Declared | Record Date | Payment Date | Amount per Share | Total Amount (millions of dollars) | ||||||||||
| February 19, 2025 | March 12, 2025 | March 31, 2025 | $0.3142 | 188 | ||||||||||
| May 7, 2025 | June 11, 2025 | June 30, 2025 | $0.3331 | 200 | ||||||||||
| August 12, 2025 | September 10, 2025 | September 29, 2025 | $0.3331 | 200 | ||||||||||
| 588 | ||||||||||||||
Following the conclusion of the third quarter of 2025, the Company declared a cash dividend to common shareholders as follows:
Date Declared | Record Date | Payment Date | Amount per Share | Total Amount (millions of dollars) | ||||||||||
| November 12, 2025 | December 10, 2025 | December 31, 2025 | $0.3331 | $200 | ||||||||||
QUARTERLY RESULTS OF OPERATIONS
Quarter ended (millions of dollars, except EPS and ratio) | Sep 30, 2025 | Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | ||||||||||||||||||
| Revenues | 2,299 | 2,066 | 2,408 | 2,095 | 2,192 | 2,031 | 2,166 | 1,979 | ||||||||||||||||||
| Purchased power | 1,080 | 899 | 1,220 | 1,060 | 1,047 | 940 | 1,096 | 990 | ||||||||||||||||||
Revenues, net of purchased power1 | 1,219 | 1,167 | 1,188 | 1,035 | 1,145 | 1,091 | 1,070 | 989 | ||||||||||||||||||
| Net income attributable to common shareholders | 421 | 327 | 358 | 200 | 371 | 292 | 293 | 181 | ||||||||||||||||||
| Basic EPS | $0.70 | $0.54 | $0.60 | $0.33 | $0.62 | $0.49 | $0.49 | $0.30 | ||||||||||||||||||
| Diluted EPS | $0.70 | $0.54 | $0.60 | $0.33 | $0.62 | $0.49 | $0.49 | $0.30 | ||||||||||||||||||
Earnings coverage ratio1 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.9 | ||||||||||||||||||
1 See section “Non-GAAP Financial Measures”.
Variations in revenues and net income attributable to common shareholders over the quarters are primarily due to the impact of seasonal weather conditions on customer demand and market pricing, as well as timing of regulatory decisions.
5 | | |||||||
HYDRO ONE LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
For the three and nine months ended September 30, 2025 and 2024
CAPITAL INVESTMENTS
The Company makes capital investments to maintain the safety, reliability and integrity of its transmission and distribution system assets and to provide for the ongoing growth and modernization required to meet the expanding and evolving needs of its customers and the electricity market. This is achieved through a combination of sustaining capital investments, which are required to support the continued operation of Hydro One’s existing assets, and development capital investments, which involve additions to both existing assets and large-scale projects such as new transmission lines and transmission stations.
Assets Placed In-Service
The following table presents Hydro One’s assets placed in-service during the three and nine months ended September 30, 2025 and 2024:
| Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||||||||
(millions of dollars) | 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||
| Transmission | 256 | 323 | (20.7 | %) | 590 | 677 | (12.9 | %) | |||||||||||||||
| Distribution | 318 | 270 | 17.8 | % | 987 | 675 | 46.2 | % | |||||||||||||||
| Other | 3 | 4 | (25.0 | %) | 14 | 11 | 27.3 | % | |||||||||||||||
| Total assets placed in-service | 577 | 597 | (3.4 | %) | 1,591 | 1,363 | 16.7 | % | |||||||||||||||
Transmission Assets Placed In-Service
Transmission assets placed in-service decreased by $67 million, or 20.7%, for the quarter ended September 30, 2025, compared to the same period in 2024, primarily due to:
•timing of assets placed in-service for station refurbishments and replacements primarily related to the Middleport Transmission Station, the Cherrywood Transmission Station, and the Lennox Transmission Station;
•customer connection project at the Windsor NextStar Transmission Station; and
•investments placed in-service for the Network Management System; partially offset by
•investments placed in-service in Sault Ste. Marie for the Sault #3 Circuit.
Transmission assets placed in-service decreased by $87 million, or 12.9%, for the nine months ended September 30, 2025, compared to the same period in 2024, primarily due to similar factors noted above as well as lower volume of line refurbishments; partially offset by investments placed in-service at South Middle Road Transmission Station; and investments placed in-service at the Orillia Distribution Warehouse.
Distribution Assets Placed In-Service
Distribution assets placed in-service increased by $48 million, or 17.8%, for the quarter ended September 30, 2025, compared to the same period in 2024, primarily due to:
•assets placed in-service for the Advanced Metering Infrastructure (AMI) 2.0 system; and
•timing of investments placed in-service for system capability reinforcement projects; partially offset by
•lower volume of wood pole replacements;
•lower volume of work on customer connections; and
•timing of investments placed in-service for information technology initiatives.
Distribution assets placed in-service increased by $312 million, or 46.2%, for the nine months ended September 30, 2025, compared to the same period in 2024, primarily due to similar factors noted above, as well as higher volume of storm-related asset replacements; and investments placed in-service for the Orillia Distribution Warehouse and the Orillia Operation Centre.
6 | | |||||||
HYDRO ONE LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
For the three and nine months ended September 30, 2025 and 2024
Capital Investments
The following table presents Hydro One’s capital investments during the three and nine months ended September 30, 2025 and 2024:
| Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||||||||
(millions of dollars) | 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||
| Transmission | |||||||||||||||||||||||
| Sustaining | 293 | 338 | (13.3 | %) | 842 | 941 | (10.5 | %) | |||||||||||||||
| Development | 187 | 104 | 79.8 | % | 557 | 353 | 57.8 | % | |||||||||||||||
| Other | 39 | 19 | 105.3 | % | 69 | 90 | (23.3 | %) | |||||||||||||||
| 519 | 461 | 12.6 | % | 1,468 | 1,384 | 6.1 | % | ||||||||||||||||
| Distribution | |||||||||||||||||||||||
| Sustaining | 124 | 136 | (8.8 | %) | 564 | 402 | 40.3 | % | |||||||||||||||
| Development | 107 | 145 | (26.2 | %) | 303 | 383 | (20.9 | %) | |||||||||||||||
| Other | 26 | 28 | (7.1 | %) | 82 | 87 | (5.7 | %) | |||||||||||||||
| 257 | 309 | (16.8 | %) | 949 | 872 | 8.8 | % | ||||||||||||||||
| Other | 3 | 3 | — | % | 10 | 8 | 25.0 | % | |||||||||||||||
| Total capital investments | 779 | 773 | 0.8 | % | 2,427 | 2,264 | 7.2 | % | |||||||||||||||
Transmission Capital Investments
Transmission capital investments increased by $58 million, or 12.6%, in the third quarter of 2025 compared to the third quarter of 2024, primarily due to:
•investments in the Waasigan Transmission Line Project and the St. Clair Transmission Line Project; partially offset by
•investments in the Orillia Distribution Warehouse.
Transmission capital investments increased by $84 million, or 6.1%, in the nine months ended September 30, 2025, compared to the same period in 2024, primarily due to similar factors noted above, partially offset by lower volume of station refurbishments and equipment replacements; lower volume of line refurbishments and wood pole replacements; and lower spend on major development projects.
Distribution Capital Investments
Distribution capital investments decreased by $52 million, or 16.8%, in the third quarter of 2025 compared to the third quarter of 2024, primarily due to:
•lower volume of wood pole replacements;
•lower spend on system capability reinforcement projects;
•investments in the Orillia Operation Centre, Orleans Operation Centre, and Orillia Distribution Warehouse; and
•lower volume of work on customer connections; partially offset by
•investments in Ontario’s broadband initiative.
Distribution capital investments increased by $77 million, or 8.8%, in the nine months ended September 30, 2025, compared to the same period in 2024, primarily due to:
•higher spend on storm-related asset replacements; and
•investments in Ontario’s broadband initiative; partially offset by
•lower volume of wood pole replacements;
•lower spend on system capability reinforcement projects;
•investments in the Orillia Operation Centre, Orleans Operation Centre, and Orillia Distribution Warehouse; and
•lower spend on customer connections.
