XPost: can.politics, tor.general   
   From: *Oct.15.2015*@tweek.eu   
      
   If Ms Wynne makes the initial offering to only Ontarians, the sell will   
   be much better received.  If it goes completely public - allowing   
   American investors or even other foreign country investments - it could   
   be a horse that won't leave the gate.   
   __________________________________________________________________________   
      
   Globe and Mail - March 10, 2015   
      
   Hydro One privatization plan in the works for Ontario   
      
      
      
   Province would float 10 to 15 per cent of Crown corporation in IPO in   
   high-stakes bid to raise billions for infrastructure spending   
      
   Ontario Premier Kathleen Wynne is crafting a plan to sell shares in   
   Hydro One, a high-stakes privatization manoeuvre that goes beyond   
   anything her government has previously considered in its bid to raise   
   billions of dollars to build new infrastructure.   
      
   Under the proposal, government and industry sources told The Globe and   
   Mail, the province would float 10 to 15 per cent of the Crown   
   corporation in an initial public offering, and possibly follow with   
   additional stock sales that would further reduce its stake.   
      
   The plan represents a calculated gamble.  Ontarians already pay a   
   premium for electricity, and consumers will be looking for reassurance   
   that a partial selloff of Hydro One will not drive rates even higher.   
   The province has a fraught history with privatization that could make   
   the current proposal politically difficult.   
      
   But it could also offer big rewards, allowing the government to extract   
   the money it needs to fund the Premier's marquee $29-billion plan to   
   build new transit lines and upgrade highways.  Already battling to   
   eliminate a $12.5-billion deficit and wrestling with one of the largest   
   subsovereign debt loads in the world, the government must look to any   
   available source of financing for its infrastructure spending plans.   
      
   A parade of Bay Street investment bankers over the past year have told   
   the government Hydro One's enterprise value – the combined value of its   
   debt and equity – is roughly $15-billion to $16-billion, which means the   
   IPO could raise upward of $1-billion.   
      
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   For underwriters, a Hydro One IPO would represent a chance to earn tens   
   of millions of dollars in fees by selling a piece of a massive   
   infrastructure asset.  Such a move would be rare in Canada, where most   
   provinces and territories own the bulk of their electricity businesses.   
     There are exceptions, including Nova Scotia, which privatized its   
   power corporation in the 1990s, and Alberta, which uses a mix of public   
   and private firms to meet its electricity needs.   
      
   Ms. Wynne, who is set to table a budget within six weeks, is expected to   
   present the IPO proposal to cabinet colleagues before that.   
      
   The plan is different from a recommendation last fall by Ed Clark, the   
   former CEO of Toronto-Dominion Bank who is advising the government on   
   its infrastructure financing options. Mr. Clark proposed hiving off   
   Hydro One's local distribution business and selling a large stake to   
   private investors, while leaving the much larger transmission system in   
   public hands.   
      
   A senior government source said both options will be discussed: Mr.   
   Clark's original plan, and the new IPO proposal.   
      
   "The [IPO] option is getting more and more filled out by the day," the   
   source said. But "there's a whole range of pieces that are complex" and   
   must be sorted out before it goes to cabinet.   
      
   The developing proposal is said to have the blessing of Ms. Wynne's   
   powerful lieutenants: Deputy Premier Deb Matthews, Finance Minister   
   Charles Sousa, Energy Minister Bob Chiarelli and Infrastructure Minister   
   Brad Duguid.  The Premier's office declined to comment.   
      
   Hydro One, a company with 5,800 employees and $6-billion in annual   
   revenue, owns and operates 97 per cent of the province's energy   
   transmission infrastructure and distributes electricity to more than 1.4   
   million customers.   
      
   The government has not yet decided exactly how much of the company to   
   sell off beyond the initial IPO proposal, or whether the private sector   
   would ultimately own a majority of the company's equity, sources said.   
   Much of that would depend on how the initial sale goes.  Mr. Clark's   
   panel has hired Alan Hibben, a former senior investment banker with RBC   
   Dominion Securities Inc., to examine privatization proposals and suss   
   out Bay Street's interest.   
      
   The government is also trying to decide what measures to put in place to   
   ensure effective control of Hydro One and to keep rates from skyrocketing.   
   One measure under consideration is a cap on the stake any one private   
   investor could own; another is to give the government sole power to   
   appoint the board chair.  The province is also considering enacting   
   rules to keep government in control of setting rates.   
      
   The Liberals want to avoid the perceived mistakes of past privatization   
   deals, including an aborted IPO of Hydro One in 2002 and the 1999 deal   
   to lease Highway 407 to a private consortium for 99 years.  In the 407   
   arrangement, the government of Conservative premier Mike Harris was   
   accused of handing a sweetheart deal to the buyers while giving up the   
   right to control prices for users of the highway.   
      
   By taking Hydro One public, the government can argue that it has let the   
   open market set the price for the entity, rather than enter into a   
   private deal with buyers. And by keeping pricing under the purview of   
   the Ontario Energy Board, it could defuse any opposition from consumers.   
      
   The IPO may also be easier to sell to the Power Workers' Union and the   
   the Society of Energy Professionals (SEP) than Mr. Clark's original   
   proposal, which the unions have attacked in radio ads.   The IPO idea   
   would allow the unions to keep dealing with a single employer, and   
   maintain control in government hands.  The unions' opposition to the   
   other option, in fact, partly helped trigger the decision to explore an   
   IPO, sources said.   
      
   But SEP spokesman Adam Chaleff-Freudenthaler said the union isn't keen   
   on any privatization, arguing the government can do a better job of   
   controlling rates under the status quo.  "If Mr. Clark or the government   
   believes splitting up or privatizing Hydro One is the right thing to do,   
   we urge them to hold an open, transparent and rigorous hearing," he   
   wrote in an e-mail.   
      
   The government is tussling with the unions in an effort to change the   
   terms of their pensions.  Hydro workers contribute only a fraction of   
   what government does to their pensions, a liability that could make   
   Hydro One less attractive to investors.   
      
   "The pension plan has significant challenges.  It is expansive and   
   generous [and] is not sustainable for both the employees and the   
      
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