Ontario Raises $1.83 Billion for Infrastructure Investments
Government Completes Initial Public Offering of Hydro One Shares
The first phase of Hydro One's initial public offering (IPO) has now been completed, generating $1.83 billion in gross proceeds that will now be dedicated to critical investments in transit and infrastructure throughout Ontario and pay down debt.
The exercise of the over-allotment option (see quick facts) by the IPO underwriters completes the full initial offering. The government will continue to hold approximately 84 per cent of the company, as a result of this initial share sale, and will proceed with future offerings in a careful, staged, and prudent manner, over time reducing the province’s stake to 40 per cent while remaining the largest shareholder.
With this transaction, the government remains on track to realizing approximately $9 billion in net proceeds; $4 billion of which will be invested in infrastructure and $5 billion to reduce debt. In addition to the gains from share offerings, the government is benefiting from an estimated upfront gain of $2.2 billion, from the deferred tax asset benefit, as well as a special payment of $1 billion. This special payment was broken down in the prospectus as an $800 million dividend which will go to pay down debt and payables associated with the old Ontario Hydro, and $200 million in additional payments-in-lieu of taxes.
Ontario will direct all net revenue gains from the province’s sale of Hydro One common shares into the Trillium Trust which, in turn, will be used to fund infrastructure projects across Ontario that will create jobs and strengthen the economy. These proceeds will help fund priority projects such as GO Transit Regional Express Rail, Light Rail Transit projects in communities across Ontario, as well as new natural gas network expansion in rural and northern communities.
In the 2014 Budget, the government committed $29 billion in dedicated funds for public transit, transportation, and other priority infrastructure projects across Ontario. The 2015 Budget increased dedicated funds for these projects by $2.6 billion, to $31.5 billion. This incremental increase was made possible through strategically unlocking the value of certain government assets, including broadening the ownership of Hydro One, and is part of the largest infrastructure investment in Ontario’s history - more than $130 billion over ten years and making 110,000 possible jobs each year.
Broadening the ownership of Hydro One is part of the government’s plan to build Ontario up. Under this plan, Ontario continues to be the single largest shareholder in Hydro One and electricity rates will continue to be set independently by the Ontario Energy Board. Ontario’s four-part plan includes investing in people's talents and skills, making the largest investment in public infrastructure in the Province’s history, creating a dynamic, innovative environment where business thrives, and building a secure retirement savings plan.
- An over-allotment option is commonly available to underwriters of an offering, allowing the sale of shares in addition to those committed to be sold in the offering.
- The Ontario government remains the largest shareholder of Hydro One, and by law no other shareholder or group of shareholders is permitted to own more than 10 per cent.
- Hydro One rates will continue to be set by the independent regulator, the Ontario Energy Board.
“Completing this first phase of broadening Hydro One’s ownership means the government will realize $1.83 billion in gross proceeds, from the IPO, to be invested in new roads, bridges, rapid transit, schools and hospitals in communities across Ontario, and pay down debt. The government remains the largest shareholder in Hydro One, rates will continue to be set independently by the Ontario Energy Board, and the company is now positioned to become more efficient and customer focused.”