7 | | |||||||
HYDRO ONE LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
For the three and nine months ended September 30, 2025 and 2024
Major Transmission Capital Investment Projects
The following table summarizes the status of significant transmission projects as at September 30, 2025:
Project Name | Location | Type | Anticipated In-Service Date | Estimated Cost1 | Capital Cost To Date | ||||||||||||
| (year) | (millions of dollars) | ||||||||||||||||
| Development Projects: | |||||||||||||||||
Centennial Transmission Station2 | Southwestern Ontario | New transmission station and connection | 2025 | 229 | 150 | ||||||||||||
| Islington Transmission Station | Toronto Southern Ontario | New transmission station and connection | 2025 | 109 | 96 | ||||||||||||
Waasigan Transmission Line3 | Thunder Bay-Atikokan-Dryden Northwestern Ontario | New transmission line and station expansion | 2027 | 1,200 | 389 | ||||||||||||
| Holt Transmission Station | Bowmanville Central Ontario | New transmission station and connection | 2027 | 137 | 20 | ||||||||||||
St. Clair Transmission Line4 | Southwestern Ontario | New transmission line and station expansion | 2028 | 472 | 196 | ||||||||||||
| Keith Intertie Upgrade | Windsor Southwestern Ontario | Transmission station upgrade | 2028 | 109 | 8 | ||||||||||||
Longwood to Lakeshore Transmission Line5 | Southwestern Ontario | New transmission line and station expansion | TBD | TBD | 34 | ||||||||||||
Durham Kawartha Power Line6,7 | Eastern Ontario | New transmission line and station expansion | TBD | TBD | 18 | ||||||||||||
Northeast Power Line6,7 | Northeastern Ontario | New transmission line and station expansion | TBD | TBD | 16 | ||||||||||||
North Shore Link6,7 | Northeastern Ontario | New transmission line and station expansion | TBD | TBD | 14 | ||||||||||||
Wawa Timmins Power Line6,7 | Northeastern Ontario | New transmission line and station expansion | TBD | TBD | 5 | ||||||||||||
Second Longwood to Lakeshore Transmission Line5 | Southwestern Ontario | New transmission line and station expansion | TBD | TBD | 2 | ||||||||||||
Lakeshore to Windsor Transmission Line5 | Southwestern Ontario | New transmission line and station expansion | TBD | TBD | 1 | ||||||||||||
| Sustainment Projects: | |||||||||||||||||
Bruce B Switching Station Circuit Breaker Replacement8 | Tiverton Southwestern Ontario | Station sustainment | 2025 | 185 | 178 | ||||||||||||
| Middleport Transmission Station Circuit Breaker Replacement | Middleport Southwestern Ontario | Station sustainment | 2025 | 184 | 169 | ||||||||||||
| Lennox Transmission Station Circuit Breaker Replacement | Napanee Southeastern Ontario | Station sustainment | 2026 | 152 | 149 | ||||||||||||
| Esplanade x Terauley Underground Cable Replacement | Toronto Southern Ontario | Line sustainment | 2026 | 117 | 90 | ||||||||||||
| Bridgman Transmission Station Refurbishment | Toronto Southern Ontario | Station sustainment | 2026 | 108 | 90 | ||||||||||||
| Bruce A Transmission Station Switchyard Replacement | Tiverton Southwestern Ontario | Station sustainment | 2027 | 555 | 404 | ||||||||||||
| Otto Holden Transmission Station Refurbishment | Mattawa Northeast Ontario | Station sustainment | 2028 | 128 | 58 | ||||||||||||
Merivale Transmission Station Replacement and Upgrades9 | Ottawa Eastern Ontario | Station sustainment and upgrade | 2029 | 271 | 160 | ||||||||||||
| Synchronous Optical Network Telecommunication Replacement | Ontario | Telecommunication sustainment | 2029 | 137 | 14 | ||||||||||||
| Essa Transmission Station Circuit Breaker Replacement | Barrie Central Ontario | Station sustainment | 2030 | 116 | 5 | ||||||||||||
1 Estimated costs are presented gross of any potential contribution from external parties.
2 This Project is part of a two-phase project, which includes the construction of a transmission station and a transmission line to meet the needs of, and is anticipated to be largely funded by, an industrial customer. Phase 1 of the Centennial Transmission Station Project includes a new transmission station in St. Thomas and an approximately 2 km, 230 kV double-circuit transmission line between the new transmission station and an existing transmission station in the city. This phase of the project is anticipated to be in service by the end of 2025. Scope and timing of the second phase, an approximately 20 km, 230 kV double-circuit transmission line from London to St. Thomas, is currently under review.
3 The Waasigan Transmission Line Project includes construction of new transmission lines as well as station enhancements to support energization of the new lines. The estimated cost relates to the development and construction phases of the project and the anticipated in-service date reflects anticipated completion in 2027. The first phase of the project is anticipated to be in-serviced in 2026.
4 The St. Clair Transmission Line Project includes the line and associated facilities.
5 The capital cost to date relates to costs incurred in the development phase of the project. The scope and timing of these Southwestern Ontario transmission reinforcement projects are currently under review. The Independent Electricity System Operator (IESO) has recommended a target in-service date by 2032 for the Lakeshore to Windsor Transmission Line.
6 The capital cost to date relates to costs incurred in the development phase of the project. The scope and timing of these Northeastern and Eastern Ontario transmission reinforcements are currently under review. The Wawa Timmins Power Line was previously referred to as the Wawa to Porcupine Transmission Line.
7 The IESO has recommended a target in-service date of 2030 for the Wawa Timmins Power Line, and of 2029 for the Northeast Power Line, North Shore Link, and the Durham Kawartha Power Line.
8 Major portions of the Bruce B Switching Station Circuit Breaker Replacement were completed and placed in-service.
9 The coordinated project includes both an asset replacement and station expansion. The anticipated in-service dates are between 2026 to 2029.
8 | | |||||||
HYDRO ONE LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
For the three and nine months ended September 30, 2025 and 2024
Future Capital Investments
The Company estimates future capital investments based on management’s expectations of the amount of capital expenditures that will be required to provide transmission and distribution services that are efficient, reliable, and provide value for customers, consistent with the OEB’s Renewed Regulatory Framework. The Company includes projects when there is a high degree of confidence that the project will go forward and when there is a thorough estimate of the expected expenditures.
The forecast below does not include the impact of restoration costs associated with a severe storm that began on March 28, 2025 causing significant damage to system infrastructure and outages to customers in the central and eastern regions of the Province, with restoration efforts continuing into the second quarter. On April 29, 2025, the Company notified the OEB that it intended to submit a Z-Factor application to seek recovery of costs incurred for this storm. On August 28, 2025, the Company submitted the Z-Factor application. The application seeks recovery of approximately $225 million in storm-related costs, including capital and asset removal costs. The forecast is expected to be updated pending the outcome of that application.
The following tables summarize Hydro One’s annual projected capital investments for 2025 to 2027 by business segment and by category:
By business segment: (millions of dollars) | 2025 | 2026 | 2027 | ||||||||||||||||||||
Transmission1 | 2,284 | 1,760 | 1,375 | ||||||||||||||||||||
| Distribution | 1,225 | 1,061 | 912 | ||||||||||||||||||||
| Other | 33 | 47 | 32 | ||||||||||||||||||||
Total capital investments2 | 3,542 | 2,868 | 2,319 | ||||||||||||||||||||
By category: (millions of dollars) | 2025 | 2026 | 2027 | ||||||||||||||||||||
| Sustainment | 1,733 | 1,359 | 1,065 | ||||||||||||||||||||
Development1 | 1,569 | 1,336 | 1,096 | ||||||||||||||||||||
Other3 | 240 | 173 | 158 | ||||||||||||||||||||
Total capital investments2 | 3,542 | 2,868 | 2,319 | ||||||||||||||||||||
1 Figures include investments in certain development projects of Hydro One Networks not included in the investment plan approved by the OEB in the JRAP decision.
2 Since the first quarter of 2022, the Minister of Energy and Electrification (formerly the Minister of Energy) (Minister) has directed the OEB to amend Hydro One Networks’ transmission licence to require it to develop and seek approvals for eight priority transmission lines in Ontario. The future capital investments presented do not include capital expenditures, nor development costs, associated with the following three priority Southwestern Ontario transmission line projects: Longwood to Lakeshore Transmission Line, Second Longwood to Lakeshore Transmission Line, and Lakeshore to Windsor Transmission Line; nor the following four priority Northeastern and Eastern Ontario transmission line projects: North Shore Link, Northeast Power Line, Durham Kawartha Power Line, and Wawa to Porcupine Transmission Line (see section “Other Developments - Supporting Critical Transmission Infrastructure in Northeastern and Eastern Ontario”). Hydro One is currently evaluating the scope and timing of these seven lines.
3 “Other” capital expenditures include investments in fleet, real estate, information technology, and operations technology and related functions.
SUMMARY OF SOURCES AND USES OF CASH
Hydro One’s primary sources of cash flows are funds generated from operations, capital market debt issuances and bank credit facilities that are used to satisfy Hydro One’s capital resource requirements, including the Company’s capital expenditures, servicing and repayment of debt, and dividend payments.
| Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||
(millions of dollars) | 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net cash from operating activities | 713 | 623 | 1,828 | 1,831 | |||||||||||||
| Net cash from financing activities | 458 | 350 | 495 | 671 | |||||||||||||
| Net cash used in investing activities | (830) | (799) | (2,627) | (2,333) | |||||||||||||
| Net change in cash and cash equivalents | 341 | 174 | (304) | 169 | |||||||||||||
Net cash from operating activities
Net cash from operating activities increased by $90 million for the three months ended September 30, 2025, compared to the same period in 2024. The increase was impacted by various factors, including the following:
•higher pre-tax earnings; and
•increase in net working capital deficiency primarily attributable to timing differences in the settlement of receivables and payables, and lower receivables from the IESO due to lower transmission revenues, partially offset by changes in accrued liabilities and lower unearned revenue related to capital contributions.
