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Canada’s Hydro One seeks bigger M&A targets to boost customers

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Ontario‘s largest electric utility, Hydro One Ltd, is seeking acquisitions worth up to C$500 million ($397 million) to boost its customer base and consolidate the fragmented industry, a spokeswoman told Reuters.

The government of Ontario, Canada‘s most populous province, is eager to bring down electricity costs for customers. To achieve that, the province is encouraging Hydro One to obtain customers through acquisition, according to sources.

“We believe this consolidation of our business benefits the community, Ontario and Hydro One as it makes the provincial grid more efficient, while reducing costs across the system,” the Hydro One spokeswoman said.

Dealmaking will mainly focus on expanding service areas and customers, replacing aging infrastructure and improving grid reliability, said one of the sources.

Ontario’s electricity distribution network is highly fragmented with 60 companies, 55 of which hold less than a 2% share of the industry, according to data from provincial regulator the Ontario Energy Board (OEB).

Hydro One, which has a market value of C$17.9 billion, declined to say how much it plans to increase its customer base from the current 1.4 million.

While the company has by far the largest market share in the province, with 35.5% of the industry total, Toronto Hydro-Electric System Ltd and Alectra Utilities Corp are top competitors, with 21.8% and 18.1% of the market, respectively.

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Two of Hydro One’s smaller deals, worth a total C$132 million, won regulatory approval last year, encouraging the company to hunt for more opportunities.

“I think government over time has been trying to encourage consolidation,” said Gavin MacFarlane, vice president-senior credit officer at Moody’s.

The company, which had over C$2 billion in net cash as of December 31, 2020, according to its last annual report, plans to fund acquisitions using its balance sheet, said the spokeswoman.

Hydro One last month estimated spending of C$1.91 billion on capital investment for 2021, but the spokeswoman declined to comment on how much would be spent on mergers and acquisitions.

Dealmaking in Canadian power companies has accounted for $2.3 billion this year to date compared with $4.3 billion for the entirety of 2020, with Hydro One making up 2% of deals, according to data from Dealogic.

Hydro One most recently acquired the business assets of Peterborough Distribution Inc and Orillia Power Distribution Corp for a total value of C$104 million.

Hydro One told Reuters that customers in Peterborough and Orillia saw a 1% reduction in the base distribution part of their bills after the acquisitions.

“We believe there are further opportunities in Ontario for consolidation and we are open to pursuing these opportunities as they arise,” said the spokeswoman.

Hydro One, 47.3% owned by the government of Ontario, has been beefing up its mergers and acquisitions team by hiring experts from banks and other advisory firms, three sources told Reuters and the company confirmed.

Among Hydro One’s recent hires was new Vice President, Growth Matt Vines, an investment banker hired from Bank of Montreal in August who previously worked in M&A for Canadian Imperial Bank of Commerce.

While the spokeswoman for Hydro One said the company was “strengthening” its corporate strategy team, she declined to share the size of the current team with Reuters.

($1 = 1.2635 Canadian dollars)

 

(Reporting by Maiya Keidan in Toronto and Shariq Khan in Bengaluru; Editing by Denny Thomas and Steve Orlofsky)

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N.Korea fires unidentified projectile off east coast -S.Korea military

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North Korea fired an unidentified projectile off its east coast on Tuesday, South Korea’s Joint Chiefs of Staff said.

 

(Reporting by Hyonhee Shin; Editing by Christopher Cushing)

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77 per cent of Canadians aged 55-69 worried about retirement finances: survey – CTV News

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TORONTO —
More than three quarters of Canadians nearing or in early retirement are worried about their finances, at a time when more and more Canadians plan to age at home for as long as possible, a new survey has revealed.

The survey from Ryerson University’s National Institute on Ageing (NIA),conducted in collaboration with HomeEquity Bank, found that 77 per cent of Canadians within the 55-69 age demographic are worried about their financial health.

Additionally, 79 per cent of respondents aged 55 and older revealed that their retirement income — through RRSPs, pension plans, and old age security — will not be enough to be a comfortable retirement.

