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Hydro One of Canada Seeks Larger M&A Targets to Boost Customers | WKZO | All Kalamazoo

By on October 5, 2021 0

By Maiya Keidan and Shariq Khan

(Reuters) – Ontario’s largest electric utility, Hydro One Ltd, seeks acquisitions worth up to C $ 500 million ($ 397 million) to increase customer base and strengthen the industry fragmented, a spokeswoman told Reuters.

The government of Ontario, Canada’s most populous province, is eager to lower electricity costs for customers. To achieve this, the province is encouraging Hydro One to secure customers through acquisition, sources said.

“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 grid,” the door said. word of Hydro One.

The negotiation will mainly focus on expanding service areas and customers, replacing aging infrastructure and improving network reliability, one of the sources said.

Ontario’s electricity distribution system is highly fragmented with 60 companies, 55 of which have less than 2% industry shares, according to data from the provincial regulator, the Energy Board of Ontario (CEO).

Hydro One, which has a market value of C $ 17.9 billion, declined to say by how much it plans to increase its customer base from the current 1.4 million.

While the company has by far the largest market share in the province, with 35.5% of the industry total, Toronto Hydro-Electric System Ltd and Alectra Utilities Corp are the main competitors, with 21.8% respectively. % and 18.1% of the market.

LOWER INVOICE

Two of Hydro One’s smaller deals, worth a total of C $ 132 million, gained regulatory approval last year, prompting the company to seek more opportunities.

“I think the government over time has tried to encourage consolidation,” said Gavin MacFarlane, vice president and chief credit officer at Moody’s.

The company, which had more than C $ 2 billion in net cash as of Dec.31, 2020, according to its latest annual report, plans to fund acquisitions using its balance sheet, the spokesperson said.

Hydro One last month estimated C $ 1.91 billion in capital investment spending for 2021, but the spokesperson declined to comment on how much would be spent on mergers and acquisitions.

Transactions at Canadian utilities have amounted to $ 2.3 billion this year to date, compared to $ 4.3 billion for 2020 as a whole, with Hydro One accounting for 2% of transactions, Dealogic data shows .

Hydro One recently acquired the business assets of Peterborough Distribution Inc and Orillia Power Distribution Corp for a total value of C $ 104 million.

Hydro One told Reuters that customers in Peterborough and Orillia saw a 1% reduction in the basic distribution portion of their bills after the acquisitions.

“We believe there are other consolidation opportunities in Ontario and we are open to pursuing these opportunities as they arise,” said the spokesperson.

Hydro One, 47.3% owned by the Ontario government, has bolstered its mergers and acquisitions team by hiring experts from banks and other consulting firms, three sources told Reuters and the company confirmed .

Among Hydro One’s recent hires was new Vice President, Growth, Matt Vines, an investment banker hired by Bank of Montreal in August who previously worked in mergers and acquisitions for the Canadian Imperial Bank of Commerce. .

While the Hydro One spokeswoman said the company was “beefing up” its business strategy team, she declined to share the size of the current team 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)