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HYDRO OTTAWA HOLDING INC. |
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REPORT |
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SOCIÉTÉ DE
PORTEFEUILLE D’HYDRO OTTAWA INC. |
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RAPPORT |
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June 19, 2007
Le 19 juin 2007
To / Destinataire: Mayor and Members of City Council
City of Ottawa / Le maire et les membres du Conseil
SUBJECT: HYDRO OTTAWA HOLDING INC. – ANNUAL REPORT, ANNUAL GENERAL MEETING OF THE SHAREHOLDER AND REMUNERATION OF DIRECTORS
OBJET: RAPPORT ANNUEL DE LA SOCIÉTÉ DE
PORTEFEUILLE HYDRO OTTAWA INC., ASSEMBLÉE GÉNÉRALE ANNUELLE DES ACTIONNAIRES ET
RÉMUNÉRATION DES ADMINISTRATEURS
RECOMMENDATIONS
That
Council approve:
1. That the Annual Report and Financial Statements of Hydro Ottawa Holding Inc. for the Year 2006 be received;
2.
That Ernst & Young LLP be appointed as the auditor of Hydro Ottawa
Holding Inc. for the Year 2007;
3.
That the amendment to By-law No. 1 of the Hydro Ottawa Holding Inc. in
the form set out in this report be confirmed;
4.
That the remuneration provided to members of the Boards of Directors of
Hydro Ottawa Holding Inc. and Hydro Ottawa Limited be amended to adjust the
Board of Directors and committee meeting attendance fees paid to directors (to
$800 per meeting) and chairs of committees (to $1,000 per meeting) as set out
in this report; and
5.
That the Mayor and the City Clerk be authorized to sign a written resolution
on behalf of the City of Ottawa as shareholder of Hydro Ottawa Holding Inc.
setting out the resolutions approved by the City Council.
Que le Conseil municipal approuve les
recommandations suivantes :
1.
Que
soient reçus le rapport annuel et les états financiers de 2006 de la Société de
portefeuille Hydro Ottawa inc.;
2.
Que la société à
responsabilité limitée Ernst and Young soit désignée vérificatrice de la
Société de portefeuille Hydro Ottawa inc. pour l’année 2007;
3.
Que la modification au
Règlement no 1 de la Société de portefeuille Hydro Ottawa inc.
soit confirmée sous la forme présentée dans le rapport;
4.
Que la rémunération versée
aux membres du conseil d’administration de la Société de portefeuille Hydro
Ottawa inc. soit rajustée pour tenir compte des jetons de présence payés aux
administrateurs et aux présidents de comité pour leur participation aux
réunions du conseil et des comités, qui s’élèvent à 800 $ et à
1 000 $ par réunion respectivement, comme il est énoncé dans le rapport;
5.
Que le maire et le greffier
municipal soient autorisés à signer, au nom de la Ville d’Ottawa à titre
d’actionnaire de la Société de portefeuille Hydro Ottawa inc., une résolution
écrite énonçant les résolutions approuvées par le Conseil municipal.
BACKGROUND
Under the Ontario Business
Corporations Act and the terms of the Shareholder Declaration issued by the
City of Ottawa, Hydro Ottawa Holding Inc.
(“the corporation”) is required to place before its shareholder, the
City of Ottawa, annual financial statements relating to the corporation. As a privately held corporation, Hydro
Ottawa Holding Inc. is not required to prepare an annual report relating to its
activities and the activities of its subsidiaries Hydro Ottawa Limited, Energy
Ottawa Inc. and Telecom Ottawa Holding Inc.
In August 2004, the City Council requested that Hydro Ottawa Holding
report regularly on matters affecting the group of companies. The Annual Report is a component of the
response to this request while also providing the financial reporting
information required to be provided to the shareholder.
The Annual Report of Hydro Ottawa Holding
Inc. for 2006 will be distributed separately.
The consolidated financial statements included in the report consolidate
financial information relating to Hydro Ottawa Limited, Energy Ottawa Inc. and
Telecom Ottawa Holding Inc. and its subsidiaries. The Business Corporations Act requires that the financial
statements of the corporation be placed before the annual meeting of the
shareholder.
Auditor Selection
The shareholder is also required to
appoint an auditor for the corporation at the meeting. Last year, the City of Ottawa approved the
appointment of Deloitte & Touche as auditors for Hydro Ottawa Holding Inc. This was a one-year extension of an initial
three-year term that has now ended upon completion of the audit of the 2006
financial statements.