“Determining where to live and receive care as we age has been an especially neglected part of retirement financial planning,” Dr. Samir Sinha, NIA director of health policy research, said in a news release.

“These are vital considerations that can also be costly. With the vast majority of Canadians expressing their intention to age at home, within their communities, it is essential that we find both financial and health care solutions to make this option comfortable, safe and secure.”

As the COVID-19 pandemic revealed some shortcomings in the long-term care system, 44 per cent of respondents are planning to age at home, but many don’t fully understand the costs involved, the study notes.

Nearly half of respondents aged 45 and older believe that in-home care for themselves or a loved one would cost about $1,100 per month, while 37 per cent think it would cost about $2,000 per month.

In reality, it actually costs about $3,000 per month to provide in-home care comparable to a long-term care facility, according to Ontario’s Ministry of Health.

Bonnie-Jeanne MacDonald, the NIA’s director of financial security research, said it’s important Canadians understand the true costs of aging while they plan for their future.

“Canadians retiring today are likely going to face longer and more expensive retirements than their parents – solving this disconnect will need better planning by people and innovation from industry and government,” she said.

To help with their financial future, the researchers suggest Canadians should delay receiving any Canada Pension Plan or Quebec Pension Plan payments as the monthly payments increase with year of deferral. For example, someone receiving $1,000 per month at age 60 would receive $2,218.75 per month if they wait until age 70 to begin collecting.

The researchers also suggest leveraging home equity and purchasing private long-term care insurance as ways to help with financial stability for the later years.

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U.S. energy transition to create Mexico auto jobs, climate envoy Kerry says

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Mexico‘s manufacturing sector stands to benefit from a U.S. transition away from fossil fuels including through the creation of jobs for building electric vehicles, John Kerry, climate adviser to U.S. President Joe Biden, said on Monday.

“Mexico’s industrial base, already deeply integrated with the rest of North America, absolutely stands to benefit from the energy transition,” Kerry said alongside Mexican President Andres Manuel Lopez Obrador in Mexico’s Chiapas state, near the southern border with Guatemala.

Kerry traveled to Mexico to meet with his counterparts ahead of the upcoming United Nations’ COP26 climate conference in Glasgow, Scotland, which neither Lopez Obrador nor his foreign minister is expected to attend.

“When we switch from gasoline to electrified vehicles, there are going to be a lot of good-paying jobs here in Mexico because of the connection already of the automobile industry and our two countries,” said Kerry, who visited a flagship reforestation project promoted by Mexico.

The production of automobiles in North America is highly integrated through the U.S.-Mexico-Canada Agreement (USMCA)

Under Biden and Kerry, the United States has stressed the need for more aggressive action to address global warming. Lopez Obrador, on the other hand, has cut the environment ministry’s budget as part of an austerity drive and dismantled policies promoting private investment in renewable energy.

Research coalition Climate Action Tracker rates Mexico’s overall climate plan as “Highly Insufficient”, saying its policies and actions will “lead to rising, rather than falling, emissions and are not at all consistent with the Paris Agreement’s 1.5°C temperature limit.”

Lopez Obrador says he will tackle carbon emissions by revitalizing dilapidated hydropower projects under state control and through the tree planting program, called Sembrando Vida, which aims to plant 700,000 trees.

But he has also focused on reviving state-run oil and power generation companies, and his government has prioritized fossil fuels over renewable energy sources for Mexico’s national grid.

Mexico, the second-largest greenhouse gas emitter in Latin America, is seen as vulnerable to climate change and extreme weather patterns, with tropical cyclones and floods battering the country every year.

By 2030, Mexico plans to reduce greenhouse gas emissions by 22% over a business-as-usual scenario. Brazil, the region’s biggest polluter, aims to cut its emissions by 43% by 2030 compared to 2005 levels.

(Reporting by Anthony Esposito and Drazen Jorgic; Editing by Cynthia Osterman and Karishma Singh)

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