With $50M in its pockets, what will city do?
The city’s public electrical distribution utility has yet to be sold to Hydro One, but city councillors are about to discuss two options for what to do with roughly $50 million in forthcoming sale proceeds: invest in a bank portfolio and collect interest, or invest in renewable energy projects and collect dividends.
Either way, states a new city staff report, the city stands to generate money that could be used for capital projects.
Councillors won’t make any decisions on Tuesday: at a committee meeting, they will be expected to discuss the two ideas.
A city staff report suggests that councillors could invite experts to come speak to them soon about the merits of either option, and then ask the public what it thinks through an online survey.
There’s still time for council to do all that before arriving at a decision: although the city has a deal to sell Peterborough Distribution Inc. (PDI), the staff report states no transaction is expected until sometime beyond the first quarter of 2020.
The city is about to sell PDI, public electricity distributhe
tion system, to Hydro One for $105 million; net proceeds of the sale are expected to be between $50 and $55 million after fees and debts are paid.
The deal includes the wires, poles and transformers of Peterborough Utilities, which deliver electricity to 37,000 customers in Peterborough, Lakefield and Norwood.
City staff anticipates it will be approved soon by the Ontario Energy Board, which is the province’s electricity and natural gas regulator.
City council has never debated what exactly to do with the proceeds of the sale, but a new city staff report outlines two ideas.
One option is to put the $50 to $55 million into a bank portfolio and not touch the capital — just use the interest to pay for construction projects.
It’s unclear how much interest may be generated: the staff report says it could fluctuate considerably, depending on global markets.
But the report suggests using any interest to finance projects that might stem from council’s recent declaration of a climate emergency, for example.
If council’s interested, city staff also suggests ONE Investment of Toronto to manage the fund.
ONE is a non-profit that specializes in investing on behalf of municipalities, the staff report states, and has helped municipalities such as Midland and Woodstock invest after selling their utility distribution companies.
Meanwhile there’s another option for council to consider: investing in City of Peterborough Holdings Inc. (CoPHI).
The city is the sole shareholder in CoPHI, the investment company that operates electricity and water distribution systems locally.
But CoPHI also develops and operates renewable hydro and solar generation facilities and pays returns to the city ($5.7 million in dividends are expected in 2019).
The city could invest its PDI proceeds in CoPHI, the staff report states, which would boost renewable energy projects locally and earn more for the city in dividends.
John Stephenson, the president and CEO of Peterborough Utilities Group, pitched this idea to council at a meeting in early July.
“I, selfishly, would like to take it all,” Stephenson said at the time, meaning all the proceeds from the sale of PDI. “We’re a great place to invest money and we can do great things for you.”
Councillors didn’t debate or discuss the idea in July — they received the presentation for information.
The meeting takes place Tuesday this week in observance of Remembrance Day on Monday.