Elexicon shares on the block because ownership not a ‘core responsibility’ – Pickering

The ownership of an electric utility is “not a core service or responsibility” of municipalities, said a spokesperson for the City of Pickering in explaining why the neighbouring communities of Pickering and Ajax are considering selling their shares in municipally-owned Elexicon Energy.

The due diligence process in the potential dale of the shares in the utility owned by Pickering (27.9 per cent) and Ajax (21.8 per cent) is expected to take from eight to 14 months so there is plenty of time to get it right, noted Mark Guinto, who heads up Pickering’s Public Affairs and Corporate Communications division.

“The City has a responsibility to evaluate its assets to ensure they align with our strategic goals and how to best serve our community,” Guinto said. “After a thorough review, we believe that now is an opportune time to explore the potential sale of our shares in Elexicon Corporation, due to existing market conditions and the potential economic opportunity that a sale may generate.”

Guinto pointed out that the City’s focus is providing its residents with services such as snow plowing, parks, roads and 24-hour fire response. “The ownership of an electric utility is not a core service or responsibility.”

Three years ago Pickering considered selling its shares in Elexicon to help pay for its ambitious City Centre project, but after massive cost overruns during the pandemic forced the City to defer the project the decision was made to hold off on any sale of its Elexicon shares.

That potential sale is now back on the table, with Ajax joining Pickering – two of ten municipal shareholders – in looking to maximize value for taxpayers.

“As the electricity landscape continues to evolve and transform, we believe the time is right to assess our role in the sector and explore the financial value of our investment in a competitive manner,” the two municipalities declared in a joint news release. “This is a responsible step to ensure we secure optimum value of our investment for our long-term financial objectives and needs.”

Pickering and Ajax have hired Borden Ladner Gervais LLP to undertake a confidential and non-binding Request for Proposal to explore the sale of their Elexicon holdings.

Guinto noted that there were more than 300 municipally-owned electric utilities 30 years ago. Today, thanks to rapid and ongoing consolidation that includes both sales and mergers, there are just 50.

“These municipalities recognized the growing consolidation trend and the financial opportunity that is presented when an electric utility is sold,” he said, adding that Elexicon itself is the result of a series of mergers involving the former Veridian Corporation.

The proceeds from a potential sale, Guinto added, “could be reinvested into a variety of opportunities that benefit our community, including funding priority projects, improving local infrastructure and exploring other strategic investment opportunities that enhance our financial strength.”

Prospective buyers for Elexicon could include private equity firms, other utility companies or even other Elexicon municipal shareholders such as the Town of Whitby (which owns 32 per cent of the utility) or the Municipality of Clarington, which has a 9.2 per cent share.

It’s also possible the due diligence may recommend the communities hang on to their shares, said Ajax Communications Director Christie McLardie. “At the end of the process, if the market says it’s time to sell, it will be time to sell. But that will be a decision for Council.”

Elexicon paid just over $6 million in dividends last year, with the Town of Ajax realizing about $1.3 million. The value of Pickering and Ajax’s share value has not been disclosed but it is believed to be in the neighbourhood of $175 million combined.

Once the request for proposal is complete both municipalities will provide updates on any next steps.