After months of ardent speculation, Hydro One is officialy going public. Few people can be happier about it than Ed Clark.
Since April 2014 the former chief executive officer of Toronto-Dominion Bank has worked with the Ontario government to help it raise new revenues, and he was a strong advocate of taking Hydro One public -- going so far as to convince premier Kathleen Wynne that it was a smart move.
Despite furious opposition to the deal -- from other provincial parties as well as a powerful union -- the Ontario utility successfully priced its IPO at $20.50 per share on Thursday. That's near the high end of their marketing range, proving there was substantial investor demand for the deal. In total the province is expected to raise $1.83-billion from the sale.
Mr. Clark put on a brave face throughout the process, but on Thursday he acknowledged that he was elated to be able to deliver for the cash-starved province. "The premier and her cabinet put trust in you that you can actually do this," he explained in an interview. "You don't want to let people down who have trusted you."
While he always believed in the deal's merit, the market changed substanitally from when the IPO plans were put in play seven months ago. Over the summer and into the fall investor appetite deteriorated, which led people behind the deal to privately wonder exactly how much demand there ultimately would be.
In the end, the province is raising almost exactly what it originally predicted. In March Ontario had internal projections to bring in $1.88-billion -- not far off from the final haul.
Retail investors purchased roughly 40 per cent of the shares, more than the 25 per cent that was initially set aside for them. The rest goes to institutional buyers, who the province hopes will stay on as long-term shareholders. Because the retail portion is higher than originally projected, Hydro One will have to pay its underwriters more in fees. Sales to institutional investors came with a 1 per cent commission, while sales to retail investors have a three per cent fee.
If the over-allotment option is sold – and it's expected to be – the province will own 85 per cent of Hydro One going forward. The publicly traded shares, which make up the remaining 15 per cent of the company, will start trading on November 5 under the symbol 'H'.
Ultimately the Ontario Liberals will, and should, take credit for the successful deal, but Mr. Clark can't help but smile. "I might go home and have a nice glass of scotch tonight," he said.