# Wynne gov't is selling off major stake in Hydro One....good or bad for us?



## carverman (Nov 8, 2010)

Latest news is that the Wynne gov't has woken up and smelled the coffee..they can't get into infrastructure building while dealing with a huge multi-billion deficit..
so what can they sell on "Kijji"? :biggrin:




> The province could generate about $9 billion from the Hydro One sale, he said, with $5 billion going to pay the utility's debt and $4 billion being channelled into infrastructure projects.


http://www.cbc.ca/news/canada/toron...ne-sale-raise-your-electricity-rate-1.3038214

Ok so they sell 60% of the mis-managed, top heavy utility..but no private buyer is interested in the stranded debt..that supposedly had been paid off "years ago'
and is a cash cow for the Wynne gov't.



> Hydro One recently applied to the OEB for distribution rates to increase, on average, *six per cent annually over the next five years,* according to Yauch. "So, collectively, ratepayers could see double digit increases in the next couple of years regardless of who owns Hydro One.


6 percent annually..that is about 30 percent increase in the next 5 years. On top of that consumers will be paying more HST on those rate increases.
ok, I'm starting to see a method to their madness....


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## Ponderling (Mar 1, 2013)

In theory, yes it could be a good utility grade investment.

But with the gov't keeping their hands on 40% of the shares, and no other block allowed to control more than 10%, I agree with what I heard Kevin Leary call this IPO - akin to owning toxic waste. 

The Hydro One served electricity market, if the government can ever get their hands out of, could be one worth buying into. 

I am not really neutral on the issue.

A former house mate of mine, an electric utility engineer, worked as a consultant assigned to the IESO in the late 90's early 00's to write the market rules for bidding electric supply
Their hands were somewhat bound.
They were dealing with a commodity which has zero storage.
and still there were political challenges in writing a purely economy driven set of market rules.

Then look at transmission and distribution assets that they are currently looking to flog. Yes, I do agree a natural monopoly case applies here, from a technical perspactive

The assets these type of operation run have life spans that run into the decades, and upgrade programs that run from the small end in ten's of millions, and lead times of 5 years or more after regulatory right of way and connection point hurdles are overcome.

Bonds are quite a common to finance their growth needs, and that needs a stable rate environment to work well.

I am not an IPO kid of investor. So for me, no, I will not be buying this first up.



On the electrical cost rising front, no surprise there for me. Gobs of our utility assets were built in the early 50's, and are now tired and in need of refurbishment.

Spend your money on energy conservation and it is money you then don't have to earn ( and pay income tax on) to pay for rising utility bills. 
We have in the past 10 years or so:
installed a high efficiency furnace
Bought our own mid efficiency smallish hot water tank, and donw pipe wrap, low flow toilets and shower heads
Sealed up the house a fair bit better and installed an HRV for when we need to vent it at a higher rate than natural leakage
Installed newer better efficacy windows and doors
installed a gas fired stove and clothes dryer
Improved attic, second floor and basement insulation levels
Converted most light fixtures to CFL or LED.


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## carverman (Nov 8, 2010)

Ponderling said:


> Then look at transmission and distribution assets that they are currently looking to flog. Yes, I do agree a natural monopoly case applies here, from a technical perspactive
> 
> The assets these type of operation run have life spans that run into the decades, and upgrade programs that run from the small end in ten's of millions, and lead times of 5 years or more after regulatory right of way and connection point hurdles are overcome.


Not to mention wasted taxpayer dollars on the gas plants and the estimated cost of running new transmission lines from Napanee back to the GTA.
It will be billions wasted by the time they are done running a new transmission line and upgrading an old mothballed bunker oil generating station that was shut
down years ago, because it was not cost effective to operate 25 years ago!




> Spend your money on energy conservation and it is money you then don't have to earn ( and pay income tax on) to pay for rising utility bills.
> We have in the past 10 years or so:
> installed a high efficiency furnace
> Bought our own mid efficiency smallish hot water tank, and done pipe wrap, low flow toilets and shower heads
> ...


