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

Tim Fraser/The Globe and Mail

Ontario is selling a further $2.79-billion stake in Hydro One Ltd., taking advantage of the recent short-term strength in the share price to shave down its holding.

The province said it sold 120 million shares at $23.25 apiece on a bought deal basis to a syndicate of Bay Street investment banks. The deal was done at a 3.25-per-cent discount to the closing price of $24.03.

The secondary offering is being co-led by RBC Dominion Securities Inc. and CIBC World Markets Inc. In a bought deal, investment banks buy the shares at a discount and attempt to resell the stock to third party investors in a matter of hours.

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This is the third time the province has unloaded shares in the utility.

The initial public offering was warmly greeted by investors at $20.50 a share in November, 2015. A secondary offering was announced in April, 2016, at $23.65. With this latest share sale, the province's stake in Hydro One is set to fall to 49.9 per cent.

The sale of Hydro One shares has not been a politically popular move for Ontario Premier Kathleen Wynne's Liberals. In recent polls a majority of Ontarians have opposed the sale.

However, a senior official in Ms. Wynne's ‎government said they remain committed to the sale. The shares netted Ontario nearly $9-billion, money that has been earmarked for infrastructure projects, much of it for transit in the Greater Toronto Area. Without the share sales, regional rail and light rail projects would have been delayed for years, the official told The Globe and Mail. Each dollar earned through share sales and spent on infrastructure is expected to grow Ontario's economy by up to $3.83 in the long term. The official has not been identified because they aren't cleared to speak with the press.

NDP MPP Peter Taubuns said that his party did not support the sale because it could increase electricity costs. "By giving up the province's majority stake in Hydro One, Kathleen Wynne is doing even more damage to our hydro system," he said in a statement.

The Progressive-Conservative opposition did not immediately respond to the sale.

Ontario may end up selling even more shares if the "over-allotment" option is exercised. Dealers tasked with selling shares will size up demand and could sell as much as 12 million additional shares over the next 30 days.

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When it first sold shares, Ontario had said it intended to sell 60 per cent of the utility – meaning more share sales are still on tap.

The Hydro One transaction is the third bought deal announced this year in excess of a billion dollars in Canada. Cenovus Energy Ltd. raised $3-billion in a secondary offering in March. Altagas Ltd. raised $2.2-billion in January. Last year, there were eight secondary stock offerings that breached the billion-dollar level, including TransCanada's $4.4-billion deal in March 2016.

For the third time, RBC Dominion Securities landed the coveted "left lead" on the prestigious Hydro One financing but unlike the two other previous financings, CIBC earns bragging rights as the "co-lead". On the IPO and the April, 2016, secondary offering, Scotia Capital Inc. was the co-lead alongside RBC.

With a report from Justin Giovannetti

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