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Hydro One CEO plans to bolster Ontario assets, avoid US acquisitions

Hydro One Ltd. has no plans to expand out of its home province of Ontario any time soon in the wake of its failed bid for Spokane, Wash.-based Avista Corp.

The company will instead focus on growing its network of power lines and retail electricity customers in Ontario, CEO Mark Poweska said on the company's second-quarter earnings conference call on Aug. 9. Since taking over the top position at the utility in May, Poweska has been working on a plan to move the company forward after recent turmoil that saw the US$5.3 billion Avista deal collapse and wholesale changes in Hydro One's board and management.

"We're still in the process of developing a strategy, but one thing is pretty clear to me is that it will have a heavy focus on operational excellence and on Ontario," Poweska said on the Aug. 9 call. "I don't foresee us doing M&A in the U.S. in the near term."

Poweska, an engineer who was in charge of operations at BC Hydro and Power Authority before moving to Hydro One, is the first permanent head of the province-controlled company since the sudden departure of Mayo Schmidt in July 2018. Schmidt, who was the architect of the Avista takeover, and most of the board of Hydro One resigned shortly after the election of Premier Doug Ford, who had vowed during his campaign to sack senior management at the company. Regulators in Washington and other U.S. states refused to approve the transaction after Ford's election, citing the possibility of government interference in the operation of Avista's utilities. While most of the stock in the company is held by the public, the government retains control as the largest single shareholder and has the power to appoint the majority of Hydro One's board.

While Poweska has yet to unveil his plans for the company, he hinted that modernizing and upgrading Hydro One's regulated assets will be a priority.

"I like the way we're allocating our capital to the regulated businesses in this company and I believe there is growth in that business, primarily through organic growth and investment in the assets," Poweska said. "The system requires a large amount of investment and that's the case we're making in front of the regulator."

Separately on Aug. 9 Hydro One reported second-quarter 2019 adjusted net income attributable to common shareholders of C$155 million, or 26 Canadian cents per share, compared to C$194 million, or 32 cents per share, in the same quarter of 2018. The S&P Global Market Intelligence consensus normalized EPS estimate for the quarter was 27 Canadian cents.