This week, Collingwood Council met in a special meeting to discuss an request from its utility partner, PowerStream, to waive some conditions of the shareholder agreement. This meeting appears to have been called by the interim CAO, which seems to me to usurp the mayor’s authority, but we know the administration – in partnership with The Block – has long been pulling the strings in this town to serve its own ends. Plus the meeting was held mid-day at the fire hall; a time and location that appears intended to deter both public and media presence.
Well while the public was deterred, the media were present, but nothing appeared in either paper. That doesn’t surprise me in the increasingly lax EB, but I expected better from the Connection. Finally, a story appeared in the online Connection, Friday. And it – as is too often the case with local media – doesn’t tell the whole story.
First read the waiver requested by Powerstream here. It asks the town to waive, “…Article 7, Article 8 and Article 9 thereof, for purposes of the Offer up until December 14, 2016.”
Got that? No, probably not. What it means is that PowerStream intends to present its offer early next week, but doesn’t want the offer to invoke terms in the agreement that would trigger the shotgun clause. And what, you ask, is the shotgun clause? Well, let’s do a quick review of the history first.
In 2011, the former council initiated a public process to explore opportunities to sell all or a portion (up to 50%) of our electrical utility. After several public information sessions in which public input and comment was sought, and after the issue was discussed in public at the council table, requests for proposals (RFPs) were sent out to prospective LDCs across the province. A strategic committee consisting of the utility board, staff, the mayor and KPMG Consultants was created to oversee the process and report to council and the public. All of the RFPs came in for purchase at EXACTLY 50%. No one wanted to buy less and the direction from council was to sell no more than half.
After a lengthy review and analysis of the offers, PowerStream was chosen as the winner. The offer was reviewed by their lawyers and accountants, our lawyers and accountants, the lawyers and accountants and council members of their three member municipalities. The process then moved to the Ontario Energy Board whose lawyers and accountants reviewed it. And then Energy Probe’s lawyers and accountants reviewed it. Everyone approved it, the finances were clean. The deal was sealed.
In the agreement were two important clauses. First, each side had the first right of refusal to buy the other half, should the partner ever want to sell its share. Second is the shotgun clause: should either party want to sell or buy, it can make an offer to the other party. If that offer is not accepted, then the rejecting party is bound to purchase the remaining half at the amount stated in the offer. And do it within 30 days.
So why did Powerstream want to waive these clauses? Well, first of all, the town sent out RFPs to several other LDCs in the province, totally ignoring PowerStream’s first right of refusal. Yes, it’s highly unethical and sure looks illegal to me, but that’s the way things are done here this term.
I suspect PowerStream – being an honourable company highly regarded by everyone outside our town hall – decided not to drag the bad faith shown again by our town into a legal battle which would further tarnish our badly tattered reputation. And one we would lose. Badly.
Second, PowerStream clearly wants to put its offer in along with those expected (or possibly already received) from the RFP, and not force the shotgun clause. In other words, to have its offer considered in context with the rest, not start the irrevocable process the shotgun clause will effect.
And guess what The Block did? Yep: they voted NOT to waive the clauses. The Block demanded 45 days to consider the request. Which is risible since the letter clearly states an offer is coming December 14, not sometime in February.
And the request also says that,
Following December 14, 2016, in the event that no Offer has been submitted by PowerStream to Collingwood, all of the provisions of the Shareholders Agreement, including without limitation Articles 7, 8 and 9 thereof, shall again be operative with respect to any Offer.
So it was for only a week. But the interim CAO got his pet lawyer on his cell phone and The Block, hypnotized by the sound of his voice. (this moment reminds me eerily of The Return of Chandu.) After which The Block meekly obeyed the administration’s direction with its usual glassy-eyed demeanour.
By refusing to do grant those waivers, The Block highlighted their collective ignorance of the consequences of their own actions. Not to mention once again raising to the fore the illegal and unethical process they have been pursuing. They are forcing the sale through the shotgun clause, even though they haven’t the faintest clue what it means.
Since this council has passed a motion not to borrow any money, reiterated this week, we would either have to spend money from reserves to purchase the other share back at the offered price, or acquiesce to the sale to PowerStream. And do it within 30 days.
Rodger was on the phone during the meeting and said he had no reason to believe PowerStream would not accept the terms of the waiver. He said, with holidays, this was a reasonable timeline to consider an offer.
Rodger told council they were likely to have “other options,” presented to them on Tuesday.
The offers will be discussed in closed session but it is expected there will be a public process to consider the offers at some point.
Let’s leave aside the costs of having a $700-hour lawyer on a taxpayer-paid cell phone phone for an hour, and the ludicrous picture of council and the media straining to hear the tinny but compelling voice emanating from the interim CAO’s cell phone.
First Rodger doesn’t say he has spoken to anyone at PowerStream, nor did the interim CAO. No communication – the hallmark of this council and administration – between concerned parties. Between partners. How open and transparent is that? It’s just his “belief” they’re going on. And they are “likely” to have other options – but those options cannot override the legal clauses built into the agreement signed by both shareholders and approved by the OEB.
You’d think the lawyer on council would understand that. Maybe it’s a different kind of law.
And of course it will be discussed in a closed session. Every single discussion about selling our utility has been held behind closed doors this term. Last term we had public input every step. This term: none. So we didn’t expect anything better from The Most Secretive Council Ever now.
And what did Councillor Tim Fryer say? Why, he mumbled that he expected to get “public input” about this sometime in the future. Two years of secrecy, two years of conniving, scheming machinations behind closed doors, the RFPs went out and offers are coming in, the shotgun clause is about to blow off their collective foot and NOW he wants public input? That train left the station long ago, Tim. You should have paid more attention.
The smart choice – by any group brighter than a bag of hammers – would have been to approve waiving the clauses and see what everyone presents without triggering the irrevocable terms of the agreement. That would provided some flexibility to act later. But no, hammers are, apparently wiser.
The Connection also notes: “The municipality sold 50 per cent of the shares in Collus PowerStream in 2012 for $8 million in cash.” Again, that’s not the whole story. And it’s misleading.
The total value of the sale was $14,458,559. The $8 million cash was accompanied by a recapitalization and a promissory note totalling more than $6 million, also paid to the town. The purchase value was based in large part on the shared service agreement that The Block and the administration subsequently gutted.
Since recapitalization can’t be done again, there are no promissory notes outstanding, and the gutting has seriously devalued the remainder of the corporation, the best guess for subsequent offers is around $6 million, tops and maybe as low as $5M. Which, if put into town operations would pay for about five years’ worth of additional costs that separating the utilities and killing the shared services agreement will generate, as well as the loss of rental revenue and the extra costs of contracting out the IT services to a Barrie company. But there may be commissions to pay first, and a whole lot of lawyers and consultants, too. So maybe only four years.
All done without public discussion or consultation. What do we get from this secretive, Machiavellian process? Higher taxes, higher costs, lower staff morale, loss of control over our electrical rates and service, no utility dividend, a bad reputation… and The Block’s demolition derby for two more years.
Collingwood deserves better.