Hydro One announces share issue hours after critical report released
Just hours after the release of a report that warns the partial sale of Hydro One will have a negative impact on Ontario's budget balance, the utility announced Thursday it's putting millions of its shares on financial markets.
In a written statement, Hydro One says it will issue more than 81 million shares next Thursday at $20.50 a share.
"The offering is being made through a syndicate of underwriters led by RBC Capital Markets and Scotiabank," the statement said.
"The Toronto Stock Exchange ... has conditionally approved the listing of the common shares of the company subject to fulfilling customary TSX requirements."
The announcement comes on the same day Ontario's new financial accountability officer, Stephen LeClair, released his first report to the provincial legislature.
LeClair says the province would see an improvement in its budget in the first year after an initial sale of 15 per cent of shares in Hydro One.
But he says the budgetary impact could be positive or negative in subsequent years as more shares are sold, and will ultimately be negative once the Liberals sell the 60 per cent of Hydro One they plan to put on the market.
LeClair estimates the total value of Hydro One at between $11-billion and $14.3 billion, and says based on that a 60 per cent sale would generate $6.8 billion to $8.9 billion, "a wider and somewhat lower range" than the government's estimates.
But the financial accountability officer says he can't tell how the government came up with its valuations for Hydro One because the Liberals won't tell him their methodology.
Without knowing how they made their calculations, LeClair says "it is not possible" for him to offer a definitive opinion on whether the partial sale will help the government eliminate a $10.3 billion deficit by 2017-18 as promised or not.
Hydro One turns over about $750 million a year to the province, which will be reduced as private owners take their share of the profits.
'Right way to go' vs 'insane'
But Premier Kathleen Wynne says she needs to sell 60 per cent of the utility to raise money for public transit and infrastructure projects.
"In terms of the long term, we thought this was the right way to go," Wynne said Thursday at an unrelated event in
Niagara-on-the-Lake, Ont. "The other factor is that the benefit, the economic benefit of the investments we're going to make, I'm convinced that they will outweigh that long-term change in the revenue."
NDP Leader Andrea Horwath called the sale "ludicrous" and "insane," and said LeClair's report shows the government will get only a fraction of the money it was expecting.
Progressive Conservative Leader Patrick Brown said after the government puts $5 billion from the sale to pay down hydro debt, it will be left with a lot less than it expected to raise for transit and infrastructure.
"It makes no sense to sell an asset that will only net $1.4 billion while you lose an asset that brings in $700 million each and every year," he said.