Sounds like you soent a great deal on these upgrades just to save on energy costs...but not everyone has the financial resources to do this.
So..after all the upgrades you have done in the last 10 years..what is your ROI?


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## Woz (Sep 5, 2013)

$9B for 60% puts Hydro One’s valuation at $15B. Their net income in 2013 was $0.803B giving them an earnings yield of 5.4%. 20 year Ontario bonds are yielding 2.7%. It doesn’t make sense to me to sell an asset yielding 5.4% to avoid financing at 2.7% for the province’s other infrastructure projects.


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## sags (May 15, 2010)

I think it is a bad idea to put an essential service in private ownership.

Like everyone else, I take hydro for granted and expect it to always be there when I need or want it.

Unfortunately in the past, like a lot of other things we want people didn't want to pay the full cost of operation and upgrading the system, so we created debt and put it off to the future.

Ontario's debt load, accumulated by previously not wanting to pay the full cost of things, is going to make it difficult to upgrade the system now when it badly needs it.

The time has come to face the music and pay our way. There is no free lunch and if we want a dependable hydro system we will have to pay for it.

Increases in taxes is inevitable. Pundits can cry and politicians can lie..............but there is no way around it, unless Saudi Arabia or someone else is going to pay our bills.

Unfortunately with all levels of government, infrastructure spending is the last to be added to a budget and the first to be delayed.

In poll after poll Canadians recognize the need. Our politicians need to stop giving away money on election gimmicks,..........at the expense of investing in infrastructure.

That includes the Federal Government, who have not kept up spending on infrastructure and have not allocated the money already promised.

Delaying infrastructure spending only costs more in the future.


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## carverman (Nov 8, 2010)

sags said:


> Unfortunately in the past, like a lot of other things we want people didn't want to pay the full cost of operation and upgrading the system, so we created debt and put it off to the future.
> 
> Ontario's debt load, accumulated by previously not wanting to pay the full cost of things, is going to make it difficult to upgrade the system now when it badly needs it.


That debt load was mostly because of the political actions of the previous mcGuinty gov't...why isn't he on trial like Duffy?


Hydro rates will continue to rise..the next rate increase is May 1st.

Privatization, even if owned by independents will still have to put any rate increases through the OEB. Anyone who is on the RPP (not on marketer contracts) will
be facing rising electricity rates..but those who sign up with the energy marketers will also be paying higher rates.


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## fraser (May 15, 2010)

Ontario Hydro has been grossly mismanaged by successive Ontario governments since the 70s. It started with the nuclear power plant construction disaster. The debt load has been climbing since then. Ontario Hydro is actually the butt of a joke in the Hydro industry in Canada. It is amazing that Ontario voters let it get this much out of hand.

Ontario Hydro had an opportunity years ago to turn over management and operation to Manitoba Hydro. They should have jumped at it. Too late now....the fiscal damage has been done.

Ontario now has some of the most costly electricity in the country. To the point where it is hurting industry-existing and potential.

Will rates continue to rise?? Of course they will. To think or believe otherwise would be naïve.


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## carverman (Nov 8, 2010)

fraser said:


> Ontario now has some of the most costly electricity in the country. To the point where it is hurting industry-existing and potential.
> 
> Will rates continue to rise?? Of course they will. To think or believe otherwise would be naïve.


And this will drive more manufacturing out of this province, maybe not on rising electricity costs but other factors (wages/benefits) as well.
We are starting to see the exodus of some of the US originated industry as well.


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## sags (May 15, 2010)

Somebody has to pay..............

If citizens don't want to pay the cost in taxes, and companies don't want to pay the cost..............all that leaves is debt that keeps building and infrastructure that keeps deteriorating.

Ontario isn't alone on this. I have traveled the roads in Saskatchewan.......some of the worst highways in Canada. Alberta has a huge deficit in infrastructure. Some communities in Canada lack access to proper drinking water. High speed internet is only a dream in some places. 

