C4 Utility Quotes

W.A.C. Bennett grew tired of the company’s obstinance. In August 1961, after rumors of a potential takeover had circulated within the province for months, Bennett introduced the Power Development Act into the legislature in order to confiscate BC Electric for C$111.0 million. The bill passed unanimously, allowing the government to seize control of the utility. The move was highly controversial, sparking an uproar within the business press, with some overly dramatic papers even labeling Bennett a dictator. In an unfortunate coincidence, the head of British Columbia Power and BC Electric, A.E. “Dal” Grauer, had passed away a few days earlier, and his funeral transpired on the very same day the government took over the company he had led.184 In addition to taking BC Electric, the bill offered to buy the rest of BC Power for C$68.6 million, with interest accruing on this amount until the offer expired at the end of July 1963. Combined with the C$111.0 million paid for BC Electric, this offer would result in a total payment for all of BC Power’s operations of C$179.6 million—or the equivalent of C$38.00 per share. Bennett justified this price by highlighting that the proposal was a premium to the C$34.75 price the shares sold for the day before the expropriation.185 While the combined price of C$38.00 per share was reasonable, the valuation for the constituent parts was peculiar. The C$111.0 million price for BC Electric matched its paid-in capital but ignored the other C$28.6 million of common book equity. And this amount sidestepped the debate over whether book value was even an appropriate methodology for the utility in the first place. The C$68.6 million price for the rest of BC Power’s assets was even odder since these remnant assets generated no income and were carried on the balance sheet at only C$4.0 million. This was a clear overpayment for the holding company’s assets, proposed to entice it into consenting to the BC Electric takeover.186 Predictably, BC Power did not stand idly by. After preliminary attempts to negotiate a higher price were thwarted, the company took action in the Supreme Court of British Columbia on November 13, 1961. BC Power sought rulings on the validity of the initial Act, the right to additional compensation, and the convertibility feature of debentures issued by BC Electric (more on this last point in the next section).187 While the parties awaited trial, the government took additional steps to further entrench the takeover. At the end of March 1962—nearly eight months after the original seizure—the British Columbia legislature passed two new statutes. The first was the province’s amendment of the Power Development Act, which paid an additional C$60.8 million to BC Power for BC Electric and eliminated the offer for the rest of the parent company’s assets. Table 1 shows that the amendment didn’t significantly alter the total compensation. But the new consideration was a more realistic number for BC Electric and solved for the peculiar offer for the remaining assets, which BC Power would now have to sell themselves.