- Preliminary Prospectus Filed With the Ontario Securities Commission
A <Message from the Government of Ontario on where it is going on the Ownership of Hydro One
September 18th, 2015 – Ontario is moving ahead with its plan to broaden the ownership of Hydro One, in order to support the single largest investment in transit and transportation infrastructure in the province’s history, along with actions to strengthen Hydro One’s performance, customer service and system reliability.
In preparation for the Initial Public Offering, a preliminary prospectus has been filed by Hydro One with the Ontario Securities Commission (OSC) and the other Canadian securities commissions. The prospectus, approved by the Province and the company’s Board of Directors, provides a comprehensive overview of Hydro One, including its operations and its outlook.
The 2015 Budget legislation requires that, by law, the Ontario government remain the largest shareholder of the new company at a minimum 40 per cent and that no other shareholder or group of shareholders would be permitted to own more than 10 per cent. As well, Hydro One would continue to have no role in setting electricity rates. Rates will continue to be set by the independent Ontario Energy Board (OEB). The government has also introduced legislation that would, if passed, strengthen the regulatory powers of the OEB to protect ratepayers and investigate complaints.
Hydro One will now move forward to file an Amended & Restated Prospectus, following the OSC review, and will begin to undertake marketing activities and financial advisor consultations to help set a final share price for the Initial Public Offering (IPO), which the government intends to complete in November.
Maximizing the value of Hydro One is part of the government’s economic plan for Ontario. The four-part plan is building Ontario up by investing in people’s talents and skills, making the largest investment in public infrastructure in Ontario’s history, creating a dynamic, innovative environment where business thrives and building a secure retirement savings plan.
“Moving forward with the broadened ownership of Hydro One is a win-win for the public and for Hydro One’s customers. Not only will this plan provide billions for needed infrastructure investments, but we believe it will support improved performance by a company focused on customer service excellence and system reliability.”
— Bob Chiarelli, Minister of Energy
“Broadening the ownership and improving the structure of Hydro One will help maximize its value to benefit all Ontarians. The ongoing net gains from repurposing these assets will enable new investment in vital infrastructure projects across the province and, in turn, stimulate the economy, support more jobs and increase Ontario’s competitiveness.”
— Charles Sousa, Minister of Finance
- The Province anticipates being able to close the Initial Public Offering in the current fiscal year.
- Research shows that every $100 million of public infrastructure investment in Ontario boosts GDP by $114 million, particularly in construction and manufacturing sectors.
- Ontario’s infrastructure investments will support 110,000 jobs per year on average with projects such as roads, bridges, transit systems, schools and hospitals across the province.
BACKGROUNDER – Ontario Ministry of Energy
Hydro One- Initial Public Offering Implementation
The Hydro One Initial Public Offering (IPO) will be the first sale of shares to broaden ownership of the company to include members of the public.
Before Hydro One can issue an IPO, it must file a preliminary prospectus with the Ontario Securities Commission (OSC) and other Canadian securities commissions for review. The prospectus includes details about Hydro One and the offering to help potential investors make an informed decision. Hydro One is expected to file an updated version of the prospectus in the coming weeks. This prospectus will then be used by financial advisors to market the offering.
The Value of Optimizing Assets
Maximizing public assets such as Hydro One will allow the government to unlock value to make targeted investments in infrastructure projects. This is part of the largest infrastructure investment in Ontario’s history — more than $130 billion over 10 years, which will support more than 110,000 jobs per year on average with projects such as roads, bridges, transit systems, schools and hospitals across the province.
The Trillium Trust provides for the dedication of net proceeds from the sale of qualifying provincial assets to fund infrastructure projects that will create jobs and strengthen the economy to build Ontario up.
The Province can nominate 40 per cent of the members of the Hydro One board. Board members must meet pre-defined qualifications that include independence, commercial experience, and commensurate expertise.
Hydro One Oversight
Hydro One Inc. is subject to requirements of the Business Corporations Act (Ontario) and the Securities Act (Ontario). This regime would continue to apply to Hydro One after the IPO.
The Province has required Hydro One to create a dedicated Ombudsperson, similar to those found at other public companies. The Ombudsperson will be able to receive and investigate customer complaints.
As is currently the case, Hydro One would have no role in setting electricity rates. Rates would continue to be set by the independent Ontario Energy Board (OEB).
Applications for electricity rates from companies like Hydro One are reviewed by the OEB and they – not the companies themselves – make the final decision.
As the new management team succeeds in strengthening the company’s performance, such efficiencies should be reflected in downward pressure on rates.
Governance Agreement and Legislative Provisions
The Ontario government would remain the largest shareholder and no other shareholder or group of shareholders will be permitted to own more than 10 per cent of the Company’s voting shares. In addition:
- The Government of Ontario is prohibited by law from taking steps to reduce its common share ownership below a 40 per cent threshold.
- Hydro One’s head office, Ontario grid control centre, CEO, and substantially all strategic decision-making management and functions must be maintained in Ontario.
- At least 25 per cent of the IPO would be made available to individual and retail investors.
- Hydro One cannot sell all or substantially all of either the transmission or distribution assets regulated by the OEB.Enhancements to the OEBThe Ontario Energy Board will continue to be responsible for reviewing and approving Hydro One’s rate applications. The government has also introduced legislation that, if passed, would provide the OEB with additional resources, including:
- Enhanced compliance and enforcement powers by increasing penalties to companies that are not complying with the OEB’s rules and directions.
- Enhanced ability to ensure reliability and continuity of service if distribution or transmission companies are unable to fulfil their license obligations.
- Enhanced oversight for ensuring best practices on utility activities.
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