The Guelph Hydro agreement includes a $20.86 million going away present of our money to hook up with Alectra

By Gerry Barker

December 4, 2017

City of Guelph Media Release:

Guelph, Ont., December 1, 2017 – With negotiations complete, a report that shares the details about the proposed merger between Guelph Hydro and Alectra is now available on the City’s website and energizingtomorrow.ca

Guelph Speaks has commented on the media release and its comments are in bold face.

On December 13 at 6:30 p.m., City Council will meet to discuss the report, hear delegations from community stakeholders, and decide whether to approve the proposed merger.

“The report answers a lot of the questions we’ve been hearing from our community about electricity distribution rates, service reliability, the City’s dividend, our share in the merged company, and jobs,” said Derrick Thomson, chief administrative officer for the City of Guelph (and co-chair of the Strategies and Options Committee (SOC). “We encourage all community stakeholders to learn more about the proposal, ask questions, and send us comments as City Council prepares to make its final decision December 13.”

Well Derrick, here’s our comment: Please explain to the 55,000 stakeholders why after a year and a half of negotiations, why did this agreement give Guelph Hydro away getting nothing for the assets valued at $228.4 million? The citizens have just nine days to obtain, read and digest the 245-page agreement that is only available online.

In view of your invitation to participate in the process, it is too late and smacks of a deliberate attempt to conceal the details and block public participation. The administration has depended on the Internet to communicate its information. But neglects the thousands of Hydro customers who have no access to a computer or are disabled or disadvantaged.

I received a hard copy December 2 and it’s a daunting task to read and absorb 245 pages of the document with just nine days remaining before the December 13 council meeting to approve or reject the agreement.

Council refuses to answer my merger questions

On your advice I attempted to ask a number of questions but were blocked by the energizingtomorrow.ca website under the title ‘Ask us Anthing.’ I then sent the questions to every member of council receiving no resposnse. That’s so much for transparency. A member of the administration was reported as stating ‘They are asking the wrong questions.’ Not only are citizens restricted in the number of characters in their online submission, it now appears there is censorship of certain questions the administration doesn’t approve. So much for the Ask us Anything claim.

“The final report and recommendations for City Council give me confidence that this is the right direction for our city to take. Guelph residents and businesses will save money, and the City will receive higher dividends we can use to support local infrastructure, programs and services. A new Green Energy & Technology Centre would provide new jobs, economic opportunity, and strengthen Guelph’s position as an energy leader. The time has come for Guelph to embrace our energy future and this merger accomplishes that,” said Guelph Mayor Cam Guthrie.

How can the Mayor make these assertions months before the final details of the agreement are signed? How will 55,000 Guelph Hydro customers save money? How does the city receive higher dividends when it loses control of Guelph Hydro what is the basis of such a statement? Why do we need a Green Energy and Technology Centre when we just blew millions attempting to create green energy sustainability? Mayor, specify all those new jobs and economic opportunity (sic) that will strengthen Guelph’s position as an energy leader? I don’t recall that statement being part of your 2014 election campaign.

Well Mayor, there is absolutely no truth or assurance that anything you say will occur. If you had done your homework and checked Alectra’s track record of dealing with consolidation of Local Municipal Distribution (LCD) systems, you may have been more careful in your support. For example, why did Alectra purchase Brampton Hydro One but is not interested in buying Guelph Hydro?

Will the real Alectra please stand up? Is it Alectra Utilities or Alectra Inc? The city generated Dec. 13 agenda does not specify. The agenda states there is a closed-session meeting at 5:30 one hour before the public meeting.

Oh! To be a fly on the wall for that closed session.

Question: Is it a fact that Counc. June Hofland and Coun. Karl Wettstein, voted to appoint the SOC in 2016? They were former paid members on the Guelph Municipal Holdings Inc. (GMHI) Board of Directors,. GMHI controlled Guelph Hydro, are they not in conflict and should they abstain from voting in the December 13 meeting to approve/disapprove the merger?

After a year of industry research, financial analysis and community engagement, the City began negotiating a merger between Guelph Hydro and Alectra in October. The negotiated transaction before City Council offers greater benefits for customers, the community and the City as shareholder than maintaining full ownership of Guelph Hydro.

If that is true, why was the composition of the SOC appointed membership changed? It has been reported and not denied that the option of selling Guelph Hydro was taken off the table in February 2017. Did the SOC interview any organizations regarding the purchase of Guelph Hydro? We assume that after more than a year researching opportunities for either a sale or a merger, when did the SOC decide to negotiate a merge with Alectra?

It appears the SOC is a one trick pony.

Were these some of the questions that were judged to be wrong by those directing the merger campaign and therefore not answered? No wonder.

