Ontario’s planned privatization of Hydro One will cost the government up to $500-million every year in lost revenue, and drive up the province’s debt.
This explosive assertion from accountability officer Stephen LeClair in a report Thursday undermines Premier Kathleen Wynne’s argument that the unpopular sale of Hydro One must proceed in order to raise new funds to pay for transit.
Mr. LeClair’s analysis found that, while the province will get a one-time cash injection to spend on transit, it will lose money in the long run.
“Although the sale will provide $3.3 to $5.8-billion in financing for infrastructure, there will also be an ongoing loss in revenue for government, ultimately resulting in an increase in net debt,” he said in a statement.
Ms. Wynne is planning to sell 60 per cent of Hydro One on the stock market, starting with a 15-per-cent initial public offering.
Mr. LeClair estimates the province’s annual loss from the sale will end up being between $300-million and $500-million. The loss will come in part because Ontario will only be entitled to 40 per cent of Hydro One’s $750-million annual dividend, and in part because the province will immediately lose $100-million in annual payments in lieu of taxes but the company will not start paying corporate income tax until at least 2020.
In a statement, Finance Minister Charles Sousa affirmed the government’s plan to go through with the privatization.
“Net proceeds will be put aside to help finance our government’s plan to invest in infrastructure such as roads, bridges and public transit in a way that both saves borrowing costs and does not add to the province’s debt,” he said.
Mr. Sousa also insisted bringing private owners into the picture will push Hydro One into doing a better job of customer service and finding efficiencies.
“Broadening ownership of Hydro One will also result in a stronger-performing, more customer service-focused company. Increased efficiencies will result in operating cost savings which can be passed on to rate payers,” he said.