Canadians have to accept the fact that much of our infrastructure was built 50 - 100 years ago and needs replacement.........and that means they have to pay for it.

The "tax cut" choir sing a fantasy tune of lowering taxes and reducing government spending...........and things will just work out fine somehow.

If our governments focused more on what is necessary and less on things like "fitness credits" and other oddball election gimmicks...........Canada would be a better place for it.

But today is budget day..............see what goodies Santa is bringing..............and lower taxes will no doubt be promised too !


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## Beaver101 (Nov 14, 2011)

carverman said:


> *That debt load was mostly because of the political actions of the previous mcGuinty gov't...why isn't he on trial like Duffy*?
> 
> Hydro rates will continue to rise..the next rate increase is May 1st.
> 
> ...


 ... 'coz he's a weasel? And if he was, then how would Wynne have been shooed-in? :biggrin:

Watch the Polar-Vortax coming!


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## GoLong (Feb 21, 2015)

sags said:


> The "tax cut" choir sing a fantasy tune of lowering taxes and reducing government spending...........and things will just work out fine somehow.
> 
> If our governments focused more on what is necessary and less on things like "fitness credits" and other oddball election gimmicks...........Canada would be a better place for it.


I agree with this and I am fine paying taxes as long as the money is being spent responsibly. The issue is that it isn't and one reason I am so against Kathleen is that her platform has no regard for how to properly allocate what they HAVE...instead it's simply spend spend spend and then worry about it later. You make a good point about how the essentials are often passed off. The answer is simple. It sounds a lot better to voters saying "we will help pay your childs hockey expenses" than "we built some new bridges and hydro dams".


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## sags (May 15, 2010)

There was an interview on CFRB tonight with the President of the OPSEU union, and they hired some researchers to dig into the relationship between successive Liberal governments and large infrastructure firms. He was talking about billions of dollars in contract awards, and hopes the main stream media will pick up the story. At his press announcement, he says there were a number of reporters present, despite that much of the media was focused on the budget announcement.

It sounds like this has the potential to be a big story.


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## carverman (Nov 8, 2010)

Don't worry Ontario taxpayers..with the Harper gov't now telling us they have a balanced budget for 2015 and a contigency fund of 1B for infrastructure (rapid transit), the GTA and city of Ottawa can fight over that fund.
Ottawa is halfway into building their LRT to get across Ottawa (several billion, but *That*money is not needed until 2017), and the
GTA has just announced new rapid transit rail line between Brampton and Mississauga.

..both will be fighting for a piece of that 1 Billion contingency fund...and if oil ever goes up, there may be more in the federal cookie jar in the future.

Wynne is selling off 60% of Hydro One..watch the electricity rates go up dramatically in the next few years as privitization will have to make substantial investments on infrastructure and ROI.

The Feds have already sold off their shares of GM...


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## andrewf (Mar 1, 2010)

They sold GM to turn the deficit into a surplus.


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## Ponderling (Mar 1, 2013)

In response to queries about ROI on energy upgrades in our house- 
Well sometimes it is peace of mind and just the right thing to do. 
I don't live my whole of life experiences on what is the ROI

We have in the past 10 years or so:
> installed a high efficiency furnace
House when we bought it in 2003 had 1967 vintage furnace that woke me up every morning with its noisy fan. Heat exchanger rust though risk was also a ticking time bomb.
Cost premium to go high efficiency over mid efficiency was about $800 as I recall it, and the goal was resuced fan energy consumption over some 20 years of this new asset, as well as the real likelihood that the price of fuel was not going to drop.....

> Bought our own mid efficiency smallish hot water tank, and donw pipe wrap, low flow toilets and shower heads
ROI on this is huge - Avoided rental paid for the capital cost incurred to buy our own tank in less than three years. 

