Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16]

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: May 2024

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




99.1						Unaudited interim consolidated financial statements of the Registrant as at and for the three months ended March 31, 2024 and 2023

99.2						Management’s Discussion and Analysis of the Registrant as at and for the three months ended March 31, 2024 and 2023

99.3						Certification of President and Chief Executive Officer

99.4						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/ Christopher Lopez
						Name: Christopher Lopez
						Title: Executive Vice President, Chief Financial and Regulatory Officer

						Date:			May 14, 2024

HYDRO ONE LIMITED

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited)

For the three months ended March 31, 2024 and 2023



Three months ended March 31 (millions of Canadian dollars, except per share amounts)	2024	2023
Revenues
Distribution (includes $106 related party revenues; 2023 - $87) (Note 23)	1,605	1,509
Transmission (includes $551 related party revenues; 2023 - $552) (Note 23)	553	555
Other	8	10
	2,166	2,074

Costs
Purchased power (includes $825 related party costs; 2023 - $791) (Note 23)	1,096	1,010
Operation, maintenance and administration (Note 23)	322	328
Depreciation, amortization and asset removal costs (Note 4)	254	252
	1,672	1,590

Income before financing charges and income tax expense	494	484
Financing charges (Note 5)	148	136

Income before income tax expense	346	348
Income tax expense (Note 6)	51	64
Net income	295	284

Other comprehensive income (loss) (Note 7)	4	(4)
Comprehensive income	299	280

Net income attributable to:
Noncontrolling interest	2	2

Common shareholders	293	282
	295	284

Comprehensive income attributable to:
Noncontrolling interest	2	2

Common shareholders	297	278
	299	280

Earnings per common share (Note 21)
Basic	$0.49	$0.47
Diluted	$0.49	$0.47

Dividends per common share declared (Note 20)	$0.30	$0.28

See accompanying notes to Condensed Interim Consolidated Financial Statements (unaudited).


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HYDRO ONE LIMITED

CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS (unaudited)

As at March 31, 2024 and December 31, 2023


As at (millions of Canadian dollars)	March 31, 2024	December 31, 2023
Assets
Current assets:
Cash and cash equivalents	686	79
Accounts receivable (Note 8)	882	830
Due from related parties	325	313
Other current assets (Note 9)	144	132
	2,037	1,354

Property, plant and equipment (Note 10)	27,330	26,874
Other long-term assets:
Regulatory assets (Note 12)	3,321	3,260
Deferred income tax assets	119	119
Intangible assets (Note 11)	661	656
Goodwill	373	373
Other assets (Note 13)	266	216
	4,740	4,624
Total assets	34,107	32,852

Liabilities
Current liabilities:
Short-term notes payable (Note 16)	497	279
Long-term debt payable within one year (Notes 16, 17)	1,100	700
Accounts payable and other current liabilities (Note 14)	1,445	1,439
Due to related parties	211	302
	3,253	2,720

Long-term liabilities:
Long-term debt (Notes 16, 17)	15,105	14,710
Regulatory liabilities (Note 12)	1,005	908
Deferred income tax liabilities	1,163	1,067
Other long-term liabilities (Note 15)	1,698	1,682
	18,971	18,367
Total liabilities	22,224	21,087

Contingencies and Commitments (Notes 25, 26)
Subsequent Events (Note 28)

Noncontrolling interest subject to redemption	19	20

Equity
Common shares (Note 19)	5,706	5,706
Additional paid-in capital	31	30
Retained earnings	6,062	5,947
Accumulated other comprehensive income (loss)	1	(3)
Hydro One shareholders’ equity	11,800	11,680

Noncontrolling interest	64	65
Total equity	11,864	11,745
	34,107	32,852

See accompanying notes to Condensed Interim Consolidated Financial Statements (unaudited).


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HYDRO ONE LIMITED

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)

For the three months ended March 31, 2024 and 2023


Three months ended March 31, 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	—	—	293	—	293	1	294
Other comprehensive loss (Note 7)	—	—	—	4	4	—	4
Distributions to noncontrolling interest	—	—	—	—	—	(2)	(2)
Dividends on common shares (Note 20)	—	—	(178)	—	(178)	—	(178)

Stock-based compensation	—	1	—	—	1	—	1
March 31, 2024	5,706	31	6,062	1	11,800	64	11,864


Three months ended March 31, 2023 (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, 2023	5,699	34	5,562	11	11,306	66	11,372
Net income	—	—	282	—	282	1	283
Other comprehensive income (Note 7)	—	—	—	(4)	(4)	—	(4)
Distributions to noncontrolling interest	—	—	—	—	—	(2)	(2)
Dividends on common shares (Note 20)	—	—	(167)	—	(167)	—	(167)


March 31, 2023	5,699	34	5,677	7	11,417	65	11,482

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 months ended March 31, 2024 and 2023



Three months ended March 31 (millions of Canadian dollars)	2024	2023
Operating activities
Net income	295	284
Environmental expenditures	(3)	(14)
Adjustments for non-cash items:
Depreciation and amortization (Note 4)	222	221
Regulatory assets and liabilities	52	(47)
Deferred income tax expense	42	54
Other	(2)	2
Changes in non-cash balances related to operations (Note 24)	(144)	(150)
Net cash from operating activities	462	350

Financing activities
Long-term debt issued	800	1,050
Long-term debt repaid	—	(600)
Short-term notes issued	500	1,640
Short-term notes repaid	(280)	(2,210)
Dividends paid (Note 20)	(178)	(167)
Distributions paid to noncontrolling interest	(4)	(4)


Costs to obtain financing	(5)	(5)
Net cash from (used in) financing activities	833	(296)

Investing activities
Capital expenditures (Note 24)
Property, plant and equipment	(645)	(484)
Intangible assets	(22)	(24)
Change in future use assets	(19)	(33)
Capital contributions received	2	2
Other	(4)	(2)
Net cash used in investing activities	(688)	(541)

Net change in cash and cash equivalents	607	(487)
Cash and cash equivalents, beginning of period	79	530
Cash and cash equivalents, end of period	686	43

See accompanying notes to Condensed Interim Consolidated Financial Statements (unaudited).


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HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

For the three months ended March 31, 2024 and 2023

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 March 31, 2024, the Province held approximately 47.1% (December 31, 2023 - 47.1%) of the common shares of Hydro One. The principal businesses of Hydro One are the transmission and distribution of electricity to customers within Ontario.

Earnings for interim periods may not be indicative of results for the year due to the impact of seasonal weather conditions on customer demand and market pricing.

The Company's transmission business consists of the transmission system operated by Hydro One Inc.’s subsidiaries, which include Hydro One Networks Inc. (Hydro One Networks) and Hydro One Sault Ste. Marie LP, as well as an approximately 66% interest in B2M Limited Partnership, and an approximately 55% interest in Niagara Reinforcement Limited Partnership.

Hydro One’s distribution business consists of the distribution system operated by Hydro One Inc.'s subsidiaries, Hydro One Networks and Hydro One Remote Communities Inc.

Rate Setting

Deferred Tax Asset (DTA)

On April 8, 2021, the Ontario Energy Board (OEB) rendered its decision and order (DTA Implementation Decision) regarding the recovery of the DTA amounts allocated to ratepayers for the 2017 to 2021 period, plus carrying charges over a two-year period, from July 1, 2021 to June 30, 2023. In addition, Hydro One was approved to adjust the transmission revenue requirement and the base distribution rates beginning January 1, 2022, to eliminate any further amounts of future tax savings flowing to customers.

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 (US) Generally Accepted Accounting Principles for interim financial statements and 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, 2023, with the exception of the adoption of new accounting standards as described in Note 3. These Consolidated Financial Statements reflect adjustments, that are, in the opinion of management, necessary to reflect fairly 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 the annual audited consolidated financial statements for the year ended December 31, 2023.


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HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2024 and 2023

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:

Recently Adopted Accounting Guidance

Guidance

Date issued

Description

ASU Effective Date

Impact on Hydro One

ASU 2023-07

November 2023

The amendments improve the disclosures about a public entity’s reportable segments and address requests from investors for additional, more detailed information about a reportable segment’s expenses.

Fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Under assessment

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 Accounting Standards Codification (Codification). Many of the amendments allow users to more easily compare entities subject to the US 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 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.

Under assessment

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.

Under assessment

4. DEPRECIATION, AMORTIZATION AND ASSET REMOVAL COSTS




Three months ended March 31 (millions of dollars)	2024	2023
Depreciation of property, plant and equipment	200	188
Amortization of intangible assets	19	19
Amortization of regulatory assets	3	14

Depreciation and amortization	222	221
Asset removal costs	32	31
	254	252

5. FINANCING CHARGES




Three months ended March 31 (millions of dollars)	2024	2023
Interest on long-term debt	165	138
Interest on regulatory accounts	6	4
Interest on short-term notes	5	12
Other	2	4
Less: Interest capitalized on construction and development in progress	(19)	(15)
Interest earned on cash and cash equivalents	(10)	(5)
Realized gain on cash flow hedges (interest-rate swap agreements) (Notes 7, 17)	(1)	(2)

	148	136


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HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2024 and 2023

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 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 March 31 (millions of dollars)	2024	2023
Income before income tax expense	346	348
Income tax expense at statutory rate of 26.5% (2023 - 26.5%)	92	92

Increase (decrease) resulting from:
Net temporary differences recoverable in future rates charged to customers:
Capital cost allowance in excess of depreciation and amortization	(22)	(32)
Impact of DTA Implementation Decision1	—	24

Overheads capitalized for accounting but deducted for tax purposes	(11)	(10)
Interest capitalized for accounting but deducted for tax purposes	(6)	(5)
Pension and post-retirement benefit contributions in excess of expense	(1)	(5)
Environmental expenditures	(1)	(1)
Other	—	1
Net temporary differences attributable to regulated business	(41)	(28)
Net permanent differences	—	—

Total income tax expense	51	64


Effective income tax rate															14.7		%	18.4		%

1 Pursuant to the DTA Implementation Decision, the amounts represent the recovery of DTA amounts that were previously shared with ratepayers.