9 | | |||||||
HYDRO ONE LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
For the three and nine months ended September 30, 2025 and 2024
Net cash from operating activities decreased by $3 million for the nine months ended September 30, 2025, compared to the same period in 2024. The decrease was mainly attributable to:
•decrease in net working capital deficiency primarily attributable to changes in accrued liabilities and lower unearned revenue related to capital contributions, lower cost of power payable to the IESO driven by lower commodity rates charges, and timing differences in the settlement of receivables, partially offset by changes in prepaid expenses; partially offset by
•higher pre-tax earnings; and
•changes in regulatory account balances.
Net cash from financing activities
Net cash from financing activities increased by $108 million and decreased by $176 million for the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024. This was impacted by various factors, including the following:
Sources of cash
•the Company received proceeds of $1,895 million and $5,035 million from the issuance of short-term notes in the three and nine month periods ended September 30, 2025, respectively, compared to $705 million and $2,300 million received in the same periods last year.
•the Company issued $1,099 million of long-term debt in the three and nine months ended September 30, 2025, compared to $1,216 and $2,016 million issued in the same periods last year.
Uses of cash
•the Company repaid $2,335 million and $4,300 million of short-term notes in the three and nine month periods ended September 30, 2025, respectively, compared to $1,375 million and $2,370 million repaid in the same periods last year.
•the Company repaid $750 million of long-term debt in the nine month period ended September 30, 2025, compared to $700 million paid in the same period last year. The Company did not repay any long-term debt in the third quarter of either year.
•common share dividends paid in the three and nine month periods ended September 30, 2025 were $200 million and $588 million, respectively, compared to dividends of $189 million and $555 million paid in the same periods last year.
Net cash used in investing activities
Net cash used in investing activities increased by $31 million and $294 million for the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024. The increase in the third quarter was primarily due to higher capital investments. The year-to-date period reflects the investment in EWT LP (see section “Other Developments - EWT LP”), and higher capital investments, partially offset by lower additions to future use assets. See section “Capital Investments” for comparability of capital investments made by the Company during the three and nine months ended September 30, 2025 compared to the prior year.
LIQUIDITY AND FINANCING STRATEGY
Short-term liquidity is provided through FFO,3 Hydro One Inc.’s commercial paper program, and the Company’s consolidated bank credit facilities. Under the commercial paper program, Hydro One Inc. is authorized to issue up to $2,300 million in short-term notes with a term to maturity of up to 365 days.
As at September 30, 2025, Hydro One Inc. had $933 million in commercial paper borrowings outstanding, compared to $200 million outstanding at December 31, 2024. The Company also has committed, unsecured, and revolving credit facilities (Operating Credit Facilities) with a total available balance of $3,300 million as at September 30, 2025. The Operating Credit Facilities include a pricing adjustment which can increase or decrease Hydro One’s cost of borrowing based on its performance on certain sustainability performance measures, which are related to Hydro One's sustainability goals. On June 1, 2025, Hydro One extended the maturity date of the Operating Credit Facilities from 2029 to 2030. No amounts were drawn on the Operating Credit Facilities as at September 30, 2025 or December 31, 2024. The Company may use the Operating Credit Facilities for working capital and general corporate purposes. The short-term liquidity under the commercial paper program, the Operating Credit Facilities, available cash on hand and anticipated levels of FFO3 are expected to be sufficient to fund the Company’s operating requirements.
As at September 30, 2025, the Company had long-term debt outstanding in the principal amount of $17,845 million, which included $425 million of long-term debt issued by Hydro One and $17,420 million of long-term debt issued by Hydro One Inc. The majority of long-term debt issued by Hydro One Inc. has been issued under its Medium-Term Note (MTN) Program, as further described below. The Company's total long-term debt consists of notes and debentures that mature between 2025 and 2064, and as at September 30, 2025 had a weighted-average term to maturity of approximately 13.6 years (December 31, 2024 - 13.7 years) and a weighted-average coupon rate of 4.3% (December 31, 2024 - 4.2%).
3 See section “Non-GAAP Financial Measures”.
10 | | |||||||
HYDRO ONE LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
For the three and nine months ended September 30, 2025 and 2024
In February 2024, Hydro One Inc. filed a short form base shelf prospectus in connection with its MTN Program, which expires in March 2026.
On August 19, 2024, Hydro One filed a short form base shelf prospectus (Universal Base Shelf Prospectus) with securities regulatory authorities in Canada. The Universal Base Shelf Prospectus allows Hydro One to offer, from time to time in one or more public offerings, debt, equity or other securities, or any combination thereof, during the 25-month period ending in September 2026. As at September 30, 2025, no securities have been issued under the Universal Base Shelf Prospectus.
On November 29, 2024, Hydro One Holdings Limited (HOHL) filed a short form base shelf prospectus (HOHL U.S. Debt Shelf Prospectus) with securities regulatory authorities in Canada and the U.S., that expires in December 2026. The HOHL U.S. Debt Shelf Prospectus allows HOHL to offer, from time to time in one or more public offerings, debt securities, unconditionally guaranteed by Hydro One. As at September 30, 2025, no securities have been issued under the HOHL U.S. Debt Shelf Prospectus.
On August 18, 2025, Hydro One Inc. filed a short form base shelf prospectus (HOI U.S. Debt Shelf Prospectus) with securities regulatory authorities in Canada and the U.S. The HOI U.S. Debt Shelf Prospectus allows Hydro One Inc. to offer, from time to time in one or more public offerings, U.S. debt securities, during the 25-month period ending on September 18, 2027. As at September 30, 2025, no securities have been issued under the HOI U.S. Debt Shelf Prospectus.
Compliance
As at September 30, 2025, the Company was in compliance with all financial covenants and limitations associated with the outstanding borrowings and credit facilities.
OTHER OBLIGATIONS
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Summary of Contractual Obligations and Other Commercial Commitments
The following table presents a summary of Hydro One’s debt and other major contractual obligations and commercial commitments:
As at September 30, 2025 (millions of dollars) | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | ||||||||||||
Contractual obligations (due by year) | |||||||||||||||||
| Long-term debt - principal repayments | 17,845 | 1,325 | 1,175 | 1,900 | 13,445 | ||||||||||||
| Long-term debt - interest payments | 10,651 | 741 | 1,397 | 1,301 | 7,212 | ||||||||||||
| Short-term notes payable | 933 | 933 | — | — | — | ||||||||||||
Pension contributions1 | 458 | 88 | 167 | 180 | 23 | ||||||||||||
Outsourcing and other agreements | 235 | 52 | 101 | 69 | 13 | ||||||||||||
| Environmental and asset retirement obligations | 97 | 15 | 5 | 3 | 74 | ||||||||||||
| Lease obligations | 46 | 16 | 25 | 4 | 1 | ||||||||||||
| Long-term software/meter agreement | 19 | 11 | 4 | 4 | — | ||||||||||||
| Total contractual obligations | 30,284 | 3,181 | 2,874 | 3,461 | 20,768 | ||||||||||||
Other commercial commitments (by year of expiry) | |||||||||||||||||
| Operating Credit Facilities | 3,300 | — | — | 3,300 | — | ||||||||||||
Letters of credit2 | 168 | 168 | — | — | — | ||||||||||||
Guarantees3 | 540 | 540 | — | — | — | ||||||||||||
| Total other commercial commitments | 4,008 | 708 | — | 3,300 | — | ||||||||||||
1 Contributions to the Hydro One Pension Plan are based on actuarial reports, including valuations performed at least every three years, and actual or projected levels of pensionable earnings, as applicable. The most recent actuarial valuation was performed effective December 31, 2024 and filed on September 23, 2025.
2 Letters of credit consist of $153 million letters of credit related to retirement compensation arrangements, an $8 million letter of credit provided to the IESO for prudential support, and $7 million in letters of credit for various operating purposes.
3 Guarantees consist of $475 million prudential support provided to the IESO by Hydro One Inc. on behalf of its subsidiaries, as well as $60 million of guarantees provided by Hydro One to ONroute relating to OCN LP (OCN Guarantee) and $5 million relating to Aux Energy Inc.
