Debt Management
Debt and Liabilities
The Corporation inherited $38.1 billion in total debt and other liabilities from the former Ontario Hydro when the Ontario electricity sector was restructured in 1999. This amount included $30.5 billion in total debt.
A portion of the $38.1 billion was supported by the value of the assets of Ontario Hydro successor companies, leaving $20.9 billion of stranded debt not supported by those assets. The initial unfunded liability of $19.4 billion was the stranded debt adjusted for $1.5 billion of additional assets.
As at March 31, 2023, total debt and liabilities were $13.8 billion, with total debt of $13.6 billion. These figures compare to total debt and liabilities of $15.1 billion, with total debt of $14.8 billion, as at March 31, 2022.
OEFC’s financial position as at March 31, 2023 is an accumulated surplus of $1,122 million, taking into account results from operations in 2022-23 (+$655 million), an opening adjustment on adoption of financial instruments standards (-$20 million), and re-measurement losses on derivatives (-$46 million), compared to an accumulated surplus of $533 million as of March 31, 2022.
Debt Repayment Plan
OEFC services and retires the debt and other liabilities of the former Ontario Hydro from the following revenue and cash flow sources in the electricity sector:
-
Outstanding notes receivable from the Province, Ontario Power Generation (OPG) and the Independent Electricity System Operator (IESO)
-
Payments-in-lieu (PILs) of corporate income and property taxes, and Gross Revenue Charges made by OPG, Hydro One and municipal electric
utilities
-
Since its November 2015 IPO, Hydro One no longer pays PIL of corporate income tax to OEFC. Under the Electricity Act, 1998, an amount equal to
provincial corporate taxes payable by Hydro One Inc. are due and payable by the Province to OEFC
- Electricity sector dedicated income – the Province’s net income from OPG in excess of the Province’s interest cost of its investment in OPG, which may be allocated to OEFC annually by the Province at its discretion.
Dedicated Revenues
OEFC receives dedicated revenues, such as PILs, the amount equal to Hydro One Inc.’s provincial corporate income taxes, and the gross revenue charge paid to the OEFC, as well as, at the Province’s discretion, any Electricity Sector Dedicated Income (ESDI), to help service and pay down its unfunded liability.
OEFC Historical Financials
A summary of the Corporation’s Income Statements and Balance Sheets, beginning in 1999-2000 to 2021-2022 is available here.
Risk Management
OEFC’s risk management policies and procedures are designed to manage risk exposures associated with the Corporation’s debt, derivatives and related capital market transactions.
Foreign exchange and net interest rate resetting exposures remained within policy limits in 2022–23.
The table below represents the framework and policy limits employed to ensure market, credit and liquidity risks are managed in a sound and cost-effective manner.
| Risk | Status | |
|---|---|---|
| Foreign Exchange Exposure | OEFC's exposure to unhedged foreign currencies debt principal is limited to 3 per cent of outstanding debt. | Foreign exchange rate exposure remained unchanged at 0.0 per cent of outstanding debt as at March 31, 2023. |
| Net Interest Rate Exposure | The exposure of OEFC to changes in interest rates is 35 per cent of outstanding debt (net of liquid reserves). | Net interest rate resetting exposure was 22.1 per cent of outstanding debt as at March 31, 2023. |
