Re Hydro One Limited, 2018 CanLII 25072

March 27, 2018

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction)

AND

IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF HYDRO ONE LIMITED (the Filer)

Decision

Background

The principal regulator in the Jurisdiction has received an application (the Application) from the Filer for a decision under the securities legislation of the Jurisdiction (the Legislation) providing for an exemption from the requirements of section 3.2 of National Instrument 52-107 – Acceptable Accounting Principles and Auditing Standards (NI 52-107) that financial statements: (a) be prepared in accordance with accounting principles generally accepted in Canada applicable to publicly accountable enterprises (CGAAP), and (b) disclose an unreserved statement of compliance with International Financial Reporting Standards (IFRS) in the case of annual financial statements and disclose an unreserved statement of compliance with IAS 34 in the case of an interim financial report (the Exemption Sought). The Exemption Sought is similar to the exemption granted by the principal regulator in the Jurisdiction on August 27, 2015 in Re Hydro One Limited and Hydro One Inc. (the Existing Relief).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application, and

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 - Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, Northwest Territories and Nunavut (the Passport Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 - Definitions, MI 11-102 and NI 52-107 have the same meaning if used in this decision, unless otherwise defined, and “activities subject to rate regulation” has the meaning ascribed thereto in the Handbook.

Representations

This decision is based on the following facts represented by the Filer.

1The Filer is incorporated under the Business Corporations Act (Ontario). The head office of the Filer is located at 483 Bay Street, South Tower, 8th Floor, Toronto, Ontario M5G 2P5.

2The Filer is a reporting issuer or equivalent in the Jurisdiction and each of the Passport Jurisdictions and is not in default of securities legislation in any jurisdiction in Canada.

3Hydro One Inc. (HOI) is incorporated under the Business Corporations Act (Ontario). The head office of HOI is located at 483 Bay Street, South Tower, 8th Floor, Toronto, Ontario M5G 2P5.

4HOI is a reporting issuer in each of the provinces of Canada and is not in default of securities legislation in any province of Canada.

5HOI is a wholly-owned subsidiary of the Filer and its financial statements are consolidated into the financial statements of the Filer.

6HOI is an SEC issuer that prepares and files its financial statements for annual and interim periods in accordance with U.S. generally accepted accounting principles (US GAAP) as permitted by section 3.7 of NI 52-107.

7The Filer currently prepares and files its financial statements for annual and interim periods in accordance with US GAAP, in reliance on the Existing Relief.

8The Filer has activities subject to rate regulation.

9The Filer is not an SEC issuer.

10If the Filer was an SEC issuer, it would be permitted by section 3.7 of NI 52-107 to file its financial statements in accordance with US GAAP.

11The Existing Relief will expire not later than January 1, 2019.

12The International Accounting Standards Board (IASB) continues to work on a project focusing on accounting specific to activities subject to rate regulation. It is not yet known when this project will be completed or whether IFRS will include a specific standard that is mandatory for entities with activities subject to rate regulation.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that:

(a) the Existing Relief is revoked;

(b) the Exemption Sought is granted to the Filer in respect of the Filer’s financial statements required to be filed on or after the date of this order, provided that the Filer prepares those financial statements in accordance with US GAAP; and

(c) the Exemption Sought will terminate in respect of the Filer on the earliest of the following:

(i) January 1, 2024;

(ii) if the Filer ceases to have activities subject to rate regulation, the first day of the Filer’s financial year that commences after the Filer ceases to have activities subject to rate regulation; and

(iii) the effective date prescribed by the IASB for the mandatory application of a standard within IFRS specific to entities with activities subject to rate regulation.