Message to Our Shareholder

On behalf of the Board of Directors and management, we are very pleased to present this report on the performance of Hydro Ottawa Holding Inc. in 2009.

This Annual Report is the second to report on progress against the company’s 2008-2012 Strategic Direction and Financial Outlook, a five-year business strategy endorsed by our shareholder in June 2008.

The goal of that strategy is to solidify Hydro Ottawa’s position as a leading and trusted service provider, while capitalizing on an evolving industry landscape to become one of Canada’s most successful integrated utilities.

We are pleased to report that Hydro Ottawa continued to show excellent progress in the achievement of this strategy, meeting and exceeding its financial targets while continuing to deliver industry-leading service and contribute to the community as an engaged and responsible corporate citizen.

Based on the trend of solid performance established by Hydro Ottawa over the past several years, we truly believe the company has The Power to Lead, in an industry where service, efficiency and innovation are the defining features of leadership.

In 2009, Hydro Ottawa achieved a comprehensive net income of $29.4 million, and a return on equity of 9.1 percent, enabling the company to provide dividends of $17.6 million based on operations – our largest contribution to date.

On a normalized basis – excluding one-time events – the company increased its net income by $4 million compared to the previous year, while increasing revenues by 8.6 percent.

Viewed over a longer period of time, Hydro Ottawa’s key financial metrics have shown strong and steady growth over the past five years. Since the establishment of a dividend policy in 2005, Hydro Ottawa has paid dividends of $87.2 million, while increasing shareholder equity in the company by $80.9 million.

Reflecting this positive and sustained financial performance, the Dominion Bond Rating Service raised its credit rating on Hydro Ottawa’s Senior Unsecured Debt to ‘A’ from ‘A (low)’ in May 2009, following a similar upgrade by Standard and Poor’s Ratings Services in June 2008.

At the same time, Hydro Ottawa has continued to focus on the critical factors that have driven its success to date – in particular, service and efficiency.

As a company that provides an essential service to the public, nothing is more important to Hydro Ottawa’s success than the ability to deliver value to our customers, by providing reliable, responsive and innovative services at competitive rates.

Indeed, with strong and growing demand for energy management and other value-added services, the ability to meet and exceed customers’ expectations is more important than ever.

Our results in 2009 suggest we’re doing just that, with electricity service reliability performance that continues to be among the best in the industry, and overall customer satisfaction reaching 89 percent – a 13 percentage point increase since 2004.

Hydro Ottawa also continued to perform well above the industry average in terms of productivity and efficiency, ranking 12^th of 81 Ontario utilities in a recent Ontario Energy Board report comparing the unit operating costs of electrical utilities.

As a community asset, Hydro Ottawa is enhancing our City’s Power to Lead in the critical areas of environmental performance and economic development – by ensuring Ottawa’s electricity infrastructure is in excellent shape for the future; by increasing our production of renewable energy and promoting renewable generation opportunities for local homeowners and businesses; by investing in energy efficiency and conservation; and by continuing to provide stable, reliable, and growing returns to our shareholder, contributing to the City of Ottawa’s objective of financial sustainability.

these efforts and achievements not only respond to the strategic objectives set out for Hydro Ottawa in our 2008-2012 Strategic Direction and Financial Outlook; they also reflect the core mission and mandate of Hydro Ottawa, which has remained the same since the company’s inception: to deliver value to our shareholder, while benefiting our customers and the community we serve.

We are proud of the strides we have made to fulfill that mission in 2009, and grateful to our 580 employees, whose commitment to excellence and continuous improvement has made these achievements possible.

We look forward to continued success in the coming years, as we pursue our vision to be a leading, trusted integrated utility services company.

 

Sincerely,

Pierre Richard, Q.C. Chair, Board of Directors Hydro	Rosemarie T. Leclair President and Chief Executive