7. OTHER COMPREHENSIVE INCOME (LOSS)




Three months ended March 31 (millions of dollars)	2024	2023
Gain (loss) on cash flow hedges (interest-rate swap agreements) (Notes 5, 17)1	3	(4)

Other	1	—
	4	(4)

1 Includes $1 million before-tax realized gain (2023 - $2 million) and $1 million after-tax realized gain (2023 - $2 million) on cash flow hedges reclassified to financing charges.

8. ACCOUNTS RECEIVABLE


As at (millions of dollars)	March 31, 2024	December 31, 2023
Accounts receivable - billed	479	405
Accounts receivable - unbilled	467	482
Accounts receivable, gross	946	887
Allowance for doubtful accounts	(64)	(57)
Accounts receivable, net	882	830

The following table shows the movements in the allowance for doubtful accounts for the three months ended March 31, 2024 and the year ended December 31, 2023:


(millions of dollars)	March 31, 2024	December 31, 2023
Allowance for doubtful accounts – beginning	(57)	(63)
Write-offs	3	20
Additions to allowance for doubtful accounts	(10)	(14)
Allowance for doubtful accounts – ending	(64)	(57)


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HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2024 and 2023

9. OTHER CURRENT ASSETS


As at (millions of dollars)	March 31, 2024	December 31, 2023
Prepaid expenses and other assets	64	51
Regulatory assets (Note 12)	45	46
Materials and supplies	34	35
Derivative assets (Note 17)	1	—
	144	132

10. PROPERTY, PLANT AND EQUIPMENT


As at (millions of dollars)	March 31, 2024	December 31, 2023
Property, plant and equipment	39,521	39,376
Less: accumulated depreciation	(14,112)	(14,007)
	25,409	25,369
Construction in progress	1,921	1,505

	27,330	26,874

11. INTANGIBLE ASSETS


As at (millions of dollars)	March 31, 2024	December 31, 2023
Intangible assets	1,402	1,394
Less: accumulated depreciation	(838)	(819)
	564	575
Development in progress	97	81

	661	656


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HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2024 and 2023

12. 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)	March 31, 2024	December 31, 2023
Regulatory assets:
Deferred income tax regulatory asset	3,078	3,021
Post-retirement and post-employment benefits - non-service cost	88	93
Environmental	50	53
Broadband deferral	49	37
Stock-based compensation	29	29
Rural and Remote Rate Protection variance	28	30

DTA sharing	5	5
Other	39	38
Total regulatory assets	3,366	3,306
Less: current portion	(45)	(46)
	3,321	3,260

Regulatory liabilities:
Post-retirement and post-employment benefits	398	398
Retail settlement variance account	145	84
Pension benefit regulatory liability	133	99
Earnings sharing mechanism deferral	110	109
Distribution rate riders	85	99
Tax rule changes variance	33	32
Asset removal costs cumulative variance	29	29
Capitalized overhead tax variance	27	26
External revenue variance	24	19
Other Post-employment Benefits (OPEB) Asymmetrical Carrying Charge Variance Account	23	20
Pension cost differential	12	9
Deferred income tax regulatory liability	5	4

Other	33	31
Total regulatory liabilities	1,057	959
Less: current portion	(52)	(51)
	1,005	908

13. OTHER LONG-TERM ASSETS


As at (millions of dollars)	March 31, 2024	December 31, 2023
Deferred pension assets (Note 18)	133	99
Right-of-Use assets	59	49
Investments	47	43
Derivative asset	2	—
Other long-term assets	25	25
	266	216

14. ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES


As at (millions of dollars)	March 31, 2024	December 31, 2023
Accrued liabilities	908	855
Accounts payable	261	334
Accrued interest	173	149
Regulatory liabilities (Note 12)	52	51
Environmental liabilities	37	38
Lease obligations	14	12

	1,445	1,439


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HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2024 and 2023

15. OTHER LONG-TERM LIABILITIES


As at (millions of dollars)	March 31, 2024	December 31, 2023
Post-retirement and post-employment benefit liability (Note 18)	1,546	1,531
Lease obligations	44	37
Environmental liabilities	39	41
Asset retirement obligations	36	36
Derivative liabilities (Note 17)	—	2


Other long-term liabilities	33	35
	1,698	1,682

16. 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 $2,300 million.

As at March 31, 2024, Hydro One’s consolidated committed, unsecured, and revolving credit facilities (Operating Credit Facilities) totalling $2,550 million included Hydro One's credit facilities of $250 million and Hydro One Inc.'s credit facilities of $2,300 million. In January 2022, Hydro One successfully amended its Operating Credit Facilities to incorporate environmental, social and governance targets. On June 1, 2023, the maturity date for the Operating Credit Facilities was extended from 2027 to 2028. As at March 31, 2024, 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 obligation of each lender to make any credit extension 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 March 31, 2024, no debt securities have been issued by HOHL.

Long-Term Debt

The following table presents long-term debt outstanding as at March 31, 2024 and December 31, 2023:


As at (millions of dollars)	March 31, 2024	December 31, 2023
Hydro One Inc. long-term debt (a)	15,820	15,020
Hydro One long-term debt (b)	425	425

	16,245	15,445
Add: Net unamortized debt premiums	10	12
Add: Realized mark-to-market gain1	5	6
Less: Unamortized deferred debt issuance costs	(55)	(53)
Total long-term debt	16,205	15,410

Less: Long-term debt payable within one year	(1,100)	(700)
	15,105	14,710

1 In October 2023, Hydro One Inc. entered into $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.


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HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2024 and 2023

(a) Hydro One Inc. long-term debt

As at March 31, 2024, long-term debt of $15,820 million (December 31, 2023 - $15,020 million) was outstanding, the majority of which was issued under Hydro One Inc.’s MTN Program. In June 2022, Hydro One Inc. filed a short form base shelf prospectus in connection with its MTN Program, which has a maximum authorized principal amount of notes issuable of $4,000 million and expires in July 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. Upon issuance of the short form base shelf prospectus in February 2024, the Company does not qualify for the distribution of any additional notes under the previous MTN Program prospectus that was filed in June 2022. During the three months ended March 31, 2024, $800 million long-term debt was issued (2023 - $1,050 million) and $nil long-term debt was repaid (2023 - $600 million).

(b) Hydro One long-term debt

As at March 31, 2024, long-term debt of $425 million (December 31, 2023 - $425 million) was outstanding under Hydro One's short form base shelf prospectus (Universal Base Shelf Prospectus). On August 15, 2022, Hydro One filed the 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, up to $2,000 million of debt, equity or other securities, or any combination thereof, during the 25-month period ending on September 16, 2024. As at March 31, 2024, no securities have been issued under the Universal Base Shelf Prospectus. During the three months ended March 31, 2024 and 2023, no long-term debt was issued or repaid.

Principal and Interest Payments

As at March 31, 2024, 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	1,100	664	2.3
Year 2	1,250	639	3.7
Year 3	425	586	5.6
Year 4	1,175	575	3.6
Year 5	—	532	—
	3,950	2,996	3.5
Years 6-10	4,635	2,244	4.2
Thereafter	7,660	4,024	4.4
	16,245	9,264	4.1

17. FAIR VALUE OF FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Non-Derivative Financial Assets and Liabilities

As at March 31, 2024 and December 31, 2023, 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 March 31, 2024 and December 31, 2023 are as follows:

March 31, 2024

December 31, 2023

As at (millions of dollars)

Carrying Value

Fair Value

Carrying Value

Fair Value

Long-term debt, including current portion

16,205

15,654

15,410

15,235


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HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2024 and 2023

Fair Value Measurements of Derivative Instruments

Fair Value Hedges

As at March 31, 2024 and December 31, 2023, Hydro One Inc. had no fair value hedges.

Cash Flow Hedges

As at March 31, 2024 and December 31, 2023, 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 March 31, 2024 and December 31, 2023, the Company had no derivative instruments classified as undesignated contracts.

Fair Value Hierarchy

The fair value hierarchy of financial assets and liabilities as at March 31, 2024 and December 31, 2023 is as follows:


As at March 31, 2024 (millions of dollars)	Carrying Value	Fair Value	Level 1	Level 2	Level 3
Assets:
Derivative instruments (Note 9, 13)

Cash flow hedges, including current portion	3	3	—	3	—
	3	3	—	3	—

Liabilities:
Long-term debt, including current portion	16,205	15,654	—	15,654	—


As at December 31, 2023 (millions of dollars)	Carrying Value	Fair Value	Level 1	Level 2	Level 3




Liabilities:
Long-term debt, including current portion	15,410	15,235	—	15,235	—
Derivative instruments (Note 15)
Cash flow hedges, including current portion	2	2	—	2	—
	15,412	15,237	—	15,237	—

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 three months ended March 31, 2024 or the year ended December 31, 2023.

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.

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 have resulted in an increase to financing charges for the three months ended March 31, 2024 and 2023 of $1 million and $2 million, 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 results of operations in the same period during which the hedged transaction affects results of operations. During the three months ended March 31, 2024, a $6 million before-tax gain (2023 - $3 million loss), $4 million after-tax gain (2023 - $2 million loss), was recorded in OCI, and a $1 million before-tax realized gain (2023 - $2 million), $1 million after-tax gain (2023 -


			12

HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2024 and 2023

$2 million), was reclassified to financing charges. This resulted in an accumulated other comprehensive income of $2 million related to cash flow hedges as at March 31, 2024 (December 31, 2023 - less than $1 million accumulated other comprehensive loss).

