Hy­dro board eyes end to yearly $60M city gift

If util­ity di­rec­tors vote to re­voke the div­i­dend, it will blow a hole in the 2017 bud­get, coun­cil­lors say

Toronto Star - - GTA&BUSINESS - DAVID RIDER CITY HALL BUREAU CHIEF

Fac­ing tough ques­tions about a pri­va­ti­za­tion push, Toronto Hy­dro’s di­rec­tors are poised to vote on scrap­ping a div­i­dend that pumps about $60 mil­lion a year into the city of Toronto bud­get.

Coun­cil­lors, who have re­ceived no warn­ing from a Hy­dro board ex­pected to vote Nov. 23, say it would blow a hole in the 2017 bud­get — trig­ger­ing deep ser­vice cuts or a 2-per-cent prop­erty tax hike — and they ques­tion if the coun­cil-ap­pointed board of a city-owned util­ity has the power to end the long-paid div­i­dend.

“We are the sole share­holder and I be­lieve we are the fi­nal de­ci­sion­maker about what that div­i­dend will be,” said Coun­cil­lor Janet Davis after the Fri­day launch of the city’s 2017 bud­get de­lib­er­a­tions.

“There is some jock­ey­ing go­ing on be­tween the city and Hy­dro and I as­sume it has to do with the po­ten­tial sale of some or all of Toronto Hy­dro. We need to get this dis­cus­sion out of the back­rooms and the mayor’s of­fice, and into the pub­lic. The peo­ple of Toronto need to un­der­stand what’s go­ing on — the facts — as do coun­cil­lors.”

Hy­dro’s ar­gu­ment that it needs to di­vert the div­i­dend to ur­gent elec­tric­ity grid work comes as sources close to Hy­dro say chief ex­ec­u­tive An­thony Haines is ex­pected to an­nounce strong third-quar­ter prof­its, thanks to rate hikes ap­proved by the On­tario En­ergy Board last year to pay for grid up­grades, among other things.

The Star re­vealed in Jan­uary that ad­vis­ers and se­nior staff to Mayor John Tory, as well as Hy­dro of­fi­cials, were qui­etly pre­par­ing for a pos­si­ble par­tial pri­va­ti­za­tion of the elec­tric­ity util­ity.

Tory said then he was not aware of any such plans, but now ar­gues city coun­cil must take a hard look at sell­ing a mi­nor­ity Hy­dro stake to help fund grid work as well as Toronto’s pricey tran­sit ex­pan­sion. A city staff re­port on op­tions to “mon­e­tize” Hy- dro and the Toronto Park­ing Au­thor­ity is ex­pected within weeks.

One ar­gu­ment against sell­ing part of Hy­dro is it would re­duce div­i­dends to the city that to­talled $241.7 mil­lion over the past five years. Scrap­ping the cash pay­ment could po­ten­tially re­move that ob­sta­cle. But some ob­servers spec­u­late the board is send­ing a mes­sage that if coun­cil blocks pri­va­ti­za­tion that would in­ject new cap­i­tal into the elec­tric­ity dis­trib­u­tor, all its bud­get-boost­ing div­i­dends will be di­verted to grid up­grades.

Toronto Hy­dro de­clined to com­ment on the Star’s ques­tions Fri­day.

Paul Ainslie, one of three city coun­cil­lors on the Hy­dro board, con­firmed the up­com­ing vote on scrap­ping the div­i­dend, which was first re­ported by the Globe and Mail.

“Toronto Hy­dro op­er­ates as a pri­vate com­pany even though the city is the only share­holder and, as board mem­bers, we have an obli­ga­tion to make sure the com­pany is as fi­nan­cially sus­tain­able as pos­si­ble,” Ainslie said.

“Wear­ing my coun­cil­lor hat, po­lit­i­cally I know it would be very dif­fi­cult (for the city) to lose that $60 mil­lion a year.” Toronto Hy­dro’s share­holder agree­ment with the city, last up­dated in 2013, states that Hy­dro “shall de­clare ag­gre­gate div­i­dends” each fis­cal year equal to 50 per cent of Hy­dro’s an­nual con­sol­i­dated net in­come, with a min­i­mum div­i­dend of $25 mil­lion.

KEITH BEATY/TORONTO STAR FILE PHOTO

Toronto Hy­dro CEO An­thony Haines is ex­pected to an­nounce strong third-quar­ter prof­its thanks to rate hikes, sources close to the util­ity say.

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