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Hydro One, Avista executives keeping watch on Ontario election

Hydro One Ltd. and takeover target Avista Corp. are keeping a close eye on an upcoming provincial election in Ontario which could see a change in philosophy with the Canadian company's majority owner.

Ontario faces a provincial election June 7, and all three of the major parties have identified Hydro One for review or changes. The election is the first since Ontario spun off a majority stake in the electricity distribution utility, though it remains the largest single shareholder. CEO Mayo Schmidt said top executives have been working to allay concerns of executives at Spokane, Wash.-headquartered Avista and U.S. regulators about the potential change in political control of the company.

"Myself and the Chairman of the Board have had recent meetings with the Avista group," Schmidt said on a May 15 conference call to discuss first-quarter results. "Certainly, they're very interested in knowing the activities here in Ontario in terms of the election. Their confidence is very high in our organization."

A move by Hydro One directors to raise their compensation and award bonuses to Schmidt and other key executives has raised the stakes in a hotly contested election in Ontario. An Ipsos poll commissioned for television network Global News found the right-leaning Progressive Conservative Party of Doug Ford leading the race at 40% of poll respondents, with the Socialist New Democrats of Andrea Horwath behind at 35% and the ruling Liberal Party of Kathleen Wynne trailing both parties at 22%. Ford has vowed to cut board pay at Hydro One while the New Democratic Party is proposing a return of the company to government ownership. Wynne ordered a review of top-level pay at Hydro One after its information circular revealed the raises in March.

The change in Ontario's political climate has also caught the interest of regulators in the U.S. since Avista has operations in several states. "They're certainly observing and watching the Ontario election and taking a view on it," Schmidt said. "Hydro One bringing our balance sheet and expertise to their market, and sharing best practices is highly attractive to the leadership in all of those states."

Hyrdo One's US$5.3 billion purchase of Avista still requires approval by regulators in Alaska, Idaho, Oregon, Montana and Washington. To date it has announced settlement agreements in several of those states. They anticipate closing sometime in the second half of the year.

Separately on May 15, Hydro One reported first-quarter 2018 adjusted net income attributable to common shareholders of C$210 million, or 35 Canadian cents per share, increasing from C$167 million, or 28 Canadian cents per share, a year earlier. The S&P Capital IQ consensus normalized EPS estimate for the quarter was 34 Canadian cents. The company will pay an increased quarterly dividend of 23 cents per common share on June 29 to shareholders of record June 12. The dividend represents an increase of 5% since the last increase in May 2017.