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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 |
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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”