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HYDRO ONE LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
For the three and nine months ended September 30, 2025 and 2024
REGULATION
OEB Cost of Capital Policy Review
On March 6, 2024, the OEB commenced a hearing on its own motion to consider the methodology for determining the values of the cost of capital parameters and deemed capital structure to be used in the rate-setting process, as well as the methodology for determining the OEB’s prescribed interest rates and matters related to the Incremental Cloud Computing Implementation Costs deferral account, including what type of interest rate, if any, should apply to the account. On March 27, 2025, the OEB issued its Decision and Order, issuing new cost of capital parameters and confirming that the new cost of capital parameters will take effect at a utility’s next rebasing rate application. The OEB’s approach for deemed capital structure remained unchanged at 40% equity and 60% debt, for transmission and distribution electricity utilities. The OEB also concluded that the prescribed interest rate for deferral and variance accounts will continue to apply to the Incremental Cloud Computing Implementation Costs deferral account, and that each utility, in its next rebasing rate application, can propose the treatment of any future cloud solutions during the rate term, which could include a new cloud solution deferral account. If no proposal is made during that rebasing rate application, the account will be closed.
Extended Horizons Variance Account
On March 20, 2025, the OEB established a generic deferral and variance account, effective November 18, 2024. This variance account allows rate-regulated electricity distributors to record the incremental revenue requirement impacts resulting from reductions in the forecasted customer capital contributions embedded in distribution rates related to the OEB’s amendments to the Distribution System Code in December, 2024, which extend the connection horizon and revenue horizon for certain customer connections. The Company has not recorded any amounts in this account as at September 30, 2025.
Building Broadband Faster Act, 2021
In March 2021, the Province of Ontario (Province) introduced Bill 257, Supporting Broadband and Infrastructure Expansion Act, 2021, to create a new act entitled the Building Broadband Faster Act, 2021 (BBFA) that is aimed at supporting the timely deployment of broadband infrastructure within unserved and underserved rural Ontario communities. Bill 257 received Royal Assent on April 12, 2021. Bill 257 amended the Ontario Energy Board Act, 1998 (OEBA) to provide the Province with regulation-making authority regarding the development of, access to, or use of electricity infrastructure for non-electricity purposes. The BBFA Guideline and two regulations informing the legislative changes were also published in 2021, with a third regulation on annual wireline attachment rate for telecommunications carriers issued in December 2021. The most recent Order and Decision from the OEB adjusts the annual wireline attachment rate to $39.14 per attacher per pole, effective January 1, 2025.
In March 2022, the Province introduced Bill 93 (Getting Ontario Connected Act, 2022). Bill 93 received Royal Assent on April 14, 2022. Bill 93 amends the BBFA to ensure that organizations that own underground utility infrastructure near a designated high-speed internet project provide timely access to their infrastructure data, which would allow internet service providers to quickly start work on laying down underground high-speed internet infrastructure.
A regulation regarding electricity infrastructure and designated broadband projects under the OEBA (O.Reg. 410/22) came into force on April 21, 2022. On July 7, 2022, the OEB established a deferral account for rate-regulated distributors to record incremental costs associated with carrying out activities pertaining to designated broadband projects. In September 2022, the Company launched its choice-based operating model to provide internet service providers with choices on how to access the Company’s infrastructure in order to effectively execute designated broadband projects. On March 28, 2023, the Province amended the OEBA (O.Reg. 410/22) with respect to performance timelines associated with designated broadband projects.
On August 14, 2023, the third edition of the BBFA Guideline was issued with amendments providing additional guidance to support the implementation of legislative and regulatory requirements, including a framework to support cost sharing for pole attachments and make-ready work.
The Company has developed and adapted an appropriate management framework that meets the government’s objectives, including arrangements to sustain the Company’s revenues and recovery of reasonable associated costs.
On October 31, 2024, the Ministry of Infrastructure announced that it has developed a program to deliver up to $400 million in subsidies to internet service providers (ISPs) for work associated with designated broadband projects. The program is intended to enable ISPs to successfully and safely attach their material and equipment to the Company’s poles to bring connectivity to rural communities as part of a designated broadband project. A portion of the subsidies will be used to reimburse Hydro One Networks on behalf of ISPs for their share of enablement costs incurred to facilitate the program to date (see section “Related Party Transactions”).
On November 1, 2025, the Province amended the OEBA (O.Reg. 410/22), implementing a monthly capacity target of poles ready for deployment and extending the performance timelines associated with the designated broadband projects. Hydro One Networks must complete its share of the work before July 1, 2028.
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HYDRO ONE LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
For the three and nine months ended September 30, 2025 and 2024
Affordable Energy Act, 2024 and Ontario Integrated Energy Plan
In January 2024, the Electrification and Energy Transition Panel, an advisory body to the Province, released its report outlining a roadmap for Ontario’s transition to a clean energy economy. In October 2024, the Province released its vision for Ontario’s energy sector, Ontario’s Affordable Energy Future, outlining key objectives to meet growing electricity demand in Ontario. This vision was intended to help guide the Province’s first integrated energy plan (IEP), among other initiatives. In support, Bill 214, Affordable Energy Act, 2024, was introduced and subsequently received Royal Assent on December 4, 2024. The Affordable Energy Act, 2024 amended various statutes, including the Electricity Act and the OEBA, providing a legislative framework to replace the Province’s long-term energy plans (including the 2017 Long-Term Energy Plan), with integrated energy plans. Whereas the focus of the long-term energy plan has been primarily on the electricity system, the integrated energy plan is intended to address all sources of energy. The amendments effected by the Affordable Energy Act, 2024 also allow the Minister, subject to the approval of the Lieutenant Governor in Council, to issue directives to the IESO and OEB setting out implementation requirements relating to the integrated energy plan. From October to December 2024, the Ministry of Energy and Mines (Ministry) (formerly the Ministry of Energy and Electrification) ran a consultation requesting feedback to assist the Province in developing its first plan.
The changes made by the Affordable Energy Act, 2024 to the OEBA, among other things, also provide the Province with the ability to make regulations specifying amendments to the Distribution System Code and the Transmission System Code in relation to certain cost allocation and cost recovery matters relating to the construction, expansion or reinforcement of distribution systems or transmission systems, or of connections to those systems. The changes made by the Affordable Energy Act, 2024 also allow regulations to be made exempting persons or things from provisions of the Distribution System Code and the Transmission System Code relating to cost allocation or cost recovery, as well as alternative provisions that apply instead.
On June 12, 2025, the Ontario government released its first IEP, Energy for Generations, which aims to leverage electricity, natural gas, hydrogen, storage and other energy sources to provide Ontario with affordable, secure, reliable and clean energy to power growth and jobs across the province. The IEP establishes a planning horizon out to 2050, including the acceleration of the development of transmission infrastructure and the modernization of the distribution grid. As part of the IEP, the government announced the advancement of several transmission projects, including the following:
•Barrie to Sudbury Transmission Line, a new single circuit 500 kV line between Essa Transformer Station (TS) and Hanmer TS, including any associated station facilities with a target in-service date of 2032, as well as early development work on a second 500 kV line;
•Orangeville to Barrie Reconductoring Project, which involves the reconductoring of Hydro One’s existing 230kV transmission lines between Orangeville TS (Orangeville) and Essa TS (Barrie), with a target in-service date of 2027;
•Bowmanville to Greater Toronto Area (GTA) Transmission Line, a new double-circuit 500 kV line from Bowmanville Switching Station (SS) to an existing 500 kV station in the GTA with a target in-service in the early 2030s;
•Windsor to Lakeshore Transmission Line, a 230 kV transmission line from Lauzon Transformer Station (Windsor) to Lakeshore Transformer Station (Lakeshore) with a target in-service date of 2032; and
•Greenstone Transmission Line, a new 230 kV transmission line between Longlac TS (Geraldton) to Nipigon Generation Station and connecting into the East-West Tie near Nipigon Bay, and associated station facilities, with a target in-service in 2032.
On June 16, 2025, the Ministry announced a series of proposals to take certain actions to facilitate the timely development of several transmission projects to further the objectives outlined in the IEP.
The Ministry is proposing, subject to required approvals, to declare the five transmission projects as priority projects. The second Barrie to Sudbury Transmission Line is not being proposed to be declared priority at this time.
The Ministry is also proposing to bring forward Orders in Council (to be recommended by the Minister of Energy and Mines (Minister)) and companion directive, that would, if approved, direct the OEB to amend Hydro One Networks’ transmitter licence to require it to undertake development work and seek all necessary approvals to construct the Barrie to Sudbury Transmission Line, the Bowmanville to GTA Transmission Line and the Greenstone Transmission Line, and to undertake development work on the second Barrie to Sudbury Transmission Line. The Minister had previously, on March 31, 2022, directed the OEB to amend Hydro One Networks’ licence to require it to develop and seek approvals for the Windsor to Lakeshore Transmission Line. The Orangeville to Barrie Reconductoring Project does not require designation because this project relates to existing Hydro One Networks transmission infrastructure. The consultation period for the proposals was announced on June 16, 2025, and closed on August 15, 2025.
