Energy for sale? Pickering, Ajax exploring offloading shares in Elexicon

Pickering and Ajax – two of ten municipal shareholders in Elexicon Energy, Ontario’s fourth-largest utility – have decided the “time is right” to explore the sale of its shares and have retained a Toronto law firm to get the due diligence process started.

Three years ago Pickering considered selling its shares in Elexicon to help pay for its City Centre project, but after massive cost overruns during the pandemic forced the City to defer the project (it’s back on, minus the performing arts centre component), the decision was made to hold off on any sale of its Elexicon shares.

Today that potential sale is back on the table and Pickering was joined in the announcement by the Town of Ajax, with both communities desiring 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.

Ajax Communications Director Christie McLardie said there is no guarantee the Town will sell its 21.8 per cent share in the utility – valued at $75 million or so – and expects the process will help determine that decision.

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“We just know that the landscape is changing and we want to assess the financial value and see what that number will be,” she said. “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.”

McLardie said the due diligence should take between eight and fourteen months. “It’s not an overnight process.”

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

Prospective buyers 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.

Elexicon paid just over $6 million in dividends last year, with the Town of Ajax realizing about $1.3 million.

Pickering first made the decision to investigate selling its 27.9 per cent share in Elexicon in the fall of 2021 to help finance its downtown revitalization project, which at that time had ballooned to more $300 million.

The project was supposed to be funded through casino payments (delayed by the pandemic) and from development charges and reserves, leaving $94 million in debt for the City to cover, which Council was told should easily be covered by the sale of its Elexicon shares,  with some funds left over for future projects as well.

That prompted Clarington to hire a consultant to determine the ‘En Bloc Fair Market Value” of its equity of Elexicon as well but in the end both municipalities put the idea on the back burner.

Now, for Pickering and Ajax at least, it’s heating up once again.