TORONTO – Hydro One made a solid debut Thursday on the Toronto stock market in one of the largest initial public offerings in Canada in 15 years, even as controversy continued to swirl over the Ontario government’s plan to partially sell the giant transmission utility.
The company’s stock closed at $21.62, up 5.46 per cent or $1.12 from the IPO price of $20.50, with more than 18 million shares sold.
Finance Minister Charles Sousa said he was pleased to see the offering of Hydro One shares was being “well-received” on the markets.
“Every uptick on the market is an indication the future offerings will net even greater proceeds benefiting all Ontarians,” Sousa said.
“It will mean billions of dollars being reinvested into our economy, into building new assets, into producing greater revenues.”
The Opposition Progressive Conservatives said the governing Liberals wanted the Hydro One sale to “give a big payout to their well-heeled friends,” while the New Democrats warned it would drive up electricity rates and urged the government to reverse course.
“It is not too late to stop the next block of shares from going to market,” said NDP Leader Andrea Horwath. “Selling 15 per cent is bad, but selling 60 per cent is a disaster.”
Stephen Lingard, senior vice-president at investment firm Franklin Templeton Solutions, said it’s not a guarantee that electricity rates will go higher as a result of the privatization of Hydro One.
“Generally speaking, privatization focuses on maximizing profits, and sometimes that means raising prices, but it can also mean squeezing costs and focusing on margins,” Lingard said.
“So it’s not an automatic that prices go up, but certainly that would be a concern initially for ratepayers.”
The sale was also opposed by some business groups, unions, municipalities and all independent officers of the legislature, including the auditor general, ombudsman and financial accountability officer, who warned it would mean a short-term gain but in the long run would hurt the province’s bottom line.
The government plans to use the estimated $1.66 billion generated by selling 13.6 per cent of its stake in Hydro One to help fund transit and infrastructure projects. The sale of 81.1 million shares is the first step in the government’s plan to gradually part ways with 60 per cent of the electrical utility behemoth.
Three more offerings, roughly the same size, are expected to follow, which are anticipated to generate a total of $9 billion.
Roughly $5 billion of that total would go towards paying down the $8.5 billion in stranded debt left over from what was once Ontario Hydro, while the remainder would be used to fund the province’s 10-year, $130-billion transit and infrastructure plan.
Royal Bank of Canada (TSX:RY) and Bank of Nova Scotia (TSX:BNS), who are acting as underwriters in the utility’s public debut, also have an option to purchase an additional 8.15 million shares, which would bring proceeds from the IPO to a total of $1.83 billion.
The last time the Canadian markets saw such a large IPO was in March 2000, when Sun Life raised $1.8 billion in its public market debut.
—With files from Keith Leslie.
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