On a day when the overall Canadian equity market fell 0.75 per cent, Thursday proved a rewarding first day in public trading for shareholders in Hydro One Inc., with the beneficiaries of the 5.5 per cent jump including the Power Workers’ Union (PWU) and the Society of Energy Professionals (SEP).
The two unions, whose members work at either Hydro One or Ontario Power Generation, made out particularly well because they were able to buy shares largely with loans received from the province. And at some point before trading began, the province handed over far bigger loans to the unions than its original public plans had stated. …
The unions were to use the 15-year loan, held in trust, to buy Hydro One shares on the same terms and conditions as the public, including the pre-trading price of $20.50 (shares closed Thursday at $ 21.62). But the sale was to occur outside the normal distribution process, meaning the shares purchased by the two unions are over and above the 81.1 million placed with the public. If the underwriters exercise the so-called over-allotment option, the company would be diluted by another 8.15 million union-held shares.
The loans were made because the province believes it “will better align the interests of the members of the unions with the interests of other investors in Hydro One.”
As part of the deal, the unions would also set up another trust where they would use their own funds to buy Hydro One shares also at $20.50. The additional money invested beyond the loans seems to have been fairly small: According to a Thursday filing, the PWU in total bought 3,756,097 shares, for $77 million — $2 million more than the loan — while the SEP bought 1,890,243 shares, for $38.750 million, just under $3 million more.