The IEP also addressed the need for additional transmission capacity in the Red Lake Area in Northwestern Ontario. In August 2025, the IESO released the Northwest Region Integrated Regional Resource Plan Addendum (Addendum). The Addendum recommends the urgent development of the Red Lake Transmission Line, a one double-circuit 230 kV transmission line that will run from Dryden TS to Ear Falls TS, and another double-circuit 230-kV transmission line that will run from Ear Falls TS to Red Lake SS, along with associated station facilities, to meet growing capacity needs after 2028. Hydro One will work with the IESO to identify the earliest achievable in-service date for the project. On October 29, 2025, the Ministry announced a proposal to bring forward an Order in Council (to be recommended by the Minister) to declare the project as priority and a companion directive,
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HYDRO ONE LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
For the three and nine months ended September 30, 2025 and 2024
that would, if approved, direct the OEB to amend Hydro One Networks’ transmitter licence to require it to undertake development work and seek all necessary approvals to construct the project. The consultation period for the proposal will close on December 13, 2025.
On July 31, 2025, the IESO announced the launch of the Transmitter Selection Framework (TSF) Registry. Registration enables transmitters to participate in future competitive IESO transmission procurements. Hydro One Networks intends to submit an application to be included in the TSF Registry.
OTHER DEVELOPMENTS
EWT LP
On March 4, 2025, Hydro One Networks completed the acquisition of an approximate 48% interest in the EWT LP for approximately $261 million in cash, including closing adjustments. The partnership owns the East-West Tie Line, a 450-kilometre, 230-kV double-circuit transmission line spanning between Wawa and Thunder Bay, along the north shore of Lake Superior.
Northern Ontario Voltage Study
In December 2023, the IESO published its Northern Ontario Voltage Study Report (Bulk System Reactive Requirements in Northern Ontario) (the Study), which recommended installation of reactive compensation devices at several stations in Northern Ontario to address both current and future system conditions that are expected once new Northern transmission lines are in-service. This study includes projects being developed by Hydro One, including: the East-West Tie Station Expansion, the Waasigan Transmission Line Project, the Northeast Power Line (previously referred to as the Hanmer to Mississagi Line), and the North Shore Link (previously referred to as Mississagi to Third Line Line).
In March 2024, the Company received a letter from the IESO recommending Hydro One proceed with the implementation of the reactive devices, in line with the timelines identified by the IESO. The Company has reviewed and assessed the results of the Study and recommendation from the IESO and has incorporated them into the associated projects so as to meet the timelines identified by the IESO.
Supporting Critical Transmission Infrastructure in Southwestern Ontario
St. Clair Transmission Line Project
In March 2022, the Province issued an Order in Council with a directive from the Minister (formerly the Minister of Energy) to the OEB, requiring Hydro One Networks to develop and seek approvals for the St. Clair Transmission Line Project, a 230 kV line from Lambton Transmission Station to Chatham Switching Station. In response to the directive, the OEB amended Hydro One Networks’ transmission license in April 2022 to develop and seek approval for the St. Clair Transmission Line Project. On May 28, 2024, Hydro One Networks filed a leave-to-construct application seeking OEB approval of the project. The total project is expected to cost approximately $472 million, with $335 million attributable to transmission line work and $137 million attributable to station costs. On December 10, 2024, the OEB issued its Decision and Order granting leave to construct as requested in the application, with standard conditions of approval.
On September 9, 2025, Hydro One commenced the construction of the St. Clair Transmission Line Project, which is expected to be in service by 2028.
Supporting Critical Transmission Infrastructure in Northeastern and Eastern Ontario
On July 10, 2023, the Ministry (formerly the Ministry of Energy) announced a proposal to take certain actions to facilitate the timely development of three transmission projects across Northeastern and Eastern Ontario: North Shore Link, Northeast Power Line, and Durham Kawartha Power Line. On October 23, 2023, the Minister (formerly the Minister of Energy) directed the OEB to amend Hydro One Networks’ licence to require it to develop and seek approvals for these three priority transmission line projects. On November 14, 2023, further to the Minister’s Directive, the OEB amended Hydro One Networks’ electricity transmission licence to require it to develop and seek approvals for these projects in accordance with the recommendations of the IESO.
On August 1, 2024, the Ministry announced a proposal to declare the Wawa to Porcupine line as a priority project and designate Hydro One Networks, as the transmitter. These actions are intended to facilitate the timely development of a new 230 kV, 260 km transmission line in Northeastern Ontario from the Wawa Transformer Station (south of Wawa) to the Porcupine Transformer Station (Timmins area). Based on IESO forecasts, the government has identified a targeted in-service date of 2030; planned development work will inform the final construction schedule. The proposal was open for a 45 day consultation period ending September 15, 2024. On November 28, 2024, the Minister directed the OEB to amend Hydro One Networks’ transmission license to require it to develop and seek approvals for this project. On December 23, 2024, further to the Minister’s Directive, the OEB amended Hydro One Networks’ electricity transmission licence to allow it to develop and seek approvals for this Project in accordance with the recommendations of the IESO.
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HYDRO ONE LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
For the three and nine months ended September 30, 2025 and 2024
Collective Agreements
On May 4, 2025, Hydro One Inc. reached tentative renewal agreements with the PWU for both its main collective agreement and its Customer Service Operations (CSO) collective agreement which merges the two agreements into one. On June 2, 2025, the agreement was ratified by the PWU membership for a term from October 1, 2025, to March 31, 2028. Hydro One’s current collective agreement with the Society of United Professionals (Society) expired on September 30, 2025. Bargaining to renew the Society collective agreement began on June 17, 2025 and is ongoing.
The construction building trade unions have collective agreements with the Electrical Power Systems Construction Association (EPSCA). EPSCA is an employers’ association of which Hydro One is a member. All 20 of the EPSCA construction collective agreements, which bind Hydro One, expired on April 30, 2025. EPSCA negotiated five-year renewal agreements, covering the period from May 1, 2025 to April 30, 2030, for all 20 collective agreements.
Bill 2, Protect Ontario Through Free Trade Within Canada Act, and Bill 5, Protect Ontario by Unleashing our Economy Act
On April 16, 2025, the Ontario Government introduced Bill 2, Protect Ontario Through Free Trade Within Canada Act, 2025. The legislation enables the province to, among other things, enter into mutual recognition agreements with other provinces to remove internal trade barriers in the movement of goods, services, and labour.
On April 17, 2025, the Ontario Government introduced Bill 5, the Protect Ontario by Unleashing our Economy Act, which aims to streamline the permitting and authorization process for certain projects, including major infrastructure, including thorough proposed changes to the environmental permitting process in Ontario.
These Bills received Royal Assent on June 5, 2025. The Company is assessing the potential impacts of this legislation and associated regulations on Hydro One.
Sustainability Report
The Hydro One 2024 Sustainability Report entitled “A Better and Brighter Future For All” is available on the Company’s website at www.hydroone.com/sustainability.
The 2024 Sustainability Report highlights the alignment of sustainability with Hydro One’s refreshed corporate strategy to enable the Company to continue to deliver for its customers and all Ontarians. The report discloses the Company’s performance across a range of environmental, social and governance measures from January 1, 2024 to December 31, 2024.
HYDRO ONE BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
Board of Directors
Effective March 24, 2025, Timothy Hodgson, then Chair of the Board of Directors, commenced an unpaid leave of absence to pursue candidacy in the federal election. The board appointed Susan Wolburgh Jenah as Interim Chair on the same date.
On April 28, 2025, Mr. Hodgson formally resigned from the Board of Directors. Subsequently, the Board appointed Melissa Sonberg as Chair of the Board, with the appointment taking effect on June 4, 2025.
Director Cherie Brant did not stand for re-election at the Annual and Special Meeting of Shareholders on June 24, 2025.
Effective August 14, 2025, the Board of Directors appointed Michael W. Rencheck as a Director.
Executive Officers
Effective February 18, 2025, Gillian Whitebread joined Hydro One as Executive Vice President (EVP), Head of Human Resources. On the same day, Megan Telford’s title became EVP, Strategy and Energy Transition.
Effective July 21, 2025, Megan Telford was appointed as Chief Operating Officer, and Lisa Pearson was appointed as EVP, Corporate Affairs.
Effective August 25, 2025, David Lebeter commenced a temporary compassionate care leave. The Board selected Harry Taylor to become the Interim President and Chief Executive Officer. Harry Taylor continued to serve as EVP, Chief Financial and Regulatory Officer during the interim period. David Lebeter returned from leave on November 12, 2025.
NON-GAAP FINANCIAL MEASURES
Hydro One uses a number of non-GAAP financial measures to assess its performance. The Company presents FFO or “funds from operations” to reflect a measure of the Company’s cash flow, revenues, net of purchased power, to reflect the impact of revenue on net income, and net debt to reflect a measure of the Company’s financial leverage.
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HYDRO ONE LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
For the three and nine months ended September 30, 2025 and 2024
Hydro One also uses financial ratios that are non-GAAP ratios such as the net debt to capitalization ratio and annualized FFO to net debt ratio to reflect a measure of the Company’s financial leverage, and the earnings coverage ratio to reflect a measure of liquidity.
