Toronto District Heating Corporation Restructuring

The first significant transaction under Ontario’s Energy Competition Act, 1998 closed in December, resulting in the restructuring of North America’s second largest district energy company, Toronto District Heating Corporation (TDHC). TDHC was a non-share capital corporation established by a special Act to integrate the steam systems of several downtown Toronto hospitals in the 1960s, and eventually involved as stakeholders the hospitals, the City of Toronto, the Province of Ontario and the University of Toronto. It became a share capital corporation upon the proclamation of the Toronto District Heating Corporation Act, 1998 on December 15, 1999. The transaction is illustrative of the opportunities available to private/public partnerships arising in the restructured Ontario energy market. In TDHC’s case, all but one of its statutory shareholders divested of their ownership interests, and the City of Toronto welcomed Borealis Penco Corporation, a subsidiary of OMERS, as the new co-owner of the reorganized and recapitalized energy provider.

Quarterbacking the transaction as TDHC’s counsel was a team from McCarthy Tétrault led by partner David A.N. Lever (corporate/regulatory) and including partners Godyne N.L. Sibay (real estate), Donald G. Gibson (corporate/commercial) and Iain Morton (corporate/commercial) and associate Andrew Armstrong (corporate/commercial). Representing the City was a joint team of Smith Lyons and City of Toronto lawyers, led by Smith Lyons partner David J. McFadden, Q.C. (corporate/regulatory) and including associate Sean O’Neill (corporate/commercial) and City solicitors Elizabeth M. Waight (corporate/commercial) and Scott E. Pilkey (real estate). The private sector joint venture, Borealis Penco Corporation, was represented by a team from Meighen Demers led by Nicholas C. Williams (infrastructure/banking). The exiting shareholders were each represented by external counsel, specifically: Borden & Elliot partner Joanne M. Poljanowski (corporate/commercial) and associate Michael S. Held (corporate/commercial) for the hospitals; a Power Budd team of Lisa Davies and Brenda Lehmann acted for the Province; and Cassels, Brock & Blackwell LLP partners H. Donald Guthrie, Q.C., Bruce T. McNeely and Gordon G. Dickson represented the University.