The Canadian Government has identified privatisation as a popular policy option for the nation. In varying degrees, federal and provincial governments are becoming more involved in the privatisation of government-owned undertakings.
The dominant player in the Canadian economy is its largest province, Ontario. In 1999 the country’s population was just over 30 million, with Ontario being the largest region with 11.5 million inhabitants and a gross domestic product (GDP) of more than c$370bn (£167bn). As such, any privatisation activities in Ontario will affect the rest of the country.
With its election in 1995, Ontario’s Conservative government committed itself to a path of extensive privatisation. While some projects, such as the proposed privatisation of TV Ontario and the Liquor Control Board of Ontario have fallen out of favour, many other potential privatisation initiatives continue.
The province operates a number of extensive infrastructure projects that are typical candidates for privatisation in the current political and policy environment.
Ontario Hydro
Ontario Hydro, a crown corporation, has operated about 85% of all electrical generation in the province and virtually all transmission operations. Aside from the distribution commissions operated by municipalities and smaller ‘non-utility’ generators, Ontario Hydro has dominated and controlled the Ontario electricity market for almost a century.
However, with the deregulation of the Ontario electricity market, Ontario Hydro has been split into several new companies that are currently owned by the province as sole shareholder. The generation assets have all been rolled into Ontario Power Generation (OPG).
OPG is faced with the requirement to decrease its presence to 35% of current cap-acity within 10 years, pursuant to ‘decontrol’ requirements contained in the new legislation.
OPG has already indicated it will attempt to decontrol some of its assets ahead of schedule and possibly even by the time the competitive market opens later this year. It has announced plans to decontrol two of its fossil fuel facilities: the Lakeview station near Toronto and the Lennox facility near Kingston. It is also actively exploring possible divestiture of the Bruce nuclear facility on Lake Huron.
Leasing or other arrangements may be entered into by OPG to ensure that it satisfies the decontrol requirements. As such, creative lease, sale or other arrangements may be used by potential investors to enter the electricity generation market in Ontario.
