Neil Freeman, Vice President, Business Development

Transcription

1 Neil Freeman, Vice President, Business Development June 9, 2015 HORIZON UTILITIES CORPORATION and horizon UTILITIES Looking beyond & Design are registered trade-marks in Canada of Horizon Holdings Inc. and are used under license by Horizon Utilities Corporation.

2 The cost of electricity in Ontario Our goal is to keep the cost of electricity distribution as low as possible. 2 In 1996, distribution charges represented 15% of the bill Source: Ontario Distribution Sector Panel

3 Sector duplication of effort and new costs 73 local utilities for 4.8 million customers 30 local utilities in Golden Horseshoe All utilities investing in new smart grid technologies All with separate billing and administrative systems 3

4 Admin costs actually higher than operations % Split Administration vs. Operations and Maintenance all local utilities Extensive duplication of effort billing systems, call centres, regulatory, etc. Admin cost is larger than Operations & Maintenance for most local utilities Administration averages 57% of total municipal utility OM&A, with many much higher costs $568M of $1.0B Horizon is just 46% for cost of Administration 4

5 What is the traditional solution? Raise your rates. Horizon has an obligation to keep your bill down Main way to get more savings for customers is to be larger Are customers willing to pay more to remain small? Most utilities have sought rate increases rather than mergers 5

6 What is the Horizon solution? Create economies of scale through mergers Merger of 5 utilities created Hamilton Hydro Merger of Hamilton Hydro and St. Catharines Hydro created Horizon 100% Municipallyowned 242,000 customers 425 employees $675 million in total assets 2015 Proposed merger of Horizon with Enersource, PowerStream and Hydro One Brampton option to purchase Hydro One Brampton 6

7 What s the proof that mergers lower costs? Merger of Hamilton Hydro in 2000 Merger of Hamilton & St. Catharines in 2005 Both allowed Horizon to keep costs down for customers Controllable Cost / Customer 7 Source Data: Ontario Energy Board Yearbook of Distributors and Ontario Hydro MUD Bank.

8 Experts agree with us 2012 Ontario Distribution Sector Panel report favoured 8 to 12 regional utilities Review Panel identified: $20.6B investment required over next 20 years for system renewal, growth and new technology $1.7B in operating cost savings and $1.3B in avoided infrastructure investment in first 10 years from consolidation $600 in savings per customer Panel had carrots and sticks, but forced consolidation would have resulted 8

9 Experts agree with us 2015 Clark Panel s report favours just three of four strong distribution players, down from 73 currently Hydro One and Toronto Hydro are already two strong players Hydro One Brampton seen as being key to breaking deadlock and proposed merger as a real urban consolidator Hydro One Networks to be a competing strong consolidator Hydro One not to be subject to cherry-picking of customers by other local utilities 9

10 Ontario Budget supports it 1. Transfer Tax reduction for 3 years down to 22% from 33% utilities with accumulated PILs payments would have little or no tax liability 2. Full Transfer Tax exemption for local utilities with less than 30K customers 3. Capital gains portion of Departure Tax holiday for 3 years (departure from PILs regime) 10

11 New regional utility same shareholders Horizon Hamilton and St. Catharines Enersource Mississauga and Borealis (div. of Ontario Municipal Employees Retirement System) PowerStream Barrie, Markham and Vaughan Hydro One Brampton Province of Ontario Merger has option to buy out Hydro One Brampton 11

12 Four utility merger size relative to all utilities Current LDC Rankings LDC Rankings with Merger Hydro One Networks PowerStream Horizon Utilities Enersource Hydro One Brampton 4 LDC Merger Toronto Hydro A historic and strategic business opportunity Becomes 2 nd largest local utility in Ontario 950,000 customers Merger represents 4 of 10 largest electric distribution utilities Provides scale for next wave of efficiency improvement Just like Hamilton Hydro 2000 merger and Horizon 2005 merger 12 Source data: OEB Yearbook, 2013.

13 Low rates for commercial customers to continue Horizon s track record of low controllable costs, low rates in all customer classes and full returns for shareholders among lowest in Ontario Some local utilities may have lower rates in one class, but few would be lower in all commercial classes New four utility merger objective would be to lower costs through scale and mitigate pressure for rate increases 13 Source: Horizon Holdings 2013 Annual Report (based on OEB rate orders).

14 Commercial customer innovations to continue Horizon s new Large User rate has 84% reduction versus 2014 rate very good for keeping and attracting large business Horizon s strong track record of facilitating conservation and demand management incentives for commercial customers Air Liquide pipeline project $5.6M Horizon has among largest each year Horizon s new award winning intensification / infill development connection policy Canadian Urban Institute Brownie Award 2014 Merger will allow us to do more 14

15 Benefits of utility mergers for region The CUSTOMER The SHAREHOLDER The COMMUNITY Lower cost of living and cost of doing business with great customer service Combined industry leadership on smart grid, community planning, sustainability, conservation and energy mapping Efficiency savings result in lower customer rates than business as usual Lower enterprise risk with consistent and strong shareholder performance Larger dividend payments possible without otherwise higher customer costs more return from the same assets, less pressure on municipal taxes Contribute to shareholder communities being great places to live and work through technological innovation and community sustainability principles Build a great company together on a platform large enough to take full advantage of the combined company strengths 15