2019 Annual Report Energizing Life Title goes here Contents 2019 Highlights 3 Message from Our Chair 6 Message from Our President and CEO 8 A Sustainable Future for All 10 Why Invest in Hydro One 11 Our New Corporate Strategy 12 Our Five Priorities 13 Corporate Governance 24 Financial Report 26 Title goes here The Power of Connection. Energizing Life. Hydro One energizes life for people and communities, helping Ontarians live a better and brighter future. Through our network of businesses, we are growing and evolving to meet the expectations of the shareholders, regulators, Indigenous peoples and customers we serve. 85.7% Residential & small business customer satisfaction $1.7billion In capital investments to our grid to ensure safe and reliable power for communities across Ontario Hydro One Limited | Annual Report 2019 1 Corporate Profile A Network Built for the Possibilities of Tomorrow Who We Are Hydro One Limited (TSX: H) Hydro One Limited, through its wholly-owned subsidiaries, is Ontario’s largest electricity transmission and distribution provider with approximately 1.4 million valued customers, approximately $27.1 billion in assets as at December 31, 2019, and annual revenues in 2019 of approximately $6.5 billion. Our team of approximately 8,800 skilled and dedicated employees proudly build and maintain a safe and reliable electricity system which is essential to supporting strong and successful communities. In 2019, Hydro One invested approximately $1.7 billion in its transmission and distribution networks and supported the economy through buying approximately $1.5 billion of goods and services. We are committed to the communities where we live and work through community investment, sustainability and diversity initiatives. We are designated as a Sustainable Electricity Company by the Canadian Electricity Association. Hydro One Limited’s common shares are listed on the TSX and certain of Hydro One Inc.’s medium term notes are listed on the NYSE. Additional information can be accessed at www.hydroone.com; www.sedar.com or www.sec.gov) $6.5billion 8,800 2019 annual revenue Skilled and dedicated employees 2 Hydro One Limited | Annual Report 2019 Financial Highlights Financial Highlights Year ended December 31 (millions of dollars, except as otherwise noted) 2019 2018 Revenues 6,480 6,150 Purchased power 3,111 2,899 Revenues, net of purchased power1 3,369 3,251 Operation, maintenance and administration (OM&A) costs 1,181 1,105 Depreciation, amortization and asset removal costs 878 837 Financing charges 514 459 Income tax expense (recovery) (6) 915 Net income (loss) to common shareholders of Hydro One 778 (89) Adjusted net income to common shareholders of Hydro One1 918 807 Basic earnings per common share (EPS) $1.30 ($0.15) Diluted EPS $1.30 ($0.15) Basic adjusted non-GAAP EPS (Adjusted EPS)1 $1.54 $1.35 Diluted Adjusted EPS1 $1.53 $1.35 Net cash from operating activities 1,614 1,575 Funds from operations (FFO)1 1,532 1,572 Capital investments 1,667 1,575 Assets placed in-service 1,703 1,813 Transmission: Average monthly Ontario 60-minute peak demand (MW) 19,896 20,485 Distribution: Electricity distributed to Hydro One customers (GWh) 27,536 27,338 Debt to capitalization ratio2 56.3% 55.6% 1. See section “Non-GAAP Measures” for description and reconciliation of adjusted net income, basic and diluted Adjusted EPS, FFO and revenues, net of purchased power. 2. Debt to capitalization ratio is a non-GAAP measure and has been presented as at December 31, 2019 and 2018, and has been calculated as total debt (including total long-term debt, convertible debentures and short-term borrowings, net of cash and cash equivalents) divided by total debt plus total shareholders’ equity, including preferred shares but excluding any amounts related to noncontrolling interest. Management believes that the debt to capitalization ratio is helpful as a measure of the proportion of debt in the Company's capital structure. Total Assets Rate Base Revenues Regulated Earnings (Net of purchased power costs) (Before financing charges and income taxes) 7% 56% 4039%% 61%60% 1% 49% 3844%% 56%62% $27.1 $20.7 $3,369 $1,493 billion billion million million 37% 50% Transmission Distribution Other Total Shareholder Return (TSR) Hydro One 29.0% January 1, 2019 to December 31, 2019 S&P/TSX Capped Utilities Index 37. 5% S&P/TSX Composite Index 22.8% S&P 500 Electric Utilities Index 27. 