FFO
FFO is defined as net cash from operating activities, adjusted for changes in non-cash balances related to operations and distributions to noncontrolling interest. Management believes that FFO is helpful as a supplemental measure of the Company’s operating cash flows as it excludes timing-related fluctuations in non-cash operating working capital and cash flows not attributable to common shareholders. As such, management believes that FFO provides a consistent measure of the cash generating performance of the Company’s assets.
The following table provides a reconciliation of GAAP (reported) results to non-GAAP (adjusted) results on a consolidated basis.
| Three months ended September 30 | Nine months ended September 30 | ||||||||||||||||||||||
| (millions of dollars) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Net cash from operating activities | 713 | 623 | 1,828 | 1,831 | |||||||||||||||||||
| Changes in non-cash balances related to operations | (31) | 18 | 161 | (59) | |||||||||||||||||||
| Distributions to noncontrolling interest | (4) | (2) | (11) | (8) | |||||||||||||||||||
| FFO | 678 | 639 | 1,978 | 1,764 | |||||||||||||||||||
Revenues, Net of Purchased Power
Revenues, net of purchased power, is defined as revenues less the cost of purchased power; distribution revenues, net of purchased power, is defined as distribution revenues less the cost of purchased power. These measures are used internally by management to assess the impacts of revenue on net income and are considered useful because they exclude the cost of power that is fully recovered through revenues and therefore net income neutral.
The following tables provide a reconciliation of reported GAAP revenues to non-GAAP revenues, net of purchased power, on a consolidated basis.
Quarter ended (millions of dollars) | Sep 30, 2025 | Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | ||||||||||||||||||
| Revenues | 2,299 | 2,066 | 2,408 | 2,095 | 2,192 | 2,031 | 2,166 | 1,979 | ||||||||||||||||||
| Less: Purchased power | 1,080 | 899 | 1,220 | 1,060 | 1,047 | 940 | 1,096 | 990 | ||||||||||||||||||
| Revenues, net of purchased power | 1,219 | 1,167 | 1,188 | 1,035 | 1,145 | 1,091 | 1,070 | 989 | ||||||||||||||||||
Quarter ended (millions of dollars) | Sep 30, 2025 | Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | ||||||||||||||||||
| Distribution revenues | 1,605 | 1,434 | 1,761 | 1,583 | 1,551 | 1,436 | 1,605 | 1,459 | ||||||||||||||||||
| Less: Purchased power | 1,080 | 899 | 1,220 | 1,060 | 1,047 | 940 | 1,096 | 990 | ||||||||||||||||||
| Distribution revenues, net of purchased power | 525 | 535 | 541 | 523 | 504 | 496 | 509 | 469 | ||||||||||||||||||
Net Debt
The Company uses net debt as an alternative measure of outstanding debt. Management considers net debt as an important measure in assessing the financial leverage of the Company. Net debt is used by management to assess the Company’s overall debt position and financial leverage.
The following table provides a reconciliation of net debt as reported in the Company’s Consolidated Financial Statements.
As at (millions of dollars) | Sep 30, 2025 | Dec 31, 2024 | ||||||||||||
| Short-term notes payable | 933 | 200 | ||||||||||||
| Less: cash and cash equivalents | (412) | (716) | ||||||||||||
| Long-term debt (current portion) | 1,325 | 1,150 | ||||||||||||
| Long-term debt (long-term portion) | 16,500 | 16,329 | ||||||||||||
| Net Debt | 18,346 | 16,963 | ||||||||||||
Net Debt to Capitalization Ratio
The Company believes that the net debt to capitalization ratio is an important non-GAAP ratio as a measure of the Company’s financial leverage. Net debt to capitalization ratio has been calculated as net debt, as described above, divided by net debt plus total shareholders’ equity, but excluding any amounts related to noncontrolling interest. Management believes that the net debt to capitalization ratio is helpful as a measure of the proportion of debt in the Company's capital structure.
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HYDRO ONE LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
For the three and nine months ended September 30, 2025 and 2024
As at (millions of dollars) | Sep 30, 2025 | Dec 31, 2024 | ||||||||||||
| Net debt (A) | 18,346 | 16,963 | ||||||||||||
| Shareholders' equity (excluding noncontrolling interest) | 12,614 | 12,089 | ||||||||||||
| Net debt plus shareholders' equity (B) | 30,960 | 29,052 | ||||||||||||
| Net Debt-to-capitalization ratio (A/B) | 59.3 | % | 58.4 | % | ||||||||||
Annualized FFO to Net Debt
Management believes that the annualized FFO to net debt ratio is helpful as a measure of the Company’s financial leverage. Annualized FFO to net debt ratio has been calculated as FFO (see section “Non-GAAP Financial Measures - FFO”) on a rolling twelve-month period divided by net debt at the period end date (see section “Non-GAAP Financial Measures – Net Debt”). Management believes the annualized FFO to net debt ratio is helpful as a measure of the company’s ability to pay off its debt using the Company’s net operating income.
The following table provides a reconciliation of reported GAAP results to non-GAAP results on a consolidated basis.
Twelve months and period ended (millions of dollars) | Sep 30, 2025 | Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | ||||||||||||||||||
| Annualized FFO (A) | 2,489 | 2,450 | 2,356 | 2,275 | 2,238 | 2,221 | 2,256 | 2,150 | ||||||||||||||||||
| Net Debt (B) | 18,346 | 18,030 | 17,615 | 16,963 | 16,679 | 16,308 | 16,016 | 15,610 | ||||||||||||||||||
| Annualized FFO to Net Debt (A/B) | 13.6 | % | 13.6 | % | 13.4 | % | 13.4 | % | 13.4 | % | 13.6 | % | 14.1 | % | 13.8 | % | ||||||||||
Earnings Coverage Ratio
Earnings coverage ratio is defined as earnings before income taxes and financing charges attributable to shareholders, divided by the sum of financing charges and capitalized interest, and is calculated on a rolling twelve-month basis. The Company believes that the earnings coverage ratio is an important non-GAAP measure in the management of its liquidity.
Quarter ended (millions of dollars) | Sep 30, 2025 | Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | ||||||||||||||||||
| Net income attributable to common shareholders | 421 | 327 | 358 | 200 | 371 | 292 | 293 | 181 | ||||||||||||||||||
| Income tax expense | 60 | 61 | 68 | 17 | 56 | 57 | 51 | 13 | ||||||||||||||||||
| Financing charges | 172 | 169 | 163 | 158 | 158 | 157 | 148 | 147 | ||||||||||||||||||
| Earnings before income taxes and financing charges attributable to common shareholders | 653 | 557 | 589 | 375 | 585 | 506 | 492 | 341 | ||||||||||||||||||
Twelve months ended (millions of dollars) | Sep 30, 2025 | Dec 31, 2024 | ||||||||||||||||||||||||
| Earnings before income taxes and financing charges attributable to common shareholders (A) | 2,174 | 1,958 | ||||||||||||||||||||||||
Quarter ended (millions of dollars) | Sep 30, 2025 | Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | ||||||||||||||||||
| Financing charges | 172 | 169 | 163 | 158 | 158 | 157 | 148 | 147 | ||||||||||||||||||
| Capitalized interest | 30 | 27 | 24 | 24 | 24 | 22 | 19 | 19 | ||||||||||||||||||
| Financing charges and capitalized interest | 202 | 196 | 187 | 182 | 182 | 179 | 167 | 166 | ||||||||||||||||||
Twelve months ended (millions of dollars) | Sep 30, 2025 | Dec 31, 2024 | ||||||
| Financing charges and capitalized interest (B) | 767 | 710 | ||||||
| Earnings coverage ratio = A/B | 2.8 | 2.8 | ||||||
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HYDRO ONE LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
For the three and nine months ended September 30, 2025 and 2024
RELATED PARTY TRANSACTIONS
The Province is a shareholder of Hydro One with approximately 47.1% ownership as at September 30, 2025. The Ministry of Infrastructure (MOI) is a related party to Hydro One because it is controlled by the Province. The IESO, Ontario Power Generation Inc. (OPG), Ontario Electricity Financial Corporation (OEFC), and the OEB are related parties to Hydro One because they are controlled or significantly influenced by the Ministry of Energy and Mines. Hydro One also has transactions in the normal course of business with various government ministries and organizations in Ontario that fall under the purview of the Province. The following is a summary of the Company’s related party transactions during the three and nine months ended September 30, 2025 and 2024:
(millions of dollars) | Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
| Related Party | Transaction | 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Province | Dividends paid | 94 | 89 | 276 | 262 | ||||||||||||
| MOI | Broadband subsidy1 | 9 | — | 28 | — | ||||||||||||
| IESO | Power purchased | 638 | 616 | 2,012 | 1,917 | ||||||||||||
| Revenues for transmission services | 671 | 625 | 1,905 | 1,754 | |||||||||||||
| Amounts related to electricity rebates | 244 | 301 | 752 | 908 | |||||||||||||
| Distribution revenues related to rural rate protection | 64 | 64 | 191 | 190 | |||||||||||||
| Distribution revenues related to Wataynikaneyap Power LP | 34 | 29 | 100 | 89 | |||||||||||||
| Distribution revenues related to supply of electricity to remote northern communities | 12 | 12 | 37 | 36 | |||||||||||||
| Funding received related to Conservation and Demand Management programs | — | — | — | 1 | |||||||||||||
| OPG | Power purchased | 4 | 3 | 18 | 14 | ||||||||||||
| Transmission revenues related to provision of services and supply of electricity | — | — | 1 | 1 | |||||||||||||
| Distribution revenues related to provision of services and supply of electricity | 2 | 1 | 6 | 4 | |||||||||||||
| Other revenues related to provision of services and supply of electricity | — | — | 1 | 1 | |||||||||||||
| Capital contribution received from OPG | 1 | 1 | 17 | 2 | |||||||||||||
| Costs related to the purchase of services | 1 | 1 | 2 | 1 | |||||||||||||
| OEFC | Power purchased from power contracts administered by the OEFC | 1 | — | 2 | 1 | ||||||||||||
