InnPower Shareholder Presentation
InnPower Shareholder Presentation EPCOR OFFER TO PURCHASE September 16, 2015 Presented by John Skorobohacz* Town of Innisifil Strategic Advisor (*member of the InnPower Board of Directors and former Chairman)
Board of Directors • • • • •
Jason Reynar (Chairman/Town CAO) Mayor Gord Wauchope Bob Lake John Skorobohacz (former Chairman) George Shaparew
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Corporate History • Village of Cookstown 1917. • Amalgamation with Township of Innisfil in 1991. • Service was delivered through the Hydro Commission. • Customer base increased from 560 to over 11,200. 3
Corporation • November 2000 we became a Corporation - Innisfil Hydro Distribution Limited. • 2010 the Town’s municipal boundary changed. Hydro distribution territory remained unaffected.
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Corporation • In 2014 our company underwent a corporate name change to InnPower Corporation.
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Corporation • Officially opened our new office in 2015.
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Background • Jan. 14, 2015 the InnPower Board presented to our Shareholder an expression of interest by EPCOR to acquire shares in the Town’s Local Distribution Company.
Background The following direction was provided to the Board: BE IT RESOLVED THAT: The Shareholder authorizes the (InnPower) Board to explore opportunities as presented in the letter from EPCOR dated January 12, 2015 and report back in due course.
Background • At the May 6, 2015 InnPower Annual General Meeting and update was provided to our Shareholder respecting the status of the ongoing negotiations with EPCOR.
Background • Following the update our Shareholder expressed continued support for the negotiations and adopted the following resolution: BE IT RESOLVED THAT: The update regarding developments with EPCOR be received, and That the (InnPower) Board continue discussions and report back to the Shareholder in due course.
Strategic Partner vs Bid Process • Independent valuation to gauge the EPCOR offer. • Ensure that any return for the Shareholder provided strong value. • No negative impact the customers of InnPower and our employees. • Secure a proven strategic partner with significant utility sector expertise to enhance InnPower’s operational capacity. 11
Strategic Partner vs Bid Process • Ensure alignment with Council’s (shareholder’s) stated desire to promote economic development and prosperity within Innisfil. • With the backdrop of the provincial government’s stated intent to encourage LDC consolidation in Ontario, secure a partner capable of meeting that objective over the medium and long-term while meeting local needs. 12
Strategic Partner vs Bid Process • Develop a Public/Public partnership model that maintains the sensitivities of the public interest but also ascribes to leading practices of a private sector governance model. • Creating a partnership relationship focused on long term opportunities while enhancing and growing the reputation and viability of InnPower. 13
InnPower Board Position How does EPCOR align with our objectives? • EPCOR is unique. Like InnPower, EPCOR is owned by a single municipality. Yet it operates in three provinces and two American states. • EPCOR is aligned with our growth opportunities and recognizes the significance of Simcoe County and the province of Ontario.
InnPower Board Position How does EPCOR align with our objectives? • This deal is about a long term partnership that is focused on long term growth beyond our municipal boundaries while continuing to meet this community’s servicing demands. • A partner of the calibre of EPCOR will have a positive impact in future economic development initiatives in our community.
About EPCOR
About EPCOR
■
Builds, owns and operates water, wastewater and electrical transmission distribution infrastructure in the United States and Canada with $5.7 billion in assets – Serves over 1.9 million people in over 100 communities – Largest private water provider in Arizona and New Mexico All amounts in CDN dollars, as of December 31, 2014
Strategic Partnership With EPCOR ■ A successful Canadian Municipal Corporation with a strong governance model ■ Over 120 years of existence; an independent stand alone utility since 1996 with demonstrated success ■ Financially strong and stable ■ A good cultural fit for Innisfil
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EPCOR’s Financial Strength ■ ■ ■
Sole shareholder is City of Edmonton Independent Board of Directors operates at arm’s length from shareholder Raises its own debt without credit support from the City
Credit rating is A- (S&P) and A low (DBRS) Reports on SEDAR
>$2 B in dividends & taxes paid to the shareholder (the City of Edmonton) since 1996 including $141 M in 2014 - equal to about 15% of residential property taxes collected by the City
Assets: $5.7 B
Revenue: $1.9 B
Employees: 2,700
Creation of EPCOR Key Dates • 1891 Edmonton Electric Lighting and Power Company is founded. • 1902 The company becomes the first municipally owned electric utility in Canada. • 1903 Edmonton Water and Light Company constructs the first water treatment plant. • 1933 Edmonton's first traffic light is installed. • 1947 Downtown electric lines are put underground. • 1955 Edmonton switches from coal-fired boilers to gas. • 1970 Electrical distribution and power plant departments combine to form Edmonton Power. • 1989 The first Genesee unit begins operating at full load. • 1995 The company is placed under the direction of an independent board of directors. • 1996 EPCOR Utilities Inc. is formed.
