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1. Company Snapshot

1.a. Company Description

Hydro One Limited, through its subsidiaries, operates as an electricity transmission and distribution company in Ontario.It operates through three segments: Transmission Business, Distribution Business, and Other.The company owns and operates approximately 30,000 circuit kilometers of high-voltage transmission lines and 125,000 circuit kilometers of primary low-voltage distribution network.


It serves approximately 1.5 million residential, small business, commercial, and industrial customers.The company also provides telecommunications support services for its transmission and distribution businesses; and information and communications technology services and solutions.Hydro One Limited was incorporated in 2015 and is headquartered in Toronto, Canada.

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1.b. Last Insights on H

Hydro One Limited's recent performance was driven by strong Q2 earnings, beating expectations due to higher revenues. The company's profit rose 12% to C$327M, fueled by increased Ontario rates and electricity demand. Investments in grid upgrades totaled C$913M, supporting long-term energy growth. A quarterly dividend of $0.3331 per share was declared, showcasing the company's commitment to shareholders. Strategic initiatives, such as the St. Clair Transmission Line project, demonstrate Hydro One's focus on modernizing Canada's power systems and meeting growing energy demands.

1.c. Company Highlights

2. Hydro One Limited Delivers Strong Q4 2025 Results

Hydro One Limited reported a strong finish to 2025, with basic earnings per share (EPS) of $0.39, beating the prior year's Q4 EPS of $0.33 by 16.5%. However, it missed analyst estimates of $0.59. Revenue growth was driven by volume growth in transmission and distribution, as well as OEB-approved 2025 rates. The company's net income in the quarter was higher by 16.5% compared to the same period from a year ago. Hydro One also reported $166 million in savings shared with customers through reduced future rates and $254 million in productivity savings, highlighting their commitment to fiscal prudence.

Publication Date: Feb -17

📋 Highlights
  • Infrastructure Investment Growth: Deployed $3.4 billion in capital and in-service $2.9 billion of assets in 2025, supporting Ontario’s energy demand expansion driven by EVs, manufacturing, and urbanization.
  • Financial Performance: Achieved 16.5% year-over-year net income growth, with basic EPS rising to $0.39 from $0.33, and projected annual EPS growth of 6–8% for the rate period.
  • Operational Efficiency: Generated $254 million in savings across capital and operating expenditures, alongside $166 million in savings shared with customers via reduced future rates.
  • ESG & Safety Milestone: Maintained 20 consecutive months without a high-energy serious injury/fatality, with a recordable injury rate of 0.68 per 200,000 hours.
  • Strategic Partnerships: Advanced the Chatham to Lakeshore transmission project through First Nations partnerships, leveraging expanded financing options and setting a precedent for future collaborations.

Operational Highlights

The company continued to invest in infrastructure, deploying approximately $3.4 billion of capital and in-service approximately $2.9 billion of assets in 2025. Hydro One also experienced a strong year for safety, with 20 consecutive months without a high-energy serious injury or fatality and a recordable injury rate of 0.68 per 200,000 hours. The company's efforts in safety and infrastructure development are crucial in supporting its growth and reliability.

Growth Prospects and Investments

Hydro One invested $939 million in the fourth quarter, an increase of 17.5% over the same period in 2024. The company placed $1.3 billion in service for customers, an increase of 19.1% compared to the prior year. Hydro One continues to expect earnings per share to grow between 6% and 8% annually for the rate period using the normalized 2022 EPS of $1.61 as a base. Analysts estimate next year's revenue growth at 2.3%, indicating a moderate growth trajectory.

Valuation and Metrics

With a P/E Ratio of 25.93, Hydro One's stock appears to be fairly valued, considering its growth prospects. The company's ROE of 10.59% and ROIC of 5.18% indicate a decent return on equity and invested capital. The Dividend Yield of 2.33% provides a relatively stable income stream for investors. However, the Net Debt / EBITDA ratio of 5.62 may raise concerns about the company's leverage. As Harry Taylor, Chief Financial and Regulatory Officer, mentioned, "We've been able to achieve good coupons on our bonds," which helps mitigate the impact of debt.

Outlook and Risks

The company's growth is largely dependent on its ability to invest in infrastructure and manage its costs effectively. With a growing demand for energy in Ontario, driven by new homes, businesses, and electric vehicle manufacturing, Hydro One is well-positioned to benefit from this trend. However, the company's ability to manage its capital expenditures and maintain its fiscal prudence will be crucial in achieving its growth targets.

