Hydro One sale could cost province $500 million in revenue annually

Ontario’s new financial accountability officer warns the sale of Hydro One could cause a revenue shortfall of around $300-500 million a year for the province.

Stephen LeClair’s first report to the legislature finds the province will face fiscal pressures as early as next year, and the sale will have a negative impact on the province’s budget balance.

LeClair said while the sale of Hydro One would reduce this year’s deficit, it would cost the government more money later on.

“The Minister of Finance will face a reduction in revenue associated with Hydro One as early as next year,” he said in the report.

According to the report, the province would see an improvement in its budget in the first year after an initial sale of 15 per cent of shares in the utility.

But he said the budgetary impact could be positive or negative in subsequent years as more shares are sold, and will ultimately be negative once the Liberals sell the 60 per cent of Hydro One they plan to put on market.

LeClair estimates the total value of Hydro One at between $11-billion and $14.3 billion, and said based on that a 60 per cent sale would generate $6.8 billion to $8.9 billion, “a wider and somewhat lower range” than the government’s estimates.

But the financial accountability officer says he can’t tell how the government came up with its valuations for Hydro One because the Liberals won’t tell him their methodology.

Without knowing how they made their calculations, LeClair said “it is not possible” for him to offer a definitive opinion on whether the partial sale will help the government eliminate a $10.3 billion deficit by 2017-18 as promised or not.

“It would have been just cheaper for the government to borrow money … it would have been a lot better than to sell Hydro One,” PC finance critic Victor Fedeli told reporters at Queen’s Park on Thursday.

“This is an absolutely disastrous deal for the province of Ontario.”

He said Ontarians will see “fluffed up” books for the next two years, but then the province’s financial situation will deteriorate “heavily and rapidly.”

Hydro One turns over about $750 million a year to the province, which will be reduced as private owners take their share of the profits.

But Premier Kathleen Wynne says she needs to sell 60 per cent of the utility to raise money for public transit and infrastructure projects.

With files from Cynthia Mulligan