| OEB | OEB fees | 4 | 3 | 10 | 9 | ||||||||||||
1 See section “Building Broadband Faster Act, 2021”.
RISK MANAGEMENT AND RISK FACTORS
Hydro One is subject to numerous risks and uncertainties. Critical to Hydro One’s success is the identification, management, and to the extent possible, mitigation of these risks. Hydro One’s Enterprise Risk Management program assists decision-makers throughout the organization with the management of key business risks, including new and emerging risks and opportunities.
A discussion of the material risks relating to Hydro One and its business that the Company believes would be the most likely to influence an investor’s decision to purchase Hydro One’s securities can be found under the heading “Risk Management and Risk Factors” in the 2024 MD&A.
DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate disclosure controls and procedures and internal control over financial reporting as defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings. Internal control, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and due to its inherent limitations, may not prevent or detect all misrepresentations.
There were no changes in the Company’s internal control over financial reporting during the three months ended September 30, 2025 that materially affected, or are reasonably likely to materially affect, the Company’s disclosure controls and procedures and internal control over financial reporting.
18 | | |||||||
HYDRO ONE LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
For the three and nine months ended September 30, 2025 and 2024
NEW ACCOUNTING PRONOUNCEMENTS
The following table presents Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board (FASB) that are applicable to Hydro One:
Accounting Guidance To Be Adopted in 2025
| Guidance | Date issued | Description | ASU Effective Date | Impact on Hydro One | ||||||||||
| ASU 2024-02 | March 2024 | The amendments contain modifications to the codification that remove various concept statements which may be extraneous and not required to understand or apply the guidance or references used in prior statements to provide guidance in certain topical areas. | Fiscal years beginning after December 15, 2024. | No impact upon adoption | ||||||||||
| ASU 2023-09 | December 2023 | The amendments address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. | Annual periods beginning after December 15, 2024. | The adoption of the standard is not expected to have a material impact on the disclosures contained in the Company’s annual and interim consolidated financial statements | ||||||||||
Recently Issued Accounting Guidance Not Yet Adopted
| Guidance | Date issued | Description | ASU Effective Date | Impact on Hydro One | ||||||||||
| ASU 2023-06 | October 2023 | The amendments represent changes to clarify or improve disclosure or presentation requirements of a variety of subtopics in the FASB Codification. Many of the amendments allow users to more easily compare entities subject to the U.S. Securities and Exchange’s (SEC) existing disclosures with those entities that were not previously subject to the SEC’s requirements. Also, the amendments align the requirements in the Codification with the SEC’s regulations. Applicable to all entities, if by June 30, 2027 the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Codification and will not become effective for any entity. | Two years subsequent to the date on which the SEC’s removal of that related disclosure becomes effective. | Under assessment | ||||||||||
| ASU 2024-03 | November 2024 | The amendments require public business entities to disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods, which are not generally presented in the current financial statements. | Annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. | Under assessment | ||||||||||
| ASU 2025-03 | May 2025 | The amendments require entities to apply the guidance for identifying the accounting acquirer in transactions where a business that qualifies as a Variable Interest Entity is acquired through the exchange of equity interests. | Annual and interim periods beginning after December 15, 2026. | Under assessment | ||||||||||
| ASU 2025-05 | July 2025 | The amendments allow all entities to use a practical expedient when estimating expected credit losses for current accounts receivable and contract assets under Topic 606, by assuming that current conditions as of the balance sheet date remain unchanged over the asset’s life. Additionally, entities other than public business entities that elect this expedient may adopt an accounting policy to consider post–balance sheet date collection activity in their credit loss estimates. | Annual and interim periods beginning after December 15, 2025. | Under assessment | ||||||||||
| ASU 2025-06 | September 2025 | The amendments modernize accounting for internal-use software by removing outdated development stage references and introducing a capitalization threshold based on management authorization and project completion probability. | Annual periods beginning after December 15, 2027. | Under assessment | ||||||||||
19 | | |||||||
HYDRO ONE LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
For the three and nine months ended September 30, 2025 and 2024
HYDRO ONE HOLDINGS LIMITED - CONSOLIDATING SUMMARY FINANCIAL INFORMATION
Hydro One Limited fully and unconditionally guarantees the payment obligations of its wholly-owned subsidiary HOHL issuable under the short form base shelf prospectus dated November 29, 2024. Accordingly, the following consolidating summary financial information is provided in compliance with the requirements of section 13.4 of National Instrument 51-102 - Continuous Disclosure Obligations providing for an exemption for certain credit support issuers. The tables below contain consolidating summary financial information as at September 30, 2025 and December 31, 2024 and for the three and nine months ended September 30, 2025 and September 30, 2024 for: (i) Hydro One Limited; (ii) HOHL; (iii) the subsidiaries of Hydro One Limited, other than HOHL, on a combined basis, (iv) consolidating adjustments, and (v) Hydro One Limited and all of its subsidiaries on a consolidated basis, in each case for the periods indicated. Such summary financial information is intended to provide investors with meaningful and comparable financial information about Hydro One Limited and its subsidiaries. This summary financial information should be read in conjunction with Hydro One Limited's most recently issued annual and interim financial statements. This summary financial information has been prepared in accordance with U.S. GAAP, as issued by the FASB.
Three months ended September 30 (millions of dollars) | Hydro One Limited | HOHL | Subsidiaries of Hydro One Limited, other than HOHL | Consolidating Adjustments | Total Consolidated Amounts of Hydro One Limited | |||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| Revenue | 200 | 203 | — | — | 2,576 | 2,464 | (477) | (475) | 2,299 | 2,192 | ||||||||||||||||||||||
| Net Income (Loss) Attributable to Common Shareholders | 208 | 213 | — | — | 648 | 592 | (435) | (434) | 421 | 371 | ||||||||||||||||||||||
Nine months ended September 30 (millions of dollars) | Hydro One Limited | HOHL | Subsidiaries of Hydro One Limited, other than HOHL | Consolidating Adjustments | Total Consolidated Amounts of Hydro One Limited | |||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| Revenue | 594 | 570 | — | — | 7,578 | 7,114 | (1,399) | (1,295) | 6,773 | 6,389 | ||||||||||||||||||||||
| Net Income (Loss) Attributable to Common Shareholders | 617 | 581 | — | — | 1,789 | 1,574 | (1,300) | (1,199) | 1,106 | 956 | ||||||||||||||||||||||
As at September 30, 2025 and December 31, 2024 (millions of dollars) | Hydro One Limited | HOHL | Subsidiaries of Hydro One Limited, other than HOHL | Consolidating Adjustments | Total Consolidated Amounts of Hydro One Limited | |||||||||||||||||||||||||||
| Sept. 2025 | Dec. 2024 | Sept. 2025 | Dec. 2024 | Sept. 2025 | Dec. 2024 | Sept. 2025 | Dec. 2024 | Sept. 2025 | Dec. 2024 | |||||||||||||||||||||||
| Current Assets | 962 | 953 | — | — | 4,227 | 4,229 | (3,324) | (3,065) | 1,865 | 2,117 | ||||||||||||||||||||||
| Non-Current Assets | 3,260 | 3,226 | — | — | 57,320 | 54,743 | (23,680) | (23,404) | 36,900 | 34,565 | ||||||||||||||||||||||
| Current Liabilities | 1,071 | 1,061 | — | — | 6,411 | 5,468 | (3,288) | (3,028) | 4,194 | 3,501 | ||||||||||||||||||||||
| Non-Current Liabilities | 425 | 425 | — | — | 37,383 | 36,291 | (15,949) | (15,708) | 21,859 | 21,008 | ||||||||||||||||||||||
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HYDRO ONE LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
For the three and nine months ended September 30, 2025 and 2024
FORWARD-LOOKING STATEMENTS AND INFORMATION
The Company’s oral and written public communications, including this document, often contain “forward-looking information” within the meaning of applicable Canadian securities laws and “forward-looking statements” within the meaning of applicable U.S. securities laws (collectively, “forward-looking information”). Statements containing forward-looking information are made pursuant to the “safe harbour” provisions of applicable Canadian and U.S. securities laws. Forward-looking information in this document is based on current expectations, estimates, forecasts and projections about the Company’s business, the industry, regulatory and economic environments in which it operates, and includes beliefs and assumptions made by the management of the Company. Such statements include, but are not limited to, statements regarding: the Company’s transmission and distribution rate and revenue requirement applications including the JRAP and its proposed investment plan, resulting and related decisions as well as resulting rates, recovery and expected impacts and timing; expectations about the Company’s liquidity and capital resources and operational requirements; sustainability goals; the Operating Credit Facilities; expectations regarding the Company’s financing activities; the Company’s maturing debt; the Company’s ongoing and planned projects, initiatives and expected capital investments, including expected approvals, results, costs, funding sources and in-service and completion dates; expectations regarding the Company’s Z-Factor application and impacts of its outcome; contractual obligations and other commercial commitments; the BBFA, as well as related regulations, and expected impacts; expectations regarding the Ministry of Infrastructure’s subsidies program to ISPs and its results; the Company’s assessment of recovery and impacts related to the OEB-established generic variance and deferral accounts; expected impacts and results of the OEB’s new cost of capital parameters; future pension plan contributions, including estimates of total Company pension contributions; the expected results of the Province’s first integrated energy plan; collective agreements and bargaining; Protect Ontario by Unleashing our Economy Act and expected impacts; the Company’s expectations regarding submitting an application to be included in the TSF Registry; dividends; non-GAAP financial measures; internal controls over financial reporting and disclosure; the MTN Program; the Universal Base Shelf Prospectus; the HOHL U.S. Debt Shelf Prospectus; HOI U.S. Debt Shelf Prospectus; and accounting-related guidance and expected impacts. Words such as “expect,” “anticipate,” “intend,” “attempt,” “may,” “plan,” “will,” “would,” “believe,” “seek,” “estimate,” “goal,” “aim,” “target,” and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve assumptions and risks and uncertainties that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed, implied or forecasted in such forward-looking statements. Hydro One does not intend, and it disclaims any obligation, to update any forward-looking statements, except as required by law.