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 18 - 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 March 31, 2024 and 2023, 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 March 31, 2024 and 2023, there was no material accounts receivable balance due from any single customer.

As at March 31, 2024, the Company’s allowance for doubtful accounts was $64 million (December 31, 2023 - $57 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 March 31, 2024, approximately 5% (December 31, 2023 - 5%) 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 March 31, 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. As at March 31, 2023, the counterparty credit risk exposure on the fair value of these interest-rate swap contracts was not material.

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.

As at March 31, 2024, $2,000 million remained available for issuance under the Universal Base Shelf Prospectus.

On November 22, 2022, HOHL filed a short form base shelf prospectus (US Debt Shelf Prospectus) with securities regulatory authorities in Canada and the US to replace a previous prospectus that would otherwise have expired in January 2023. The US Debt Shelf Prospectus allows HOHL to offer, from time to time in one or more public offerings, up to US$3,000 million of debt securities, unconditionally guaranteed by Hydro One, expiring in December 2024. As at March 31, 2024, no securities have been issued under the US 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.


			13

HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2024 and 2023

18. PENSION AND POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS

The following table provides the components of the net periodic benefit (recovery) costs for the three months ended March 31, 2024 and 2023:


	Pension Benefits		Post-Retirement and Post-Employment Benefits
Three months ended March 31 (millions of dollars)	2024	2023	2024	2023
Current service cost	34	25	14	13
Interest cost	100	99	18	18
Expected return on plan assets, net of expenses1	(151)	(142)	—	—
Amortization of prior service (credit) cost	(1)	—	2	2
Amortization of actuarial losses (gains)	4	(5)	(5)	(7)
Net periodic benefit (recovery) costs	(14)	(23)	29	26

Charged to results of operations2	6	6	20	17

1 The expected long-term rate of return on pension plan assets for the year ending December 31, 2024 is 7.00% (2023 - 7.00%).

2 The Company accounts for pension costs consistent with their inclusion in OEB-approved rates. During the three months ended March 31, 2024, pension costs of $18 million (2023 - $22 million) were attributed to labour, of which $6 million (2023 - $6 million) was charged to operations, and $12 million (2023 - $16 million) was capitalized as part of the cost of property, plant and equipment and intangible assets.

Transfers from Other Plans

Hydro One and Inergi LP agreed to transfer the employment of certain Inergi LP employees (Transferred Employees) to Hydro One Networks. Employees related to the Information Technology Operations, Finance and Accounting, Payroll, Source to Pay, Settlements and certain Shared Services functions transferred over a period ending January 1, 2022. The Transferred Employees who are participants in the Inergi LP Pension Plan (Inergi Plan) became participants in the Hydro One Pension Plan (the Plan) upon transfer to Hydro One Networks. On March 2, 2023, the assets and liabilities of the Inergi Plan were transferred to the Plan. The value of assets and liabilities of the Inergi Plan transferred to the Plan were approximately $378 million and $333 million, respectively, at the date of transfer. Inergi and Hydro One Networks also agreed to transfer OPEB liabilities related to the Transferred Employees to Hydro One’s post-retirement and post-employment benefit plans, which occurred on the date of transfer of each group of Transferred Employees.

The transfer of Finance and Accounting, Payroll and certain Shared Services functions occurred on January 1, 2022 and the transfer of the OPEB liability of $9 million related to these Employees was completed in the first quarter of 2022. The liability was recorded as a post-retirement and post-employment benefit liability with an offset to OCL, and cash totalling $10 million was transferred to Hydro One and recorded as an asset with an offset to OCI. Both the OCI resulting from the transfer of the cash asset and the OCL resulting from the transfer of the other post-retirement benefit liability are being recognized in net income over the expected average remaining service lifetime of the Finance and Accounting, Payroll and certain Shared Services employees.

Eligible Inergi retirees were transferred to the Plan on June 1, 2023. The transfer of the OPEB liability of $15 million related to these retirees was completed in the second quarter of 2023. The liability was recorded as a post-retirement and post-employment benefit liability with an offset to OCL, and cash totalling $3 million was transferred to Hydro One, in accordance with the agreement. Both the OCI resulting from the transfer of the cash asset and the OCL resulting from the transfer of OPEB liabilities are being recognized in net income over the expected average remaining life expectancy of the Retirees and Other Former Members employees.

19. SHARE CAPITAL

Common Shares

The Company is authorized to issue an unlimited number of common shares. As at March 31, 2024, the Company had 599,077,067 (December 31, 2023 - 599,077,067) common shares issued and outstanding.

Preferred Shares

The Company is authorized to issue an unlimited number of preferred shares, issuable in series. As at March 31, 2024 and December 31, 2023, the Company had no preferred shares issued and outstanding.

20. DIVIDENDS

During the three months ended March 31, 2024, common share dividends in the amount of $178 million (2023 - $167 million) were declared and paid. See Note 28 - Subsequent Events for dividends declared subsequent to March 31, 2024.


			14

HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2024 and 2023

21. 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 LTIP, which are calculated using the treasury stock method.



Three months ended March 31	2024	2023

Net income attributable to common shareholders (millions of dollars)	293	282

Weighted-average number of shares
Basic	599,077,067	598,714,704
Effect of dilutive stock-based compensation plans	1,507,329	1,810,883
Diluted	600,584,396	600,525,587

EPS
Basic	$0.49	$0.47
Diluted	$0.49	$0.47

22. STOCK-BASED COMPENSATION

Share Grant Plans

There were no changes in share grants under the Share Grant Plans during the three months ended March 31, 2024 and 2023.

Directors' Deferred Share Unit (DSU) Plan

A summary of DSU awards activity under the Directors' DSU Plan during the three months ended March 31, 2024 and 2023 is presented below:



Three months ended March 31 (number of DSUs)	2024	2023
DSUs outstanding - beginning	94,624	99,939
Granted	5,463	18,111

DSUs outstanding - ending	100,087	118,050

As at March 31, 2024, a liability of $4 million (December 31, 2023 - $4 million) related to Directors' DSUs has been recorded at the closing price of the Company's common shares of $39.50 (December 31, 2023 - $39.70). 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 months ended March 31, 2024 and 2023 is presented below:



Three months ended March 31 (number of DSUs)	2024	2023
DSUs outstanding - beginning	134,370	118,505
Granted	14,262	18,491

DSUs outstanding - ending	148,632	136,996

As at March 31, 2024, a liability of $6 million (December 31, 2023 - $5 million) related to Management DSUs has been recorded at the closing price of the Company's common shares of $39.50 (December 31, 2023 - $39.70). This liability is included in other long-term liabilities on the consolidated balance sheets.


			15

HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2024 and 2023

Long-term Incentive Plan (LTIP)

Performance Share Units (PSU) and Restricted Share Units (RSU)

A summary of PSU and RSU awards activity under the LTIP during the three months ended March 31, 2024 and 2023 is presented below:



	PSUs		RSUs
(number of units)	2024	2023	2024	2023
Units outstanding - beginning	142,925	—	186,971	—
Granted	159,660	—	148,474	—
Forfeited	(1,198)	—	(3,349)	—



Units outstanding - ending	301,387	—	332,096	—

The grant date total fair value of the awards granted during the three months ended March 31, 2024 was $13 million (2023 - $nil). The compensation expense related to these awards recognized by the Company during the three months ended March 31, 2024 was $1 million (2023 – $nil).

Society of United Professionals (Society) RSU Plan

A summary of RSU awards activity under the Society RSU Plan during the three months ended March 31, 2024 and 2023 is presented below:



Three months ended March 31 (number of RSUs)	2024	2023
RSUs outstanding - beginning	—	36,124

Vested and issued	—	(33,031)
Settled	—	(2,964)
Forfeited	—	(129)
RSUs outstanding - ending	—	—

23. RELATED PARTY TRANSACTIONS

The Province is a shareholder of Hydro One with approximately 47.1% (2023 - 47.2%) ownership as at March 31, 2024. The Independent Electricity System Operator (IESO), Ontario Power Generation Inc. (OPG) and the OEB are related parties to Hydro One because they are controlled or significantly influenced by the Ministry of Energy. Ontario Charging Network (OCN LP) is a joint-venture limited partnership between OPG and a subsidiary of Hydro One. The following is a summary of the Company’s related party transactions during the three months ended March 31, 2024 and 2023:


Three months ended March 31 (millions of dollars)
Related Party	Transaction	2024	2023
Province	Dividends paid	84	79
IESO	Power purchased	819	787
	Revenues for transmission services	550	551
	Amounts related to electricity rebates	327	230
	Distribution revenues related to rural rate protection	63	61
	Distribution revenues related to Wataynikaneyap Power LP	30	14
	Distribution revenues related to supply of electricity to remote northern communities	12	11
	Funding received related to Conservation and Demand Management programs	—	1


OPG	Power purchased	6	4
	Transmission revenues related to provision of services and supply of electricity	1	1
	Distribution revenues related to provision of services and supply of electricity	1	1

	Capital contribution received from OPG	1	3


OEB	OEB fees	3	3
OCN LP1	Investment in OCN LP	5	—

1 OCN LP owns and operates electric vehicle fast charging stations across Ontario, under the Ivy Charging Network brand.

Sales to and purchases from related parties are based on the requirements of the OEB’s Affiliate Relationships Code. Outstanding balances at period end are interest-free and settled in cash. Invoices are issued monthly, and amounts are due and paid on a monthly basis.