“I want to thank City and Guelph Hydro staff, along with the Strategies and Options Committee for their work over the past year preparing a comprehensive financial and legal analysis for Council’s consideration. I also want to thank Guelph and Rockwood residents and businesses for participating in the process. Your questions and comments have, and will continue to guide City Council’s decision, ” added Mayor Guthrie.

Mayor, where is the evidence of “comprehensive financial and legal analysis” allegedly conducted by the SOC?

The report includes materials which address the Merger Participation Agreement and Unanimous Shareholders’ Agreement—the two main agreements that would give effect to a merger; the Green Energy & Technology Centre (GRE&T) Strategic Business Plan; a fairness opinion—an independent financial opinion which concludes the merger agreement is fair from a financial point of view, to the City as shareholder; a letter from Alectra board chair, Norm Loberg, offering City-sought assurances regarding no intent to privatize; findings from the 14-month public consultation process.

If you give our $300 million Hydro system away with little or no consideration from Alectra, a private corporation, then the benefit to the owners is nil, nada zilch, pure and simple. I, for one, have been unable to download the details of this agreement from the city website.

Linked Resources:

When I asked the city communications contact employee for assistance. I received a one-line reply that the documents were on Microsoft Explorer and Chrome browsers. I am a Mac user and use Firefox as my brouser. No reply or assistance was received. Guess that’s what can happen on a Friday afternoon.

A copy of this agreement will make an excellent door stop

Well, it doesn’t matter. I received a hard copy from another source. It’s 245 pages so it will take time to digest. There are five days left to join the petition and tell your councillors that you are opposed. Send your request to oppose the merger to gerrybarker76@gmail.com Please include your full name, address and ward.

Local ownership and dividends

In addition to its regular annual dividend, Guelph Hydro would pay the City a special dividend of $18.5 million.

So to sweeten the pot, the agreement includes a special dividend of $18.5 million from Guelph Hydro to the City of Guelph. Such a transaction is simply getting paid with your own money.

Toss in the $2.36 million that the City and Guelph Hydro is paying to join this Alectra club.

No mention in the ageement of the $93 milion in Guelph Hydro’s long-term debt. It’s made up of two debentures assigned to Guelph Municipal Holdings Inc. one due in 2030 and the other in 2045. Who pays the interest to satisfy that liability? Answer, it’s us the taxpayers.

Why is GMHI receiving the Alectra dividends?

The City would receive a 4.63 per cent ownership interest in Alectra. Among other things, this percentage determines what share of Alectra’s future dividends Guelph Municipal Holdings Inc. is to receive

Just to keep it straight, in return for giving away our $300 million Guelph Hydro system, we get a 4.63 per cent ownership of Alectra? On top of that, for the privilege, it only costs us another $20.86 million to join Alectra.

Why is GMHI receiving the unknown amount of Alectra dividends and not the city?

Especially when GMHI has already lost $63 million in Guelph shareholders equity? Did not the Mayor state that Alectra would pay twice what Guelph Hydro was paying in dividends to the city? That could become $3 million a year. Guelph Hydro had a net profit in 2016 of $7 million. That’s after all expenses including the $1.5 million dividend paid to the city that year.

So why are we giving it away?

Okay, we citizens have no idea where Guelph Hydro is finding $18.5 million to send to its corporate owner, the City of Guelph. Yes that’s still we the people. This is starting to resemble a Ponzi scheme where the shareholders are paid with their own money.

If this deal is approved, it will be snowing, if you get my drift

Summing up: This agreement to give Guelph Hydro away to Alectra will cost the city $20.86 milion. Alectra is not putting up a dime. It’s a mystery why city council is being snowed by this deal. What would they do if it were their own money?

In return we get a 4.64 per cent share of Alectra, the Alectra dividend amount is unknown. Does the agreement contain Alectra’s certified copies of the following: 

Details of incorporation, jurisdictions

Current assets and liabilities

Status of long-term debt and type of liability

Names of shareholders and corporate officers and interest

What is the difference between Alectra Utilities and Alecrta Inc?

Names and position of senior staff

Names and terms of office of the Alectra Board of Directors

Dividend distributions in 2016 and 2017 YTD

Income statement from January 31, 2017

If this informatiin is judged proprietory, then the city lawyers and accountantss should swear to their authenticity and the contents reviewed on behalf of the shareholders.

What assurances do the Guelph Hydro shareholders have that this information was disclosed to the SOC in confidence because parts of it are proprietory?

If the SOC did not pursue answers to these vital questions of the merger proposal during negotiations, then how can it possibly support the merger if they don’t share the intimate details of each organization?

