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Miners worried: Hydro One sale could spell price troubles

If the controversial privatization of Hydro One results in increased hydro prices, it could spell trouble for the province's mining sector, says the Ontario Mining Association.
Mining industry veterans from Vale Canada, Fuller Supply and Stantec shared some of their knowledge and experience with mining students from Sudbury’s three post-secondary institutions during the annual Mining Day event at Laurentian University on Thursday evening. File photo
If the controversial privatization of Hydro One results in increased hydro prices, it could spell trouble for the province's mining sector, says the Ontario Mining Association.

“We're concerned, obviously,” said Chris Hodgson, the association's president. “The mining market is not great, so if you want to stay in business you have to be competitive.”

Hodgson and other mining industry representatives were a Queen's Park on Nov. 3, where they met with various MPPs for the annual Meet the Miners lobby day.

The province's rising hydro rates were a big topic of discussion during the meetings, Hodgson said.
Hydro costs represent around 15 per cent of a mine's operating costs, and with smelting operations that can increase to 30, or even 50 per cent, Hodgson said.

Hydro is second only to labour for most mines' operational costs.

On Nov. 1, the Ontario Energy Board increased hydro rates by 0.3 cents to 8.3 cents/kWh for off-peak hours; 0.6 cents to 12.8 cents/kWh for mid-peak hours; and 1.4 cents to 17.5 cents/kWh for on-peak hours.

The on-peak hydro rate in Ontario has increased by 77 per cent since 2010.

But even with increasing hydro rates, Hodgson said the power-hungry mining sector has benefited from programs like the Industrial Electricity Incentive Program, which cuts hydro costs for selected new companies, or new projects, by as much as 50 per cent.

On Nov. 5, the province started its initial public offering of Hydro One shares by opening up a 13.6 per cent stake in the company to investors.

The stock increased more than five per cent in morning trading, where prices jumped from $20.50 at the initial public offering, to $21.46 a share by 11:27 a.m.

It was one of the biggest initial public offerings in Canada in the last 15 years.

The province plans to eventually allow investors to purchase up to 60 per cent of the company, and expects to raise $9 billion from that sale.

The Liberal government would use $5 billion to pay of Hydro One's debt, and the remainder to help cover an ambitious $130-billion plan to improve the province's infrastructure.

Michael Mantha, the NDP's Northern Development and Mines critic, has long opposed the Hydro One sale, and said it's still not too late for the government to change its mind about the large portion of the company that still remains in public hands.

“You do not sell one of your largest assets, because it will have a negative impact on the province.”

In a report published Oct. 29, Stephen LeClair, Ontario’s first Financial Accountability Officer, said the province could net as little as $6.8 billion from the sale, leaving a far smaller amount remaining for infrastructure. And once complete, the province would lose out on $500 million in Hydro One revenues a year.

To date, 185 of Ontario's 444 municipalities have passed motions calling for the government to change course on its plans to sell off 60 per cent of Hydro One.

Mantha said he is convinced the sale will result in increased hydro rates, and will have a negative impact on the mining industry.


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Jonathan Migneault

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