Hydro One Q3 2026 Earnings: EPS Slips a Cent, 2027 Capital Plan Up $1.2 Billion
Hydro One Limited earned $0.69 per share on a basic basis in the third quarter of 2026, a cent below the $0.70 of a year earlier, on revenue up 8.4% to $2,491 million. Net income attributable to common shareholders fell $8 million to $413 million. But the release carries a far larger number than that cent: the company raised its 2027 capital plan by $1.2 billion, extended its published capital forecast five years further to 2032, and dropped the footnote that had kept eight priority transmission lines outside the plan altogether.
For a regulated utility the size of the build is the earnings engine, so a plan that went from two published years to seven matters more to a holder of this stock than a penny of EPS.
Revenue rose 8.4%, and the cent went to cost
| Line (C$M unless noted) | Q3 2026 | Q3 2025 | Change |
|---|---|---|---|
| Revenues | 2,491 | 2,299 | 8.4% |
| Purchased power | 1,204 | 1,080 | 11.5% |
| Revenues, net of purchased power (non-GAAP) | 1,287 | 1,219 | 5.6% |
| OM&A costs | 325 | 296 | 9.8% |
| Depreciation, amortization, asset removal | 301 | 272 | 10.7% |
| Financing charges | 188 | 172 | 9.3% |
| Income tax expense | 60 | 60 | 0.0% |
| Net income attributable to common shareholders | 413 | 421 | (1.9%) |
| Basic EPS | $0.69 | $0.70 | (1.4%) |
| Diluted EPS | $0.68 | $0.70 | (2.9%) |
| Net cash from operating activities | 892 | 713 | 25.1% |
| Funds from operations (non-GAAP) | 663 | 678 | (2.2%) |
| Capital investments | 1,084 | 779 | 39.2% |
| Assets placed in-service | 658 | 577 | 14.0% |
| Avg monthly Ontario 60-minute peak demand (MW) | 23,734 | 23,080 | 2.8% |
| Electricity distributed to customers (GWh) | 8,136 | 7,937 | 2.5% |
Consolidated financial highlights, p. 8 of Hydro One’s third quarter 2026 report.
Nine months read better than the quarter: revenue of $7,441 million up 9.9%, net income attributable to common shareholders of $1,174 million up 6.1%, and basic EPS of $1.96 against $1.84.
Set against the eight quarters before it, with each third quarter marked, this is the only year-over-year decline in the record these three filings cover. The Q3 2025 report’s quarterly table reaches back to the quarter ended December 31, 2023, which gives eight year-over-year pairs between the three of them, from the December 2024 quarter to this one, and seven of the eight rose.
The cent reconciles exactly, on three cost lines
Revenue net of purchased power rose $68 million, to $1,287 million. The three cost lines above net income rose $74 million between them, $814 million against $740 million, up 10.0%. Equity income was $4 million against $6 million. Income tax expense was $60 million in both quarters and income attributable to noncontrolling interest was $4 million in both, so both drop out of the comparison.
That is the whole quarter. Sixty-eight million dollars of extra net revenue, $74 million of extra cost and $2 million less equity income leaves net income $8 million lower and EPS a cent lower. Our arithmetic on the company’s own figures, and it foots.
Transmission OM&A rose 19.3% to $130 million, “primarily due to: higher work program expenditures, including station maintenance and vegetation management work; and higher asset write-offs”. Distribution OM&A edged down 0.6% to $163 million and the Other segment rose 39.1% to $32 million. The $29 million on depreciation, amortization and asset removal is attributed to storm restoration lifting asset removal costs, higher station construction spend, and a growing asset base.
Two cautions on the top line. Purchased power, up 11.5% to $1,204 million, is a pass-through, which is exactly why Hydro One reports revenue net of it: the 5.6% net-of-purchased-power line reflects earnings power and the 8.4% headline does not. Nor does all of the gross movement reach net income, because the distribution OM&A decrease includes “net income neutral items” offset in revenue.
Financing charges rose $16 million, and long-term debt interest rose $28 million
Financing charges rose $16 million to $188 million, and note 5 on p. 37 holds the parts: interest on long-term debt up $28 million to $212 million, interest on short-term notes down to $1 million from $9 million, capitalized interest absorbing $4 million more at $34 million, and the remaining lines netting out. The longer run of this line ran in this morning’s rate application piece.
