Innisfil approves sale of InnPpower
INNISFIL — Town council has approved the sale of 50% of InnPower (formerly Innisfil Hydro) to Edmonton-based EPCOR to create a new ‘strategic partnership’.
There was a strong turnout for a special meeting on Wednesday night and for the open house that preceded the council session. Numerous questions and concerns were received from the public, but at the end of the day, council decided to move forward with the sale.
An application will also have to be made to the Ontario Energy Board for approval. If given the green light, the deal could go through by early 2016.
Strategic advisor John Skorobohacz, the town's former chief administrative officer, outlined the rationale behind the proposal, noting that it was EPCOR that approached Innisfil in January, expressing interest in the acquisition of shares in InnPower.
Innisfil had already looked at EPCOR as a possible model for its new water/wastewater municipal services corporation.
“Your council started exploring ways to undertake strategic investment in the employment lands,” an expansion of infrastructure that “mirrored similar challenges that Edmonton faced in its early years,” which led to the establishment of EPCOR by that city in 1996, Skorobohacz said.
EPCOR now has assets of more than $5.7 billion, and is involved not only in hydro distribution but hydro generation, water, wastewater, even fibre-optics and natural gas, in three provinces and two American states, servicing nearly two million customers.
Innisfil had sought an independent valuation of InnPower, driven by expectations that the province would push for consolidation of existing hydro distribution companies.
But the cash was not as important to the board of directors or the town, as the strategic opportunities presented by the proposed sale to EPCOR.
The offer of $19 million for 50% of InnPower shares, plus a 5% finder’s fee for investments over $75 million provides a total offer that “exceeds the valuation,” Skorobohacz said.
But more importantly, makes financing immediately available for projects that include servicing of the south-end Barrie land – which, although annexed by Barrie in 2010, continue to be part of the InnPower service area – and expansion of servicing to the Innisfil Heights employment area.
The cost of servicing that area has been estimated at $80 million. If EPCOR brings its expertise and money to the project, the town will receive the 5% finder’s fee.
And although the deal means that InnPower will split the $640,000 in annual dividends currently paid to the Town of Innisfil, that loss will be offset by the increased customer base in the south-end Barrie, and increased assessment from development of Innisfil Heights.
EPCOR is offering to the lease of the main floor of the new InnPower offices on Yonge Street, and will pay an additional $150,000 to furnish and $150,000 to cover legal and financing costs.
“This isn’t just a hydro company," Skorobohacz said. "They have expertise in hydroelectricity, water and wastewater, and also gas distribution. Look, this is a strategic partner... a partner that is aligned with our future servicing needs.”
There has been no decision as yet as to how to spend the $19-million payment, which will be subject to public consultation.
Skorobohacz said no rate changes are expected as a result of the proposed EPCOR share purchase, nor would there be a reduction in service.
Joan Jay was one of several local residents to comment on the proposal at the meeting.
“You are moving way too fast on this,” she said. “I, as a concerned taxpayer, don’t want one of our major assets sold off. Who do you think you are, Kathleen Wynne?”
Innisfil District Association president Ross Pityk said that his organization had received queries from residents across the municipality. He asked for details on the how the $19 million will be spent, an exit strategy on the proposed deal and for more open communication on major decisions by council, so residents aren’t left scrambling for information at the last minute.
“We have been told how fantastic the deal is," Pityk said. "Are there any perils? Are there any negative things that the public should be aware of?”
Former councillor Rod Boynton praised the sale as finally providing a way to service the Innisfil Heights employment area after years of promises.
Boynton said the town had attempted to purchase servicing from Barrie, but the result was a further annexation by Barrie in 2010.
“We know how that worked out," he said. "Stabbed in the back.”
Most of the speakers were critical.
“I would have thought he was working for EPCOR,” said Henry Kooistra, referring to Skorobohacz’s presentation while also calling for a public referendum. “Did EPCOR even write this presentation? It’s unheard of, if we’re going to enter in a sale, not to have a public process.”
Among the speakers was PowerStream's Brian Bentz, who congratulated the town for addressing the issue of InnPower’s future viability by looking at a possible partnership. He suggested a merger with PowerStream could provide rate relief for InnPower customers.
“By bringing utilities together, we can reduce costs to the benefit of consumers,” Bentz said.
He acknowledged the “exclusivity clause” in the EPCOR offer, which precludes consideration of other deals for a period of six months, but said his aim was “simply to let you know that an option with PowerStream is available.... Council has an important decision to make.”
“I get the feeling you’ve already made the decision. We’re on a speeding train,” said resident Michael Popovich. “I think you’ve checked into Hotel California and there’s no way to check out.”
Popovich urged council to at least look at a PowerStream offer.
“This is just happening without input, and some way of measuring it," he said. "I think you have to pull back a little bit.”
Town CAO Jason Reynar responded to the concerns, noting that the 50-50 partnership would mean that EPCOR would own half of InnPower’s assets, but also half of InnPower’s debt. He also noted that an exit strategy would have to be worked out.
That said, the partnership is both a “profit-oriented venture and a public-oriented venture,” combining local community control with the resources and expertise of the larger partner.
“It has all the makings of a very perfect marriage," Reynar said.
InnPower director Bob Lake noted "Innisfil has potential (but) we don’t have money.”
The deal with EPCOR will provide the dollars for a new substation in the south-end Barrie area to meet expected growth, and investment in infrastructure to service Innisfil Heights.
Council, in a recorded vote, voted 7-2 in favour of confirming the sale of 50% of InnPower as recommended by the board, and moving forward with detailed negotiations.
Voting against were councillors Richard Simpson and Stan Daurio.
Daurio was concerned that the town was being committed to the sale before critical details were worked out, and that there might be other offers.
“There’s no question this is a good plan,” he said. “There may be a better one. ... I still think residents would want us to look at both proposals.”
Coun. Doug Lougheed noted that Innisfil stands to lose approximately $300,000 a year in dividends, “but the flip side of that is we’re getting 22 million bucks.”