Grimsby does a hydro share shuffle

Photo:
Grimsby’s biodigester on Sobie Road was initially to be operational last November when the clock started running on its 20-year FIT contract. Hydro officials said in December it would be ready in late spring. As of this week it is still under construction.

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By Mike Williscraft
NewsNow

In a move to “tidy up” a “cumbersome” hydro company infrastructure, Grimsby’s Administration and Finance Committee voted Monday to create a second holding company which will add another board of directors under its family of hydro-related holdings.

While everyone around the committee table agreed repeatedly how complex and awkward the hydro administration structure is only Ald Dave Kadwell asked any questions about a move which would shuffle the core structure of the Town’s largest asset.

Among the questions, which were never clearly answered, were:

1) Why, if the wording of an agreement when FortisOntario bought 10 per cent of Grimsby Power Inc in 2009, would it come forward six years later to adjust the agreement?

2) A $12.9 million value was assigned. Where did that value come from and how was it arrived at?

Mayor Bob Bentley, who also sits as a director on the hydro companies boards of directors told the committee the creation of a second holding company was to clear up issues created when the Fortis sale contract was “worded wrong”.

“The structure initially set was very confusing, very cumbersome,” said Bentley, who added the company’s “intent” was to buy 10 per cent of GPI, not NPI.

“We need to tidy up our entities.”

In the proposed move, which still has to be ratified by full council next Monday at its regular meeting, Grimsby Energy, Grimsby Hydro and Niagara Regional Broadband Networks would be grouped under Holdco 2, the newly formed company.

This group would be 100 per cent owned by the Town of Grimsby.

NPI and GPI would remain linked.

“We need to properly align the infrastructure,” said Bentley.

“Why now?” asked Kadwell?

“It came up under an Infrastructure Ontario funding inquiry,” said Bentley.

“It does read Fortis owns 10 per cent of NPI, so it currently is not 100 per cent municipally owned.”

The diagram included in the package for the committee noting “post-restructuring” still shows Fortis connected to NPI and to the new Holdco 2, a point not lost on Kadwell.

“I am just trying to work my way through the clouds here,” said Kadwell.

“The 12.9 million shares and $12.9 million, where did that valuation come from? Where did that value per share come from? How was it arrived at?”

“I’m really not sure,” said Bentley.

“It was $1 per share.”

Kadwell questioned further.

“Just what are we buying here? I would like to see a list breaking down what we are getting for that $12.9 million.”

“We’re not spending anything. We are just aligning the structure. You already know the ownership percentage,” said Bentley.

Kadwell said he still could not understand what would necessitate such a significant restructuring of the company.

“So seven years later (after the Fortis sale), why is this coming to the table now?” asked Kadwell.

Bentley went back to the “cumbersome” structure and noted, “The ownership is not clear.”

As Kadwell continued to ask questions, Ald. John Dunstall noted that the moves suggested did not seem to do what proponents of the restructuring said it would do.

“We know it is already confusing, so why create another company then? The other holding company, will it have its own board of directors? The new company could just make it more confusing,” said Dunstall.

“And who will be on that board? Who will run it? Is there not an easier way? That’s what I say,” added Kadwell.

Finance committee chair Carolyn Mullins, who was recently added to the hydro company’s board said yes, there would be another board.

As to the structure, Grimsby CEO Derik Brandt started to note several possible set-ups for the board including a duplicate of another board for simplicity, but Bentley cut off his comment, noting “The structure of the new board has not been decided.”

At that point, Ald. Steve Berry seemed to lose patience with the line of questioning.

“Yes, it is a cumbersome structure, but that was the recommendation we received and we need to move forward. (Law firm) Bordan Ladner makes recommendations across the province. If someone has a better idea, please bring it forth,” said Berry.

“There are also tax advantages but we won’t get into that right now. That’s for another meeting.”

Kadwell persisted.

“I just don’t understand the share valuation. I want to know what is on the table. I want to know what the Town is getting,” said Kadwell.

“We need to tidy it up. This kind of thing has been done often in the Town. There is tax savings. It gives Fortis the proper alignment,” said Berry.

“Your comments seem to indicate there is something going on. I don’t know what you’re trying to imply. I’m on the board and I’m trying to understand what you are trying to get across.”

“We’re just tidying up paperwork and you believe something else is happening?”

“You are clearing it but setting up a company with a new board and you don’t know what structure the board will have? Wouldn’t it be prudent to have that information now?” asked Kadwell.

“You’ve got that information,” said Bentley.

“Ya, well, I’ve been waiting for information since May 24, too,” added Kadwell, with no expansion on what that pending information is.

“That’s another matter,” said Bentley.

Although the dust never really did settle, the finance committee passed the recommendations, complete with documents dated Jan. 1, 2016.

The matter will come back to full council this Monday, Aug. 15 at town hall.