NDP MPP and Energy Critic Peter Tabuns has been asking some very pertinent questions on the sale of Hydro One, particularly the $2.6 billion the government has given Hydro One which matches a $2.6 billion “Departure tax” that will be due when the company ceases to have an ownership that is greater than 90% public.
From October 6:
Mr. Peter Tabuns: I’m going to go back to the $2.6-billion payment that Ontario makes to Hydro One for their departure tax.
Supplementary estimates show that $2.6 billion is coming from the Ministry of Energy and will go to Hydro One. Is that correct?
and so on, until this one passage I will interpret – by highlighting the key words and adding my commentary:
Mr. Serge Imbrogno: I’ll just say that the $2.6 billion goes towards paying down the stranded debt, so that transaction is targeted towards stranded debt. Putting in the additional capital increases our value, and then when we sell the portion of Hydro One, that’s what we’re using to put towards infrastructure. That’s maximizing the amount we can get for infrastructure from that transaction.
The “stranded debt” is not a line item that can be paid down. It is a calculation made by subtracting the assets of the Ontario Electricity Financial Corporation (OEFC) from the liabilities.
Current assets of the OEFC include a note from the government representing, in part the original owner’s equity in Hydro One, and ~$5 billion due from the province of Ontario.
due to confusion between “stranded debt” and “residual stranded debt”, I prefer to use the term “unfunded liability” instead of stranded debt, which matches its appearance on the OEFC balance sheet.
Mr. Peter Tabuns: In part you’re maximizing it
Mr. Serge Imbrogno: So we’ll be paying down the stranded debt and we’ll be reinvesting the proceeds in infrastructure
Mr. Peter Tabuns: But you’re maximizing by reducing the cash that we have available. You’re not going to be paying down more debt than you would have otherwise. Your goal, as stated previously, is $5 billion for debt reduction. Correct?
Mr. Serge Imbrogno: That’s not changing. The $2.6 billion is separate from paying down the debt related to the transaction
Mr. Peter Tabuns: So actually $7.6 billion will be plowed into debt reduction in the aggregate. Correct?
The Unfunded Liability was reported as $8.185 billion as of March 31, 2015 – since which time another ~.5 billion of debt retirement charges were collected. If this were true, there is no unfunded liabilityRead More »