Ontario raises $5B from sale of Hydro One shares
Keith Leslie, The Canadian Press
Published Thursday, November 12, 2015 12:23PM EST
Last Updated Thursday, November 12, 2015 4:08PM EST
TORONTO -- The Ontario government raised $1.83 billion from the sale of the first 15 per cent of shares in Hydro One, the giant transmission utility that turns over about $750 million a year to taxpayers.
The province also gained $2.2 billion from a deferred tax asset benefit and another $1 billion from a special $800 million dividend and $200 million payment-in-lieu of taxes as part of the privatization process.
The company borrowed the $1 billion to make payments to the province "because Hydro One is taking steps to move closer to an (Ontario Energy Board) expectation of a 60-40 debt-to-equity ratio," said Jordan Owens, press secretary for Energy Minister Bob Chiarelli, in an email. "This is similar to the ratios of other companies in the industry."
The New Democrats warned that electricity ratepayers will have to pay back the borrowed $1 billion on their bills, and accused the Liberal government of bad math.
"On Oct. 20, the government stated (at committee) that the $2.2 billion deferred tax benefit was 'non-cash,"' said NDP energy critic Peter Tabuns. "How can non-cash fund transit? There is no $2.2 billion."
Hydro One's updated prospectus said a revaluation of its fixed asset meant there would be an enhanced deferred tax benefit of about $2.2 billion that "will result in a one-time fiscal gain by the province."
Owens said the government would amend legislation to "ensure this one-time fiscal gain goes toward transit and transportation infrastructure."
Money raised in the IPO and the other payments put the government over halfway towards its goal of raising $9 billion by privatizing 60 per cent of Hydro One.
The Liberals plan to use $5 billion to pay down some of the $8.3 billion in stranded debt left after the old Ontario Hydro was broken into five companies, while the remaining $4 billion would fund transit and infrastructure projects.
The government plans another three offerings of Hydro One shares, but insists it will retain control with 40 per cent of the shares in the newly-privatized company by limiting all other owners to a maximum of 10 per cent of shares.
Hydro One owns the province's electricity grid, with 29,000 kilometres of transmission lines, and also serves as the local electricity distributor for 1.3 million customers, mostly in rural and northern Ontario.
The company issued a statement saying the underwriters for the IPO exercised their option to buy an additional 8,150,000 common shares at the IPO price of $20.50 per share.
The sale of the additional shares, the over-allotment, was completed Thursday, and increased the gross proceeds from the IPO by an additional $167 million, resulting in total gross proceeds of $1.83 billion.
Financial accountability officer Stephen LeClair warned that the Hydro One sale would be good in the short-term for the province's bottom line, but would ultimately add to the already record net debt of $284 billion because of the government's reduced share from the annual dividend.
All other independent officers of the legislature, including the auditor general and ombudsman, also oppose the sale.