Hydro One Avista takeover rejection signals Washington regulators blocking a utility acquisition over governance risk, EPS dilution, and balance sheet impact, as investors applaud share price gains and a potential US$103M break fee.

Key Points

A regulator-led block of Hydro One's Avista bid, citing EPS dilution, balance sheet risk, and governance concerns.

✅ Washington denies approval; Idaho, Oregon decisions pending.

✅ EPS dilution avoided; balance sheet strength preserved.

✅ Shares rise 5.7%; US$103M break fee if deal collapses.

Opposition politicians may not like it but investors are applauding the rejection of Hydro One Ltd.'s $6.7-billion Avista takeover of U.S.-based utility Avista Corp.

Shares in the power company controlled by the Ontario government, which has also proposed a bill redesign to simplify statements, closed at $21.53, up $1.16 or 5.7 per cent, on the Toronto Stock Exchange on Thursday.

On Wednesday, Washington State regulators said they would not allow Ontario's largest utility to buy Avista over concerns about political risk that the provincial government, which owns 47 per cent of Hydro One's shares, might meddle in Avista's operations.

Financial analysts had predicted investors would welcome the news because the deal, announced in July 2017, would have eroded earnings per share and weakened Hydro One's balance sheet.

"The Washington regulator's denial of Avista is a positive development for the shares, in our opinion," said analyst Ben Pham of BMO Capital Markets in a report on Wednesday.

"While this may sound odd, we note that the Avista deal is expected to be EPS dilutive and result in a weaker balance sheet for (Hydro One). Not acquiring Avista and refocusing its attention on its core Ontario franchise ... along with related interprovincial arrangements such as the Ontario-Quebec electricity deal under discussion would likely be viewed positively if the deal ultimately breaks."

Decisions are yet to come from Idaho and Oregon state regulators, but Washington was probably the most important as the state contains customers making up about 60 per cent of Avista's rate base, Pham said.

He pointed out that a US$103-million break fee is to be paid to Avista if the deal collapses due to a failure to obtain regulatory approval.

CIBC analyst Robert Catellier raised his 12-month Hydro One target price by 25 cents and said many shareholders will feel "relieved" that the deal had failed.

He warned that the company's earnings power could deteriorate as the province seeks to reduce power bills by 12 per cent, despite an Ontario-Quebec hydro deal that may not lower costs.

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BNEF 2019 New Energy Outlook projects surging renewable energy demand, aggressive decarbonization, wind and solar cost declines, battery storage growth, coal phase-out, and power market reform to meet Paris Agreement targets through 2050.

Key Points

Bloomberg's NEO 2019 forecasts power demand, renewables growth, and decarbonization pathways through 2050.

✅ Predicts wind/solar to ~50% of global electricity by 2050

✅ Foresees coal decline; Asia transitions slower than Europe

✅ Calls for power market reform and battery integration

In a report that examines the ways in which renewable energy demand is expected to increase, Bloomberg New Energy Finance (BNEF) finds that “aggressive decarbonization” will be required beyond 2030 to meet the temperature goals of the Paris Agreement on climate change.

Focusing on electricity, BNEF’s 2019 New Energy Outlook (NEO) predicts a 62% increase in global power demand, leading to global generating capacity tripling between now and 2050, when wind and solar are expected to make up almost 50% of world electricity, as wind and solar gains indicate, due to decreasing costs.

The report concludes that coal will collapse everywhere except Asia, and, by 2032, there will be more wind and solar electricity than coal-fired electricity. It forecasts that coal’s role in the global power mix will decrease from 37% today, as renewables surpass 30% globally, to 12% by 2050 with the virtual elimination of oil as a power-generating source.

Highlighting regional differences, the report finds that:

Western European economies are already on a strong decarbonization path due to carbon pricing and strong policy support, with offshore wind costs dropping bolstering progress;

by 2040, renewables will comprise 90% of the electricity mix in Europe, with wind and solar accounting for 80%;

the US, with low-priced natural gas, and China, with its coal-fired plants, will transition more slowly even as 30% from wind and solar becomes feasible; and

China’s power sector emissions will peak in 2026 and then fall by more than half over the next 20 years, as solar PV growth accelerates, with wind and solar increasing from 8% to 48% of total electricity generation by 2050.

Power markets must be reformed to ensure wind, solar and batteries are properly remunerated for their contributions to the grid.

The 2019 report finds that wind and solar now represent the cheapest option for adding new power-generating capacity in much of the world, amid record-setting momentum, which is expected to attract USD 13.3 trillion in new investment. While solar, wind, batteries and other renewables are expected to attract USD 10 trillion in investment by 2050, the report warns that curbing emissions will require other technologies as well.

Speaking about the report, Matthias Kimmel, NEO 2019 lead analyst, said solar photovoltaic modules, wind turbines and lithium-ion batteries are set to continue on aggressive cost reduction curves of 28%, 14% and 18%, respectively, for every doubling in global installed capacity. He explained that by 2030, energy generated or stored and dispatched by these technologies will undercut electricity generated by existing coal and gas plants.

