Officers in Pickering and Ajax say it’s too early to inform whether or not they’ll promote their shares in a neighborhood energy firm.
On July 3, the municipalities introduced that they might start entertaining bids for his or her parts of Elexicon Company.
“It’s a sizeable asset,” stated Pickering Mayor Kevin Ashe in an interview with Durham Radio Information. “We’re just looking to see what that value might be, and then council and our communities will make a determination if capitalizing that asset makes sense to us.”
Pickering owns 27.9 per cent of Elexicon, whereas Ajax owns 21.8 per cent. Collectively, their shares make up slightly below 50 per cent of the corporate.
The remaining shares are owned by the municipal governments in Whitby, Clarington and Belleville, who just lately stated they might not be promoting.
“Maintaining majority control is a valuable investment that ensures Whitby, Clarington, and Belleville have a voice in local energy distribution,” the three argued in a joint assertion on Monday. “Protecting this public sector partnership and avoiding privatization ensures the majority stakeholder municipalities continue to receive dividends that support key municipal initiatives and benefit taxpayers.”
Pickering and Ajax argue that promoting the shares may carry cash into the general public coffers, which may then be used for infrastructure.
“This is not unique by any means in Ontario,” stated Mark Rodger, a senior associate at Borden Ladner Gervais LLP, which is main Ajax’s and Pickering’s Request for Proposal (RFP) course of, in an interview with Durham Radio Information. “Several municipalities over the past 20 years have engaged in these processes.”
“There is an active market in Ontario for these regulated electricity distributors,” he added. “Back in the 1990s, and leading up to the restructuring of the Ontario electricity sector, we had over 300 local utilities in Ontario. And through consolidation and sales over that period, we’re down to about 55. So there’s an active market, and you explore the market because sometimes there are very significant premiums paid over the established value. That’s something that can be quite attractive.”
Rodger pointed to the gross sales of vitality distribution firms in Orillia, Peterborough, Port Colborne, Woodstock, Gravenhurst and Thorold in latest many years.
“We don’t have a predetermined outcome,” stated Ashe. “We’re looking at the marketplace to see what happens. The business is changing. We’re a growing community with huge needs for infrastructure and investment. So we’re just looking at it to value the asset and see if now is an opportune time or not. Council will certainly engage with our communities to make a determination of what’s best for the long term financial objectives of the city and also to protect ratepayers.”
As as to if clients may see any impacts on their hydro bills, each Ashe and Rodger stated these are regulated by the Ontario Vitality Board (OEB).
“These are all regulated utilities,” stated Rodger. “The Vitality Board controls issues just like the charges which might be paid. They impose requirements on service reliability. […] That occurs independently of who really owns these firms.
“There is a process, through the Ontario Energy Board, where utilities have to apply for rate [changes],” stated Ashe.
“No matter who owns it, there will be a statutory review and a statutory process where consumers can be intervenors,” he added. “We don’t think this potential transaction will have any impact on customers.”
In response to Ashe, if the customer needed to pay a premium to purchase the shares, they might not be allowed to recuperate the cash by means of ratepayers.
“There is a high level of probability, when we go to the marketplace, that a public entity might in fact be the purchaser,” he stated. “It could be Hydro One. It could be the other shareholders. It could be another utility that is publicly owned. So we don’t have any predetermined target of who’s going to buy it or who’s interested in it; that’s why we retained professionals to help us in this process.”
“There has been no final decision made, whether a sale will in fact take place,” stated Rodger. “We’re just starting the process of exploring this. In any event, it’s going to likely be a number of months before this matter comes back to council.”
“The community will be well-informed as we go through this process,” stated Ashe.
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