			16

HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2024 and 2023

24. CONSOLIDATED STATEMENTS OF CASH FLOWS

The changes in non-cash balances related to operations consist of the following:



Three months ended March 31 (millions of dollars)	2024	2023
Accounts receivable (Note 8)	(52)	(33)
Due from related parties	(12)	(3)
Materials and supplies (Note 9)	1	(6)
Prepaid expenses and other assets (Note 9)	(13)	(17)
Other long-term assets (Note 13)	(1)	(1)
Accounts payable	(71)	(36)
Accrued liabilities	53	(29)
Due to related parties	(91)	(64)
Accrued interest (Note 14)	24	24
Long-term accounts payable and other long-term liabilities (Note 15)	(2)	(3)
Post-retirement and post-employment benefit liability	20	18
	(144)	(150)

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 months ended March 31, 2024 and 2023. The reconciling items include net change in accruals and capitalized depreciation.



Three months ended March 31, 2024 (millions of dollars)	Property, Plant and Equipment	Intangible Assets	Total
Capital investments	(649)	(24)	(673)
Reconciling items	4	2	6
Cash outflow for capital expenditures	(645)	(22)	(667)



Three months ended March 31, 2023 (millions of dollars)	Property, Plant and Equipment	Intangible Assets	Total
Capital investments	(473)	(26)	(499)
Reconciling items	(11)	2	(9)
Cash outflow for capital expenditures	(484)	(24)	(508)

Supplementary Information



Three months ended March 31 (millions of dollars)	2024	2023
Net interest paid	129	119
Income taxes paid	17	21

25. 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.

26. 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 March 31, 2024 (millions of dollars)	Year 1	Year 2	Year 3	Year 4	Year 5	Thereafter
Outsourcing and other agreements	123	51	8	8	3	16
Capital agreements	44	56	38	5	—	—
Long-term software/meter agreement	18	18	2	1	1	—


			17

HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2024 and 2023

Outsourcing and other agreements

In February 2021, Hydro One entered into a three-year agreement for information technology services with Capgemini Canada Inc., which expired on February 29, 2024 and included an option to extend for two additional one-year terms at Hydro One's discretion. In June 2023, Hydro One provided Capgemini Canada Inc. with notice to extend the agreement, effective March 1, 2024 and to expire March 1, 2026.

Capital Agreements

In the course of business, Hydro One has entered into agreements committing to the purchase of specified equipment from various suppliers upon successful completion of certain milestones. As at March 31, 2024, Hydro One has committed to future contingent payments of $143 million.

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 March 31, 2024 (millions of dollars)	Year 1	Year 2	Year 3	Year 4	Year 5	Thereafter
Operating Credit Facilities	—	—	—	—	2,550	—
Letters of credit1	177	—	—	—	—	—
Guarantees2	512	—	—	—	—	—

1 Letters of credit consist of $157 million letters of credit related to retirement compensation arrangements, a $13 million letter of credit provided to the IESO for prudential support, and $7 million in letters of credit for various operating purposes.

2 Guarantees consist of $475 million prudential support provided to the IESO by Hydro One Inc. on behalf of its subsidiaries, as well as guarantees provided by Hydro One to the Minister of Natural Resources (Canada) and ONroute of $2 million and $30 million, respectively, relating to OCN LP (OCN Guarantee) and $5 million relating to Aux Energy Inc., the Company's indirect subsidiary.

27. SEGMENTED REPORTING

Hydro One has three reportable segments:

•The Transmission Segment, which comprises the transmission of high voltage electricity across the province, interconnecting local distribution companies and certain large directly connected industrial customers throughout the Ontario electricity grid;

•The Distribution Segment, which comprises the delivery of electricity to end customers and certain other municipal electricity distributors; and

•Other Segment, which includes certain corporate activities, investments including a joint venture that owns and operates electric vehicle fast charging stations across Ontario under the Ivy Charging Network brand, and the operations of the Company’s telecommunications business and of a wholly-owned subsidiary that provides energy solutions to commercial and industrial clients. The Other Segment includes the DTA which arose from the revaluation of the tax bases of Hydro One’s assets to fair market value when the Company transitioned from the provincial payments in lieu of tax regime to the federal tax regime at the time of Hydro One’s initial public offering in 2015. This DTA is not required to be shared with ratepayers, the Company considers it to not be part of the regulated transmission and distribution segment assets, and it is included in the other segment.

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 in deciding how to allocate resources and evaluate the performance of each of the segments. The Company evaluates segment performance based on income before financing charges and income tax expense from continuing operations (excluding certain allocated corporate governance costs).


			18

HYDRO ONE LIMITED

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)

For the three months ended March 31, 2024 and 2023


Three months ended March 31, 2024 (millions of dollars)	Transmission	Distribution	Other	Consolidated
Revenues	553	1,605	8	2,166
Purchased power	—	1,096	—	1,096
Operation, maintenance and administration	121	180	21	322
Depreciation, amortization and asset removal costs	133	118	3	254
Income (loss) before financing charges and income tax expense	299	211	(16)	494

Capital investments	421	249	3	673


Three months ended March 31, 2023 (millions of dollars)	Transmission	Distribution	Other	Consolidated
Revenues	555	1,509	10	2,074
Purchased power	—	1,010	—	1,010
Operation, maintenance and administration	123	185	20	328
Depreciation, amortization and asset removal costs	128	122	2	252
Income (loss) before financing charges and income tax expense	304	192	(12)	484

Capital investments	298	196	5	499

Total Assets by Segment:


As at (millions of dollars)	March 31, 2024	December 31, 2023
Transmission	20,185	19,819
Distribution	12,956	12,696
Other	966	337
Total assets	34,107	32,852

Total Goodwill by Segment:


As at (millions of dollars)	March 31, 2024	December 31, 2023
Transmission	157	157
Distribution	216	216
Total goodwill	373	373

All revenues, assets and substantially all costs, as the case may be, are earned, held or incurred in Canada.

28. SUBSEQUENT EVENTS

Dividends

On May 13, 2024, common share dividends of $188 million ($0.3142 per common share) were declared.


			19

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS

For the three months ended March 31, 2024 and 2023

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 months ended March 31, 2024, as well as the Company’s audited consolidated financial statements and MD&A for the year ended December 31, 2023. The Consolidated Financial Statements have been prepared in accordance with United States (US) 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 US/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 US. This MD&A provides information as at and for the three months ended March 31, 2024, based on information available to management as of May 13, 2024.

CONSOLIDATED FINANCIAL HIGHLIGHTS AND STATISTICS



Three months ended March 31 (millions of dollars, except as otherwise noted)	2024	2023	Change
Revenues	2,166	2,074	4.4	%
Purchased power	1,096	1,010	8.5	%
Revenues, net of purchased power1	1,070	1,064	0.6	%
Operation, maintenance and administration (OM&A) costs	322	328	(1.8	%)
Depreciation, amortization and asset removal costs	254	252	0.8	%
Financing charges	148	136	8.8	%
Income tax expense	51	64	(20.3	%)
Net income to common shareholders of Hydro One	293	282	3.9	%


Basic earnings per common share (EPS)	$0.49	$0.47	4.3	%
Diluted EPS	$0.49	$0.47	4.3	%



Net cash from operating activities	462	350	32.0	%
Funds from operations (FFO)1	602	496	21.4	%

Capital investments	673	499	34.9	%
Assets placed in-service	240	237	1.3	%

Transmission: Average monthly Ontario 60-minute peak demand (MW)	19,799	20,228	(2.1	%)
Distribution: Electricity distributed to Hydro One customers (GWh)	8,613	8,545	0.8	%


As at	March 31, 2024		December 31, 2023
Debt to capitalization ratio2	57.6	%	57.2	%

1 The Company prepares and presents its financial statements in accordance with US GAAP. The Company also utilizes non-GAAP financial measures to assess its business and measure overall underlying business performance. Revenues, net of purchased power, and FFO are non-GAAP financial measures. Non-GAAP financial measures do not have a standardized meaning under GAAP, which is used to prepare the Company’s Consolidated Financial Statements and might not be comparable to similar financial measures presented by other entities. See section “Non-GAAP Financial Measures” for a discussion of these non-GAAP financial measures and a reconciliation of such measures to the most directly comparable GAAP measure.

2 Debt to capitalization ratio is a non-GAAP ratio. Non-GAAP ratios do not have a standardized meaning under GAAP, which is used to prepare the Company’s Consolidated Financial Statements and might not be comparable to similar financial measures presented by other entities. See section “Non-GAAP Financial Measures” for a discussion of this non-GAAP ratio and its component elements.

OVERVIEW

The Company's transmission business consists of the transmission system operated by subsidiaries of Hydro One Inc. (a wholly-owned subsidiary of the Company), which includes Hydro One Networks Inc. (Hydro One Networks) and Hydro One Sault Ste. Marie LP, as well as an approximate 66% interest in B2M Limited Partnership, and an approximate 55% interest in Niagara Reinforcement Limited Partnership.

