The sale of Hydro One: short-term gain, long-term loss

by | Nov 20, 2015 | Biz/Tech

Robert Williamson

Biz/Tech Reporter

The Ontario government’s sale of Hydro One has gone ahead, as planned, despite several warnings from Stephen LeClair, the watchdog hired to monitor the Liberal government’s activities since the gas plant scandal which cost taxpayers $1.1 billion.

“We analyzed the sale and found that the results would have a negative impact on the province [over a long term period],” said LeClair. “It isn’t the role of the FAO [Financial Accountability Office] to present the government with alternative options.”

Wynne’s plan of selling off the Ontario government’s 60 per cent stake in Hydro One would net the province somewhere between $3.3 and $5 billion dollars after paying the utility’s debt. LeClair’s report to the Liberals made it clear this was short-term gain over long-term investment, an unwise move in the watchdog’s eyes.

“We [the Financial Accountability Office of Ontario] presented the Liberals with several different outcomes based off of the sale of their stake in Hydro One,” said LeClair. “In these scenarios, the value of the government’s stake in the company passes the value of the immediate sale in only four years.”

The Financial Accountability Office of Ontario (FAO), the firm which LeClair works out of, ran a number of tests based off of research and the hard data presented to them by the sale. The majority of the hypotheticals told LeClair that the sale of Hydro One would leave the province worse off than before.

“In the three scenarios we presented, there was only one year of a positive income statement resulting from the sale,” said LeClair. “[The province’s debt] only worsens in the five years after that.”

Wynne justified the sale by saying the funds would go towards the province’s infrastructure. Ed Clark, former banker and Wynne’s advisor on the sale, believes the social rate of return from the sale, resulting in more subway lines and better roads, outweighs the financial hit the government will take.

These are the political moves that have lifelong, Liberal supporting students questioning Wynne’s intentions.

“I always vote Liberal, even after everything [gas plant scandal] with Wynne, but this makes me wonder where her head is at,” said John Samuel Wach, 24, a Media Foundations student at Humber College. “This seems like she’s trying to plan for the next vote rather than the future, and as a student that’s the last thing I need to hear.”

Though Wynne’s intentions aren’t clear at this point, some believe she could be receiving pressure from the federal government to clean up the province’s $3.5 billion deficit.

“I think she’s just trying to balance the books right now, get the Liberals out of the red before the next election.” said Kyle Hatton, 26, an Advertising Copywriting student at Humber College.

For now, the potential $5 billion the government will be receiving from the sale will most definitely help out the province’s deficit, though time will tell if this was a wise move by Wynne.