Canadian Manufacturing

Revised Hydro One sale prospectus shows Ontario poised to raise $1.7B

Government to issue 81.1M shares at $19 to $21 each, according to latest filing

TORONTO—Ontario’s Liberal government says it expects to raise $1.7 billion from the initial public offering of 15 per cent of Hydro One.

The province plans to sell 81.1 million shares in the initial offering – expected to take place in November – at a price of between $19 and $21 per share, according to a revised prospectus the province filed Friday with the Ontario Securities Commission.

“This (price) range is temporary and provided for the purposes of marketing to potential investors,” said Energy Minister Bob Chiarelli. “The final share price will be determined after a defined marketing period, as well as further analysis.”

The initial offering, which is the next step in the privatization of the giant electricity transmission utility, will be followed by three similar-sized offerings.

The Liberals hope to raise $9 billion by selling 60 per cent of Hydro One, with $5 billion going to pay down the utility’s debt and $4 billion to help pay for the government’s 10-year, $130-billion plan to upgrade public transit and infrastructure across Ontario.

“Unlocking the value of our provincial assets will provide billions towards the single, largest investment in transit and transportation infrastructure in the province’s history,” said Chiarelli.

About 25 per cent of the Hydro One shares would be reserved for retail investors, with the rest going to institutional investors.

Moody’s Investors Services downgraded the senior unsecured ratings of Hydro One from A2 to A1 after the initial prospectus was filed in September, and said the outlook for the utility remains negative.

Ontario’s opposition parties and more than one third of the province’s municipalities are also opposed to the sale of Hydro One, and warn it will drive already high electricity prices even higher.

Eight independent officers of the Ontario legislature, including the auditor general and ombudsman, also banded together in an unprecedented move to oppose the Hydro One sale and warn it will shield the company from public scrutiny.

But the Liberals insist the government will maintain control of Hydro One by keeping 40 per cent of it in public hands and limiting other buyers to 10 per cent ownership.

“The government will remain the single largest shareholder in Hydro One, and rates will continue to be set independently by the Ontario Energy Board,” said Chiarelli.

Even though the shares in Hydro One haven’t gone on sale to the public yet, the government has offered them to workers at the utility and at Ontario Power Generation as part of negotiated labour contracts. The value of the shares given to the electricity sector workers won’t be calculated until the IPO proceeds.

The prospectus states Hydro One, which owns and operates 29,000 kilometres of high-voltage transmission lines and is a local electricity distributor for about 1.2 million customers, has $23 billion in assets and revenues over $6 billion in 2014.

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