Ontario First Nations have over $400 million worth of investments in Hydro One shares but they can’t withdraw a cent for at least another 10 years.
Ron Jamieson, who sits on the board for the Ontario First Nations (OFN) Sovereign Wealth Fund representing Six Nations, provided an update on the fund’s impressive growth to Six Nations Elected Council’s finance meeting on Monday, demonstrating large gains since first investing in Hydro One shares in 2017.
The OFN purchased 14 million shares in 2017 with a $259 million loan, representing two per cent of Hydro One’s total shares. Each share was valued at $18 in 2017. Today, the shares are valued at $30.
“We’re one of the top five shareholders in Hydro One,” said Jamieson.
The OFN receives sizeable quarterly dividends from Hydro One, which are then re-invested for greater gains, said Jamieson. Toronto firm Connor, Clark and Lund is handling those investments.
“Every time there’s a dividend payment, we have extra cash,” said Jamieson. “The shares continue to rise. Hydro One is operating a very efficient business. The shares are bieng looked upon favourably in the market. The dividend from utilities is pretty secure. That’s an important consideration.”
Since 2017, the OFN has been able to pay down $14 million of the $259 million loan.
“We’re wanting to get that down as quickly as we can.”
The total value of the investments is $473 million, an increase of $144 million since 2017.
The OFN receives quarterly dividends of about $3.4 million.
Jamieson, however, issued a word of caution.
“Nobody knows what the stock market will eventually do. I’m sure that most of you are aware over the last couple years, shares have gone up pretty dramatically. Although we’re in wonderful shape today at ($30 per share) that could change. I just want people to be aware of that. It’s not a never-ending increase in value. It could fluctuate.”
All shares are held in a trust account at Royal Bank.
Coun. Wendy Johnson said the fallout from Covid is expected to hit markets in the fall and wondered if the OFN was prepared for that.
“It’s difficult to project into the future what the share values will be. You’re absolutely right, Wendy, shares move up and down with the vagaries of the market place,” he told the Councillor.
But, he said, “It’s almost foolish to project too far into the future what it will be. There’s a motion by all the chiefs that the investment…must be held as it is for a period not less than 12 years or until the holdings are over $90 million, whichever comes first. We’re looking at a long-term situation here.”
Jamieson praised investment manager Connor, Clark and Lund for keeping the OFN in such good shape.
“They are just an outstanding group. They’re not affiliated with any bank. We thought that was important to give us an independent look at how the investments were being managed. The board is very pleased with the work they’ve done.”
The term of the loan is 25 years, said Jamieson, with 22 years left, and some chiefs have asked to cash out some of the money.
“We simply can’t do that under the original chiefs’ resolution. We’re not allowed to do that for another 10 years at least.”
Every quarter when we get a payment from Hydro One, the OFN makes an interest payment on the loan and has $1.7 million additionally each quarter that they pass to on to Connor, Clark and Lund to invest.
“We treat the money very much as you would a pension plan,” said Jamieson. “It’s a very conservative investment plan. We’re very aware that we don’t want those dollar numbers to go down. We have projected by end of the term (25 years), our investment account will be worth far more than the amount owing on the loan. We’re in a very positive position and I believe we’ll stay that way going forward.”
He added that every time a Hydro One share goes up one dollar, that is a $14 million gain against the value of the OFN shares.
“It’s doing very, very well. This has been an outstanding investment. It’s just a super deal. I’m pleased to represent Six Nations on the board.”
