Collus PowerStream Hydro Share Sale. Public Information Session

Transcription

1 Collus PowerStream Hydro Share Sale Public Information Session Collingwood Library Thursday November 23, 2017 J. Mark Rodger, Partner Borden Ladner Gervais LLP

2 Background: milestone events since the Collus share sale in 2012 In 2012 Collingwood sold 50% of its Collus shares to PowerStream (now Alectra) for $8M. In July, 2016 Collingwood Council announced that a competitive Request for Proposals process would be undertaken to determine market interest regarding the sale of Collus PowerStream. At the same time, Collingwood Council directed senior Town staff and legal counsel meet with Alectra executives to explore whether Alectra was willing to make an offer to buy the Town s remaining shares outside of the requirements of the Unanimous Shareholders Agreement. From Dec. Jan Collingwood Council received a purchase offer from Alectra as well as purchase proposals from other utilities submitted under the RFP process. The RFP offers included a proposal from EPCOR, a 100% municipally-owned Canadian company. 2

3 Background: milestone events since the Collus share sale in 2012 There were significant differences in price & terms between the Alectra and EPCOR proposals. Council directed that the EPCOR proposal be explored further. EPCOR s proposal evolved over time which included, at one point, a proposal involving water and waste water infrastructure renewal. However Council decided not to pursue any arrangement involving water/waste water infrastructure and to focus only on the potential sale of Collus PowerStream. Negotiations with EPCOR have taken place, as described in various communications & press releases from the Town. 3

4 Background: 2012 Unanimous Shareholders Agreement Buy/Sell Requirements As a result of the Town s 50% share sale in 2012, Collingwood and Alectra entered into a binding shareholders agreement called the Unanimous Shareholders Agreement or USA. Part of that Agreement deals with obligations on both parties should a shareholder wish to sell their shares. These are referred to as buy/sell or shot gun clauses. Buy/Sell offers have the effect of launching a process where the end result is a sale of the business. Once an offer is made, the party who receives it MUST either: Accept the offer and sell on the price & terms offered, OR Buy out the party who made the offer on the same price & terms offered. If no response is made the receiving party is deemed to sell its shares at a 10% discount. The party who triggers the offer does not control the final outcome the receiving party does. 4

5 Process: Collingwood issued Buy/Sell Offers to Alectra on October 23, 2017 Alectra had 20 days to decide whether to accept the Town s offer to buy Alectra s shares or for Alectra to buy the Town s shares under the same price & terms that the Town offered. Alectra decided to sell its shares. Therefore, Collus PowerStream will be sold to EPCOR. 5

6 Summary of Key Sale Terms 1. Fairness to Ratepayers Experience: EPCOR is an experienced electricity distribution system operator. Competitive Distribution Rates: EPCOR will apply for a 1% rate reduction for residential customers (effective on closing) & no distribution rate rebasing for 5 years. Continued Local Presence: EPCOR will lease the Collus PowerStream facilities for up to 25 years, or will construct a new Collus PowerStream operations centre in Collingwood after 10 years. 6

7 Summary of Key Sale Terms: 2. Fairness to Collus PowerStream Employees Job Security: 2 year job and location guarantee for all existing Collus PowerStream employees. Maintaining Employment Agreements/Benefits: all existing employment contracts, collective agreements, pension and benefits etc. remain in place. 7

8 Summary of Key Sale Terms: 3. Fairness to Collingwood Taxpayers Collingwood has Maximized the Sale Price: Town Council had a duty to achieve the highest value possible in any sale of the Town s shares. The final total net proceeds from the sale to the Town after adjustments are estimated to be $12.5M to $13M. In 2012 the share sale proceeds received by the Town were $8M. The premium on purchase price cannot be recoverable from ratepayers. Premiums can only be recouped by the buyer from efficiency improvements & scale and scope economies over time. 8

9 Summary of Key Sale Terms: 3. Fairness to Collingwood Taxpayers Breakdown of Collingwood s portion of the $25M total Share Purchase Price: $11.888M for the Town s 50% shares $200,000 towards transaction costs $150,000 towards Waterfront Master Plan = $12.238M Plus Additional Payments to Collingwood: 50% of adjustments (estimated at $750,000 assuming a July/18 closing) 50% of excess cash at closing (not known as this time) $200,000 (if OEB does not approve the residential distribution rate reduction) $216,000 rent per year for up to 25 years (plus inflationary/market changes) 9

10 Summary of Key Sale Terms EPCOR continues current planned capital expenditures: $2M per year on average for next 5 years. EPCOR to meet or exceed current service standards. Advisory Committee to be established (3 Town & 3 EPCOR representatives). Collingwood Council appoints Town representatives. 10

11 Summary of Key Sale Terms EPCOR indemnifies Collingwood for Transfer Tax & Departure Tax. Existing debt obligations (including existing Infrastructure Ontario debt) continues to be funded by utility after sale to EPCOR. No value added payment from Collingwood to EPCOR. Collingwood makes no contribution towards EPCOR s transaction costs. 11

12 Next Step: Applying for Ontario Energy Board Approval Ontario Energy Board must approve sales before transactions can close. Ontario Energy Board approval process could take from 3 months to over one year. Ontario Energy Board applies a no harm test in deciding whether to approve or not. OEB test: is there a reasonable expectation based on underlying cost structures that the costs to serve customers following a sale will be no higher than they would otherwise have been under the status quo? After approval is received, the sale transactions close 1 to 2 months thereafter. The public can participate in the OEB process by becoming a formal intervenor or by sending a letter of comment. A Notice of Application will be published in local newspapers shortly. 12