Would you invest in Toronto Hydro if you could?



As cities expand, so does the demand for financing those cities. Municipal and provincial governments must meet the demands of growth one way or another and that often means building ways to generate the energy needed to power the growth. The current debate is whether or not these companies should be seeking private funds to foot the rather expensive bill

According to Jim Burpee, head of the Canadian Electricity Association, there are funds interested in this area, particularly Canadian pension funds, which are currently looking to increase their investment in electricity companies in our nation. Burpee shares in Greg Quinn’ article on Bloomberg.com that these companies need to raise $350 billion for infrastructure financing by 2030 and suggests that private investors might be the way they need to do it.

“Electric utilities, which sell debt that’s often backed by provincial governments and generate revenue from regulated contracts, would be attractive investments for pension fund managers seeking assets to match longer-term liabilities, Burpee said.” Though public opinion on this move is still low, according to Quinn, capital investment in the electrical grid is “rising to about $15 billion a year from an average of about $10 billion over the last four decades”:

“Pension funds may boost equity stakes in electricity ventures, similar to Ontario Municipal Employees Retirement System’s January purchase of a 31.6 percent interest in the Bruce Power Ontario nuclear site, he said. They could also be key bidders if governments overcome public reticence about selling assets such as Toronto-based Hydro One Inc., said Burpee, who worked at Ontario Power Generation Inc., the government owned utility formerly known as Ontario Hydro, for three decades before joining the association in 2012.

Ontario is considering selling assets to help pay for new infrastructure, the Globe and Mail newspaper reported yesterday, citing people it didn’t identify. Past discussions on the topic have included the potential sale of Hydro One, the newspaper said. Toronto mayoral candidate Karen Stintz said she may sell or lease part of Toronto Hydro Corp. to fund an expanded subway network.

‘I don’t see a large appetite of Canadians to support privatization,’ Burpee said, referring to electricity assets. ‘That’s a very legitimate position to take, but you are saying I will take all the cash now versus a stream of cash.’”

Read more about this highly charged electrical and political issuing over at Bloomberg.com.

What do you think of the privatization of our utilities? Is this a good idea or a bad one? Let us know what you think on Twitter: @signaturemark.