TORONTO — Ontario's Liberal government took another step Friday towards selling Hydro One and said an initial public offering in the huge electricity transmission utility was expected by early November.
A preliminary prospectus was filed with the Ontario Securities Commission and its counterparts across Canada, providing a detailed overview of Hydro One, which lists $22.6 billion in total assets.
A better run Hydro One will benefit electricity ratepayers and customers as well as investors, said Ed Clark, the former TD Bank CEO who chairs Premier Kathleen Wynne's advisory panel on government assets.
"If you believe as I do that a publicly run company will naturally be driven to find ways to reduce costs, the system is set up ideally to capture those savings for the benefits of customers," said Clark.
The government hopes to start with an initial offering of 15 per cent of Hydro One shares, added Clark.
Moody's Investors services downgraded the senior unsecured ratings of Hydro One after Friday's announcement from A2 to A1, and said the outlook remains negative.
The government is one step closer to the partial privatization of Hydro One, "reducing the probability of extraordinary support from the province," said Moody's senior analyst Gavin MacFarlane.
"The negative outlook reflects the high probability of a further one notch downgrade following the initial public offering," he said.
Ontario Finance Minister Charles Sousa said the prospectus will be amended before a full regulatory review, which will be followed by a marketing review to assess the price and valuation of Hydro One before they proceed with the IPO.
"Of course, we're in a 'quiet period' so it limits us to the degree to which we can speculate on its valuation," he said.
The government hopes to raise $9 billion from a sale of 60 per cent of Hydro One, which owns the province's transmission grid and also serves as a local electricity distributor for 1.4 million customers, mostly in rural and northern Ontario.
Wynne says the Liberals need money from the sale to help fund a 10-year, $130-billion program for public transit and infrastructure, although she promises to use $5 billion of the revenue to pay down hydro debt.
The new CEO at Hydro One, Mayo Schmidt, has a total compensation package of about $4 million, way above the $1.26 million for former CEO Carmine Marcello.
Schmidt's base salary is about $800,000, and the rest of his compensation and that for other top brass at Hydro One will be based on performance, including a good safety record and improved customer service, said Energy Minister Bob Chiarelli.
"Very, very specific targets must be achieved for the executives to reach anywhere close to their maximum," he said.
Ontario's opposition parties oppose the privatization of Hydro One and warn it will send already high electricity rates even higher.
"When the energy minister comes out and just talks about dividends and nothing else, it seems as though this government doesn't care about electricity rates," said Progressive Conservative critic Todd Smith.
Voters never got a say on the sale of Hydro One, but executives at the utility have practically won the lottery, said NDP energy critic Peter Tabuns.
"Instead of looking out for the best interests of Ontarians, Kathleen Wynne is more concerned with stuffing the pockets of a small group of Bay Street investors and Hydro One executives," said Tabuns.
The eight independent officers of the Ontario legislature — including the auditor general and ombudsman — took the unusual step of banding together to condemn the Hydro One sale, warning it will shield the company from public scrutiny.
The New Democrats disputed Wynne's claim that by holding on to 40 per cent of Hydro One and limiting other buyers to a maximum of 10 per cent, the province will retain control of the company and its board.
"The prospectus confirms that the government will not have any control, 'de facto' or otherwise, over Hydro One, saying 'the province will engage in the business and affairs of Hydro One as an investor and not as a manager,'" said Tabuns.
Hydro One gave the province a dividend of $287 million in 2014.
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