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Selling all or part of Hydro One would fetch piles of cash for the government, but it won’t fix the province’s badly broken electricity market, and would also be a missed opportunity for much-needed energy reform.Tim Fraser/The Globe and Mail

Ontario's two main power workers' unions could end up owning a slice of a partially privatized Hydro One, The Globe and Mail has learned.

The idea, which took shape in talks between the provincial government and the unions in recent weeks, would see the Power Workers' Union and the Society of Energy Professionals each receive a small percentage of the Crown corporation's stock, likely under 5 per cent combined, sources familiar with the discussions said.

It could be a similar arrangement as the privatization of Bruce Power more than a decade ago, when the PWU and SOEP acquired stakes in the company. Such a move could also be meant to persuade the unions to allow the contentious privatization.

Ontario Premier Kathleen Wynne and her asset advisory council, led by ex-banker Ed Clark, are considering two options for privatizing Hydro One, which manages the bulk of the province's electricity transmission and distribution systems. The premier's goal is to raise billions to pay for new public transit lines and roads. But the Premier is also eager to ensure power rates don't go up as the result of a privatization.

The first option, unveiled by Mr. Clark last year, would entail hiving off and selling Hydro One's local distribution networks while keeping its transmission lines under government control. The other, revealed last week by The Globe, would see the province float 10 to 15 per cent of the company in an initial public offering on the stock market, followed by further share sales that could eventually reduce the government's ownership stake to below 50 per cent. The enterprise value of Hydro One is believed to be as much as $16-billion.

The unions are against privatization, but are thought to be more receptive to the second option, as it would leave the company in one piece.

The government could pay a political price if privatization opponents are able to whip up public antipathy toward the idea. SOEP, in conjunction with the Canadian Union of Public Employees, is planning to unleash a wave of anti-privatization radio ads Monday, warning of higher electricity prices if the private sector is allowed into Hydro One.

"We can't trust private, for-profit owners to deliver reliable affordable electricity. They answer to their shareholders, not you and me," an announcer intones in the 30-second spot, which has been posted online.

One source said the equity offer is a way to persuade the unions to dial back such campaigns. A different souce, however, adamantly denied that was the case, saying it was the PWU that first proposed the idea of receiving an equity stake in Hydro One, as the union did in the Bruce Power arrangement.

The government is already in discussions with both unions, hoping to achieve a favourable settlement that would make the Crown corporation more financially attractive to investors. Among other things, the government is hoping to reduce Hydro One's pension liabilities.

The details of the ownership stake have not been finalized, but there are several possibilities: The government could simply give shares to the unions, or the unions could pay for them. One source close to the discussions expressed optimism that a deal would be reached.

None of the parties involved, however, would discuss the prospective arrangement publicly Friday. "As you know the Power Workers' Union's collective agreement with Hydro One ends March 31, 2015. The agreement with the Society of Energy Professionals ends in mid-2016. As such, the parties have been engaging in negotiations. As negotiations are ongoing, we have nothing further to add to your story at this time," Jennifer Beaudry, spokeswoman for Energy Minister Bob Chiarelli, wrote in an e-mail.

SOEP declined to comment; PWU president Don MacKinnon did not respond to an interview request.

The Bruce Power deal took place in 2002, under the previous Progressive Conservative government. As part of the deal that saw some of the province's nuclear fleet privatized, the PWU and SOEP received shares in the company.

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