City Council in mid-90s faced:
■ ■
Deregulation of the electrical industry City faced tight financial constraints
Options
1. 2. 3.
Divest Edmonton Power Corporatize the Utility Other Hybrid
Outcome
■ ■ ■
Created EPCOR (City as Sole Shareholder) Combined Power and Water Utilities Independent Board
EPCOR’s Governance
Governance Principle
Stand-alone Borrowing/ Credit Rating
For Profit Commercial Orientation
Growth Mandate Beyond Municipal Boundaries
Blue Chip Board
Supporting Structure
Appropriate Capital Structure
Full Cost of Service Utility Rates
Dividend Policy Supports Growth
No Elected Officials
Offer • Cash component • Finders Fee ($750M @.5%)
$19,000,000 $ 3,750,000 $ 22,750,000
– The finder’s is activated once EPCOR has invested $75M in projects in Innisfil – One time Fit out/regional office $ 150,000 – Legal & Financial re-imbursement $ 150,000
Town Administration • Should you accept this proposal your administration will over the next several months present to you a report respecting the disposition of the revenues you will derive from this transaction. That process will ensure public input and a range of options for your future consideration 23
Conclusion • The InnPower Board has given due consideration to this strategic partnership with EPCOR and we the BOARD of Directors have unanimously supported this proposal. Further, the Board recommends to the Shareholder that it authorizes the Board to proceed with negotiating definitive agreements with EPCOR.
Shareholder Oversight • As Shareholder you will need to approve the final documents supporting the sale • The final documents would be anticipated some time this fall once the transaction details are negotiated.
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Board of Directors • • • • •
Jason Reynar (Chairman/Town CAO) Mayor Gord Wauchope Bob Lake John Skorobohacz (former Chairman) George Shaparew
2
Corporate History • Village of Cookstown 1917. • Amalgamation with Township of Innisfil in 1991. • Service was delivered through the Hydro Commission. • Customer base increased from 560 to over 11,200. 3
Corporation • November 2000 we became a Corporation - Innisfil Hydro Distribution Limited. • 2010 the Town’s municipal boundary changed. Hydro distribution territory remained unaffected.
4
Corporation • In 2014 our company underwent a corporate name change to InnPower Corporation.
5
Corporation • Officially opened our new office in 2015.
6
Background • Jan. 14, 2015 the InnPower Board presented to our Shareholder an expression of interest by EPCOR to acquire shares in the Town’s Local Distribution Company.
Background The following direction was provided to the Board: BE IT RESOLVED THAT: The Shareholder authorizes the (InnPower) Board to explore opportunities as presented in the letter from EPCOR dated January 12, 2015 and report back in due course.
Background • At the May 6, 2015 InnPower Annual General Meeting and update was provided to our Shareholder respecting the status of the ongoing negotiations with EPCOR.
Background • Following the update our Shareholder expressed continued support for the negotiations and adopted the following resolution: BE IT RESOLVED THAT: The update regarding developments with EPCOR be received, and That the (InnPower) Board continue discussions and report back to the Shareholder in due course.
