Public Utilities Act, Section 101
In this decision, the AUC considered the application of AltaLink Investment Management Ltd. (“AIML”), in its capacity as the general partner of AltaLink Investments, L.P. (“AILP”), to cause AILP, to offer, issue and sell senior, unsecured bonds or other debt securities in the aggregate principal amount of up to $300 million prior to November 1, 2020. The AUC approved the application.
On March 13, 2020, AIML, as the general partner of AILP, applied with the AUC, under Section 101 of the Public Utilities Act, to cause AILP to offer, issue and sell senior, unsecured bonds or other debt securities (collectively, “Debt Securities”) in the aggregate principal amount of up to $300 million prior to November 1, 2020.
In Decision 21555-D01-2016, the AUC approved Rule 031, which provides guidance to the application of a conditional exemption from the requirement to seek advance AUC approval for issuances of equities and long-term debt, and an exemption from certain operational reporting requirements. Section 3 of Rule 031 exempts a number of securities transactions from advance AUC approval. Section 3.4 states that if an issuance does not qualify for exemption under this rule, the designated owner must seek advance AUC approval for the issuance by way of a formal application.
Accordingly, should a debt or equity issuance not qualify for the exemption under Rule 031, the designated utility owner must seek approval of its securities transaction under section 101(2) of the Public Utilities Act.
Details of the Application
The AUC noted that AIML plans to cause AILP to offer, issue, and sell Debt Securities in the aggregate principal amount of up to $300 million prior to November 1, 2020.
The AUC noted that AIML and AILP do not qualify for an exemption under section 3.1 of Rule 031. Consequently, AIML is required to obtain approval from the AUC, under section 101(2) of the Public Utilities Act, before issuing any bonds or other evidence of indebtedness for terms greater than one year.
Section 101(2)(a)(ii) of the Public Utilities Act requires that the AUC determine (a) whether the proposed issuance is to be made in accordance with law; and (b) whether the AUC is satisfied regarding the purposes of the proposed debt issuance described in the application.
Based on the opinion provided by AIML’s legal counsel, Borden Ladner Gervais LLP, dated March 11, 2020, the AUC was satisfied that due diligence was being exercised and steps have been taken to ensure that the issuance will be made in accordance with law.
The AUC accepted AIML’s submitted purposes of the issuance and was satisfied that the level of detail provided in the application is consistent with similar applications made by other AUC regulated utilities that are required to obtain approval of proposed debt issuances.
The AUC concurred with AIML’s assessment that approval of AIML’s debt issuances does not inhibit the AUC from conducting a detailed examination of the prudence of AIML’s debt issuances in future general tariff applications or related proceedings. The onus still resides with AIML to demonstrate that actual debt issuance was obtained prudently and that the costs, term, and other matters are consistent with the public interest and operation of a public utility.
The AUC reviewed the current application and found that the proposed debt issue appears to be in the public interest for the purposes of financing assets or activities in the operation of the public utility.
The AUC found that the requirements of section 101(2)(a)(ii) of the Public Utilities Act were met and approved the debt issuance of AIML, in its capacity as the general partner of AILP, in the aggregate principal amount of up to $300 million, and the proposed purposes of the debt issuance.