HomeMy WebLinkAboutFIN 17-17 Oty od Report to
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PICKERING
Report Number: FIN 17-17
Date: June 12, 2017
From: Stan Karwowski
Director, Finance & Treasurer
Subject: Authority to Engage Consulting & Professional Services to Conduct a Peer Review
of the Hydro Merger Valuation and Business Case
Recommendation:
1. That Report FIN 17-17 of the Director, Finance & Treasurer regarding the Authority to
Engage Consulting & Professional Services to Conduct a Peer Review of the Hydro Merger
Valuation and Business Case be received;
2. That Council grant the Treasurer the authority to hire a consultant and professional services
for the specific purpose of conducting a peer review of the hydro merger valuation and
business case in accordance with Purchasing Policy 10.03(c), as the assignment may be
more than $50,000.00;
3. That the hiring of the consultant be on the condition that Pickering is reimbursed by Veridian
for all of its costs;
4. That the consulting engagement be charged to General Government Consulting account
(2126.2392.0000) and the reimbursement of costs be allocated to Miscellaneous Revenue
account (1599.9990.0000); and
5. That the appropriate officials of the City of Pickering be authorized to take the necessary
actions as indicated in this report.
Executive Summary: Grant Thornton LLP, a professional services company has been hired
by Veridian and Whitby Hydro Energy Corporation or Whitby Hydro to lead the two parties through
the merger process. As part of the merger.process, Grant Thornton LLP and the utilities are
undertaking a thorough review of the valuations, business case and related issues. The merger is
reaching a critical stage where an independent review of the valuation and business case is
required. The peer review process consists of hiring an accounting firm or other consulting firm
that has a background in hydro mergers and valuations to review the documents prepared by
Grant Thornton LLP. The peer review process would provide an independent evaluation and
assessment of the following major components: business case, financial model, valuation of
Veridian and Whitby Hydro, synergies forecast, merger and shareholders agreement and
company prepared operational and financial due diligence reports. The results of the peer review
would be shared among Veridian's municipal shareholders (Ajax, Belleville and Clarington.)
Pickering was selected as the lead for this consulting project. However, Pickering will consult with
FIN 17-17 June 12, 2017
Subject: Authority to Engage Consulting & Professional Services to Conduct a Page 2
Peer Review of the Merger Valuation Process (Veridan &Whitby Hydro)
and Business Case
the other Veridian municipal Treasurers regarding the final consulting project scope and selection
of the consultant. This preapproval is being sought in advance of the summer recess to ensure
that the work can proceed as soon as the documents from GT and the utilities are available.
After the independent consultant has completed their review, it is anticipated that the Veridian
municipal shareholders will review the consultants reports and provide an update to their
respective councils.
•
Discussion: The peer review process is the process of subjecting Grant Thornton and the
utilities work as it relates to the various merger issues to an independent review that will
incorporate a municipal perspective. The peer review process will provide the Veridian municipal
shareholders with an extra level of assurance that the proposed benefits and risks of the merger
have been evaluated and tested. The peer review process has been used by other hydro mergers
throughout the Province. The proposed cost of the peer review process can range from $25,000
to $50,000. It is the intent of staff to "fine tune" the project scope by working with the other
municipal Treasurers of Veridian shareholders to control the project's scope and cost. Before the
engagement will proceed, Pickering will also contact Veridian to ensure that the project's cost is
acceptable to Veridian and receive written confirmation that Veridian will reimburse Pickering for
its costs.
Attachments: None
Prepared/Endorsed By:
IOW
Stan Karwowski, MBA, CPA, CMA
Director, Finance & Treasurer
Recommended for the consideration
of Pickering City Council
61 7D'7
Tony Prevedel, P.Eng.
Chief Administrative Officer