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2014 Sustainability-based Annual Report

29 Financials – Our Story in Numbers Horizon Holdings Inc., as the parent of Horizon Utilities and Horizon Energy Solutions, has delivered consistently strong financial results and dividends to its shareholders. This record of strong and sustainable profitability directly supports our communities through sustainable investment in a vital electricity distribution network and acts as a testament to our commitment to cost effectiveness. Through its subsidiaries, Horizon Holdings Inc. invested $33.0 million in infrastructure improvements in 2014. Net income was $4.3 million and included $14.4 million of net electricity costs that represent past or future settlements with customers. Excluding these pass-through costs, Horizon Holdings had a strong operating net income performance of $18.7 million. Further information regarding Horizon Holdings’ financial condition and results of operations is available in its Management’s Discussion and Analysis and the Audited Consolidated Financial Statements for the year ended December 31, 2014 (found in the rear pocket of this report or on our websites). In terms of dividends, a total of $13.5 million were paid to the Hamilton and St. Catharines community shareholders in 2014. These results were achieved while maintaining among the lowest rates in every customer class in Ontario. Cost and revenue comparisons Our goal is to be the best performing energy company in Ontario. We measure our controllable cost and revenue per customer, and return on equity performance against our industry peers. The accompanying figures are from the Ontario Energy Board’s Yearbook of Electricity Distributors, with an average of the most recent three reported years used to smooth out single-year exceptions. On balance, Horizon Utilities operates with much less revenue per customer than other Local Distribution Companies (LDC). From 2011 to 2013, we required an average of $447 of revenue per customer per year, a key comparative indicator of rates (Figure 5). By comparison, Horizon Utilities was 15 per cent below the $528 for the Golden Horseshoe LDCs and 16 per cent below the Ontario average of $529. Horizon Utilities was able to operate with less revenue because its controllable costs (operations, maintenance and administration or “OM&A”) of $208 per customer, on a three-year average, were 30 per cent lower than the Ontario average of $298, and also lower than the $259 for the 25 distributors in the Golden Horseshoe (Figure 5). On average from 2011 to 2013, Horizon Utilities had the eighth lowest controllable costs per customer (OM&A) of all LDCs in Ontario (Figure 6). Return on Equity Comparison Horizon Utilities has a three-year return on equity average of 9.68 per cent over 2011 to 2013 (Figure 7). The average of the 25 utilities in the Golden Horseshoe is 8.10 per cent and the average of all local distribution companies is lower still at 6.60 per cent. Figure 5 Controllable Costs and Revenue Per Customer Comparison $447 $208 Horizon Utilities $528 $259 $529 $298 Golden Horseshoe LDCs Average Ontario LDC Average $600 $500 $400 $300 $200 $100 $0 Controllable Cost 2011–2013 Average Distribution Revenue 2011–2013 Average 600 500 400 300 200 100 0 Figure 6 Controllable Costs Per Customer 2011–2013 Average Horizon Utilities $208 $1,000 $800 $600 $400 $200 $0 All LDCs lowest to highest cost Figure 7 Return on Equity Comparison 2011–2013 Average Horizon Utilities Golden Horseshoe LDCs Average Ontario LDC Average 9.68% 8.10% 6.60% 10% 8% 6% 4% 2% 0% Graph data is based on OEB Yearbook of Electricity Distributors data for 2011-2013 and excludes Hydro One Networks Inc.


2014 Sustainability-based Annual Report
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