Description of the Sale

DESCRIPTION OF SALE

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updated 07/10/18

AVISTA has agreed to sell itself to HYDRO ONE, a Canadian electric transmission and distribution company, 47% owned by the Province of Ontario and headquartered in Toronto.  This is an all cash deal with HYDRO ONE purchasing all outstanding shares of AVISTA for US$53 per share, a 24% premium over the share value as of market close on July 18, 2017.

According to Avista and HYDRO ONE, ““Following completion of the transaction, Avista will maintain its existing corporate headquarters in Spokane and will continue to operate as a standalone utility in Washington, Oregon, Idaho, Montana and Alaska. Its management team and employees will remain in place and it will operate with its own Board of Directors representing the interests of the Pacific Northwest and the communities it serves. The combined company’s headquarters will be based in Toronto.””

(Nine man board of directors, 5 members designated by Hydro One, including Mayo Schmidt, CEO of Hydro One, and 4 members designated by Avista, including Scott Morris, CEO of Avista.  Scot Morris will be the Chair of the board of Avista post-merger.)

 

OBJECTION BASED ON UNFAIR COMPETITION WITH A GOVERNMENT BACKED AND CONTROLED COMPANY, WHOSE POLICIES WILL BE WHIP SAWED BY ONTARIO POLITICS.  IT IS QUITE LIKELY THAT THE NEW PRIEMERE OF ONTARIO, AS OF THE JUNE 7, 2018 ELECTION, WILL FIRE THE HYDRO ONE CEO, AS HE HAS VOWED.

We are a capitalist country.  Free enterprise and competition, animated and constrained by the profit motive have made us prosperous.

Hydro One is controlled by a political entity – the Canadian Province of Ontario.

There are two problems with that.

Hydro One is backed by the assets of the taxpayers of Ontario – what private entity could compete with Hydro One on price due to their taxpayer backing?

For that reason this purchase is fundamentally anti free enterprise and thus anti-capitalist.

The other problem is that Hydro One may not be constrained by the profit motive in its operation of AVISTA.  Hydro One could operate AVISTA with political motives.  They could follow the green agenda, which until the June 7, 2018 election animated the politics of Ontario  – using AVISTA to fulfill somehow Ontario’s green energy agenda.  They could operate AVISTA as a market for wind and solar generating equipment made in Ontario that would not be economic without mandates and subsidies, thus milking rate payers and tax payers.

It does appear that Hydro One is partially animated by the profit motive, judging by this quote from their CEO Mayo Schmidt “”Our shareholders will see stable, strong, forward-looking returns on equity. For the people of Ontario, who are also shareholders, this means a growing income stream to help fund public programs like hospitals, schools and transit.””  So their major share holder, the Province of Ontario wants to fund their “hospitals, schools and transit” with our Avista power bill.  I don’t want to fund Ontario with my power bill. 

This is the Mayo Schmidt letter I am referring to: https://www.hydroone.com/about/corporate-information/subsidiaries/avista

It also appears that the HYDRO ONE purchase of Avista is partially animated by the political ideology of the former super green Ontario government just thrown out of office.  Utility customers in the Interstate 5 corridor may be OK with paying a premium for green considerations, but AVISTA customers are not those people.  Here is a quote from Ontario’s former Premier:

“”Premier Kathleen Wynne is defending Hydro One’s takeover of an American utility that owns a coal plant after years of Liberal boasting that Ontario has banned the plants to cut pollution and greenhouse gases.

She suggested the $6.7-billion purchase of Avista, based in Washington state, heralds the spread of Ontario’s clean-energy push beyond the province’s borders.

“As you all know, Ontario has shut down all of the coal-fired generation in the province. Hydro One has made a business decision to acquire a . . . company that has a small minority share in a coal plant,” Wynne said Friday in Ottawa.

“Let me just say this: you won’t find another jurisdiction — pretty much around the world — that has gone as far in terms of renewable clean energy as Ontario so I see this as a real validation of our opportunity to take that influence elsewhere.”””

Here is a link to the article containing the above quotes about extending policies :  https://www.thestar.com/news/queenspark/2017/07/21/premier-wynne-defends-hydro-one-purchase-of-us-utility-that-owns-a-coal-plant.html

Here is the link to the YouTube video showing Kathleen Wynne making this statement. https://www.youtube.com/watch?v=527VJqu0PHI