Energy Minister Bob Chiarelli says the government is paying for legal and financial advice to potentially cut First Nations in as part-owners of Hydro One – and he expects it may happen before the utility’s next stock offering.

The Ontario government already has a political accord signed with the Chiefs of Ontario, an umbrella group representing 133 Ontario First Nations. Chiarelli said Thursday that two discussion tables have been set up with the chiefs, where talks about the recent Hydro One IPO and energy policy are taking place.

The energy minister also said the government has provided “capacity funding” for the Chiefs of Ontario to “hire legal and financial technical assistance so they can grasp a lot of the ins and outs of the IPO.”

“We have an intention of trying to work something out, hopefully sooner than later,” Chiarelli said. The minister wouldn’t comment on how big an ownership stake First Nations could take, or how much it was costing to pay for the technical assistance.

Chiarelli did say, though, that the government expects there will be a solution before Hydro One's next stock offering.

“We expect it'll happen in that time frame," he said.

“The Province is in discussions with Chiefs of Ontario regarding potential equity for the First Nations,” added Jordan Owens, Chiarelli’s spokesperson, in an email. “To help First Nations identify their interests on this issue, the Province is providing COO with support for the hiring of professional advisers.‎”

The possibility of First Nations taking a stake in Hydro One was laid out in the company’s prospectus for the recent initial public offering. The prospectus also made it clear the Métis Nation of Ontario had “expressed an interest” in the IPO, and that the province was prepared to speak with the group about “broadened ownership” of Hydro One.

It's a sensitive issue, as Hydro One's distribution and transmission lines run through First Nations territory. Prior to the IPO, in August, Ontario Regional Chief Isadore Day raised concerns about inadequate consultation with aboriginal groups on the partial privatization of Hydro One. The risk factors listed in the final Hydro One prospectus also included “First Nations and Métis Claims.”

“There’s a lot of opportunity here, and if we’re not adequately consulted in the beginning, we would then defer this to: Are we going to have to turn this into a consent discussion?” Day said.

The government has already brought in two unions as minority owners of Hydro One. The final prospectus said the province agreed to sell somewhere between 3.66 million and four million shares to the Power Workers’ Union and somewhere between 1.84 million and two million shares to the Society of Energy Professionals (for a total of approximately one per cent of the company).

What’s more, the province agreed to loan the two unions money to help them buy some of their Hydro One shares. As part of the deal, the PWU would borrow $75 million and the Society would receive $36 million. The unions are allowed to pay the interest on the loans with the quarterly dividends they’ll receive from Hydro One stock, but they won’t be able to vote their shares until they pay off their debts.

Hydro One shares were trading above $22.40 on Thursday, nine per cent higher than the $20.50 selling price the province’s underwriters received. The government received approximately $1.83 billion in proceeds from the opening share sale of Hydro One, wherein 15 per cent of the company was sold to investors.

The Ontario Liberal government remains committed to selling up to 60 per cent of Hydro One in future stock offerings, although no investor other than the province will be allowed to hold more than 10 per cent. In return, the government is estimating it will receive $9 billion, which it will split between paying off hydro debt and funding infrastructure projects.

To contact the reporter on this story:
gzochodne@qpbriefing.com

Discussions underway on First Nations ownership stake in Hydro One

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