Province to sell off 60% of Hydro One
But Ontario to retain regulatory, price control in scheme to help pay for new transit projects
Premier Kathleen Wynne’s Liberals will sell off 60 per cent of the province’s $16billion Hydro One transmission utility to bankroll new transit infrastructure, the Star has learned.
Queen’s Park will retain a 40-per-cent stake and minority shareholders will be limited to a 10-per-cent ownership, sources say.
At the same time, Hydro One Brampton and Hydro One Networks’ distribution arm will be spun off into a separate company and sold outright for up to $3 billion.
The changes — and a plan to allow the sale of beer in about 300 supermarkets — are key aspects of a major report to be released today by Wynne’s privatization guru Ed Clark, the former TD Bank CEO.
Insiders confide that Wynne will immediately accept Clark’s findings and move forward ahead of Finance Minister Charles Sousa’s April 23 budget.
All proceeds will go toward a 10-year, $29-billion infrastructure plan that includes $15 billion to build public transit in the Greater Toronto and Hamilton Area.
Wynne defended the Hydro One partial privatization, saying it’s a “very different process” than the full selloff the Progressive Conservative administration had planned in 2002 because Ontario will keep the largest single ownership stake
$22.6B Total assets of Hydro One $16B Its open market value, according to insiders $749M Its net income in 2014, on revenues of $6.5 billion
and maintain regulatory and price control.
“We cannot sacrifice our future prosperity and our future economic health by not investing in infrastructure,” said the premier, noting she “ran on a review of assets” in the June 2014 election.
“It’s much more difficult to imagine a future where we don’t invest in infrastructure, where we don’t build the roads and the bridges in the north that we know are needed, that we don’t build the public transit that we know is needed in the Greater Toronto and Hamilton Area,” she said.
The government will also strengthen the Ontario Energy Board, the regulatory body that controls hydro prices, in a bid to better protect electricity ratepayers, sources say.
Canada’s major banks, pension funds, and foreign firms such as the U.S. holding company Berkshire Hathaway have expressed interest in purchasing chunks of Hydro One.
Current Hydro One chair Sandra Pupatello will soon be succeeded by David Denison, former president and CEO of the Canada Pension Plan Investment Board. It will be Denison’s job to get the utility primed for sale.
In order to shed Hydro One’s government-owned image before going public it was decided that Pupatello, a former cabinet minister who finished second to Wynne for the Liberal leadership in 2013, should be replaced.
The company, which owns 97 per cent of the province’s transmission grid, had a net income last year of $749 million on revenues of $6.5 billion, providing Queen’s Park with a $287-million dividend.
While Hydro One has $22.6 billion in total assets, government insiders believe it will be worth around $16 billion on the open market.
Beyond Hydro One, Clark’s panel is urging major changes to Ontario’s alcohol distribution system that has changed little since the Prohibition era of the 1920s.
A significant annual ‘franchise fee’ will be levied upon the Beer Store, bringing much-needed revenue into the provincial treasury
Queen’s Park will keep its 651-store Liquor Control Board of Ontario, but the private 448-outlet Beer Store chain — owned by the foreign parent companies of Labatt, Molson and Sleeman — faces new competition.
The province will auction off beer licences to about 300 of Ontario’s 1,500 supermarkets. No one grocer will be allowed to own more than 25 per cent of them.
A significant annual “franchise fee” will be levied upon the Beer Store, which will bring much-needed revenue into a provincial treasury saddled with a $10.9-billion deficit in 2014-15.
As disclosed by the Star on Wednesday, an expansion of wine sales in grocery stores will be delayed as Clark takes a closer look at that issue.
“The reality is, as Ed Clark and his team started this discussion with the alcohol and beverage sector, the complications around the Beer Store and the unfairness inherent in the way the Beer Store was organized became very clear,” said Wynne.
“It’s taken a lot of energy and time to deal with that issue. And the fact is we do have wine that’s being sold already in some grocery stores,” she said, referring to the Americanowned Wine Rack and Canadianowned Wine Shop that operate a combined 268 supermarket kiosks and stand-alone stores that sell Ontario and blended foreign bulk wine.
“We need to build on that and we need to have the same kind of intense conversation. But the Beer Store was the entry point into levelling the playing field, creating more convenience and more fairness,” the premier said. NDP Leader Andrea Horwath warned that selling off Hydro One is amistake that consumers will pay for forever.
“It is a one-time hit of cash for the current government that Ontarians will be paying for generations,” she said, predicting electricity rates will rise and noting a legal opinion prepared by Sack, Goldblatt Mitchell LLP for the Canadian Union of Public Employees that says “the premier’s plan might not even be legal.”