Horizon Utilities pitches merger to St. Catharines
Niagarathisweek.com
Oct. 7, 2015
By Scott Rosts
Horizon Utilities officials say bigger will be better if a merger is approved to create what would be the second-largest utility in the province.
Lower rates and increased dividends for the city were among the major benefits for St. Catharines, Horizon president Max Cananzi told city councillors on Monday night during a St. Catharines Hydro shareholder meeting. Cananzi made a 20-minute presentation and addressed any questions from councillors before it was taken into closed session for further discussion.
The plan would replace Horizon, which was created in 2005 when Hamilton Hydro and St. Catharines Hydro merged, and create a new company owned by the municipalities of St. Catharines, Hamilton, Mississauga, Barrie, Markham, and Vaughan, as well as Borealis - part of the Ontario Municipal Employees Retirement System. The new company would purchase Hydro One Brampton and serve 960,000 customers. The deal would need the approval of all involved municipalities and a green light by the Ontario Energy Board.
“The benefits are huge,” Cananzi said, noting the merger is expected to provide 5.9 per cent lower average annual rates through the next 25 years, and 8 per cent lower after 10 years. The merger, he said, would require $9 million less per year from customers, which equates to about $40 less for the average per customer per year.
That would come, he said, with no changes to service centres, with one continuing to remain in place in St. Catharines, a commitment to maintain service response levels and response time, and the potential to see as many as 15 more jobs at the St. Catharines call centre, which will be one of two centres for the utility. Currently, he said, there are about 30 employees at the call centre.
“We really like the opportunities Niagara provides,” Cananzi said.
Significant savings with the merger will translate into additional dividends for the shareholder, and ultimately more savings for the customer down the road. While there will be $97 million in transition costs, operating and capital expenditure savings will still add up to about $426 million in the first 10 years, with $51 million per year of savings sustained after 10 years. Efficiencies will include consolidating certain operations, including billing systems and call centres.
The city, said Cananzi, would see about a $1 million average increase per year in dividends over the next 25 years. That would come, he said, without higher customer costs, with more return from the same assets and less pressure on municipal taxes.
While the different shareholders would own varying percentages, Cananzi stressed all would be equal partners.
“There is no one party with a controlling interest,” he said, later adding St. Catharines will always have one seat at the table as a shareholder.
Questions from councillors revolved around the future of the call centre, as well as whether the scale of the company will help the bottom line.
“We have a very strong case here. The savings are in front and real,” Cananzi said to Coun. Bruce Williamson when asked about the size of the utility should the merger be approved, and whether there would be a threshold of being “too big”.
Williamson also asked about governance, stressing the need for the community to have its voice around the table.
“We negotiated shareholder rights for the founding partners,” said Cananzi, noting there will be 13 board members - one from St. Catharines. “It will be reserved and guaranteed.”
Councillors Bill Phillips, Mark Elliott and Sandie Bellows all asked about jobs, including the potential for growth, whether there would be any lost in St. Catharines, and stressed the importance of keeping jobs in the community.
“All of the people dealing with assets and customers ... the service part of the operation isn’t affected,” said Cananzi.
St. Catharines Council will formally consider the proposal at its Tuesday, Oct. 20 meeting. The meeting was moved from the usual Monday night to accommodate the federal election.
In a statement, Mayor Walter Sendzik said council's primary concern with the proposal is ensuring reduced costs for customers and increased returns for taxpayers.
“We also want to ensure that customers will experience the same or greater level of service they have come to expect from Horizon Utilities,” he said.
The city is inviting those who would like to speak on the issue at the Oct. 20 meeting to contact the clerk’s office to make a request, at 905-688-5601, ext. 1507 or by email at clerks@stcatharines.ca.
THE MERGER
Horizon Utilities (in Hamilton and St. Catharines), Enersource (in Mississauga) and Power Stream (Barrie, Markham and Vaughan) along with acquiring Hydro One in Brampton.
Customers before merger: 242,000 (188,000 in Hamilton and 54,000 in St. Catharines).
Customers after merger: 960,000
Employees before: 425
Employees after: Undetermined
Total assets before: $675 million
Total assets after: $2.6 billion
Hydro distribution before: 5.5 billion kwhs
Hydro distribution after: 25 billion kwhs
Horizon shareholders today: The City of Hamilton owns 78.9 per cent. The city of St. Catharines owns a 21.1 per cent.