20180126Avista to Staff_DR_061(H1).DOCX

HYDRO ONE LIMITED
RESPONSE TO REQUEST FOR INFORMATION
JURISDICTION:OREGONDATE PREPARED:10/02/2017
CASE NO.:UM 1897WITNESS:Mayo Schmidt
REQUESTER:PUC StaffRESPONDER:Adele PantusaTYPE:Data RequestDEPT: Law
REQUEST NO.:Staff – 061(H1)TELEPHONE: [phone]EMAIL: [e-mail]:
Please provide further background on each of the following planned or completed acquisitions addressing the: A) status, B) premium (if any) paid in the C) acquisition price, amount of purchase debt financed, and overview of the acquisition, D) how it contributes (or will contribute) to Hydro One earnings and E) whether and when what parts of the acquisition were or will be rate based.
Acquisition of Hydro One Sault Ste. Marie – Great Lakes Power Transmission completed on October 31, 2016, as bulleted on pages 6 and 14 of Hydro One’s Post Second Quarter 2017 Investor Overview;
Acquisition of Orilla Power Distribution announced on August 15, 2016, as bulleted on page 14 of Hydro One’s Post Second Quarter 2017 Investor Overview,
Acquisition of Norfolk LDC;
Acquisition of Haldimand LDC; and
Acquisition of Woodstock LDC.RESPONSE:All values are in C$.
Acquisition of Hydro One Sault Ste. Marie – Great Lakes Power Transmission
Part A)
On October 31, 2016, following receipt of regulatory approvals of the transaction, Hydro One also acquired one electricity transmission company, Great Lakes Power Transmission LP (“Great Lakes Power”), operating along the eastern shore of Lake Superior, north and east of Sault Ste. Marie, Ontario. On January 16, 2017, Great Lakes Power’s name was changed to Hydro One Sault Ste. Marie LP (“HOSSM”).
Part B)
Goodwill of approximately $159 million was recognized in the Great Lakes Power acquisition.
Part C)
The total purchase price for Great Lakes Power was approximately $376 million, including the assumption of approximately $150 million in outstanding indebtedness.
Hydro One Inc. financed each acquisition using cash on hand, or cash raised using its commercial paper program.  In the case of HOSSM, Hydro One Inc. also assumed its existing long term debt.
This transaction increased Hydro One’s transmission coverage to ~98% of province-wide capacity with the addition of 560 km of high and medium voltage transmission lines, stations and related infrastructure.
Part D)
Great Lakes Power contributed approximately $6 million of revenue and approximately $1 million of net income in the year of closing.
Part E)
HOSSM continues to operate as a standalone regulated entity, much as it did prior to Hydro One receiving OEB approval to purchase it. As per conditions of the OEB’s approval, Hydro One will not incorporate HOSSM’s rate base into its transmission business, for rate making purposes, for a period of 10 years. This period is known as the rate rebasing deferral period as contained in the OEB’s Mergers, Acquisitions, Amalgamations and Divestitures policies and guidelines. Following this period, Hydro One will seek formal approval to set rates for its transmission business that will incorporate the rate base of HOSSM.
Acquisition of Orillia Power Distribution
Part A)
In August 2016, Hydro One reached an agreement to acquire Orillia Power, an electricity distribution company located in Simcoe County, Ontario. The acquisition is subject to regulatory approval by the OEB.
Part B)
As per Orillia Power Distribution’s 2015 audited Financial Statements, the estimated goodwill at December 31, 2015 would be approximately $14 million.
Part C)
The purchase price is approximately $41 million, including the assumption of approximately $15 million in outstanding indebtedness and regulatory liabilities, subject to closing adjustments.
Hydro One Inc. will finance the acquisition using cash on hand, or cash raised using its commercial paper program.

Orillia Power Distribution is an electricity distribution company located in central Ontario. With this acquisition, approximately 14,000 new customers will be added to Hydro One’s distribution business. The transaction includes conditional agreements to build backup grid control center and additional operating facilities following closing.
Part D)
Orillia Power Distribution is expected to contribute positively to revenues and net income of Hydro One post acquisition.
Part E)
OEB approval for this transaction is pending. If approved, the rate base of this utility will be kept separate from Hydro One’s istribution’s rate base for rate making purposes for a period of 10 years, after which Hydro One will seek formal approval to set rates for its distribution business that will incorporate the assets of Orillia Power Distribution.