Hydro One’s distribution business consists of the 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 consists of other investments, including 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 months ended March 31, 2024 and 2023

For the three months ended March 31, 2024 and 2023, Hydro One's segments accounted for the Company's total revenues, as follows:


Three months ended March 31	2024		2023
Transmission	25	%	26	%
Distribution	74	%	73	%
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 three months ended March 31, 2024 and 2023 as follows:


Three months ended March 31	2024		2023
Transmission	51	%	52	%
Distribution	48	%	47	%
Other	1	%	1	%

As at March 31, 2024 and December 31, 2023, Hydro One’s segments accounted for the Company’s total assets as follows:


As at	March 31, 2024		December 31, 2023
Transmission	59	%	60	%
Distribution	38	%	39	%
Other	3	%	1	%

RESULTS OF OPERATIONS

Net Income

Net income attributable to common shareholders of Hydro One for the quarter ended March 31, 2024 of $293 million is an increase of $11 million, or 3.9%, compared to the same period in 2023. Significant influences on the change in net income attributable to common shareholders of Hydro One included:

•higher revenues, net of purchased power,1 resulting from an increase in transmission and distribution revenues due to Ontario Energy Board (OEB) - approved 2024 rates;

•higher financing charges attributable to higher interest on long-term debt as a result of higher weighted-average interest rates and higher average debt levels, partially offset by a lower average volume of short-term notes outstanding and higher average volume of short-term investments; and

•higher income tax expense, when excluding net income neutral items, is primarily due to lower deductible timing differences compared to the prior year and higher pre-tax earnings.

While net income neutral, the results of operations in the period are also impacted by the cessation of the OEB-approved recovery of deferred tax asset (DTA) amounts previously shared with ratepayers (DTA Recovery Amounts) on June 30, 2023 (see section “Regulation - Deferred Tax Asset” for further details) which resulted in a decrease to revenue that has been offset by lower income tax expense.

EPS

EPS was $0.49 for the three months ended March 31, 2024, compared to EPS of $0.47 in 2023. The increase in EPS was primarily driven by the impact of higher earnings year-over-year, as discussed above.

1 Revenues, net of purchased power, is a non-GAAP financial measure. See section “Non-GAAP Financial Measures”.


			2

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2024 and 2023

Revenues



Three months ended March 31 (millions of dollars, except as otherwise noted)	2024	2023	Change
Transmission	553	555	(0.4	%)
Distribution	1,605	1,509	6.4	%
Other	8	10	(20.0	%)
Total revenues	2,166	2,074	4.4	%

Transmission	553	555	(0.4	%)
Distribution revenues, net of purchased power1	509	499	2.0	%
Other	8	10	(20.0	%)
Total revenues, net of purchased power1	1,070	1,064	0.6	%

Transmission: Average monthly Ontario 60-minute peak demand (MW)	19,799	20,228	(2.1	%)
Distribution: Electricity distributed to Hydro One customers (GWh)	8,613	8,545	0.8	%

1 Revenues, net of purchased power, is a non-GAAP financial measure. See section “Non-GAAP Financial Measures”.

Transmission Revenues

Transmission revenues decreased by 0.4% compared to the quarter ended March 31, 2023, primarily due to the following:

•net income neutral items, including lower revenues associated with the cessation of the DTA recovery period and the OEB-approved recovery of regulatory assets in the prior year, which are offset in income tax expense and OM&A; and

•lower average monthly peak demand; partially offset by

•higher revenues resulting from OEB-approved 2024 rates.

Distribution revenues

Distribution revenues increased by 6.4% compared to the quarter ended March 31, 2023, primarily due to the following:

•higher purchased power costs, which are fully recovered from ratepayers and thus net income neutral;

•higher revenues resulting from OEB-approved 2024 rates; and

•higher energy consumption; partially offset by

•net income neutral items, including lower revenues associated with the cessation of the DTA recovery period which are offset in income tax expense; and

•lower revenue of Hydro One Remotes, which is offset in OM&A and therefore net income neutral.

Distribution revenues, net of purchased power,2 increased by 2.0% compared to the quarter ended March 31, 2023, primarily due to the reasons noted above, adjusted for the recovery of purchased power costs.

OM&A Costs



Three months ended March 31 (millions of dollars)	2024	2023	Change
Transmission	121	123	(1.6	%)
Distribution	180	185	(2.7	%)
Other	21	20	5.0	%
	322	328	(1.8	%)

Transmission OM&A Costs

Transmission OM&A costs were 1.6% lower than the quarter ended March 31, 2023, primarily due to:

•lower OM&A associated with the OEB-approved recovery of historical cost deferrals, which is offset in revenue and therefore net income neutral; partially offset by

•higher work program expenditures.

Distribution OM&A Costs

Distribution OM&A costs were 2.7% lower than the quarter ended March 31, 2023, primarily due to:

•lower fuel costs of Hydro One Remotes, which are fully recovered through revenue and therefore net income neutral; partially offset by

•higher allowance for doubtful accounts.

2 Revenues, net of purchased power, is a non-GAAP financial measure. See section “Non-GAAP Financial Measures”.


			3

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2024 and 2023

Depreciation, Amortization and Asset Removal Costs

Depreciation, amortization and asset removal costs increased by $2 million, or 0.8%, for the quarter ended March 31, 2024, compared to the same period in 2023, primarily due to growth in capital assets as the Company continues to place new assets in-service, consistent with its ongoing capital investment program, partially offset by lower amortization of regulatory assets.

Financing Charges

Financing charges increased by $12 million, or 8.8%, for the quarter ended March 31, 2024, primarily due to higher interest on long-term debt as a result of higher weighted-average interest rates and higher average debt levels, partially offset by a lower average volume of short-term notes outstanding and higher average volume of short-term investments.

Income Tax Expense

Income tax expense was $51 million for the three months ended March 31, 2024, compared to $64 million for the same period in 2023. The $13 million year-over-year decrease in income tax expense was primarily due to the following:

•OEB-approved regulatory adjustments, principally related to the cessation of DTA recovery on June 30, 2023, pursuant to the DTA Implementation Decision, that are offset by a corresponding reduction in revenue and therefore net income neutral; partially offset by

•lower deductible timing differences compared to the prior year; and

•higher pre-tax earnings, adjusted for the net income neutral items.

The Company realized an effective tax rate of approximately 14.7% for the three months ended March 31, 2024, compared to approximately 18.4% realized in the same period in 2023. The decrease of 3.7%, was primarily attributable to the factors noted above.

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 the 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, financial condition, 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 May 13, 2024, Hydro One had 599,425,257 issued and outstanding common shares.

The Company is authorized to issue an unlimited number of preferred shares, issuable in series. As at May 13, 2024, 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 May 13, 2024 was 1,735,572.

Common Share Dividends

In 2024, 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 12, 2024

March 13, 2024

March 28, 2024

$0.2964

$178

Following the conclusion of the first quarter of 2024, 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)

May 13, 2024

June 12, 2024

June 28, 2024

$0.3142

$188


			4

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2024 and 2023

QUARTERLY RESULTS OF OPERATIONS


Quarter ended (millions of dollars, except EPS and ratio)	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022
Revenues	2,166	1,979	1,934	1,857	2,074	1,862	2,031	1,840
Purchased power	1,096	990	854	798	1,010	895	963	852
Revenues, net of purchased power1	1,070	989	1,080	1,059	1,064	967	1,068	988
Net income to common shareholders	293	181	357	265	282	178	307	255

Basic EPS	$0.49	$0.30	$0.60	$0.44	$0.47	$0.30	$0.51	$0.43
Diluted EPS	$0.49	$0.30	$0.59	$0.44	$0.47	$0.30	$0.51	$0.42

Earnings coverage ratio2	2.8	2.9	3.0	3.1	3.2	3.3	3.3	3.3

1 Revenues, net of purchased power, is a non-GAAP financial measure. See section “Non-GAAP Financial Measures”.

2 Earnings coverage ratio, which is calculated on a rolling 12-month basis, is a non-GAAP ratio. Non-GAAP ratios do not have a standardized meaning under GAAP, which is used to prepare the Company’s Consolidated Financial Statements and might not be comparable to similar financial measures presented by other entities. See section “Non-GAAP Financial Measures” for a discussion of this non-GAAP ratio and its component elements.

Variations in revenues and net income 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.

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 months ended March 31, 2024 and 2023:



Three months ended March 31 (millions of dollars)	2024	2023	Change
Transmission	64	115	(44.3	%)
Distribution	172	122	41.0	%
Other	4	—	100.0	%
Total assets placed in-service	240	237	1.3	%

Transmission Assets Placed In-Service

Transmission assets placed in-service decreased by $51 million, or 44.3%, for the quarter ended March 31, 2024, compared to the same period in 2023, primarily due to the following:

•timing of assets placed in-service for station refurbishments and replacements primarily related to the Nanticoke Transmission Station and Bridgman Transmission Station that were placed in-service in the prior year; partially offset by

•higher volume of wood pole replacements.

Distribution Assets Placed In-Service

Distribution assets placed in-service increased by $50 million, or 41.0%, for the quarter ended March 31, 2024, compared to the same period in 2023, primarily due to the following:

•higher spend on line refurbishments, wood pole replacements and customer connections;

•higher spend on minor fixed assets;

•investments placed in-service for system capability reinforcement projects; and

•higher volume of storm-related asset replacements related to a storm in February of this year.


			5

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2024 and 2023

Capital Investments

The following table presents Hydro One’s capital investments during the three months ended March 31, 2024 and 2023:



Three months ended March 31 (millions of dollars)	2024	2023	Change
Transmission
Sustaining	288	220	30.9	%
Development	109	62	75.8	%
Other	24	16	50.0	%
	421	298	41.3	%
Distribution
Sustaining	107	81	32.1	%
Development	115	100	15.0	%
Other	27	15	80.0	%
	249	196	27.0	%
Other	3	5	(40.0	%)
Total capital investments	673	499	34.9	%

Transmission Capital Investments

Transmission capital investments increased by $123 million, or 41.3%, in the first quarter of 2024 compared to the first quarter of 2023, primarily due to the following:

•higher volume of station refurbishments and equipment replacements;

•higher volume of work on customer connections;

•higher spend on station work attributable to the Waasigan Transmission Line;

•investments in the St. Clair Transmission Line; and

•timing of work at Third Line Transmission Station.