Capital spending jumped 39.2% and the mix moved toward new lines
Capital investments were $1,084 million, up 39.2%, after a first half that ran 7.3% below the first half of 2025.
| Capital investments (C$M) | Q3 2026 | Q3 2025 | Change |
|---|---|---|---|
| Transmission sustaining | 230 | 293 | (21.5%) |
| Transmission development | 333 | 187 | 78.1% |
| Transmission other | 14 | 39 | (64.1%) |
| Transmission total | 577 | 519 | 11.2% |
| Distribution sustaining | 334 | 124 | 169.4% |
| Distribution development | 160 | 107 | 49.5% |
| Distribution other | 8 | 26 | (69.2%) |
| Distribution total | 502 | 257 | 95.3% |
| Other | 5 | 3 | 66.7% |
| Total | 1,084 | 779 | 39.2% |
Capital investments by segment and category, p. 14.
Distribution nearly doubled on Ontario’s broadband initiative, the AMI 2.0 system and storm-related asset replacements. The mix inside transmission is the more telling half: sustaining spend fell 21.5% while development rose 78.1%, money moving from refurbishing the existing system to building new lines, which the company ties to the Northeast Power Line, the North Shore Link and the Longwood to Lakeshore projects. Nine months carried $2,611 million against a full-year 2026 plan of $3,951 million, leaving roughly $1,340 million for the fourth quarter on our arithmetic, a larger quarter than any of the first three.
Spending and rate base are not the same thing, and the filing draws the line on p. 13. Capital investments are additions to property, plant and equipment, while assets placed in-service are “completed capital assets that have been transferred into service and are available for their intended use during the period, and as applicable, included in the Company’s rate-regulated asset base”. The two moved apart here: transmission capital spending rose 11.2% while transmission assets placed in-service fell 3.9% to $246 million, which the filing puts down to “timing of assets placed in-service for station refurbishments and replacements” (p. 13). What did reach service was the Etobicoke Greenway, “a new approximately six-kilometre, 230-kilovolt transmission line” adding “approximately 300 megawatts of capacity to the region” (p. 3).
The 2027 plan was raised $1.2 billion and the forecast now runs to 2032
Hydro One publishes a Future Capital Investments table in each of these reports. Three months ago it stopped at 2027.
The 2026 figure rose 2.5% to $3,951 million from the $3,854 million published three months ago, and the 2027 figure rose $1,213 million, or 25.6%, to $5,955 million, transmission up $992 million and distribution up $221 million, all on our arithmetic from the two published tables. The five years from 2028 to 2032, published for the first time, total $39,675 million. By category it is the quarter’s mix shift again: development roughly doubles between 2026 and 2027, from $2,279 million to $4,543 million, while sustainment falls from $1,506 million to $1,266 million.
Hydro One gives its reasons. The 2026 and 2027 estimates were updated in the quarter for the first phase of the Waasigan Transmission Line Project and for the North Shore Link costs filed with the OEB in September. The 2028 to 2032 figures follow the filing of the investment plan forming part of Hydro One Networks’ 2028 to 2032 Joint Rate Application, JRAP28. And the sentence doing the most work: “As part of the extended forecast horizon, the disclosure now also includes estimated capital expenditures, including development costs, for projects for which a leave-to-construct application has not yet been filed with the OEB.”
Three measurements of this build are now in circulation and they are not versions of each other. The $39,675 million is Hydro One Limited consolidated capital investment. The approximately $37 billion is Hydro One Networks Inc.’s own proposed five-year plan, inclusive of OM&A. Closest to a like-for-like read against the consolidated forecast is the capital component of that application alone, roughly $27.7 billion: approximately $16.7 billion transmission, $10.8 billion distribution and $192 million for the Sault Ste. Marie Limited Partnership (p. 3).
No two can be added. Subtract one from the other anyway and the gap is roughly $12 billion, for which the filing gives reasons but no arithmetic: the consolidated figure is Hydro One Limited and so spans the whole group rather than Hydro One Networks alone, footnote 1 puts certain Networks development projects left out of JRAP28 inside it, and the extended horizon, per the sentence quoted above, takes in projects with no leave-to-construct application yet filed.
