Municipally-owned utility says priority needs to be investments in infrastructure
TORONTO, Nov. 14, 2016 /CNW/ - Toronto Hydro Corporation's Board of Directors announced today that it has determined it is in the best interests of the company to reduce dividend payments to its sole shareholder, the City of Toronto, to $25 million per year until further notice, in order to prioritize investments in infrastructure and address considerable and growing pressures on the company's capital structure.
This reduction of dividend payments arises out of Toronto Hydro's need, in the context of its current capital structure, to use its cash resources for the purpose of making infrastructure investments necessary to maintain the safety and reliability of the electricity grid, and to help the company keep pace with unprecedented growth in Toronto. Any declaration and payment of future dividends is subject to the ongoing discretion of the Board acting in compliance with their fiduciary duties and applicable law.
While Toronto Hydro's current capital program is supported through distribution rates approved by the Ontario Energy Board, customer rates pay a utility back over decades for infrastructure expenses that it must pay up-front today. A utility like Toronto Hydro finances those upfront costs through a combination of debt and equity. Maintaining a healthy capital structure is important for utilities to access debt financing at the lowest available cost: an appropriate debt-to-equity ratio is essential. Sometimes additional equity is required by utilities to keep capital structures in balance, and ensure that utilities have access to the financing required to pay for the up-front costs of needed grid investments. In the absence of other sources of equity being available, reduction of the dividend and reinvestment of those amounts is expected to help Toronto Hydro to ease the pressures on its capital structure over time while still making necessary infrastructure investments.
"Toronto Hydro is financially strong and needs to keep pace with infrastructure renewal, growth in the city and increasing electrification due to government policy changes."
– David Williams, Chair, Toronto Hydro Corporation Board of Directors
- Toronto Hydro has paid the City of Toronto approximately $679.5 million in aggregate dividends since 2003.
- In 2016, as a result of the dividend reduction, Toronto Hydro expects to pay the City of Toronto approximately $63.35 million in aggregate dividends, which includes $38.35 million in respect of 2015, and $25 million in respect of 2016.
ABOUT TORONTO HYDRO
Toronto Hydro owns and operates an electricity distribution system, which delivers electricity to approximately 758,000 customers located in the city of Toronto. It is the largest municipal electricity distribution company in Canada and distributes approximately 19% of the electricity consumed in the province of Ontario.
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Toronto Hydro Corporation (the "company") includes forward-looking information in its news release within the meaning of applicable securities laws in Canada ("forward-looking information"). The purpose of the forward-looking information is to provide expectations regarding the company's future results of operations, performance, business prospects and opportunities and may not be appropriate for other purposes. All forward-looking information is given pursuant to the "safe harbour" provisions of applicable Canadian securities legislation. The words "can", "could", "will" and similar expressions are often intended to identify forward-looking information, although not all forward-looking information contains these identifying words. The forward-looking information reflects the company's current beliefs and is based on information currently available to it. The forward-looking information in this news release includes, but is not limited to, the company's intention to reduce its dividend payments to its sole shareholder, the City of Toronto, to $25 million per year until further notice, in order to prioritize investments in infrastructure and address considerable and growing pressures on the company's capital structure; the company's expectation that a dividend reduction and reinvestment of those amounts would help Toronto Hydro to ease the pressures on its capital structure over time while still making necessary infrastructure investments and the company's expectation to pay the City of Toronto approximately $63.35 million in aggregate dividends in 2016. The statements that make up the forward-looking information are based on assumptions that include, but are not limited to, the company's existing capital structure, the company's capitalization requirements and the infrastructure investments necessary to maintain the safety and reliability of the electricity grid and help the company keep pace with unprecedented growth in Toronto.
The forward-looking information is subject to risks, uncertainties and other factors that could cause actual results to differ materially from historical results or results anticipated by the forward-looking information. The factors which could cause results or events to differ from current expectations include, but are not limited to, the possibility that the company's capital requirements, payments, and required infrastructure are significantly different than currently expected.
All forward-looking information in the news release is qualified in its entirety by the above cautionary statements and, except as required by law, the company undertakes no obligation to revise or update any forward-looking information as a result of new information, future events or otherwise after the date hereof.
SOURCE Toronto Hydro Corporation
Image with caption: "Toronto Hydro Corporation announces dividend reduction. (CNW Group/Toronto Hydro Corporation)". Image available at: http://photos.newswire.ca/images/download/20161114_C3274_PHOTO_EN_817069.jpg
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