On July 12th, the Province of Ontario and First
Nations, represented by the Chiefs-in-Assembly, announced an
agreement-in-principle for Ontario to sell up
to 15 million shares of Hydro One Limited to First Nation
communities in the province. The Liberal government in Ontario has
partially privatized the public utility, and so far 30% of Hydro
One's shares have been sold. If the 15 million shares are sold
to First Nations, it would constitute another 2.5%.
The Chiefs-in-Assembly established a Chiefs Committee on Energy
to undertake this initiative on behalf of the 133 First Nation
communities in Ontario. Each First Nation would have up to two
years from the signing of binding agreements to decide whether to
participate in the deal. A base threshold of 80% First Nation
participation by the end of 2017 is needed before the transaction
If the agreement is ratified, Ontario would sell the shares to a
new investment vehicle owned collectively by First Nations. The
purchase would be financed with a 25-year loan from Ontario of up
to $268 million, depending on the number of First Nation
communities participating. The shares for the loan would be sold at
$18 per share, which is above the province's book value for the
shares, but below the $24 to $26 range the stock has been trading
in recent months. Ontario would also provide seed capital to a new
First Nation investment fund of up to $45 million over the first
three years, depending on the degree of First Nation
The agreement-in-principle between Ontario and First Nations is
part of the Wynne government's controversial plan to sell off 60% of Hydro
One. Both opposition parties have warned that the sell-off of Hydro
One will drain Ontario of revenue while increasing the cost of
electricity for consumers. The governing Liberals, on the other
hand, have said that the proceeds from the sale will stimulate the
economy and help fund important infrastructure projects.
The sale of Hydro One is the largest sell-off of a Canadian crown
corporation in 20 years, however the Ontario government will
remain the largest shareholder of the public utility, and by law,
no other shareholder or group of shareholders is permitted to own
more than 10%. Ontario's decision to partially privatize Hydro
One stems in part from the report of the Advisory Council on Government
Assets. Led by Ed Clark, the Advisory Council was appointed by
the Premier in April 2014 to "consider various options to
generate better returns and revenues to maximize the value of"
Hydro One (along with the LCBO and Ontario Power Generation). The
Advisory Council recommended that the government dilute its
interest in Hydro One's distribution business by bringing in
private capital and retaining a minority share of 40% to 45%.
Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
The Government of Alberta recently announced a number of policy changes that will impact the Alberta Electricity Market, composed of its generators, transmitters, distributors, retailers, electricity consumers and wholesale electricity market.
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