> Sealed up the house a fair bit better and installed an HRV for when we need to vent it at a higher rate than natural leakage.
HRV was found on the curb for free, and I installed it as an exhaust air route from my old school photo darkroom exhaust outlet. 
As I painted rooms over the years I would install gaskets behind new electrical outlets, and foam the crack between the wall and floor when refinishing the baseboard trim. 

>Installed newer better efficacy windows and doors.
Windows were 1967 aluminum frames two panes, no vacuum between the panes. We live on a bus route. Noisy. New windows much more quiet. Doors were wood panle type - replaced with steel with foam centre. Lots of this effort was DIY.


> installed a gas fired stove and clothes dryer.
First gas stove was found free at the curb. Since replaced with basic $600 gas stove.
Gas clothes dryer was bought used $275. Both plumbed for gas when the new furnace and water tank and BBQ outside connection was installed.
Gas is quite a bit cheaper to derive heat out of than electricity.
From a bit of an inside view on electricity asset replacement demands that are building in Canada, electricity only had one direction to go in cost - up.

>Improved attic, second floor and basement insulation levels.
shed roof type attic- made on site roof rafters for us, so attic is not too bad to move around in. maybe $400 to add 6" of insulation batts. Allows the second foolr to stay warm enough that we can allow furnace to set back overnight .
Second floor insulation as a $1200 increment on a much larger job of replacing the 45 year old aluminum siding that never had a vapour barrier in the wall too was an easy spend 
Basement was not insulated when we bought. Closed sale in February and there was no snow for 18" around the foundation, so obviously was a major heat loss source. Insulated header and rim joist spaces, and added wall insulation as I finished the basement to pretty much give us a 33% increase in total usable house space

> Converted most light fixtures to CFL or LED. 
Upstairs was all switched outlets which was not a good idea with small kids. So I installed OEM fluorescent light source ceiling fixtures.
LED goes in when the CFL light burns out in a medium screw base socket. 
LED lives much happier in some luminaires than CFL does, where the heat rise killed the CFL integral ballast in short order often.


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## sags (May 15, 2010)

Our hydro bill is $110 - $120 a month, so a 6% increase is only another $5.

I don't see what the big deal is.


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## carverman (Nov 8, 2010)

Ponderling said:


> In response to queries about ROI on energy upgrades in our house-
> Well sometimes it is peace of mind and just the right thing to do.
> I don't live my whole of life experiences on what is the ROI


Ok, you replaced a lot of stuff in your house for peace of mind, not necessarily the ROI on energy costs.

A new furnace assuming $2500 for a high efficiency gas type has a typical life of 20 years or less on the heat exchanger.
Usually when these develop cracks and start to leak Carbon monoxide into the heating ducts..the furnace is redtagged and you are forced to change it.
So lets say $2500 /20 yrs = $125 per year

Hot water tank; 40 US gal is about $700 (life expectancy 15 to 20 years before a leak develops) so that is about $50 a year.

Free HRV..other than work installing it, that is $0

New doors and windows :say $2000 over x (25 years) that's $80 a year

Gas stove for $600 (over 25 years) thats about $25 a year 
Gas clothes dryer ($275) over 15 years thats about $20 a year
Insulation $400 + $1200 ($1600) over 25 years is about $65 a year
Basement wall insulation ???
Converted light fixtures to CFL (low cost) vs LED (high initial cost) ???

Don't know what your nat gas and electricity bills were before, but lets say after spending all that money and averaging it out to one year of upgrade cost vs energy costs saved
on your nat gas/hydro bill ($345/12 months ...are you saving at least $30 a month on both bills to reflect what you put into your place?


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## Ponderling (Mar 1, 2013)

carverman said:


> Ok, you replaced a lot of stuff in your house for peace of mind, not necessarily the ROI on energy costs.
> 
> >Hot water tank; 40 US gal is about $700 (life expectancy 15 to 20 years before a leak develops) so that is about $50 a year.<
> I recall it was about $300 at HD. Hauled it home myself, plumbed the water connections myself, and had the gas contractor do the flue connections and gas plumbing at the same time as the furnace.
> ...


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