To achieve this level of transition and decarbonization, the report stresses, power markets must be reformed to ensure wind, solar and batteries are “properly remunerated for their contributions to the grid.”

Additionally, the 2019 NEO includes a number of updates such as:

• new scenarios on global warming of 2°C above preindustrial levels, electrified heat and road transport, and an updated coal phase-out scenario;
• new sections on coal and gas power technology, the future grid, energy access, and costs related to decarbonization technology such as carbon capture and storage (CCS), biogas, hydrogen fuel cells, nuclear and solar thermal;
• sub-national results for China;
• the addition of commercial electric vehicles;
• an expanded air-conditioning analysis; and
• modeling of Brazil, Mexico, Chile, Turkey and Southeast Asia in greater detail.

Every year, the NEO compares the costs of competing energy technologies, informing projections like US renewables at one-fourth in the near term. The 2019 report brought together 65 market and technology experts from 12 countries to provide their views on how the market might evolve.

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France-Germany Energy Solidarity underscores EU energy crisis cooperation: gas supply swaps, electricity imports, price cap talks, and curbs on speculation as Russian pipeline flows halt and winter demand rises across the bloc.

Key Points

A pact where France sends gas to Germany as Germany supplies power, bolstering EU cooperation and winter security.

✅ Gas to Germany; power to France amid nuclear outages.

✅ EU price cap, anti-speculation, joint gas purchasing.

✅ No new Spain-France pipeline unless case improves.

France will send gas to Germany if needed while Germany stands ready to provide it with electricity, President Emmanuel Macron said on Monday, saying this showcased European solidarity in the face of the energy crisis stemming from the war in Ukraine, which many view as a wake-up call to ditch fossil fuels across the bloc.

European gas prices surged, share prices slid and the euro sank on Monday after Russia stopped pumping gas via a major supply route, and Germany's 200 billion euro package sought to cushion the blow, in another warning to the 27-nation EU as it scrambled to respond to the crisis ahead of winter. read more

"Germany needs our gas and we need power from the rest of Europe, notably Germany," France's president told a news conference as EU electricity reform remains under debate following a phone call with German Chancellor Olaf Scholz.

The necessary connections for France to deliver gas to Germany when needed would be finalised in the coming weeks, he said, adding that France, which had long been a net exporter of electricity, will need help from its neighbours because of technical problems its nuclear plants face. read more

Macron, however, said that he did not understand demand for a third gas link between France and Spain, rejecting calls to increase capacity with a new pipeline.

He added he was open to changing his mind on that point, especially as Germany's utility troubles deepen, should Scholz or Prime Minister Pedro Sanchez argue convincingly for it.

Ahead of a meeting on Friday of EU energy ministers, Macron said France was in favour of buying gas at a European rather than a national level, as emergency electricity measures are weighed, and called for European Union measures to control energy prices.

He said it was necessary to act against speculation on energy prices at EU level, as the EU outlines possible gas price cap strategies for discussion, and also said France was in favour of putting a cap on the price of pipeline Russian gas.

Macron also repeated calls for all to turn down air conditioners when it's hot and to limit heating to 19 degrees Celsius this winter, noting that rolling back electricity prices is tougher than it appears this year.

"Everyone has to do their bit," he said.

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Hydro One Disconnection Ban Extension keeps Ontario electricity customers connected during COVID-19, extending the moratorium on power shutoffs and expanding financial relief programs amid ongoing pandemic restrictions and persistent hot weather across the province.

Key Points

An open-ended Ontario utility moratorium preventing residential power shutoffs and offering bill relief during COVID-19.

✅ No residential disconnections until further notice

✅ Extended bill assistance and flexible payment options

✅ Response to COVID-19 restrictions and extreme heat

Ontario's primary electricity provider says it's extending a ban on disconnecting homes from the power grid until further notice.

Hydro One first issued the ban towards the beginning of the province's COVID-19 outbreak, saying self-isolating customers needed to be able to rely on electricity while they were kept at home during the pandemic.

A spokesman for the utility says the ban was initially set to expire at the end of July, but has now been extended in a manner similar to winter disconnection bans without a fixed end-date.

Hydro One says the move is necessary given the ongoing restrictions posed by the pandemic, and notes it has supported provincial COVID-19 efforts in recent months, as well as persistent hot weather across much of the province.

It says it's also planning to extend a financial relief program to help customers struggling to pay their hydro bills, reflecting demand for more choice and flexibility among ratepayers.

The province also extended off-peak electricity rates to provide relief for families, small businesses and farms during this period.

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SaskPower-Manitoba Hydro Power Sale outlines up to 215 MW of clean hydroelectric baseload for Saskatchewan, supporting renewable energy targets, lower greenhouse gas emissions, and interprovincial transmission line capacity starting 2022 under a 30-year agreement.

Key Points

A long-term deal supplying up to 215 MW of hydroelectric baseload from Manitoba to Saskatchewan to cut emissions.

