Guelph Hydro-Alectra financial highlights

Guelph Hydro would pay the City a special dividend of $18.5 million. Over the next 20 years, a merger would also increase Guelph’s dividends by a total of $10.1 million.

Financial comparison

Financial Position Standalone Merger Commentary
Equity Value at Closing $129.4 million $129.4 million Current equity value – same under either scenario.

Growth in equity value in a merger with Alectra should be more robust than on a standalone basis due to scale and significant innovation investment

Closing Adjustments Not Applicable $18.5 million To compensate Guelph Hydro for its more favourable expected Net Debt and working capital positions relative to Alectra
Incremental Dividends Not Applicable $10.1 million Guelph’s estimated incremental dividends as a result of incremental synergies and share of original Alectra synergies
Standalone Dividends
2019-2038
$91.2 million $91.2 million Base dividends same under either scenario (greater of $3 M or 50% of Net income)
Total $220.6 million $249.9 million Guelph is better off financially under a merger with Alectra than on a standalone basis with $29 million in additional cash through closing adjustments and dividends, as well as greater potential equity value appreciation.

Summary of savings

Description Expected savings
Operations Maintenance & Administration synergies from Guelph Hydro
(2019-2027)
$28.5 million
Capital synergies from Guelph Hydro
(2019-2027)
$3.8 million
Operations Maintenance & Administration synergies from Guelph Hydro
(2027-2042)
$73.7 million
Total cash savings from
Guelph Hydro-Alectra merger
$106 million
Total cash savings from original Alectra merger
(based on original Alectra merger business case)
$426 million
Total cash savings $532 million

Guelph’s electricity rates

Electricity distribution rates may not go down after a merger, but they’ll go up less than they would if Guelph Hydro continued to operate alone. Even before realizing efficiencies, a merger allows customers to avoid an estimated 5% rate increase in 2021, and another estimated 5% increase in 2026.

On top of those savings, a merger would reduce duplication and create operating efficiencies, and customers would further benefit from lower costs.

Learn more about the electricity charges on your bill

Operating, maintenance and administration costs per customer

Annual savings of $4.3 million are expected. After 2027, rates will be reset to pass along all savings from the merger to customers. We can also expect about $50 million in annual operating, maintenance and administration and capital savings from the original Alectra merger to flow through entirely to customers.

Ownership after a merger

The City would own 4.63% of Alectra and have a permanent seat on the board of directors.

  • City of Mississauga 26.60%
  • City of Vaughan 20.50%
  • City of Hamilton 17.31%
  • City of Markham 15.00%
  • City of Barrie 8.37%
  • City of Guelph 4.63%
  • City of St. Catharines 4.63%
  • OMERS Infrastructure 2.96%
9 MBGuelph Hydro-Alectra City Council report and presentation

Ontario Energy Board requirements

Any plan to buy sell or merge electricity utility assets must be approved by the Ontario Energy Board. That means the proposal must show it will not have an adverse effect on ratepayers based on the Board’s statutory objectives:

  • To protect the interests of consumers with respect to prices and the adequacy, reliability, and quality of electricity service.
  • To promote economic efficiency and cost effectiveness in the generation, transmission, distribution, sale and demand management of electricity and to facilitate the maintenance of a financially viable electricity industry.
  • To promote electricity conservation and demand management in a manner consistent with the policies of the Government of Ontario, including having regard to the consumer’s economic circumstances.
  • To facilitate the implementation of a smart grid in Ontario.
  • To promote the use and generation of electricity from renewable energy sources in a manner consistent with the policies of the Government of Ontario, including the timely expansion or reinforcement of transmission systems and distribution systems to accommodate the connection of renewable energy generation facilities.

Learn more about the Ontario Energy Board No Harm Test in the Handbook to Electricity Distributor and Transmitter Consolidations