Further to Guelph Hydro’s on-going discussions with the shareholder about our merger workplan with Horizon Utilities Corporation, I am writing to provide you – and through you, the shareholder – a brief year-end update on our status to date, including our expected next-steps.Background
The shareholder will recall that the driver for exploring a merged entity traces to our GHI Board’s strategic view that our impact on the economic well-being of the community is best served by ensuring the lowest possible electricty rates for our diverse customer base. Our board also believes that the best strategy for achieving this in an increasingly regulation-intense environment is to merge our distribution operations with a partner offering critical mass, economies of scale, and opportunities for substantial efficiency gains within a merged entity.
The compatability of our strategic direction with that of Horizon, and our common vision, focus on customers, and commitment to energy conservation all contribute to our belief that Horizon is our best business partner.
Progress To Date
Three key principles have been established: first, that any merger must create demonstrable value to the shareholders; second, that a merger must be accomplished with no loss of employment for employees wishing to remain with the merged entity; and third, that a merger must achieve measurable mitigation of future rate increases.
Two in-depth assessments have been completed to help shape the Business Case. The first is an independent assessment/valuation of all aspects of each utility’s assets and infrastraucture. The second is an independent review of each organization’s financial and operational business practices.
Multi-Utility Integration Teams have been established to study discrete organizational areas (i.e., Human Resources, Information Services, Engineering, Operations, etc.). These teams have determined best-practices of each organization and they have identified efficiencies and economies-of-scale available to the potential merged entity. The work of these teams is virtually complete.
Next StepsWe now expect a DRAFT Business Case before the end of December. The boards and senior management of Guelph Hydro and Horizon Utiltities will each independently review the case for an understanding of its key recommendations and implications. This step will be completed in January 2008.
Assuming approval in principle of the Business Case by each Board, Guelph Hydro will provide copies of the draft Business Case, including supporting documentation, to independent shareholder advisors to enable them to complete their own due diligence on behalf of the shareholder. We expect to be able to provide this information before the end of January 2008.
Guelph Hydro will then conduct a public information process including individual reviews of key opportunities and issues with each councillour, public information sessions, and breakfast meetings for our key customers and other community leaders. This process is expected to be concluded by the middle of February 2008.
Once this process is completed, including the evaluation of all comments and suggestions from both the community at large and from the shareholder’s independent advisors, and the Guelph Hydro and Horizon boards have affirmed their support for the merger, we will present the Business Case and Recommendations for Merger directly to City Council for approval at a public meeting. Similar presentations will occur with Hamilton City Council and St. Catharine’s City Council. Our current timetable for these presentations is late February/early March 2008.
I trust that this update of our activities to-date and our plans for moving appropriate recommendations forward is helpful. We are all anxiously awaiting the draft Business Case so we can begin to understand and work to achieve the specific benefits to the shareholder and to our customers contained in the recommendations. Guelph Hydro