In February 2007, Hydro Ottawa Holding
issued a request for proposals (RFP) for external audit services for a
three-year term. The RFP was sent to
the four accounting firms that audit the financial statements for the ten
largest electricity distribution companies in Ontario. The Board of Directors appointed a committee
made up of four directors (from the Boards of Hydro Ottawa Holding and Hydro
Ottawa Limited, including the President and Chief Executive Officer) and the
Chief Financial Officer to review proposals received and recommend one firm for
selection. This committee and the
Board of Directors has recommended that Ernst & Young be appointed as the
auditor of Hydro Ottawa Holding Inc. and its subsidiaries for the year
2007. Ernst & Young has
considerable experience in auditing the financial statements of electricity
distribution companies and their affiliated companies. The City Manager has been consulted in
relation to the proposed appointment and concurs with this recommendation.
By-law Amendment
In June 2006, on the recommendation of
the Nominating Committee of Hydro Ottawa Holding Inc., City Council appointed a
number of directors to the Board of Directors of Hydro Ottawa Holding. Among the appointments, City Council
appointed Pierre Richard to a term of four years and recommended that he be
appointed as Chair. The organizing
by-law of the corporation limited the terms of appointment of directors to
three years. In order to give effect to
the appointment made by City Council, the Board of Directors amended the
organizing by-law to provide that the Chair of the corporation have a four-year
term. The Ontario Business Corporations
Act requires that the shareholder (through City Council) confirm the
amendment of the by-law at its next meeting in order that it may continue to
have effect. The full text of the
amendment is attached at Annex “A”.
Remuneration of Directors
The Shareholder Declaration for Hydro
Ottawa Holding Inc. provides that the shareholder establishes the remuneration
paid to the directors of Hydro Ottawa Holding and its subsidiaries (including
Hydro Ottawa Limited). The Shareholder
Declaration also requires that the Board of Directors review director
remuneration every other year and bring forward recommendations to City Council
at the meeting considering the annual financial statements. Those levels of remuneration have not been
adjusted since the corporations were created in October 2000, with the
exception of an adjustment to the remuneration of the Chair approved in August
2004.
In 2006, Hydro Ottawa Holding retained
the consulting firm SpencerStuart to conduct a review of director
remuneration. SpencerStuart is a firm
that specializes in director and executive recruitment and studies and monitors
governance practices in Canada and other countries, including director
remuneration. This review demonstrates
that the remuneration paid to directors of Hydro Ottawa companies is below that
paid to other Ontario public utilities of comparable size.
A number of legislative provisions in
areas including occupational health and safety, environmental compliance and
licence compliance impose a duty of due diligence on directors in the exercise
of their responsibilities. Directors
are also responsible for setting strategic directions for the corporation and
its subsidiaries and monitor the performance of management. Directors of the corporation spend a significant
amount of time in preparing for meetings of the respective Boards of Directors
and their committees, including the review of numerous reports.
The responsibilities of the chairs of the
committees of the Boards are significantly more involved. They must establish the annual schedule of
meetings of their committees, establish the agendas of meetings and frequently
review draft reports and other materials proposed to be included with agendas. They preside at meetings of the committees
and report to their respective Boards of Directors on matters arising from
committee meetings. Currently,
committee chairs receive no additional remuneration for fulfilling these
additional duties. It is an emerging
corporate practice to provide additional remuneration to directors who chair
committees.
SpencerStuart has recommended adjustments
to the remuneration of directors, including adjusting meeting attendance fees
for directors to $800 per meeting and providing committee chairs with a fee
of $1,000 per meeting. (See extract
from the report of SpencerStuart attached at Annex ‘B’). The Board of Directors of Hydro Ottawa Holding, based on the
recommendations of SpencerStuart, is recommending that the fee paid to
directors (other than the chair of a committee) for attending at meetings of
the Boards of Directors and committees of Hydro Ottawa Holding Inc. and Hydro
Ottawa Limited be adjusted to $800 per meeting. It is also recommended that the fee paid to the chair of a
committee for attending and chairing a committee meeting be $1,000 per
meeting. No adjustment to the annual
stipend paid to directors is recommended.
_________________________________ Pierre Richard Q.C. Chair |
________________________________ Rosemarie T. Leclair President and Chief Executive Officer |
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Hydro Ottawa Holding Inc
(the “Corporation”)
1.
Section 3.2 of By-law No. 1 of the Corporation with respect to the term of
directors by adding thereto the following paragraph as paragraph (a) and
renumbering all subsequent paragraphs:
3.2 Term of Directors - The term of office of each
Director (other than an ex officio Director) shall:
(a)
in the case of the Chair of the Board of
Directors, for a term of four years;
Annex “B”