Distribution Capital Investments

Distribution capital investments increased by $53 million, or 27.0%, in the first quarter of 2024 compared to the first quarter of 2023, primarily due to the following:

•higher spend on line refurbishments, wood pole replacements and customer connections;

•investments in the Orillia Operation Centre and Orillia Distribution Center;

•investment in the Advanced Metering Infrastructure 2.0 system;

•higher spend on system capability reinforcement projects;

•higher spend on minor fixed assets; and

•higher spend on storm-related asset replacements following the storm in February of this year; partially offset by

•lower spend on information technology (IT) initiatives primarily due to execution of major projects in the prior year.


			6

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2024 and 2023

Major Transmission Capital Investment Projects

The following table summarizes the status of significant transmission projects as at March 31, 2024:

Project Name

Location

Type

Anticipated
In-Service Date

Estimated

Cost1

Capital Cost
To Date

(year)

(millions of dollars)

Development Projects:

Chatham to Lakeshore
Transmission Line2

Southwestern Ontario

New transmission line and
station expansion

2024

253

168

East-West Tie Station Expansion3

Northern Ontario

New transmission connection
and station expansion

2024

191

189

Barrie Area Transmission
Upgrade4

Barrie-Innisfil
Southern Ontario

Upgraded transmission line
and stations

2024

125

114

St. Clair Transmission Line5

Southwestern Ontario

New transmission line and
station expansion

2025

Islington Transmission Station

Toronto Southern Ontario

New transmission station and
connection

2025

109

Waasigan Transmission Line6

Thunder Bay-Atikokan-Dryden
Northwestern Ontario

New transmission line and
station expansion

2027

1,200

100

Longwood to Lakeshore
Transmission Line7

Southwestern Ontario

New transmission line and
station expansion

TBD

Second Longwood to Lakeshore
Transmission Line7

Southwestern Ontario

New transmission line and
station expansion

TBD

Lakeshore to Windsor

Transmission Line7

Southwestern Ontario

New transmission line and
station expansion

TBD

Mississagi to Third Line Line8

Northeastern Ontario

New transmission line and
station expansion

TBD

Hanmer to Mississagi Line8

Northeastern Ontario

New transmission line and
station expansion

TBD

Durham Kawartha Power Line8

Eastern Ontario

New transmission line and
station expansion

TBD

Sustainment Projects:

Bruce B Switching Station
Circuit Breaker Replacement

Tiverton
Southwestern Ontario

Station sustainment

2024

185

172

Beck #2 Transmission Station

Circuit Breaker Replacement4

Niagara area
Southwestern Ontario

Station sustainment

2024

135

126

Middleport Transmission Station
Circuit Breaker Replacement

Middleport
Southwestern Ontario

Station sustainment

2025

184

147

Lennox Transmission Station
Circuit Breaker Replacement

Napanee
Southeastern Ontario

Station sustainment

2026

152

133

Esplanade x Terauley
Underground Cable Replacement

Toronto
Southern Ontario

Line sustainment

2026

117

Bridgman Transmission Station
Refurbishment

Toronto
Southern Ontario

Station sustainment

2026

108

Bruce A Transmission Station
Switchyard Replacement

Tiverton
Southwestern Ontario

Station sustainment

2027

555

148

Merivale Transmission Station

Replacement and Upgrades9

Ottawa
Eastern Ontario

Station sustainment and
upgrade

2029

271

1 Estimated costs are presented gross of any potential contribution from external parties.

2 The Chatham to Lakeshore Transmission Line Project includes the line and associated facilities and is further discussed in the section “Other Developments - Supporting Critical Infrastructure in Southwestern Ontario.”

3 The East-West Tie Station Expansion Project has been placed in-service in phases, with significant portions of the project placed in-service over the 2021-23 period, and final project in-service expected in 2024.

4 Major portions of the Barrie Area Transmission Upgrade and Beck #2 Transmission Station Circuit Breaker Replacement were completed and placed in-service.

5 The estimated cost of the St. Clair Transmission Line relates to the development phase of the project and the anticipated in-service date reflects the anticipated completion date of the development phase only. Completion of the line remains subject to stakeholder consultation and regulatory approvals.

6 The Waasigan Transmission Line Project includes both Phase 1 and Phase 2, inclusive of necessary stations 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 the anticipated completion of Phase 2 in 2027. The first phase of the project is expected to be in-serviced as close to the end of 2025 as possible and is further discussed in the section “Other Developments - Supporting Critical Transmission Infrastructure in Northwestern Ontario”.

7 The scope and timing of these Southwestern Ontario transmission reinforcements are currently under review.

8 The scope and timing of these Northeastern and Eastern Ontario transmission reinforcements are currently under review. Durham Kawartha Power Line was previously referred to as Greater Toronto Area East Line.

9 The coordinated project includes both an asset replacement and station expansion. The anticipated in-service dates are between 2026 to 2029.


			7

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2024 and 2023

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 following tables summarize Hydro One’s annual projected capital investments for 2024 to 2027 by business segment and by category:


By business segment: (millions of dollars)	2024	2025	2026	2027
Transmission1	1,998	1,935	1,696	1,507
Distribution	1,093	1,060	938	884
Other	20	18	15	14
Total capital investments2	3,111	3,013	2,649	2,405


By category: (millions of dollars)	2024	2025	2026	2027
Sustainment	1,760	1,618	1,452	1,221
Development1	1,075	1,165	1,006	1,008
Other3	276	230	191	176
Total capital investments2	3,111	3,013	2,649	2,405

1 Figures include investments in certain development projects of Hydro One Networks not included in the investment plan approved by the OEB in the Joint Rate Application (JRAP) decision.

2 On March 29, 2021, the IESO requested Hydro One to initiate work to develop and construct a new transmission line between Chatham and Lambton (the St. Clair Line) to support agricultural growth in Southwestern Ontario. On March 31, 2022, the Minister of Energy directed the OEB to amend Hydro One Networks' transmission licence to require it to develop and seek approvals for this and three other priority transmission lines to meet growing demand in Southwestern Ontario. On October 23, 2023, the Minister of Energy further directed the OEB to amend Hydro One Networks' licence to require it to develop and seek approvals for three priority transmission line projects to meet growing electricity demand in Northeastern and Eastern Ontario (see section “Other Developments - Supporting Critical Transmission Infrastructure in Northwestern Ontario”). The future capital investments presented do not include capital expenditures of the six additional lines, as Hydro One is currently evaluating the scope and timing of this work.

3 “Other” capital expenditures include investments in fleet, real estate, IT, 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 March 31 (millions of dollars)	2024	2023
Net cash from operating activities	462	350
Net cash from (used in) financing activities	833	(296)
Net cash used in investing activities	(688)	(541)
Increase (decrease) in cash and cash equivalents	607	(487)

Net cash from operating activities

Net cash from operating activities increased by $112 million for the three months ended March 31, 2024, compared to the same period in 2023. The increase was impacted by various factors, including the following:

•changes in regulatory account balances; and

•higher pre-tax earnings; partially offset by

•decrease in net working capital deficiency primarily attributable to lower cost of power payable to the Independent Electricity System Operator (IESO), and higher transmission revenue receivables from the IESO, partially offset by higher accrued liabilities.

Net cash from (used in) financing activities

Net cash from financing activities increased by $1,129 million for the three months ended March 31, 2024, compared to the same period of 2023. This was impacted by various factors, including the following:

Sources of cash

•the Company issued $800 million of long-term debt in the first quarter of 2024, compared to $1,050 million of long-term debt issued in the same period last year.

•the Company received proceeds of $500 million from the issuance of short-term notes in the first quarter of 2024, compared to $1,640 million received in the same period last year.


			8

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2024 and 2023

Uses of cash

•the Company repaid $280 million of short-term notes in the first quarter of 2024, compared to $2,210 million repaid in the same period last year.

•common share dividends paid in the first quarter of 2024 were $178 million, compared to dividends of $167 million paid in the same period last year.

•the Company repaid $nil of long-term debt in the first quarter of 2024, compared to $600 million repaid in the same period last year.

Net cash used in investing activities

Net cash used in investing activities for the three months ended March 31, 2024 was $147 million higher than the same period of 2023 as a result of higher capital investments. See section “Capital Investments” for comparability of capital investments made by the Company during the period ended March 31, 2024 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 March 31, 2024, Hydro One Inc. had $497 million in commercial paper borrowings outstanding, compared to $279 million outstanding at December 31, 2023. The Company also has revolving bank credit facilities (Operating Credit Facilities) with a total available balance of $2,550 million as at March 31, 2024. The Operating Credit Facilities include a pricing adjustment which can increase or decrease Hydro One’s cost of funding based on its performance on certain Sustainability Performance Measures, which are related to Hydro One's sustainability goals. On June 1, 2023, the maturity date for the Operating Credit Facilities was extended from 2027 to 2028. No amounts were drawn on the Operating Credit Facilities as at March 31, 2024 or December 31, 2023. 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 March 31, 2024, the Company had long-term debt outstanding in the principal amount of $16,245 million, which included $425 million of long-term debt issued by Hydro One and $15,820 million of long-term debt issued by Hydro One Inc. The long-term debt issued by Hydro One was issued under its short form base shelf prospectus (Universal Base Shelf Prospectus), as further described below. 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 2024 and 2064, and as at March 31, 2024, had a weighted-average term to maturity of approximately 13.2 years (December 31, 2023 - 13.7 years) and a weighted-average coupon rate of 4.1% (December 31, 2023 - 4.1%).