These forward-looking statements are based on a variety of factors and assumptions including, but not limited to, the following: no unforeseen changes in the legislative and operating framework for Ontario’s electricity market or for Hydro One specifically; favourable decisions from the OEB and other regulatory bodies concerning outstanding and future rate and other applications; no unexpected delays in obtaining required regulatory approvals; no unforeseen changes in rate orders or rate setting methodologies for the Company’s distribution and transmission businesses; no unfavourable changes in environmental regulation; continued use of U.S. GAAP; a stable regulatory environment; no significant changes to the Company's current credit ratings; no unforeseen impacts of new accounting pronouncements; no changes to expectations regarding electricity consumption; no unforeseen changes to economic and market conditions; completion of operating and capital projects that have been deferred; and no significant event occurring outside the ordinary course of business. These assumptions are based on information currently available to the Company, including information obtained from third-party sources. Actual results may differ materially from those predicted by such forward-looking statements. While Hydro One does not know what impact any of these differences may have, the Company’s business, results of operations, financial condition and credit stability may be materially adversely affected if any such differences occur. Factors that could cause actual results or outcomes to differ materially from the results expressed or implied by forward-looking statements include, among other things:
•regulatory risks and risks relating to Hydro One’s revenues, including risks relating to actual performance against forecasts, competition with other transmitters and other applications to the OEB, the rate-setting models for transmission and distribution, the recoverability of capital expenditures, obtaining rate orders or recoverability of total compensation costs;
•risks associated with the Province’s share ownership of Hydro One and other relationships with the Province, including potential conflicts of interest that may arise between Hydro One, the Province and related parties, risks associated with the Province’s exercise of further legislative and regulatory powers, risks relating to the ability of the Company to attract and retain qualified executive talent or the risk of a credit rating downgrade for the Company and its impact on the Company’s funding and liquidity;
•risks relating to the location of the Company’s assets on Reserve lands, that the Company’s operations and activities may give rise to the Crown’s duty to consult and potentially accommodate Indigenous communities, and the risk that Hydro One may incur significant costs associated with transferring assets located on Reserves;
•the risk that the Company may be unable to comply with regulatory and legislative requirements or that the Company may incur additional costs for compliance that are not recoverable through rates;
•the risk of exposure of the Company’s facilities to the effects of severe weather conditions, natural disasters, man-made events or other unexpected occurrences for which the Company is uninsured or for which the Company could be subject to claims for damage;
21 | | |||||||
HYDRO ONE LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
For the three and nine months ended September 30, 2025 and 2024
•risks associated with information system security and maintaining complex information technology and operational technology (OT) system infrastructure, including system failures or risks of cyber-attacks or unauthorized access to corporate information technology and OT systems;
•the risk of non-compliance with environmental regulations and inability to recover environmental expenditures in rate applications and the risk that assumptions that form the basis of the Company’s recorded environmental liabilities and related regulatory assets may change;
•the risk of labour disputes and inability to negotiate or renew appropriate collective agreements on acceptable terms consistent with the Company’s rate decisions;
•the risk that the Company may not be able to execute plans for capital projects necessary to maintain the performance of the Company’s assets or to carry out projects in a timely manner or the risk of increased competition for the development of large transmission projects or legislative changes affecting the selection of transmitters;
•risks associated with asset condition, capital projects and innovation, including public opposition to or delays or denials of the requisite approvals and accommodations for the Company’s planned projects;
•risks related to the Company’s work force demographic and its potential inability to attract and retain qualified personnel;
•the risk that the Company is not able to arrange sufficient cost-effective financing to repay maturing debt and to fund capital expenditures, the risk of a downgrade in the Company’s credit ratings or risks associated with investor interest in ESG performance and reporting;
•risks associated with fluctuations in interest rates and failure to manage exposure to credit and financial instrument risk;
•risks associated with economic uncertainty and financial market volatility;
•the risk of failure to mitigate significant health and safety risks;
•the risk of not being able to recover the Company’s pension expenditures in future rates and uncertainty regarding the future regulatory treatment of pension, other post-employment benefits and post-retirement benefits costs;
•the impact of the ownership by the Province of lands underlying the Company’s transmission system;
•the risk associated with legal proceedings that could be costly, time-consuming or divert the attention of management and key personnel from the Company’s business operations;
•the impact if the Company does not have valid occupational rights on third-party owned or controlled lands and the risks associated with occupational rights of the Company that may be subject to expiry;
•risks relating to adverse reputational events or political actions relating to Hydro One and the electricity industry;
•the potential that Hydro One may incur significant expenses to replace functions currently outsourced if agreements are terminated or expire before a new service provider is selected;
•risks relating to acquisitions, including the failure to realize the anticipated benefits of such transactions at all, or within the time periods anticipated, and unexpected costs incurred in relation thereto;
•risks relating to an outbreak of infectious disease;
•the inability to continue to prepare financial statements using U.S. GAAP; and
•the risk related to the impact of any new accounting pronouncements.
Hydro One cautions the reader that the above list of factors is not exhaustive. Some of these and other factors are discussed in more detail in the section entitled “Risk Management and Risk Factors” in this MD&A.
In addition, Hydro One cautions the reader that information provided in this MD&A regarding the Company’s outlook on certain matters, including potential future investments, is provided in order to give context to the nature of some of the Company’s future plans and may not be appropriate for other purposes.
Additional information about Hydro One, including the Company’s Annual Information Form, is available on SEDAR+ at www.sedarplus.com, the US Securities and Exchange Commission’s EDGAR website at www.sec.gov/edgar.shtml, and the Company’s website at www.HydroOne.com/Investors.
22 | | |||||||
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS – FULL CERTIFICATE
I, David Lebeter, President and Chief Executive Officer, Hydro One Limited, certify the following:
1.Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Hydro One Limited (the “issuer”) for the interim period ended September 30, 2025.
2.No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3.Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4.Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
5.Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings
a.designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i)material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii)information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.
5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission.
5.2 N/A
5.3 N/A
6.Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2025 and ended on September 30, 2025 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
| Date: | November 13, 2025 | |||||||
/s/ David Lebeter | ||||||||
| President and Chief Executive Officer | ||||||||
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS – FULL CERTIFICATE
I, Harry Taylor, Executive Vice President, Chief Financial and Regulatory Officer, Hydro One Limited, certify the following:
1.Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Hydro One Limited (the “issuer”) for the interim period ended September 30, 2025.
2.No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3.Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4.Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
5.Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings
a.designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i)material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii)information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.
5.1 Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission.
5.2 N/A
5.3 N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2025 and ended on September 30, 2025 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
| Date: | November 13, 2025 | |||||||
| /s/ Harry Taylor | ||||||||
| Executive Vice President, Chief Financial and Regulatory Officer | ||||||||