3. NewsRoom

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How The Evolving Story Shapes Hydro One (TSX:H) Risk Reward Outlook

Jan -23

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RBC Revises Q4 Estimates for Canadian Energy Infrastructure Companies

Jan -22

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Hydro One and the Society of United Professionals reach tentative agreement

Jan -13

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Hydro One to Release Fourth Quarter 2025 Results on February 13, 2026 Before Markets Open

Jan -12

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Caldwell Releases Landmark Whitepaper "Utilities at the Eye of the Storm," Featuring Insights from North America's Most Influential Energy Leaders

Jan -06

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Ontario's largest electricity providers take scammers off the nice list this holiday season

Dec -12

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New report finds 50 per cent of youth athletes in Ontario say their coach is the adult they trust the most in their lives, yet hazing remains a widespread issue

Nov -25

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Ontario Approves Hydro One Plan for New 500-kV Transmission Line to GTA

Nov -24

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.78%)

6. Segments

Distribution

Expected Growth: 2.5%

Hydro One's 2.5% distribution growth is driven by its regulated transmission and distribution business, which provides a stable source of cash flow. Additionally, the company's investments in grid modernization and renewable energy projects are expected to contribute to growth. Furthermore, Hydro One's strong balance sheet and ability to manage costs effectively also support its distribution growth.

Transmission

Expected Growth: 3.5%

Transmission from Hydro One Limited's 3.5% growth driven by increasing electricity demand, infrastructure upgrades, and grid modernization. Additionally, Ontario's growing population and economic expansion contribute to rising energy needs, while Hydro One's investments in renewable energy sources and grid resiliency further support growth.

Other

Expected Growth: 2.0%

Hydro One's 2.0% growth is driven by increasing electricity transmission and distribution rates, investments in grid modernization, and rising demand for renewable energy sources. Additionally, the company's focus on operational efficiency and cost savings initiatives contribute to its growth. Furthermore, Hydro One's expansion into new markets and services, such as telecommunications and fibre optics, also support its growth momentum.

7. Detailed Products

Transmission Services

Hydro One's transmission services provide high-voltage transmission lines and towers that transport electricity from generating stations to local distribution systems.

Distribution Services

Hydro One's distribution services provide low-voltage distribution lines and equipment that deliver electricity from the transmission system to homes and businesses.

Generation Services

Hydro One's generation services provide electricity from hydroelectric, wind, and thermal generating stations.

Energy Storage

Hydro One's energy storage solutions provide innovative battery storage systems to optimize energy usage and reduce peak demand.

Smart Grid Solutions

Hydro One's smart grid solutions provide advanced technologies to manage and optimize the distribution grid, improving efficiency and reliability.

Electricity Infrastructure Development

Hydro One's electricity infrastructure development services provide planning, design, and construction of new transmission and distribution infrastructure.

8. Hydro One Limited's Porter Forces

Forces Ranking

Threat Of Substitutes

Hydro One Limited operates in a highly regulated industry, and the threat of substitutes is moderate. While there are alternative energy sources available, the cost and feasibility of switching to these alternatives are high.

Bargaining Power Of Customers

Hydro One Limited's customers have limited bargaining power due to the lack of alternative energy providers in the region. This gives the company a significant advantage in negotiating prices and contracts.

Bargaining Power Of Suppliers

Hydro One Limited relies on a few large suppliers for its equipment and materials. While these suppliers have some bargaining power, the company's large scale of operations and long-term contracts mitigate this risk.

Threat Of New Entrants

The threat of new entrants in the electricity transmission and distribution industry is low due to the high barriers to entry, including significant capital requirements and regulatory hurdles.

Intensity Of Rivalry

The electricity transmission and distribution industry is highly competitive, with several players competing for market share. Hydro One Limited faces intense rivalry from other utilities and independent power producers.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 57.34%
Debt Cost 4.85%
Equity Weight 42.66%
Equity Cost 5.41%
WACC 5.09%
Leverage 134.43%

11. Quality Control: Hydro One Limited passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Evergy

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Value: 5.8

Growth: 4.7

Quality: 4.4

Yield: 8.0

Momentum: 8.5

Volatility: 10.0

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Fortis

A-Score: 6.9/10

Value: 5.8

Growth: 4.4

Quality: 4.5

Yield: 8.0

Momentum: 8.5

Volatility: 10.0

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A-Score: 6.7/10

Value: 5.4

Growth: 4.1

Quality: 5.4

Yield: 8.0

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FirstEnergy

A-Score: 6.6/10

Value: 5.4

Growth: 3.6

Quality: 4.9

Yield: 8.0

Momentum: 8.0

Volatility: 10.0

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Hydro One

A-Score: 6.3/10

Value: 4.8

Growth: 4.7

Quality: 4.1

Yield: 6.0

Momentum: 8.5

Volatility: 10.0

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Avangrid

A-Score: 4.5/10

Value: 4.9

Growth: 4.3

Quality: 3.5

Yield: 4.0

Momentum: 7.0

Volatility: 3.3

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

56.67$

Current Price

56.67$

Potential

-0.00%

Expected Cash-Flows