November 12th, 2015
November 12th, 2015
Today, the Liberal government claimed that in addition to generating $1.83 billion in gross proceeds from selling Hydro One, it also received an “upfront gain of $2.2 billion, from the deferred tax asset benefit, as well as a special payment of $1 billion.”
That’s bad math.
Here are the facts:
There is no $2.2 billion
On October 20, 2015, in the Standing Committee on Estimates, the government stated that the $2.2 billion deferred tax benefit was “non-cash.” Ontario NDP Energy Critic Peter Tabuns demanded to know how “non-cash” could fund transit,
Mr. Peter Tabuns: And so how does the government use the $2.2 billion in non-cash gains to pay for subway trains?
Mr. Serge Imbrogno: The details of how the Trillium Trust will work will be part of the legislation that the government is bringing forward, so I can’t really speculate on how you credit the $2.2 billion and how you fund it, and how you fund it over time.
The “special payment of $1 billion” will come from ratepayers
Hydro One will be borrowing $800 million in order to make its “special payment” which includes an additional $200 million Payment-in-Lieu. Page 102 of the October 29, 2015 Supplemented Hydro One Prospectus says, “Hydro One Inc., either through issuances of commercial paper [short-term debt] or drawings under the Liquidity Facility or the New Term Facility, will make $800 million in cash available. Hydro One Inc. will use the proceeds received… to pay a dividend or make a return of capital to the Province in the amount of $800 million. ”
In order to pay the province, Hydro One is borrowing money. Even though ratepayers will receive no benefit from this $800 million loan, they will be responsible for paying it back, with interest.
“Today's announcement is not only inaccurate, but does nothing to help people who need to get to home, school or work on time,' said Ontario NDP Energy Critic Peter Tabuns. 'The government’s numbers are just accounting tricks. Ontario’s independent Financial Accountability Officer looked at the sale, and he confirmed that selling Hydro One will put Ontario in a worse financial shape than before. Instead of raising $4 billion for infrastructure, the FAO said the sale might raise only $1.4 billion in actual cash, equal to a mere 1% of the government’s infrastructure plans. Commuters deserve better than smoke and mirrors.'