In February 2024, Hydro One Inc. filed a short form base shelf prospectus in connection with its MTN Program, which expires in March 2026. Upon issuance of the short form base shelf prospectus in February 2024, the Company does not qualify for the distribution of any additional notes under the previous MTN Program prospectus that was filed in June 2022.

On August 15, 2022, Hydro One filed the 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, up to $2,000 million of debt, equity or other securities, or any combination thereof, during the 25-month period ending on September 16, 2024. As at March 31, 2024, no securities have been issued under the Universal Base Shelf Prospectus. A new Universal Base Shelf Prospectus is expected to be filed in the third quarter of 2024.

On November 22, 2022, Hydro One Holdings Limited (HOHL) filed a short form base shelf prospectus (US Debt Shelf Prospectus) with securities regulatory authorities in Canada and the US to replace a previous prospectus that would otherwise have expired in January 2023. The US Debt Shelf Prospectus allows HOHL to offer, from time to time in one or more public offerings, up to US$3,000 million of debt securities, unconditionally guaranteed by Hydro One, expiring in December 2024. As at March 31, 2024, no securities have been issued under the US Debt Shelf Prospectus.

Compliance

As at March 31, 2024, the Company was in compliance with all financial covenants and limitations associated with the outstanding borrowings and credit facilities.

3 FFO is a non-GAAP financial measure. See section “Non-GAAP Financial Measures”.


			9

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2024 and 2023

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 March 31, 2024 (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	16,245	1,100	1,675	1,175	12,295
Long-term debt - interest payments	9,264	664	1,225	1,107	6,268
Short-term notes payable	497	497	—	—	—
Pension contributions1	441	71	149	159	62
Environmental and asset retirement obligations	129	38	15	2	74
Outsourcing and other agreements	209	123	59	11	16
Capital agreements	143	44	94	5	—
Lease obligations	62	15	28	17	2
Long-term software/meter agreement	40	18	20	2	—
Total contractual obligations	27,030	2,570	3,265	2,478	18,717

Other commercial commitments (by year of expiry)
Operating Credit Facilities	2,550	—	—	2,550	—
Letters of credit2	177	177	—	—	—
Guarantees3	512	512	—	—	—
Total other commercial commitments	3,239	689	—	2,550	—

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, 2022 and filed on September 26, 2023.

2 Letters of credit consist of $157 million letters of credit related to retirement compensation arrangements, a $13 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 guarantees provided by Hydro One to the Minister of Natural Resources (Canada) and ONroute of $2 million and $30 million, respectively, relating to OCN LP (OCN Guarantee) and $5 million relating to Aux Energy Inc., the Company's indirect subsidiary.

REGULATION

Deferred Tax Asset

On April 8, 2021, the OEB rendered its DTA Implementation Decision, approving the recovery of the DTA amounts allocated to ratepayers and included in customer rates for the 2017 to 2021 period, plus carrying charges, over a two-year recovery period from July 1, 2021 to June 30, 2023. The DTA Implementation Decision had no impact to FFO4 in the first quarter of 2024 as the DTA Recovery period ceased in June 2023 (2023 - increase of $34 million).

Incremental Cloud Computing Implementation Costs Deferral Account

On November 2, 2023, the OEB established an industry-wide generic deferral account, effective December 1, 2023, which allows rate-regulated entities, including electricity distributors and transmitters, to record incremental cloud computing implementation costs incurred and any related offsetting savings, if applicable, in a regulatory account for future recovery subject to the approval of the OEB. On March 6, 2024, the OEB commenced a hearing that will consider matters related to the Incremental Cloud Computing Implementation Costs deferral account, including what type of interest rate, if any, should apply. As at March 31, 2024, the Company has not recorded any amounts in this account, however it is assessing the potential impact of establishing the account for future periods.

4 FFO is a non-GAAP financial measure. See section “Non-GAAP Financial Measures”.


			10

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2024 and 2023

Building Broadband Faster Act, 2021

In March 2021, the 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 being issued in December 2021. The most recent Order and Decision from the OEB on November 2022 adjusts the annual wireline attachment rate to $36.05 per attacher per pole.

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, in conjunction with the OEB and other stakeholders, has developed and implemented an appropriate regulatory framework that meets the government’s objectives, including arrangements to sustain the Company’s revenues and recovery of reasonable associated costs.

OTHER DEVELOPMENTS

Northern Ontario Voltage Study

In December 2023, the IESO published its Northern Ontario Voltage Study Report (Bulk System Reactive Requirements in Northern Ontario), 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, the Hanmer to Mississagi Line, and the 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 is currently assessing the impact of this letter.

Chapleau Hydro Purchase Agreement

On November 6, 2023, Hydro One Networks and Chapleau Public Utilities Corporation (Chapleau Hydro) signed a definitive agreement for Hydro One Networks to acquire Chapleau Hydro’s distribution business to serve electricity customers within the Township of Chapleau. The agreement includes purchasing substantially all of Chapleau Hydro’s electricity distribution assets. Chapleau Hydro is owned by the Township of Chapleau. Hydro One Networks is expected to pay approximately $2.3 million for the transaction, subject to adjustments. The acquisition is conditional upon the satisfaction of customary closing conditions and approval by the OEB. On November 20, 2023, Hydro One filed a Mergers, Amalgamations, Acquisitions and Divestitures application with the OEB to seek approval for the transaction. On April 18, 2024, the OEB issued its decision approving Hydro One’s application for the acquisition.


			11

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2024 and 2023

Supporting Critical Transmission Infrastructure in Southwestern Ontario

On November 24, 2022, the OEB issued its Decision and Order granting Hydro One Networks leave to construct the Chatham to Lakeshore Transmission Line Project, with standard conditions of approval.

On June 15, 2023, Hydro One commenced construction of the Chatham to Lakeshore Transmission Line Project, which is expected to be in-service by December 2024 and completed for a total cost of $253 million.

On April 22, 2024, Chatham x Lakeshore Limited Partnership (CLLP) was formed to own and operate the transmission line. On April 26, 2024, Hydro One Networks, on behalf of CLLP, filed an application with the OEB requesting certain approvals, including obtaining an electricity transmission licence and approval to sell assets related to the Chatham to Lakeshore Transmission Line Project to CLLP.

Supporting Critical Transmission Infrastructure in Northwestern Ontario

In 2013, the Province issued an Order in Council with a directive from the Minister of Energy to the OEB, requiring Hydro One Networks to develop and seek approvals for the Northwest Bulk Transmission Line (now the Waasigan Transmission Line). In response to the 2013 directive, the OEB amended Hydro One Networks’ transmission license in 2014 to develop and seek approval for the project.

On April 25, 2023, the Company received a letter from the IESO confirming the need for reliable electricity in Northwestern Ontario. In this letter, the IESO recommends that Phase 2 of the Waasigan Transmission Line Project, a single-circuit 230 kilovolt transmission line between Mackenzie Transmission Station in the Town of Atikokan and Dryden Transmission Station in the City of Dryden, should be in-serviced as soon as practically possible following Phase 1 of the project. This follows an IESO letter received in May 2022 in which it recommended construction of Phase 1 to proceed with an in-service date as close to the end of 2025 as possible.

On July 31, 2023, Hydro One Networks filed a leave-to-construct application seeking OEB approval for the Waasigan Transmission Line Project. On November 9, 2023, an Environmental Assessment was filed with the Ministry of Environment Climate and Parks for review and approval, which incorporated both phases of the project. On April 16, 2024, the OEB issued its Decision and Order granting leave to construct as requested in the application, with standard conditions of approval.

Hydro One has agreements with nine First Nation communities providing them the opportunity to acquire 50% ownership in the transmission line component of the project.

Supporting Critical Transmission Infrastructure in Northeastern and Eastern Ontario

On July 10, 2023, the Ministry of Energy (Ministry) announced a proposal to take certain actions to facilitate the timely development of three transmission projects across Northeastern and Eastern Ontario (see section "Major Transmission Capital Investment Projects"). On October 23, 2023, the Minister of Energy directed the OEB to amend Hydro One Networks’ licence to require it to develop and seek approvals for the three priority transmission line projects noted above. On November 14, 2023, further to the Minister’s Directive, the OEB amended Hydro One’s electricity transmission licence to require it to develop and seek approvals for these projects in accordance with the recommendations of the IESO.

Sustainability Report

The Hydro One 2022 Sustainability Report entitled “Enabling Ontario's Clean Energy Future” is available on the Company’s website at www.hydroone.com/sustainability.

The 2022 Sustainability Report discloses the Company’s environmental, social and governance performance and provides a better understanding of how Hydro One manages the opportunities and challenges associated with its business. The report also includes disclosure relating to the Company’s current efforts in its priority areas of People, Planet and Community.

HYDRO ONE EXECUTIVE LEADERSHIP TEAM

On January 2, 2024, Chris Lopez announced his intention to step down as Executive Vice President (EVP) and Chief Financial and Regulatory Officer, effective June 30, 2024.

On March 20, 2024, Hydro One announced the appointment of Renée McKenzie as EVP, Digital and Technology Solutions, effective March 25, 2024.


			12

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2024 and 2023

NON-GAAP FINANCIAL MEASURES

Hydro One uses a number of financial measures to assess its performance. The Company presents FFO or “funds from operations” to reflect a measure of the Company’s cash flow, and revenues, net of purchased power, to reflect revenues net of the cost of purchased power. FFO and revenues, net of purchased power, are non-GAAP financial measures which do not have a standardized meaning prescribed by GAAP and might not be comparable to similar measures presented by other entities. They should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under GAAP.

Hydro One also uses financial ratios that are non-GAAP ratios such as debt to capitalization ratio and earnings coverage ratio. Non-GAAP ratios do not have a standardized meaning prescribed by GAAP and might not be comparable to similar measures presented by other entities. They should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under US GAAP.

