Last-ditch attempt to unite city under one utility fails

A last-minute effort by Greater Sudbury Utilities to buy Hydro One's local customers before the utility's initial public offering of shares failed because of the asking price.

Ward 1 Coun. Mark Signoretti, who sits on the GSU's board of directors, said the offer was roughly triple the value of the asset, a signal that Hydro One wasn't serious.

"It was way out of line,” Signoretti said. “Generally, in this type of (transaction), the asking price would have been 1.2 to 1.5. So in our opinion, they weren't ready to make a deal happen."

The offer came after an August meeting with Ontario Energy Minister Bob Chiarelli during the annual Association of Municipalities of Ontario meeting.

"In that meeting, basically ... we reiterated our position about purchasing Hydro One assets, but we specifically outlined about our three principles that it has to be good for Sudbury Hydro customers, good for Hydro One customers and it has to be good for the shareholder, which is the city of Sudbury," Signoretti said.

"There was talk about a joint venture, so subsequent to that meeting, the minister said he would reach out to (Hydro One) to try to get us to have a conversation ... It came down that the asking price was unrealistic. It wasn't reasonable."

The conference call during which the offer was made took place Oct. 7, about three weeks before shares of Hydro One went public. The province has so far raised about $5 billion with the IPO, through a combination of share sales, tax benefits and dividend payments.

The GSU has tried to buy Hydro One's 30,000 customers in Greater Sudbury before, but the share sale meant any future deal would be that much more complicated. Signoretti said it would have been a good deal for consumers.

The GSU has lower distribution rates than Hydro One, better customer service and reliability, plus it's locally owned and controlled.

"We wanted to make sure if there was an opportunity for us to help out Hydro One customers and put it under one utility, it would have made sense to do so at that time," he said. "With Sudbury Hydro, there's a return value to the people of Greater Sudbury, whereas Hydro One rates support payments to Queen's Park."

The difference between what Hydro One wanted for the assets and what made sense for the GSU was too large to resolve through negotiations, Signoretti said.

"It was more of an exploratory meeting,” he said. “But when you're exploring different sides and you can see ... you're way out of whack on one end, it's kind of hard to bridge that gap."

GSU spokesperson Wendy Watson said they haven't closed the door on the idea, because of the potential benefits to local ratepayers. Money raised here stays to improve the local power system, she said.

"Whereas (when) Hydro One raises capital from their ratepayers, they could invest it maybe in Sudbury or maybe in southwestern Ontario or way up in extreme Northern Ontario,” Watson said. “Capital that was raised here wouldn't necessarily be invested here. It would go wherever Hydro One felt they needed it.

"The IPO, certainly, makes it more complicated if it were ever going to happen,” she added. “There is no active conversation right now."

Signoretti said the GSU board hasn't given up hope of one day uniting the city under a single utility. A letter dated Nov. 10 to Chiarelli said GSU still wants to buy Hydro One assets, even though the October offer was out of whack.

"The gap was too large, but we're always open to looking at that option if it's still available,” he said. “So we kept that door open for dialogue, or for them to come back and meet with us."