Ontario’s Hydro One Hunts New Acquisitions to Consolidate Electricity Market

Hydro One Ltd., Ontario’s largest electricity distributor, looks for acquisition opportunities to expand its customer base and consolidate a highly fragmented industry. The amount of acquisitions could total roughly C$500 million ($397 million). As an effort to lower customers’ electricity bills, the Government of Ontario encourages Hydro One’s goal of increasing its customers through acquisition.

Hydro One stated that it believed the consolidation of industry would benefit the company, the state of Ontario and the community as it would reduce the costs by making the provincial grid more efficient. The company also plans to replace aging infrastructure and improve grid reliability.

According to Ontario Energy Board (OEB), the state’s energy regulator, Ontario’s power distribution industry is highly fragmented with 60 companies, 55 of which hold less than a 2% share. Hydro One did not disclose how much it plans to increase its customer base. The company currently has 1.4 million customers and has a market value of C$17.9 billion.

Hydro One is Ontario’s top electricity distributor with 35.5% market share. It is followed by Toronto Hydro-Electric System Ltd (21.8%) and Alectra Utilities Corp (18.1%).

Hydro One made two smaller deals last year worth a total of C$132 million. After those deals were approved last year, the company decided to hunt for more acquisitions. The company announced C$2 billion in net cash in last year’s annual report, and plans to fund the new acquisitions using its balance sheet.

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