FFO

FFO is defined as net cash from operating activities, adjusted for (i) changes in non-cash balances related to operations, (ii) dividends paid on preferred shares, and (iii) 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 March 31
(millions of dollars)	2024	2023
Net cash from operating activities		462	350
Changes in non-cash balances related to operations		144	150
Distributions to noncontrolling interest		(4)	(4)
FFO		602	496

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 GAAP (reported) revenues to non-GAAP (adjusted) revenues, net of purchased power, on a consolidated basis.


Quarter ended (millions of dollars)	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022
Revenues	2,166	1,979	1,934	1,857	2,074	1,862	2,031	1,840
Less: Purchased power	1,096	990	854	798	1,010	895	963	852
Revenues, net of purchased power	1,070	989	1,080	1,059	1,064	967	1,068	988


Quarter ended (millions of dollars)	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022
Distribution revenues	1,605	1,459	1,329	1,285	1,509	1,371	1,458	1,314
Less: Purchased power	1,096	990	854	798	1,010	895	963	852
Distribution revenues, net of purchased power	509	469	475	487	499	476	495	462


			13

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2024 and 2023

Debt to Capitalization Ratio

The Company believes that the debt to capitalization ratio is an important non-GAAP ratio in the management of its debt levels. This non-GAAP ratio does not have a standardized meaning under US GAAP and may not be comparable to similar measures presented by other entities. Debt to capitalization ratio has been calculated as total debt (including total long-term debt and short-term borrowings, net of cash and cash equivalents) divided by total debt plus total shareholders’ equity, 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.


As at (millions of dollars)	Mar 31, 2024	Dec 31, 2023

Short-term notes payable	497	279
Less: cash and cash equivalents	(686)	(79)
Long-term debt (current portion)	1,100	700
Long-term debt (long-term portion)	15,105	14,710
Total debt (A)	16,016	15,610

Shareholders' equity (excluding noncontrolling interest)	11,800	11,680
Total debt plus shareholders' equity (B)	27,816	27,290


Debt-to-capitalization ratio (A/B)									57.6		%	57.2		%

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. This non-GAAP ratio does not have a standardized meaning under US GAAP and may not be comparable to similar measures presented by other entities.


Quarter ended (millions of dollars)	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022
Net income to common shareholders	293	181	357	265	282	178	307	255
Income tax expense	51	13	36	65	64	41	100	68
Financing charges	148	147	143	144	136	128	122	119
Earnings before income taxes and financing charges attributable to common shareholders	492	341	536	474	482	347	529	442

Twelve months ended (millions of dollars)	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022
Earnings before income taxes and financing charges attributable to common shareholders (A)	1,843	1,833	1,839	1,832	1,800	1,824	1,814	1,774

Quarter ended (millions of dollars)	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022
Financing charges	148	147	143	144	136	128	122	119
Capitalized interest	19	19	20	18	15	16	16	16
Financing charges and capitalized interest	167	166	163	162	151	144	138	135

Twelve months ended (millions of dollars)	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022
Financing charges and capitalized interest (B)	658	642	620	595	568	549	544	539

Earnings coverage ratio = A/B	2.8	2.9	3.0	3.1	3.2	3.3	3.3	3.3


			14

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2024 and 2023

RELATED PARTY TRANSACTIONS

The Province is a shareholder of Hydro One with approximately 47.1% ownership as at March 31, 2024. The IESO, Ontario Power Generation Inc. (OPG), and the OEB are related parties to Hydro One because they are controlled or significantly influenced by the Ministry. OCN LP is a joint-venture limited partnership between OPG and a subsidiary of Hydro One. The following is a summary of the Company’s related party transactions during the three months ended March 31, 2024 and 2023:



Three months ended March 31 (millions of dollars)
Related Party	Transaction	2024	2023
Province	Dividends paid	84	79
IESO	Power purchased	819	787
	Revenues for transmission services	550	551
	Amounts related to electricity rebates	327	230
	Distribution revenues related to rural rate protection	63	61
	Distribution revenues related to Wataynikaneyap Power LP	30	14
	Distribution revenues related to supply of electricity to remote northern communities	12	11
	Funding received related to Conservation and Demand Management programs	—	1
OPG	Power purchased	6	4
	Transmission revenues related to provision of services and supply of electricity	1	1
	Distribution revenues related to provision of services and supply of electricity	1	1

	Capital contribution received from OPG	1	3


OEB	OEB fees	3	3
OCN LP1	Investment in OCN LP	5	—

1 OCN LP owns and operates electric vehicle fast charging stations across Ontario, under the Ivy Charging Network brand.

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 2023 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 March 31, 2024 that materially affected, or are reasonably likely to materially affect, the Company’s disclosure controls and procedures and internal control over financial reporting.


			15

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2024 and 2023

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:

Recently Adopted Accounting Guidance

Guidance

Date issued

Description

ASU Effective Date

Impact on Hydro One

ASU 2023-07

November 2023

Fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Under assessment

Recently Issued Accounting Guidance Not Yet Adopted

Guidance

Date issued

Description

ASU Effective Date

Impact on Hydro One

ASU 2023-06

October 2023

Two years subsequent to the date on which the SEC’s removal of that related disclosure becomes effective.

Under assessment

ASU 2023-09

December 2023

Annual periods beginning after December 15, 2024.

Under assessment

ASU 2024-02

March 2024

Fiscal years beginning after December 15, 2024.

Under assessment


			16

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2024 and 2023

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 22, 2022. 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 March 31, 2024 and December 31, 2023 and for the three months ended March 31, 2024 and March 31, 2023 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 US GAAP, as issued by the FASB.


Three months ended March 31 (millions of dollars)	Hydro One Limited		HOHL		Subsidiaries of Hydro One Limited, other than HOHL		Consolidating Adjustments		Total Consolidated Amounts of Hydro One Limited
	2024	2023	2024	2023	2024	2023	2024	2023	2024	2023
Revenue	178	167	—	—	2,387	2,280	(399)	(373)	2,166	2,074
Net Income (Loss) Attributable to Common Shareholders	178	167	—	—	491	466	(376)	(351)	293	282


As at March 31, 2024 and December 31, 2023 (millions of dollars)	Hydro One Limited		HOHL		Subsidiaries of Hydro One Limited, other than HOHL		Consolidating Adjustments		Total Consolidated Amounts of Hydro One Limited
	Mar. 2024	Dec. 2023	Mar. 2024	Dec. 2023	Mar. 2024	Dec. 2023	Mar. 2024	Dec. 2023	Mar. 2024	Dec. 2023
Current Assets	130	125	—	—	3,990	2,868	(2,083)	(1,639)	2,037	1,354
Non-Current Assets	3,488	3,486	—	—	50,448	49,487	(21,866)	(21,475)	32,070	31,498
Current Liabilities	538	532	—	—	4,787	3,815	(2,072)	(1,627)	3,253	2,720
Non-Current Liabilities	425	425	—	—	33,425	32,433	(14,879)	(14,491)	18,971	18,367

FORWARD-LOOKING STATEMENTS AND INFORMATION

The Company’s oral and written public communications, including this document, often contain forward-looking statements that are 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 applications including the JRAP and its proposed investment plan, resulting and related decisions including the DTA Implementation Decision, 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; expectations for Hydro One to file a new Universal Base Shelf prospectus in the third quarter of 2024; the Company’s maturing debt; the Company’s ongoing and planned projects, initiatives and expected capital investments, including expected approvals, results, costs and in-service and completion dates; contractual obligations and other commercial commitments; the number of Hydro One common shares issuable in connection with outstanding awards under the share grant plans; the BBFA and expected impacts; the Company’s assessment of impacts related to the OEB-established generic variance and deferral accounts; expectations regarding the OEB hearing related to Incremental Cloud Computing Implementation Costs deferral account; future pension plan and contributions, including estimates of total Company pension contributions beyond 2024 up to 2029; dividends; non-GAAP financial measures; internal controls over financial reporting and disclosure; the MTN Program; the Universal Base Shelf Prospectus; the US Debt Shelf Prospectus; recent accounting-related guidance and expected impacts; and the Company’s acquisitions. 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: the scope of the COVID-19 pandemic and duration thereof as well as the effect and severity of corporate and other mitigation measures on the Company’s operations, supply chain or employees; 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


			17

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2024 and 2023

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 US 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;

•risks associated with information system security and maintaining complex IT and operational technology (OT) system infrastructure, including system failures or risks of cyber-attacks or unauthorized access to corporate IT 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, including the COVID-19 pandemic (including a significant expansion in length or severity of the COVID-19 pandemic, including the spread of its variants, restricting or prohibiting the Company’s operations or significantly impacting the Company’s supply chain or workforce; severity of mitigation measures relating to the


			18

HYDRO ONE LIMITED

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

For the three months ended March 31, 2024 and 2023

COVID-19 pandemic and delays in completion of and increases in costs of operating and capital projects; and the regulatory and accounting treatment of incremental costs and lost revenues of the Company related to the COVID-19 pandemic);

•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.


			19

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 March 31, 2024.

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 January 1, 2024 and ended on March 31, 2024 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.



Date:						May 14, 2024

						/s/ David Lebeter
						President and Chief Executive Officer

FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS – FULL CERTIFICATE

I, Christopher Lopez, 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 March 31, 2024.

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

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 January 1, 2024 and ended on March 31, 2024 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.



Date:						May 14, 2024

						/s/ Christopher Lopez
						Executive Vice President, Chief Financial and Regulatory Officer

Hydro One (PK) (USOTC:HRNNF)
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