Hydro One Networks’ forecast rate base runs from $33.6 billion in 2028 to $49.2 billion in 2032
Rate base is the asset value a regulated return is applied to, which makes it the step between a capital plan and shareholder earnings, and JRAP28 puts a forecast on it year by year for Hydro One Networks. The report summarises what it calls the key elements of the application under the heading “Electricity Rates – Joint Rate Application”.
| Year | Hydro One Networks transmission rate base (forecast) | Transmission revenue requirement | Hydro One Networks distribution rate base (forecast) | Distribution revenue requirement |
|---|---|---|---|---|
| 2028 | $19,199 million | $2,727 million | $14,435 million | $2,695 million |
| 2029 | $20,661 million | $2,931 million | $15,795 million | $2,998 million |
| 2030 | $22,268 million | $3,185 million | $17,136 million | $3,245 million |
| 2031 | $24,205 million | $3,365 million | $18,958 million | $3,402 million |
| 2032 | $28,470 million | $3,650 million | $20,712 million | $3,541 million |
Key elements of JRAP28 as filed with the OEB, p. 19 of the Q3 2026 report, under the column headings “Hydro One Networks – Transmission” and “Hydro One Networks – Distribution”.
Combined, the forecast rate base runs from $33,634 million in 2028 to $49,182 million in 2032, a 46.2% increase across four steps, or 10.0% a year compounded. The combined revenue requirement runs from $5,422 million to $7,191 million, up 32.6%, or 7.3% a year. Both are our arithmetic on the company’s table.
That 10.0% is an average no single year matches, and the unevenness is all on one side. Transmission rate base steps up 7.6%, then 7.8%, then 8.7%, and then 17.6% in 2032 alone, from $24,205 million to $28,470 million. Distribution steps between 8.5% and 10.6% throughout. One year at the far end of the forecast carries a disproportionate share of the transmission build, which is also the year furthest from any approval.
The other thing the table says is that rate base grows faster than the revenue requirement it supports, 10.0% a year against 7.3%. That gap is a question rather than a finding: a revenue requirement is what customers pay to carry the asset base, and the spread could sit in the return assumption, in the depreciation and operating mix, or in the conventions of the filing itself. It is the first thing to ask the company about, and the application is where it gets argued.
These are Hydro One Networks asset bases rather than Hydro One Limited’s, and forecast stocks rather than flows, which is two separate reasons they do not compare with the consolidated capital forecast or the $37 billion plan above.
One assumption sits underneath the revenue requirements, and the table’s own footnote flags it: they are “filing estimates utilizing the OEB’s 2026 Allowed Return on Equity (ROE) of 9.11%”, a rate set by the Cost of Capital Parameters the OEB released on October 31, 2025 and “expected to be updated for 2028 based on the Cost of Capital Parameters in place at that time”.
That allowed return is also the link between this table and a shareholder. A regulated utility is allowed to earn a return on the equity portion of its rate base, and the OEB deems that portion at 40% for transmission and distribution utilities, so a growing rate base grows the equity base the allowed return applies to, while the rate of return itself is re-set. This morning’s piece on the rate application sets out that mechanism, the deemed capital structure and the April 2026 Z-Factor denial at length. Rate base, revenue requirement and the non-GAAP leverage measures further down are the vocabulary this kind of filing runs on, and our guide to financial ratios explained is the place to start if any of them is new.
Fortis gave five-year rate base guidance of its own when it reported this month, and our Fortis Q3 2026 earnings coverage sets it out.
The footnote excluding eight priority transmission lines is gone
Three months ago the same capital table carried a second footnote saying the figures “do not include capital expenditures, nor development costs, associated with” eight named priority transmission lines, and that “Hydro One is currently evaluating the scope and timing of these eight lines”. The Q3 2026 table does not carry it.
That is a checkable update to our own coverage: until this report, those eight lines sat outside the published plan.
How far the eight have actually travelled is the caveat that goes with that. One, the North Shore Link, has been filed; one, the Second Longwood to Lakeshore, has been abandoned. The other six still carry “TBD” estimated cost and “TBD” anticipated in-service date in the project table on p. 15, with $50 million of capital cost to date between them on our arithmetic: Wawa Timmins $24 million, Sudbury Barrie $9 million, Windsor Lakeshore $8 million, Greenstone $4 million, Bowmanville to East Greater Toronto Area $3 million and Red Lake $2 million. For three of the six the footnotes say the scope and timing of the line is currently under review.