5% S&P 500 Index 31.5% This report contains forward-looking statements that are based on current expectations, estimates, forecasts and projections about our business and the industry in which we operate, and includes beliefs and assumptions made by the management of our Company. Words such as “expect” and “will” 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. We do not intend, and we disclaim any obligation, to update any forward-looking statements, except as required by law. All figures in this document are approximate figures that are rounded to the nearest decimal place. Hydro One Limited | Annual Report 2019 3 2019 Highlights Hydro One’s Our Regulated Business Our Unregulated Business Transmission Our other segment consists principally of our telecommunications business, Hydro Our transmission system transmits high-voltage Business One Telecom Inc. (HOT), which provides electricity from nuclear, hydroelectric, natural telecommunications support for Hydro One’s gas, wind and solar sources to distribution transmission and distribution businesses. HOT companies and industrial customers Network offers comprehensive communications and across Ontario. Our system accounts for information technology services and solutions approximately 98%1 of Ontario’s transmission (cloud services, managed services and capacity with approximately 30,000 circuit security-based services) that extend beyond kilometres of high-voltage transmission lines. the core fibre and connectivity services it has We also own and operate 25 cross-border traditionally offered. interconnections with neighbouring provinces and the United States, which allow electricity to flow into and out of Ontario. Distribution Our distribution system is the largest2 in Ontario. It consists of approximately 123,000 circuit kilometres of primary low-voltage power lines serving approximately 1.4 million customers, mostly in rural areas. As well, Hydro One Remote Communities Inc. serves 1. based on revenue approved by the OEB customers in one grid-connected and 21 2. based on customers (per OEB yearbook) off-grid communities in Ontario’s far north. Hydro One’s Role in the Ontario Electric Power System Our transmission and distribution systems safely and reliably serve communities throughout Ontario. Our customers are suburban, rural and remote homes and businesses across the province. Our communities are proudly and safely serviced by a team of skilled and dedicated employees. Industrial, Commercial and Residential Customers Residential and Commercial Industrial, DistributionSystem Transformer Transmission Transformer Transformer (increased to System (decreased to (decreased to higher voltage) medium voltage) lower voltage) Electricity Sources Generation Transmission Distribution 4 Hydro One Limited | Annual Report 2019 Key Highlights 1 2 High Customer Satisfaction Leadership in Power Restoration Across all lines of business including Recognized by the Edison Electric Institute (EEI) Emergency Assistance 87.2% transmission customer satisfaction, Award for our response efforts following the deadly California wildfires in 85.7% residential and small business 2018 and for helping Manitoba Hydro after a severe storm in October 2019. customer satisfaction, 89.5% First This complements response times within our own borders – Hydro One’s Nations customer satisfaction and Customer Average Interruption Duration Index (CAIDI), a key measure of 90.0% Hydro One Telecom Inc. success in delivering reliable power, improved by 9.7% in 2019. customer satisfaction. We also earned two customer service awards from the Ontario Energy Association. 3 4 5 Supporting Local Businesses Productivity Savings Reducing Costs Remaining a substantial contributor A 49.3% increase in year-over- A 4.7%, or $51 million, reduction to Ontario’s economy through the year productivity savings with in annual operating costs adjusted purchase of local goods and services, $202.3 million saved in 2019 for Avista related costs in 2019 including $41.3 million spent with as compared to $135.5 million from 2018. Indigenous businesses in 2019. in 2018. Hydro One partnered with government and industry 6 7 stakeholders, Indigenous Capital Investments Best Employer, 5th Year peoples, customers, unions Approximately $1.7 billion in capital For the fifth consecutive year, and other stakeholders investments to expand the electricity Hydro One has been recognized throughout the year to grid and renew and modernize by Forbes in its list of Canada’s Best achieve a number of key existing infrastructure. Employers for 2020, underscoring performance milestones. our commitment to creating an engaged workforce and positive working environment. Hydro One Drives Ontario’s Economy 1 98% 38 ~1.4 million 83 Of Ontario’s Electric utilities companies Residential and business Large industrial customers transmission