Apr 16, 2015
Ontario to fund infrastructure with beer tax, Hydro One IPO
, BNN Bloomberg
The Ontario Liberal government plans to funnel spending into transportation infrastructure by hiking the tax on beer and selling a 60 per cent stake in Hydro One through an initial public offering.
The province will implement several booze reforms which includes introducing a new "volumetric" tax on beer, permitting the sale of the beverage in up to 450 supermarkets and a pilot program that will see the sale of 12-packs in ten LCBO stores.
Ontario expects to raise $100 million annually with the new tax, which amounts to approximately 25 cents on a case of 24.
However, the province made an agreement with two of the biggest brewers to ensure that this tax will not be passed on to the consumer for the first two years.
The agreement will also make it easier for craft brewers to list their products in the foreign-owned Beer Store's outlets.
"I'm here to announce that the status quo is over and that the days of monopoly are done," Ontario Premier Kathleen Wynne said Thursday, following recommendations by a government-appointed panel, headed by former TD Bank CEO Ed Clark, which examined how the Liberals could extract the most money for some of its public assets.
Clark says the province wants some grocery stores to have beer on their shelves as early as this Christmas. By early 2017, about 150 grocery stores are expected to carry beer.
"By making smart decisions now -- decisions that unlock the value of of assets and that ensure that every public dollar is at work for the people of Ontario," Wynne said.
SEMI-PRIVATIZATION OF HYDRO ONE A 'BALANCED' SOLUTION
The province could generate about $9 billion from the Hydro One IPO, the biggest of its kind in Canada so far. According to Clark, $5 billion of that will be used to pay its debt. That leaves $4 billion – which the province will use to help pay for Wynne's $130 billion program to build new subways, rail lines and roads.
The government plans to hold on to the remaining 40 percent of the province's electricity transmission system. No other shareholder or group of shareholders will be permitted to own more than 10 per cent.
Clark's report suggests that the government only offer 15 per cent of the company in the initial tranche of the sale.
Wynne touts the government's commitment to keep a majority stake in the utility provider a "balanced" solution to unlocking billions of dollars for the provincial government.
The government will pass legislation allowing the proceeds of the sale to flow into Trillium Trust to be used for infrastructure spending.
Wynne also announced the merger of Hydro One Brampton with Enersource, PowerStream and Horizon Utilities, creating the second-largest electricity distributor in Ontario.
