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Power lines run out of the the Hydro One Claireville Transfer Station in Vaughan, Ontario Monday March 9, 2015.

tim fraser The Globe and Mail

The Ontario Liberals are on the verge of launching their initial public offering for Hydro One, proving they are wasting little time post-Labour Day to market the deal to investors.

The massive offering, expected to be worth $2.25-billion, is one step closer to reality now that the full underwriting syndicate has been chosen, according to people familiar with the deal. The IPO prospectus is expected to be filed later this week or early next week; after that the government and its Bay Street advisers will start marketing the deal to investors.

In June, the government named Scotia Capital and RBC Dominion Securities as the lead underwriters. The deal has since been syndicated, and the additional investment banks now involved include the other bank-owned Canadian dealers, as well as a number of international banks – something that was expected after the Big Six banks as well as Goldman Sachs Canada and Barclays were invited to pitch for the lead underwriting roles.

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The Liberals, led by Kathleen Wynne, have long said they would like to launch the IPO this coming fall or winter. The recent progression fits with this timeline, and also shows dedication to getting the deal into the market as soon as possible. Global markets gyrated at the end of August and no one can predict where investor appetite will be in a few months.

There is also extra incentive to get the offering into the market. Despite the recent volatility, Canadian investors have remained willing to buy big deals, as proven by the successful $1.9-billion financing for Emera Inc. last week. Tapping into this thirst will be crucial to a successful Hydro One IPO because larger offerings are typically harder to sell simply because there is so much new stock to be sold.

Still, the government must balance its priorities. Hydro One named Mayo Schmidt as its new chief executive officer in August and the current IPO timeline means he will be thrust into the marketing road show right off the bat. He started in the role on Sept. 3.

Yet Mr. Schmidt is a veteran leader and has ample capital markets experience, having run Viterra Inc. before it was sold to Glencore. This history should help make him a quick study.

The government is also hungry for fresh funds. Proceeds from the Hydro One IPO will be used to pay back debt as well as fund new infrastructure initiatives. If the partial sale is successful, they will be able to change the narrative and focus on where the funds will be deployed instead of continuously defending their decision to do the deal.

Under the current plan, the provincial Liberals will sell a 15-per-cent stake in Hydro One through the IPO and continue to hold the remaining 85 per cent.

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