Strategic Partner vs Bid Process • Independent valuation to gauge the EPCOR offer. • Ensure that any return for the Shareholder provided strong value. • No negative impact the customers of InnPower and our employees. • Secure a proven strategic partner with significant utility sector expertise to enhance InnPower’s operational capacity. 11
Strategic Partner vs Bid Process • Ensure alignment with Council’s (shareholder’s) stated desire to promote economic development and prosperity within Innisfil. • With the backdrop of the provincial government’s stated intent to encourage LDC consolidation in Ontario, secure a partner capable of meeting that objective over the medium and long-term while meeting local needs. 12
Strategic Partner vs Bid Process • Develop a Public/Public partnership model that maintains the sensitivities of the public interest but also ascribes to leading practices of a private sector governance model. • Creating a partnership relationship focused on long term opportunities while enhancing and growing the reputation and viability of InnPower. 13
InnPower Board Position How does EPCOR align with our objectives? • EPCOR is unique. Like InnPower, EPCOR is owned by a single municipality. Yet it operates in three provinces and two American states. • EPCOR is aligned with our growth opportunities and recognizes the significance of Simcoe County and the province of Ontario.
InnPower Board Position How does EPCOR align with our objectives? • This deal is about a long term partnership that is focused on long term growth beyond our municipal boundaries while continuing to meet this community’s servicing demands. • A partner of the calibre of EPCOR will have a positive impact in future economic development initiatives in our community.
About EPCOR
About EPCOR
■
Builds, owns and operates water, wastewater and electrical transmission distribution infrastructure in the United States and Canada with $5.7 billion in assets – Serves over 1.9 million people in over 100 communities – Largest private water provider in Arizona and New Mexico All amounts in CDN dollars, as of December 31, 2014
Strategic Partnership With EPCOR ■ A successful Canadian Municipal Corporation with a strong governance model ■ Over 120 years of existence; an independent stand alone utility since 1996 with demonstrated success ■ Financially strong and stable ■ A good cultural fit for Innisfil
18
EPCOR’s Financial Strength ■ ■ ■
Sole shareholder is City of Edmonton Independent Board of Directors operates at arm’s length from shareholder Raises its own debt without credit support from the City
Credit rating is A- (S&P) and A low (DBRS) Reports on SEDAR
>$2 B in dividends & taxes paid to the shareholder (the City of Edmonton) since 1996 including $141 M in 2014 - equal to about 15% of residential property taxes collected by the City
Assets: $5.7 B
Revenue: $1.9 B
Employees: 2,700
Creation of EPCOR Key Dates • 1891 Edmonton Electric Lighting and Power Company is founded. • 1902 The company becomes the first municipally owned electric utility in Canada. • 1903 Edmonton Water and Light Company constructs the first water treatment plant. • 1933 Edmonton's first traffic light is installed. • 1947 Downtown electric lines are put underground. • 1955 Edmonton switches from coal-fired boilers to gas. • 1970 Electrical distribution and power plant departments combine to form Edmonton Power. • 1989 The first Genesee unit begins operating at full load. • 1995 The company is placed under the direction of an independent board of directors. • 1996 EPCOR Utilities Inc. is formed.
City Council in mid-90s faced:
■ ■
Deregulation of the electrical industry City faced tight financial constraints
Options
1. 2. 3.
Divest Edmonton Power Corporatize the Utility Other Hybrid
Outcome
■ ■ ■
Created EPCOR (City as Sole Shareholder) Combined Power and Water Utilities Independent Board
EPCOR’s Governance
Governance Principle
Stand-alone Borrowing/ Credit Rating
For Profit Commercial Orientation
Growth Mandate Beyond Municipal Boundaries
Blue Chip Board
Supporting Structure
Appropriate Capital Structure
Full Cost of Service Utility Rates
Dividend Policy Supports Growth
No Elected Officials
Offer • Cash component • Finders Fee ($750M @.5%)
$19,000,000 $ 3,750,000 $ 22,750,000
– The finder’s is activated once EPCOR has invested $75M in projects in Innisfil – One time Fit out/regional office $ 150,000 – Legal & Financial re-imbursement $ 150,000
Town Administration • Should you accept this proposal your administration will over the next several months present to you a report respecting the disposition of the revenues you will derive from this transaction. That process will ensure public input and a range of options for your future consideration 23
Conclusion • The InnPower Board has given due consideration to this strategic partnership with EPCOR and we the BOARD of Directors have unanimously supported this proposal. Further, the Board recommends to the Shareholder that it authorizes the Board to proceed with negotiating definitive agreements with EPCOR.
Shareholder Oversight • As Shareholder you will need to approve the final documents supporting the sale • The final documents would be anticipated some time this fall once the transaction details are negotiated.
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