North Shore Link was filed, the Second Longwood to Lakeshore line was abandoned
On September 11, 2026, Hydro One Networks and HOSSM filed a joint leave-to-construct application for the North Shore Link, a new 230 kV line from Mississagi Transformer Station near Wharncliffe to the HOSSM-owned Third Line Transformer Station in Sault Ste. Marie. The release puts it at approximately $1.3 billion and 105 kilometres, in service in 2029; the project table carries $1,362 million estimated with $70 million spent to date.
The other went the other way. On August 20, 2026 the IESO issued the South and Central Bulk Plan, which “identified a preferred alternative to the Second Longwood to Lakeshore Transmission Line” with an anticipated in-service beyond 2045, and so “Hydro One has ceased all further development work on the Second Longwood to Lakeshore Transmission Line”. Mind the names: the Longwood to Lakeshore line, filed May 19, 2026 at an estimated $1,166 million for 2030 service, is a different project, and it is alive.
Net debt rose $980 million, and the FFO leverage measure improved year over year but not sequentially
Net debt was $19,548 million at September 30 against $18,568 million at December 31, 2025, $980 million added in nine months on our arithmetic. Net debt to capitalization was 59.7%, against 59.5% at the end of 2025, 59.3% a year earlier and 59.9% at June 30, 2026. Annualized funds from operations to net debt, which the filing presents as a measure of financial leverage, read 13.9% against 13.6% a year earlier, and is down from both 14.1% at June 30 and 14.2% at December 31, 2025.
Net cash from operating activities rose 25.1% to $892 million on working capital movements the filing attributes mainly to “higher accrued liabilities, and higher cost of power payable to the IESO driven by higher purchased volumes and commodity rate charges”. Funds from operations, which strips working capital out, fell 2.2% to $663 million. The operating cash line read on its own would flatter the quarter.
The extended forecast carries a funding question with it. Annual consolidated capital investment is planned to rise from $3,951 million this year to $8,862 million in 2030, before easing to $7,321 million by 2032, net debt is already $19,548 million at 59.7% of capitalisation, and funds from operations to net debt has slipped from the 14.2% it read at the end of last year. On August 14, 2026, per p. 18, “Hydro One filed a short form base shelf prospectus (Universal Base Shelf Prospectus) with securities regulatory authorities in Canada”, which lets it offer debt, equity or other securities through a 37-month period ending in September 2029. “As at September 30, 2026, no securities have been issued under the Universal Base Shelf Prospectus.” Whether a build of this size gets funded on debt alone, against a deemed structure of 60% debt, is the open question a holder is left with.
The published consensus implies $0.35 for the fourth quarter
The board declared $0.3531 per share on November 9, payable December 31 to holders of record December 9, $212 million in total. For the other Canadian names competing for the same income money, our ranking of Canadian dividend stocks is the place to start.
Full-year consensus, from five analysts and read before this release, is $2.31 for 2026. Nine months have delivered $1.96 of reported basic EPS, so that figure implies roughly $0.35 in the fourth quarter on our arithmetic, against the $0.39 of a year earlier. Treat it as what the published number implies rather than as a stated view: it may be struck on an adjusted basis rather than reported basic EPS, and five analysts sit behind it. Estimate data from StockAnalysis.
The quarter and the plan pull on the same mechanism from opposite ends. Cost lines tied to the size of the asset base and the debt funding it grew $74 million while net revenue grew $68 million, and the plan Hydro One has just published raises that asset base across seven years instead of two, with development rather than sustainment taking the increase. If the extended forecast proceeds broadly as filed, depreciation and financing charges move with it, which is what makes the plan, and not the cent, the number to watch from here.
Disclaimer: The content on bestcanadianstocks.ca is for informational and entertainment purposes only and does not constitute financial advice. Past performance is not indicative of future results. Always consult a qualified financial advisor before making investment decisions. Company figures are Hydro One Limited’s own, from its Q3 2026 report for the three and nine months ended September 30, 2026, and from its Q2 2026 and Q3 2025 reports for comparatives, with the document and page cited at each use. Full-year consensus earnings estimates are from StockAnalysis, read on November 10, 2026 before the release.
