As testimony continued in the Collingwood judicial inquiry, it remains unclear who made decisions on how and why to sell 50 per cent of the town’s Collus shares to PowerStream in 2012.
David McFadden, a former director on the Collus Power Board of Directors, and a member of the Strategic Partnership Task Team (SPTT), took the witness stand on Wednesday and Thursday.
The SPTT was struck to manage the request for proposal process and evaluate the bids that came in as a result.
However, McFadden testified the team didn’t make any formal decisions about what would be in the request for proposal or how each portion of the bids would be weighted.
McFadden remembered a discussion in January 2010 at a Collus Power board meeting at which the group started talking about options for Collus, which included continuing as is, selling a portion of the distribution company, or selling the entire thing.
“There was a discussion about, you know, if we keep it, we’ve got the challenges we have to deal with,” said McFadden of the meeting. “If we sell it … there was just a consensus in the room we don’t want to sell a hundred per cent, we don’t want to give up that kind of control, and so 50/50 might answer the problems.”
However, he said the discussion was general and no decisions were made by the board.
By February, 2011, KPMG was hired by Ed Houghton, president and CEO of Collus, to undertake a valuation of Collus.
In May, 2011, council received some information on the valuation of Collus. A share sale was proposed at an in camera meeting to council in June, 2011.
Based on a slide presentation apparently delivered by Houghton to council in camera, he explained three restructuring options for Collus including maintaining status quo, selling part or all of Collus, and a strategic partnership option.
McFadden said the strategic partnership option was one generally discussed at the board level.
“It came around to the idea that, okay, if we can get a partner who can not only bring in money for the town, but also bring in expertise and resources for the company, that seemed to be a good alternative,” said McFadden.
“And that’s how the discussions were during this time period. There was a lot of talk about this and what seemed to work best if you want to maintain local control, get money, and then get all the resources that a company needs in the way in which the market had reconfigured.”
The presentation concluded with a list of next steps that included identifying potential strategic partners, preparing a request for proposal, and forming a team made up of the Collus Power board (Mayor Sandra Cooper, David McFadden, and Dean Muncaster), Ed Houghton, Tim Fryer (then chief financial officer for Collus), Collingwood Chief Administrative Officer Kim Wingove, and a council representative (who turned out to be Deputy Mayor Rick Lloyd).
This team became known as the Strategic Partnership Task Team.
There is no decision recorded in the minutes from the in-camera meeting, but what was suggested as "next steps" did occur.
The notes from the meeting indicate Houghton provided an update to council on a study being undertaken by Collus Power to investigate their strategic opportunities. The notes also stated Houghton would provide a detailed report to council when the study was complete.
On July 8, 2011, the Collus board of directors met and approved “next steps” for the Collus Power strategic partnership option.
According to McFadden’s testimony, the decision to pursue a strategic partnership or sell shares should have been made by the shareholder, which is the town of Collingwood; specifically, town council.
“If you look at municipal law, and I’ve been through this quite a number of times, the shareholder is the council … it’s actually all of council,” said McFadden, who spent his career as a lawyer.
However, the agreement for services from KPMG, the financial consultants hired to do a valuation of Collus, were directed to the holding company, Collingwood Utility Services Corporation, rather than to council. It was signed by Houghton.
Later, when asked who decided what would be in the request for proposal and how it would be weighted, McFadden said he didn’t know exactly who made those decisions, but assumed it came from the town.
He said it wasn’t a formal decision from the Strategic Partnership Task Team.
“That’s one of the challenges, you know, in the municipal arena is who actually gives green lights at certain times,” he said.
He said he assumed the ultimate direction to send out a request for proposal and get a valuation of Collus was coming from the shareholder.
The hearings continue next week at the town hall council chambers. Read more about the witness list here.
