Purchase will lead to savings: Hydro One VP

The regulated environment means Hydro One’s upcoming $6.7 billion purchase of U.S. energy company Avista Corp. will have “absolutely no bearing on rates for customers,” company vice-president Ferio Pugliese said Thursday.

That includes thousands of residents of Peterborough County and neighbouring municipalities such as the City of Kawartha Lakes and Haliburton and Northumberland counties. Pending regulatory approval, Hydro One also has a deal in place to acquire Peterborough Distribution, the hydro distribution unit of Peterborough Utilities.

Pugliese was busy speaking with reporters across the province Thursday to assure them the purchase announced Wednesday is good news. It is a common misconception that the transaction will prompt rate increases, he said.

Both entities will become more efficient in the supply chain and have more purchasing power, for example, Pugliese said.

“Through that, we will get more savings and those savings will be deferred right back to the customers,” he said, pointing out that other efficiencies will come from the common platforms the companies share, such as internet technology.

The friendly, all-cash transaction expected to close in the second half of 2018 will create one of the largest regulated utilities in North America.

The deal was unanimously approved by the boards of both companies but still requires approval from United States regulators and Avista shareholders.

The $6.7 billion will come from Hydro One shareholders, Pugliese stressed. “These transactions are designed to deliver value back to the organizations by way of returns on equity ... The customers are not at all impacted by this.”

Regarding Hydro One’s purchase of Peterborough Distribution (PDI), Pugliese pointed out that there will be a 10-year rate freeze after the sale closes. “If anything ... the savings we get, you could see further advantages as a result.”

After the close of financial markets Wednesday, Toronto-based Hydro One said that it will pay C$67 per share in cash for the Spokane, Wash.-based firm. Shares in Avista closed Wednesday at US$43.33 on the New York Stock Exchange.

Under the agreement, Avista would keep its existing corporate headquarters and continue to operate as a stand-alone utility in Washington, Oregon, Idaho, Montana and Alaska.

The two companies have a complementary mix of assets, Pugliese said, pointing out how a small percentage of Avista’s operations are in power generation, and how it is mostly involved in transmission and distribution.

Hydro One, which operates 98 per cent of the power grid in the province, will benefit from the gas distribution offerings Avista does have, Pugliese said.

Hydro One has more than 1.3 million customers, $25 billion in assets and employs 5,500 people. Avista provides electric and natural gas services to 721,000 customers.

“(The purchase) allows us to grow our footprint in another jurisdiction,” he said. “All of the stakeholders (including the provincial government) ... will benefit.”

Hydro One went public in November 2015, raising $1.83 billion in one of the largest and most politically charged initial public offerings in Canada. The partial sale of the utility was part of the Ontario government’s plan to raise money to fund transit and infrastructure projects.