Acquisition of Norfolk LDC
Part A)
In April 2013, Hydro One entered into an agreement with the Corporation of Norfolk County
(“Norfolk County”) to purchase all the outstanding shares of Norfolk Power. for approximately
$93 million, subject to OEB approval. On July 3, 2014, the OEB issued its Decisions and Order
for our company to acquire all of the outstanding shares of Norfolk Power and for the transfer of
Norfolk Power Distribution Inc.’s (the distribution company of Norfolk Power) distribution system to
Hydro One Networks Inc. In August 2014, we completed the Norfolk Power acquisition transaction.In September 2015, Hydro One successfully completed the integration of Norfolk Power, including the integration of employees, customers, business processes, information and operations.
Part B)
Goodwill of approximately $40 million was recognized in the Norfolk Power acquisition.
Part C)
The total purchase price for Norfolk Power, net of existing debt assumed, was approximately $68 million.
Hydro One Inc. financed each acquisition using cash on hand, or cash raised using its commercial paper program.
Norfolk Power was the holding company that owned Norfolk Power Distribution, a local electricity distribution company, and Norfolk Energy, a non-rate regulated energy services company, located in southwestern Ontario. Due to this acquisition, approximately 18,000 new customers were added to Hydro One’s Distribution Business.
Part D)
Norfolk Power contributed approximately $18 million of revenue and approximately $1 million of net income in the year of closing.
Part E)
For rate making purposes the acquired distribution utilities, and their associated rate bases, of Norfolk, Haldimand and Woodstock, have been kept separate from Hydro One Network’s distribution rate base. From 2021, Hydro One has proposed, in its current Distribution rate filing for 2018-22 (EB-2017-0049 - Exhibit D1,Tab 1,Schedule 1), to integrate the individual rate bases of Norfolk, Haldimand and Woodstock into the larger Hydro One Distribution rate base. The application remains with the OEB for approval.
Acquisition of Haldimand LDC
Part A)
The acquisition of Haldimand County Hydro was completed on June 30, 2015. In September 2016, Hydro One successfully completed the integration of the entity, including the integration of employees, customer and billing information, business processes, and operations.
Part B)
Goodwill of approximately $33 million was recognized in the Haldimand Hydro acquisition.
Part C)
The purchase price for Haldimand Hydro, net of existing debt assumed, was approximately $65 million.
Hydro One Inc. financed each acquisition using cash on hand, or cash raised using its commercial paper program.
Haldimand Hydro was an electricity distribution company located in southwestern Ontario. Due to this acquisition, approximately 21,000 new customers were added to Hydro One’s Distribution Business.
Part D)
Haldimand Hydro contributed approximately $32 million of revenue and approximately $6 million of net income in year of acquisition.
Part E)
For rate making purposes the acquired distribution utilities, and their associated rate bases, of Norfolk, Haldimand and Woodstock, have been kept separate from Hydro One Network’s Distribution rate base. From 2021, Hydro One has proposed, in its current Distribution rate filing for 2018-22 (EB-2017-0049 - Exhibit D1,Tab 1,Schedule 1), to integrate the individual rate bases of Norfolk, Haldimand and Woodstock into the larger Hydro One Distribution rate base. The application remains with the OEB for approval.
Acquisition of Woodstock LDC
Part A)
The acquisition of Woodstock Hydro Services was completed on October 31, 2015. In September 2016, Hydro One successfully completed the integration of the entity, including the integration of employees, customer and billing information, business processes, and operations.
Part B)
Goodwill of approximately $22 million was recognized in the Woodstock Hydro acquisition.
Part C)
The purchase price for Woodstock Hydro, net of existing debt assumed, was approximately $32 million.
Hydro One Inc. financed each acquisition using cash on hand, or cash raised using its commercial paper program.
Woodstock Hydro was an electricity distribution company located in southwestern Ontario. Due to this acquisition, approximately 16,000 new customers were added to Hydro One’s Distribution Business.
Part D)
Woodstock Hydro contributed approximately $12 million of revenue and approximately $2 million of net income in year of acquisition.
Part E)
For rate making purposes the acquired distribution utilities, and their associated rate bases, of Norfolk, Haldimand and Woodstock, have been kept separate from Hydro One Network’s Distribution rate base. From 2021, Hydro One has proposed, in its current Distribution rate filing for 2018-22 (EB-2017-0049 - Exhibit D1,Tab 1,Schedule 1), to integrate the individual rate bases of Norfolk, Haldimand and Woodstock into the larger Hydro One Distribution rate base. The application remains with the OEB for approval.