It’s what we don’t know that hurts

Alectra certainly knows everything it needs to propose this merger but what do the shareolder’s of Guelph Hydro know about the inner workings of Alectra?

On the surface, it appears that the city administration doesn’t care what the shareholders’ interests are, only that they get their hands on $18.5 million of the shareholder’s money.

Where do you think that money is going?

Again, don’t be duped by hollow promises. This is not a deal but a blatant steal of our prime asset.

Why would the SOC who ostensibly negotiated this merger, ever be lured by the so-called special dividend of $18.5 million to be paid to the city using our public funds, in return for recommending this merger?

More to the point, if city councillors believe this merger benefits the 55,000 customers of Guelph Hydro, then they are suffering from power cut to the brain.

Alectra’s current policy is to pay annual dividends equal to 60% of its net income. This policy is expected to continue, and as a result of the merger the dividends payable to the City would increase significantly as compared to the dividends it would receive if Guelph Hydro continued operating alone.

Promises, promises will get us nowhere

The key words here are “expects” and the “promise” of greater dividends paid to the city. Is this a guarantee and part of a committment by Alectra in the merger agreement?

Guelph would receive one permanent seat on Alectra’s board of directors and have the right to appoint an independent director.

The Guelph Hydro brand would be used for one year following the merger.

So what? Once you transfer the corporation and its assets, it’s game over.

Electricity distribution rates

Electricity distribution rates are not expected to go down after a merger, but they wouldn’t go up as much as they would if the City maintained full ownership of Guelph Hydro.

Guelph and Rockwood customers would avoid an estimated 5% distribution rate increase in 2021, and another estimated 5% increase in 2026, and would also benefit from the savings expected from consolidating the two companies.

Service and reliability

Alectra would meet or exceed service standards and reliability for electricity distribution customers in Guelph and Rockwood.

Is this why Alectra doubled its customer service charges in its current operating distributions systems? Does the agreement protect Guelph Hydro’s lower cost customer service charges and for how long?

Protection from privatization

Alectra is 97% municipally-owned, with the remaining 3% owned by a subsidiary of OMERS (Ontario Municipal Employees Retirement System). Alectra’s existing unanimous shareholders’ agreement is the result of extensive negotiation among its shareholders, none of whom planned to privatize.

Provisions in Alectra’s unanimous shareholder agreement, tax disincentives, and the municipal character of its shareholders are all protections against future privatization of the utility.

To describe Alectra’s clients as being 97 per cent municipal-owned is a stretch. In Guelph’s case once the deal is approved it is no longer municipal-owned. If the agreement has a clause that gives Guelph Hydro the right to withdraw would that be opposed by Alectra.

Green Energy & Technology Centre

The GRE&T Centre would employ eight to ten people, and Alectra would invest $5 million in capital to convert parts of Guelph Hydro’s existing headquarters into demonstration areas, laboratories or showrooms. It would invest an additional $3 million annually to fund pilot projects, demonstrations, salaries, administration, marketing, and partnerships.

Gee! All it cost Guelph Hydro shareholders was $300 million

This is an offer by Alectra to sweeten the deal for the political-left inclined voters. Our city has had a belly-full of left-inspired environmental projects to last 100 years. These include: Entensive bike lanes throughout the city; waste removal; garbage bin collections; downtown redevelpment; the GMHI green energy district energy debacle that lost some $63 million in in GMHI shareholder equity; building an infrastructure needs liability of $450 million; failure to fulfill promises of building a new downtown public Library and a South-End Recreation Centre.

So, why would council accept an offer from Alectra to take over Guelph Hydro for nothing?

Yet our Mayor is endorsing the merger along with a number of his council.

Jobs

Guelph Hydro employs about 130 people. Approximately 30 positions are expected to be addressed through attrition, voluntary retirement or voluntary separation, whenever possible.  An equal number of positions would be offered relocation opportunities within Alectra starting in 2019, with the majority of moves occurring in 2020 and 2022.

The facts: The 38 jobs potentially lost. In the report released December 1, some 60 jobs will be lost, or about 46% of existing Guelph Hydro staff. It is predicted about 10 jobs will be created for the Green Energy Technology centre – net job loss =50 jobs.

Guelph Hydro’s key outside workers recently transferred to the Power Workers of Canada trade union, from their present collective bargaining unit. With attrition of staff, Alectra will have to provide skilled replacements workers from other jurisdictions who are not familiar or reside anywhere close to the city.

If you conclude that the merger deal is not for Guelph, send your name, address and ward to gerrybarker76@gmail.com to be added to our petition opposing the merger. Also, letting your municipal councillor know before December 13 about your opinion will build our collective opposition.

Your voice matters

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