Ontario has been searching for a buyer for a 49% minority stake in Hydro One since the middle of 2002, hoping to make some C$2B (US$1.3B). But it was unable to find a buyer who would meet the province’s conditions over control and decision-making processes. The failure of the sale is likely to leave a substantial hole in the province’s finances and may require it to sell other assets.

Cancelling the sale is the latest in a series of disasters that have beset Ontario since it decided to deregulate the industry. It was hoped the deregulation would enable the state to divest debts of C$38B being carried by the state’s Ontario Hydro utility. However, when competition was introduced in May 2002 prices leaped by more than 25%. Premier Arnie Eves said in November 2002 that he would freeze prices and pay rebates to Hydro customers.

Initially the province planned to sell off all of Hydro One – one of three companies created in the deregulation – through an initial public offering that would have brought in C$5.5B (US$3.6B). But the plan foundered in early 2002 when Ontario’s Superior Court said the province had no authority to sell it.