TORONTO – Shares in Hydro One, the giant transmission utility whose partial sale has sparked political controversy in Ontario, climbed in trading during its debut Thursday on the Toronto Stock Exchange in one of the largest initial public offerings in Canada in 15 years.
The company’s stock was at $21.60 in early afternoon trading, up from the IPO price of $20.50, with more than 16 million shares sold.
Finance Minister Charles Sousa said he was pleased to see the offering of Hydro One shares was being “well-received” on the markets.
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“Every uptick on the market is an indication the future offerings will net even greater proceeds benefiting all Ontarians,” Sousa said.
“It will mean billions of dollars being reinvested into our economy, into building new assets, into producing greater revenues.”
The Opposition Progressive Conservatives said the governing Liberals wanted the Hydro One sale to “give a big payout to their well-heeled friends,” while the New Democrats warned it would drive up electricity rates and urged the government to reverse course.
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“It is not too late to stop the next block of shares from going to market,” said NDP Leader Andrea Horwath. “Selling 15 per cent is bad, but selling 60 per cent is a disaster.”
The sale was also opposed by some business groups, unions, municipalities and all independent officers of the legislature, including the auditor general, ombudsman and financial accountability officer, who warned it would mean a short-term gain but in the long run would hurt the province’s bottom line.
The government plans to use the estimated $1.66 billion generated by selling 13.6 per cent of its stake in Hydro One to help fund transit and infrastructure projects. The sale of 81.1 million shares is the first step in the government’s plan to gradually part ways with 60 per cent of the electrical utility behemoth.
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Three more offerings, roughly the same size, are expected to follow, which are anticipated to generate a total of $9 billion.
Roughly $5 billion of that total would go towards paying down the $8.5 billion in stranded debt left over from what was once Ontario Hydro, while the remainder would be used to fund the province’s 10-year, $130-billion transit and infrastructure plan.
Royal Bank of Canada (TSX:RY) and Bank of Nova Scotia (TSX:BNS), who are acting as underwriters in the utility’s public debut, also have an option to purchase an additional 8.15 million shares, which would bring proceeds from the IPO to a total of $1.83 billion.
The last time the Canadian markets saw such a large IPO was in March 2000, when Sun Life raised $1.8 billion in its public market debut.