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Guelph Hydro And Alectra Announce Merger

Web posted on December 05, 2017

Guelph, Ont., December 2017 With negotiations complete, a report that shares the details about the proposed merger between Guelph Hydro and Alectra is now available on the City's website and energizingtomorrow.ca.

On December 13 at 6:30 p.m., City Council will meet to discuss the report, hear delegations from community stakeholders, and decide whether to approve the proposed merger.

"The report answers a lot of the questions we've been hearing from our community about electricity distribution rates, service reliability, the City's dividend, our share in the merged company, and jobs," said Derrick Thomson, chief administrative officer for the City of Guelph. "We encourage all community stakeholders to learn more about the proposal, ask questions, and send us comments as City Council prepares to make its final decision December 13."

"The final report and recommendations for City Council give me confidence that this is the right direction for our city to take. Guelph residents and businesses will save money, and the City will receive higher dividends we can use to support local infrastructure, programs and services. A new Green Energy & Technology Centre would provide new jobs, economic opportunity, and strengthen Guelph's position as an energy leader. The time has come for Guelph to embrace our energy future and this merger accomplishes that," said Guelph Mayor Cam Guthrie.

After a year of industry research, financial analysis and community engagement, the City began negotiating a merger between Guelph Hydro and Alectra in October. The negotiated transaction before City Council offers greater benefits for customers, the community and the City as shareholder than maintaining full ownership of Guelph Hydro.

"I want to thank City and Guelph Hydro staff, along with the Strategies and Options Committee for their work over the past year preparing a comprehensive financial and legal analysis for Council's consideration. I also want to thank Guelph and Rockwood residents and businesses for participating in the process. Your questions and comments have, and will continue to guide City Council's decision, " added Mayor Guthrie.

The report includes materials which address the Merger Participation Agreement and Unanimous Shareholders' Agreementthe two main agreements that would give effect to a merger; the Green Energy & Technology Centre (GRE&T) Strategic Business Plan; a fairness opinionan independent financial opinion which concludes the merger agreement is fair from a financial point of view, to the City as shareholder; a letter from Alectra board chair Norm Loberg offering City-sought assurances regarding no intent to privatize; findings from the 14-month public consultation process.

Key features of the proposed merger

Local ownership and dividends
In addition to its regular annual dividend, Guelph Hydro would pay the City a special dividend of $18.5 million.

The City would receive a 4.63% ownership interest in Alectra. Among other things, this percentage determines what share of Alectra's future dividends Guelph Municipal Holdings Inc. will receive.

Alectra's current policy is to pay annual dividends equal to 60% of its net income. This policy is expected to continue, and as a result of the merger the dividends payable to the City would increase significantly as compared to the dividends it would receive if Guelph Hydro continued operating alone.

Guelph would receive one permanent seat on Alectra's board of directors and have the right to appoint an independent director.

The Guelph Hydro brand would be used for one year following the merger.

Electricity distribution rates
Electricity distribution rates are not expected to go down after a merger, but they wouldn't go up as much as they would if the City maintained full ownership of Guelph Hydro.

Guelph and Rockwood customers would avoid an estimated 5% distribution rate increase in 2021, and another estimated 5% increase in 2026, and would also benefit from the savings expected from consolidating the two companies.

Service and reliability
Alectra would meet or exceed service standards and reliability for electricity distribution customers in Guelph and Rockwood.

Protection from privatization
Alectra is 97% municipally-owned, with the remaining 3% owned by a subsidiary of OMERS (Ontario Municipal Employees Retirement System). Alectra's existing unanimous shareholders' agreement is the result of extensive negotiation among its shareholders, none of whom planned to privatize.

Provisions in Alectra's unanimous shareholder agreement, tax disincentives, and the municipal character of its shareholders are all protections against future privatization of the utility.

Green Energy & Technology Centre
Alectra would establish the Green Energy & Technology Centre at Guelph Hydro's current location. The centre would be a platform for accelerating and integrating new and emerging energy technologies and help prepare Guelph's local utility company to address Ontario's changing energy landscape, and the global energy transformation already underway.

The GRE&T Centre would employ eight to ten people, and Alectra would invest $5 million in capital to convert parts of Guelph Hydro's existing headquarters into demonstration areas, laboratories or showrooms. It would invest an additional $3 million annually to fund pilot projects, demonstrations, salaries, administration, marketing, and partnerships.

Jobs
Guelph Hydro's current location would become a Southwest Operations Centre for at least 10 years.

Guelph Hydro employs about 130 people. Approximately 30 positions are expected to be addressed through attrition, voluntary retirement or voluntary separation, whenever possible. An equal number of positions would be offered relocation opportunities within Alectra starting in 2019, with the majority of moves occurring in 2020 and 2022.

Guelph Hydro employees will be treated equitably and with respect. Fair programs will be developed to support employees should they wish to transition from the organization voluntarily.

Ontario Energy Board approval
The merger would be submitted to the Ontario Energy Board for approval. Among other things, the board would have to be satisfied that the merger would not cause harm to consumers with respect to price; and adequacy, reliability and quality of electricity service.

About Guelph Hydro Electric Systems Inc.
Guelph Hydro is a medium-sized local distribution company delivering electricity in a safe and reliable manner to more than 55,000 customers in Guelph and Rockwood, Ontario. You can learn more about Guelph Hydro at guelphhydro.com

About the City of Guelph
Guelph is a growing, diverse and vibrant community of more than 120,000 people, located about 100 kilometres west of Toronto, Ontario, Canada. Guelph City Council has the authority to make the final decision about the ownership of Guelph Hydro. Learn more about Guelph City Council at guelph.ca/council

About Alectra
Alectra is the largest municipally-owned electric utility in Canada based on the total number of customers served. Alectra's family of energy companies distributes electricity to nearly one million customers in Ontario's Greater Golden Horseshoe Area and provides innovative energy solutions to these and thousands more across Ontario.

The Alectra family of companies includes Alectra Inc., Alectra Utilities Corporation and Alectra Energy Solutions.


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