✅ Up to 215 MW delivered starting 2022 via new intertie

✅ Supports 40% GHG reduction target by 2030

✅ 30-year term; complements wind and solar integration

Saskatchewan's Crown-owned electric utility has made an agreement to buy more hydroelectricty from Manitoba.

A term sheet providing for a new long--term power sale has been signed between Manitoba Hydro and SaskPower which will see up to 215 megawatts flow from Manitoba to Saskatchewan, as new turbine investments advance in Manitoba, beginning in 2022.

SaskPower has two existing power purchase agreements with Manitoba Hydro that were made in 2015 and 2016, but the newest one announced Monday is the largest, as financial pressures at Manitoba Hydro continue.

SaskPower President and CEO Mike Marsh says in a news release that the clean, hydroelectric power represents a significant step forward when it comes to reaching the utility's goal of reducing greenhouse gas emissions by 40 per cent by 2030, aligning with progress on renewable electricity by 2030 initiatives.

Marsh says it's also reliable baseload electricity, which SaskPower will need as it adds more intermittent generation options like wind and solar.

SaskPower says a final legal contract for the sale is expected to be concluded by mid-2019 and be in effect by 2022, and the purchase agreement would last up to 30 years.

"Manitoba Hydro has been a valued neighbour and business partner over the years and this is a demonstration of that relationship," Marsh said in the news release.

The financial terms of the agreement are not being released, though SaskPower's latest annual report offers context on its finances.

Both parties say the sale will partially rely on the capacity provided by a new transmission line planned for construction between Tantallon, Sask. and Birtle, Man. that was previously announced in 2015 and is expected to be in service by 2021.

"Revenues from this sale will assist in keeping electricity rates affordable for our Manitoba customers, while helping SaskPower expand and diversify its renewable energy supply," Manitoba Hydro president and CEO Kelvin Shepherd said in the utility's own news release.

In 2015, SaskPower signed a 25 megawatt agreement with Manitoba Hydro that lasts until 2022. A 20-year agreement for 100 megawatts was signed in 2016 and comes into effect in 2020, and SaskPower is also exploring a purchase from Flying Dust First Nation to further diversify supply.

The deals are part of a memorandum of understanding signed in 2013 involving up to 500 megawatts.
 

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Alberta Electricity Market Reforms aim to boost grid reliability and efficiency through a day-ahead market, transmission policy changes, clearer pricing signals, AESO oversight, and smarter siting near existing infrastructure to lower consumer costs.

Key Points

Policies add a day-ahead market and transmission fees to modernize the grid and improve reliability.

✅ Day-ahead market for clearer pricing and scheduling

✅ Up-front, non-refundable transmission payments by generators

✅ AESO to draft new rules by end of 2025

The Alberta government is implementing significant electricity policy changes to its electricity market to enhance system reliability and efficiency. These reforms aim to modernize the grid, accommodate growing energy demands, and align with best practices observed in other jurisdictions.

Proposed Market Reforms

The government has outlined several key initiatives:

• Day-Ahead Market Implementation: Introducing a day-ahead market is intended to provide clearer pricing signals and improve the scheduling of electricity generation. This approach allows market participants to plan and commit to energy production in advance, enhancing grid stability.

• Transmission Policy Revisions: The government proposes reforms to transmission policies, including the introduction of up-front and non-refundable transmission payments from new power generators. These payments would vary based on the proximity of new generators to existing transmission lines with available capacity. As part of a broader market overhaul, this strategy encourages the development of power plants in areas where existing infrastructure can be utilized, potentially reducing costs for consumers and businesses.

Government's Objectives

Minister of Affordability and Utilities, Nathan Neudorf, emphasized that these changes are necessary to meet growing energy demands and modernize Alberta’s electricity system. The government's goal is to create a more reliable and efficient electrical system that benefits both consumers and the broader economy.

Industry Reactions

The proposed reforms have elicited mixed reactions from industry stakeholders amid profound sector change across Alberta:

• Renewable Energy Sector Concerns: The Canadian Renewable Energy Association (CanREA) has expressed concerns about the potential for punitive market and transmission changes, and some retailers have similarly urged caution. They advocate for policies that support the integration of renewable energy sources and ensure fair treatment within the market.

• Regulatory Oversight: The Alberta Electric System Operator (AESO) is tasked with preparing restructured energy market rules by the end of 2025. This timeline reflects the government's commitment to a thorough and consultative approach to market reform.

Implications for Consumers

The Alberta government's proposed market changes aim to enhance the reliability and efficiency of the electricity system by considering measures such as a Rate of Last Resort to provide additional stability. By encouraging the development of power plants in areas with existing infrastructure, the reforms seek to reduce costs for consumers and businesses. However, the success of these initiatives will depend on careful implementation and ongoing engagement with all stakeholders to balance the diverse interests involved.

Alberta's proposed electricity market reforms represent a significant step toward modernizing the province's energy infrastructure. By introducing a day-ahead market and revising transmission policies, the government aims to create a more reliable and efficient electrical system and promote market competition more effectively. While these changes have generated diverse reactions, they underscore the government's commitment to addressing the evolving energy needs of Alberta's residents and businesses.

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