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Any Canadians thinking about purchasing Hydro One when they list it on TSX November 5? They said it's going to be around $19-21 price range and a return of about 4%/year.
For those of you who are not familiar with Hydro One, it's basically a public utility asset (largest power supplier in Ontario; owns 97% of province's transmission capacity) and the government is planning on selling 15% of its ownership every year for the next 4 years (60%). I think it'd be a great investment. Not sure if the IPO price will remain at those range though.
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The issue I see is that the government is planning on pushing out such a large number of shares. So there will be some downward pressure during the next 4 years when the government is getting rid of their 60%. How much of an effect that will have really depends on the daily trading volume... also it's probable that they will be selling larger chunks to big investment companies etc.
Other than that, well it's a safe-bet utility as far as I see it. Well for as long as we are going to use wires to transfer electricity. Probably very little growth in the future so with a 4% yield... well it's not that bad, pretty much in line with the other energy utilites. But you can find some other nice Canadian companies (like telecoms and banks) giving you that ~4% with a lot more upside when it comes to growth.
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I usually stay away from IPOs like the plague and I think Hydro One will be the same. Its hard to tell how the company is run and I want to read through the financials and do my research instead of blindly betting on companies going public. Theres still a lot of noise about the mismanagement at the company - but utilities are a good bet when it comes to safety.
Sure enough, we will be paying more for electricity rates in the province - I just read this morning that Hydro One will be raising the rates again. Grrrr
