How the city plans to sell Guelph Hydro, something that Farbridge failed to do

By Gerry Barker

June 8, 2017

Today it’s Part One. Monday Part Two will be published

Nine years ago, former mayor Karen Farbridge attempted to convince city council and citizens to merge Guelph Hydro with systems in Hamilton and St. Catharines. The mayor had a comfortable majority of followers on council, so what could go wrong?

Well, it did as council turned it down. It was the only time I can recall that the mayor lost a major battle. Looking back, it occurred only because the people almost unanimously rejected the proposal and the councillors heard them. It was a rare occasion where the people had the final say.

The mayor needed the money that a sale of Guelph Hydro would provide. The first priority was to pay the $22 million toward the federal and provincial government’s special infrastructure plan. Under the plan, Guelph would pay one third, as would each of the senior governments. Some $66 million was approved and spent on a variety of shovel-ready projects in the city.

But the mayor’s plan almost failed because of the citizen’s revolt against selling Guelph Hydro. Instead, the mayor, who sat on the Hydro board of directors, notified the board that council was calling a $30 million note that Hydro owed the city. That solved the city’s share of the infrastructure plan and there was a little left over that was spent on a time clock in the Sleeman Centre and $2 million building bicycle lanes on Stone Road between Edinborough and Gordon Streets.

This all happened in the first three years of the Farbridge administration.

Shortly following her re-election in November 2010, the mayor set up Guelph Municipal Holdings, Inc. (GMHI), a corporation wholly owned by the city. The mayor was chair of the company and controlled the board of directors by naming four councillors, Lise Burcher, Todd Dennis, Karl Wettstein and June Hofland. Two independent directors were appointed.

The company had assets including Guelph Hydro and the Guelph Junction Railroad. GMHI sent a dividend of $1.5 million to the city each year. The last known total was $9 million before the roof fell in with the revelation in May 2016 that GMHI had lost $26.6 million and had never made a profit.

With a startup in late 2011, in five years, little was known about its operations as the meetings were held in closed session.

In addition to the losses, there was a large loan taken out of Guelph Hydro for $65 million that was described by former GMHI Chief Executive Officer, Pankaj Sardana as impaired. In the 2015 city financial statement the loan was listed as $69 million as there had been no repayment by GMHI. That loan is now on the city books listed as an asset. This will eventually have to be written off.

GMHI spent money on solar panels on some public buildings, two gas-fired District Energy pumps, costing $11 million to supply hot and cold water to a handful of downtown and Hanlon Business Park buildings. It was an abortive co-generation scheme to use the pumps to pump the water in underground pipes to the buildings and generate electricity.

For four years, GMHI worked in the dark led by the former mayor and former Chief Administrative Officer Ann Pappert.

The campaign to sell the city’s most valuable and profitable asset

Next Tuesday, June 13 starting at 6:30 p.m. city council, as GMHI shareholders, representing the citizens of Guelph and will hear a review of the project to sell Guelph Hydro by mid-2018, before the city election in October. Prior to the meeting, council will meet in closed session to discuss the all-important details of the project, far from the madding crowd.

Last October, council approved commencing an investigation by the Strategic Options Committee (SOC) composed at the time of Chief Administrative Officer Derrick Thomson as chair, CEO of Guelph Hydro, Pankaj Sardana as co-chair, and Robert Bell, Hydro board member,.Two citizen members, Mark Goldberg and Ron Puccini were also named.

According to the Energizing Tomorrow website, only Mr. Goldberg and Mr. Puccini live in Guelph.

There are no elected representatives on this committee. There are two individuals, Mr. Sardana and Mr. Bell who are closely associated with Guelph Hydro.

So, we can conclude that this operation not only includes the SOC but also Guelph Hydro Electric Systems. The Board of Directors of Guelph Hydro Electric Systems included: Ms. Jane Armstrong. Ms. Judy Fountain, Robert Bell, Bruce Cowan, Ted Sehl, Rick Thompson and Ms. Jasmine Urisk.

Under no circumstances am I suggesting that these folks were complicit in the GMHI financial disaster.

There does not appear to be checks or balances or direct oversight of this potential disposal of the most valuable asset of the city’s assets. Also, the public has had little to say since formation of the SOC. Granted, council must have the final say but its members are not directly involved in this exercise being handled by the SOC and its advisors, a consultant and a Toronto law firm.

It also comes as a surprise that there are certain members of Guelph Hydro Electric Systems who had exposure to GMHI financial disaster that cost the city $26.6 million. These include Jasmine Urisk, Ted Gehl, Jane Armstrong, Judy Fountain and Robert Bell.

Mr. Goldberg of the SOC served on the GMHI board of directors. Mr. Sardana, co-chair of the SOC, was formerly CEO and CFO of GMHI.

Then came an announcement. Mr. Sardana was replaced as co-chair of SOC by Hydro Board chair Jane Armstrong and Mr. Puccini resigned to be replaced by Douglas Auld.

On Monday, June 12, look for Part Two that details the strategy to complete the sale of Guelph Hydro by mid 2018

In the meantime, here is an unedited portion of the 48 pages publish on the city website, of the proposal to be approved June 13 by council acting as shareholders of GMHI.

As determined in Phase 1, Ontario’s energy landscape is changing, and mid-sized utilities like Guelph Hydro are looking for better ways to:

  • Meet customer expectations;
  • Take advantage of modern technologies;
  • Cover costs of delivering safe, reliable electricity service;
  • Fund local infrastructure maintenance and upgrades; and
  • Prepare and respond to more frequent and severe storms.

I draw your attention to item four – Fund local infrastructure, maintenance and upgrades.

So do we sell a profit-making asset to fund years of neglect of city infrastructure?

I don’t believe this for one minute. As I will explain in the next part of this two-part series, the proceeds resulting from the sale of Guelph Hydro will be primarily used to pay down the accumulated debt of GMHO and the $69 million note owed to Guelph Hydro.

We have never been informed if GMHI spent that loan money and on what?

There are so many questions needing answers.

Part Two will analyse and comment on the nuts and bolts process of moving ahead with this sale of Guelph Hydro.

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4 Comments

Filed under Between the Lines

4 responses to “How the city plans to sell Guelph Hydro, something that Farbridge failed to do

  1. Colleen

    It is interesting to note that when Councilor James Gordon pointedly asked the SOC why they were recommending sale or merger at the first meeting despite overwhelming public opinion against both options SOC member Bob Bell stated that he has more expertise im mergers and acquisitions than the general public and therefore knows better.

    • Colleen

      Also, to clarify SOC member Bob Bell and Councillor Bob Bell are not the same person.

    • Colleen: Thanks for the clarification. I refer to Mr.”Hydro” Bell as Robert to avoid the obvious confusion. It’s comforting to know that he says he knows more about M&A than the general public, the people who own the utility. Where do they find these people?

    • Colleen: That’s why I refer to Hydro co-chair Bell as “Robert” to avoid confusion.

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