Po­ten­tial hy­dro merger could be good for West Perth’s bot­tom line

The Beacon Herald - - LOCAL NEWS - ANDY BADER POST­MEDIA NEWS

West Perth – one of the eight cur­rent mu­nic­i­pal share­hold­ers of the ERTH Corp. (ERTH) – will vote at a spe­cial share­hold­ers meet­ing Aug. 10 in Inger­soll whether to ac­cept a pro­posed merger with West Coast Huron En­ergy Inc. (Goderich Hy­dro).

All in­di­ca­tions sug­gest share­hold­ers will ap­prove the letter of in­tent to merge, pro­tect­ing their in­vest­ment, Coun. Ni­cholas Vink ex­plained to coun­cil dur­ing its July 24 meet­ing.

“It is a few hun­dred thou­sand dol­lars in sav­ings that we’ll be able to achieve by merg­ing these two lo­cal dis­tri­bu­tion com­pa­nies to­gether,” said Vink, the mu­nic­i­pal­ity’s board mem­ber.

ERTH is a mu­nic­i­pally owned par­ent com­pany head­quar­tered in Inger­soll that em­ploys ap­prox­i­mately 130 peo­ple from of­fices in Inger­soll, Aylmer, Mitchell, Thorn­dale, Lon­don and Toronto. ERTH’s core as­set is the Erie Thames Pow­er­lines Corp., a reg­u­lated lo­cal dis­tri­bu­tion com­pany (LDC) dis­tribut­ing elec­tric­ity through roughly 352 kilo­me­tres of power lines to 14 com­mu­ni­ties in south­west­ern On­tario: Aylmer, Beachville, Nor­wich, Ot­ter­ville, Burgessville, Clin­ton, Mitchell, Dublin, Inger­soll, Thames­ford, Em­bro, Tav­i­s­tock, Bel­mont and Port Stan­ley.

Vink ex­plained that ERTH is one of West Perth’s largest in­vest­ments, as the mu­nic­i­pal­ity holds $2 mil­lion in prom­is­sory notes, which pays 7.5 per cent in­ter­est, and an es­ti­mated $1.7 mil­lion in shares.

“We al­ways talk about this, whether ERTH has turned the cor­ner in terms of profit mak­ing,” Vink said.

Based on 2016 fi­nan­cial state­ments, ERTH made a net profit of $1.17 mil­lion with all of its en­ti­ties com­bined.

“It makes my job eas­ier when ERTH is mak­ing money,” Vink said.

If and when the Goderich merger takes place, Goderich will be a 22.5 per cent owner of ERTH, which will re­duce West Perth’s own­er­ship from eight per cent by 1/16th, or 6.25 per cent to­tal.

A few mem­bers of coun­cil won­dered what this merger would mean for West Perth since ERTH owns prop­erty on Holmes Street in Mitchell. Some had hoped for a new build­ing along the High­way 8 cor­ri­dor.

“Does it make sense to ser­vice the High­way 8 cor­ri­dor from a non­cen­tral spot?” Vink said.

CAO Jeff Brick also up­dated coun­cil that Erie Thames rents space in the Hib­bert shop in Staffa, which is cur­rently up for re­zon­ing for an even­tual sale, and felt West Perth would know by its Au­gust coun­cil meet­ing whether it wished to ex­tend the agree­ment.

“We can spec­u­late with what they might do with prop­erty in West Perth but I don’t think there’s any value in that,” Brick said.

Coun. Bob Burten­shaw said dur­ing dis­cus­sion that West Perth will have to de­cide “whether we’ll come out ahead on this” but Vink said the merger would be good news for all in­volved, giv­ing them a chance to lock in elec­tric­ity rates.

Since 2008, there has been a mora­to­rium on the 33–per-cent trans­fer tax payable in con­nec­tion with the trans­fer of mu­nic­i­pally owned elec­tric­ity as­sets. Dur­ing this trans­fer tax hol­i­day, which is sched­uled to ex­pire Dec. 31, 2018, Erie Thames has been ac­tively look­ing to merge with like-minded com­mu­nity-based part­ners in ac­cor­dance with a key goal of its strate­gic plan, namely to grow the com­pany to 25,000 to 40,000 cus­tomers.

Merger and ac­qui­si­tion ac­tiv­ity in the On­tario sec­tor has re­duced the num­ber of LDCs from 330 in 2000 to ap­prox­i­mately 70 to­day. LDC con­sol­i­da­tion ac­tiv­ity has picked up again re­cently as the province has in­cen­tivized the in­dus­try by al­low­ing merged LDCs to re­coup their trans­ac­tion costs and rec­og­nize ef­fi­cien­cies and cost sav­ings over a 10-year pe­riod. - Mitchell Ad­vo­cate

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