Canada’s Hydro One seeks larger M&A targets to spice up prospects


Oct 5 (Reuters) – Ontario’s largest electrical utility, Hydro One Ltd (H.TO), is searching for acquisitions price as much as C$500 million ($397 million) to spice up its buyer base and consolidate the fragmented trade, a spokeswoman instructed Reuters.

The authorities of Ontario, Canada’s most populous province, is keen to carry down electrical energy prices for patrons. To obtain that, the province is encouraging Hydro One to acquire prospects by acquisition, in accordance with sources.

“We believe this consolidation of our business benefits the community, Ontario and Hydro One as it makes the provincial grid more efficient, while reducing costs across the system,” the Hydro One spokeswoman stated.

Dealmaking will primarily concentrate on increasing service areas and prospects, changing ageing infrastructure and enhancing grid reliability, stated one of many sources.

Ontario’s electrical energy distribution community is very fragmented with 60 corporations, 55 of which maintain lower than a 2% share of the trade, in accordance with information from provincial regulator the Ontario Energy Board (OEB).

Hydro One, which has a market worth of C$17.9 billion, declined to say how a lot it plans to extend its buyer base from the present 1.4 million.

While the corporate has by far the most important market share within the province, with 35.5% of the trade complete, Toronto Hydro-Electric System Ltd and Alectra Utilities Corp are high rivals, with 21.8% and 18.1% of the market, respectively.


Two of Hydro One’s smaller offers, price a complete C$132 million, received regulatory approval final 12 months, encouraging the corporate to hunt for extra alternatives.

“I think government over time has been trying to encourage consolidation,” stated Gavin MacFarlane, vice president-senior credit score officer at Moody’s.

The firm, which had over C$2 billion in internet money as of December 31, 2020, in accordance with its final annual report, plans to fund acquisitions utilizing its steadiness sheet, stated the spokeswoman.

Hydro One final month estimated spending of C$1.91 billion on capital funding for 2021, however the spokeswoman declined to touch upon how a lot can be spent on mergers and acquisitions.

Dealmaking in Canadian energy corporations has accounted for $2.3 billion this 12 months so far in contrast with $4.3 billion for the whole lot of 2020, with Hydro One making up 2% of offers, in accordance with information from Dealogic.

Hydro One most just lately acquired the enterprise property of Peterborough Distribution Inc and Orillia Power Distribution Corp for a complete worth of C$104 million.

Hydro One instructed Reuters that prospects in Peterborough and Orillia noticed a 1% discount within the base distribution a part of their payments after the acquisitions.

“We believe there are further opportunities in Ontario for consolidation and we are open to pursuing these opportunities as they arise,” stated the spokeswoman.

Hydro One, 47.3% owned by the federal government of Ontario, has been beefing up its mergers and acquisitions workforce by hiring consultants from banks and different advisory corporations, three sources instructed Reuters and the corporate confirmed.

Among Hydro One’s current hires was new Vice President, Growth Matt Vines, an funding banker employed from Bank of Montreal (BMO.TO) in August who beforehand labored in M&A for Canadian Imperial Bank of Commerce (CM.TO).

While the spokeswoman for Hydro One stated the corporate was “strengthening” its company technique workforce, she declined to share the dimensions of the present workforce with Reuters.

($1 = 1.2635 Canadian {dollars})

Reporting by Maiya Keidan in Toronto and Shariq Khan in Bengaluru
Editing by Denny Thomas and Steve Orlofsky

High voltage electrical power transmission lines are photographed at night in Toronto, February 9, 2007.     REUTERS/J.P. Moczulski (CANADA)/File Photo

The moon turns orange during a total lunar eclipse behind the CN Tower and the skyline during moonset in Toronto, October 8, 2014. REUTERS/Mark Blinch/File Photo

High-voltage electrical power transmission lines at night in Toronto, February 9, 2007. REUTERS/J.P. Moczulski/File Photo