Manitoba Committee Hansard — 7 November 1996 (Public Utilities Committee, Sitting 15, 36th Legislature, 2nd Session)

36-2-pu15

Manitoba — Debates (Hansard)

, Second Session - Thirty-Sixth Legislature of the Legislative Assembly of Manitoba Standing Committee on Public Utilities and Natural Resources Chairperson Mr. Jack Penner Constituency of Emerson Vol. XLVI No: 15- 2:30p.m. , Thursday, November 7, 1996

MANITOBA LEGISLATIVE ASSEMBLY Thirty.Sixth Legislature Members, Constituencies and Political AtlUiation Name Constituency l!ar1)t ASHTON, Steve Thompson N.D.P. BARRETT, Becky Wellington N.D.P. CERILLI, Marianne Radisson N.D.P. CHOMIAK, Dave Kildonan N.D.P. CUMMINGS, Glen, Hon. Ste. Rose p C. DACQUAY, Louise, Hon. Seine River P.C. DERKACH, Leonard, Hon. Roblin-Russell P.C. DEWAR, Gregory Selkirk N.D.P. DOER, Gary Concordia N.D.P. DOWNEY, James, Hon. Arthur-Virden PC . DRIEDGER, Albert, Hon. Steinbach P.C. DYCK, Peter Pembina P.C. ENNS, Harry, Hon. Lakeside P.C. ERNST, Jim, Hon. Charles wood P.C.

EVANS, Clif Interlake N.D.P. EVANS, Leonard S. Brandon East N.D.P. - FILMON, Gary, Hon. Tuxedo P.C. FINDLAY, Glen, Hon. Springfield P.C. FRIESEN, Jean Wolseley N.D.P. GAUDRY, Neil St. Boniface Lib. GILLESHAMMER, Harold, Hon. Minnedosa P.C. HEL WER, Edward Gimli P.C. HICKES, George Point Douglas N.D.P. JENNISSEN, Gerard Flin Flon N.D.P. KOWALSKI, Gary The Maples Lib. LAMOUREUX, Kevin Inkster Lib. LATHLIN, Oscar The Pas N.D.P. LAURENDEAU, Marcel St. Norbert P.C. MACKINTOSH, Gord St. Johns N.D.P. MALOWAY, Jim Elmwood N.D.P. MARTINDALE, Doug Burrows N.D.P. McALPINE, Gerry Sturgeon Creek P.C. McCRAE, James, Hon.

Brandon West P.C. McGIFFORD, Diane Osborne N.D.P. MciNTOSH, Linda, Hon. Assiniboia P.C. MIHYCHUK, MaryAnn St. James N.D.P. - MITCHELSON, Bonnie, Hon. River East P.C. NEWMAN, David Riel P.C. PALLISTER, Brian, Hon. Portage Ia Prairie P.C. PENNER, Jack Emerson P.C. PITURA, Frank Morris P.C. PRAZNIK, Darren, Hon. Lac du Bonnet P.C. RADCLIFFE, Mike River Heights P.C. REID, Daryl Transcona N.D.P. REIMER, Jack, Hon. Niakwa P.C. RENDER, Shirley St. Vital P.C. ROBINSON, Eric Rupertsland N.D.P. ROCAN, Denis Gladstone P.C. SALE, Tim Crescentwood N.D P. SANTOS, Conrad Broadway N.D.P. STEFANSON, Eric, Hon. Kirktield Park P.C.

STRUTHERS, Stan Dauphin N.D.P. SVEINSON, Ben La Verendrye PC . TOEWS, Vic, Hon. Ross mere PC . TWEED, Mervin Turtle Mountain P.C. VODREY, Rosemary, Hon. Fort Garry P.C. WOWCHUK, Rosann Swan River N.D.P.

807 LEGISLATIVE ASSEMBLY OF MANITOBA THE STANDING COMMITTEE ON PUBLIC UTILITIES AND NATURAL RESOURCES Thursday, November 7, 19 96 TIME - 2:30 p.m. LOCATION - Winnipeg, Manitoba CHAIRPERSON- Mr. Jack Penner (Emerson) VICE-CHAIRPERSON - Mr. Ben Sveinson (La Verendrye) ATTENDANCE - 10- QUORUM - 6 Members of the Committee present: Hon. Messrs. Findlay, Stefanson, Messrs. Ashton, Laurendeau, Penner, Pitura, Sale, Struthers, Sveinson, Tweed APPEARI NG: Mr. Richard Yaffe, Counsel to Province Mr. Julian Benson, Secretary to Treasury Board Ms.

Shirley Strutt, Legislative Counsel MATTERS UNDER DISCUSSION : Bill 67- The Manitoba Telephone System Reorganization and Consequential Amendments Act *** Mr. Chairperson: Could the Standing Committee on Public Utilities and Natural Resources please come to order. When this committee rose when we last met, we were considering Bill 67, and we were in the midst of considering clause by clause on Clause 12 as amended. Do you want to proceed with Clause 12 as amended? *

(1440) Mr. Tim Sale (Crescentwood): Mr. Chairperson, I want to just record first for the record that I want to thank honourable members and counsel and staff for, I think, a good process this morning. I think we made some good progress. I think both sides of the committee recognized that there is a profound difference in our views about the desirable outcome of this legislation, but I think we have, in a very modest way, perhaps improved the legislation slight ly. I appreciate the minister's flexibility in consid ering some amendments.

I think that the committee has approached its task thoughtfully, and I appreciate that. I think that, hopefully, we can continue to do that this afternoon. I want to make some comments on

Section 12 , and, in making the comments, I want to be very clear that I am not casting doubt on the government's or the minister's integrity in terms of putting forward what they believe to be the best possible level of protection. But I think that we should very, very clearly record that this particular clause is about as close to the heart of this legislation as you can get in terms of the difficulty with the intent that the government has.

I think the government has every intenti on of attempting to make it possible for Manitobans to continue to show the kind of loyalty and pride in their corporation that they have obviously already shown. I would just start by saying that I think we all may well confuse reality, if we think that it has been because MTS has been such a good marketer or because Faneuil has deluged Manitobans with calls either to come back home or to maintain their services, that MTS has the best record in Canada of retaining its long distance rate base and its local rate base. I think it has the best record for two primary reasons.

One is because it is an excellent company, well run, and provides high-quality service to all Manitobans, a service whose quality we talked about often in this committee, but it is a service level which is the envy of many people who live in jurisdictions outside of Canada and even some who live in Canada who know that this is a very good service. Manitobans support the very good service.

808 LEGISLATIVE ASSEMBLY OF MANITOBA November 7, 1996 I think it is also true that Manitobans have stayed with MTS because they believe in MTS. In some way they believe that it represents and reflects back to them their commitment to a province that has developed over 80- plus years. I think Manitobans have a deep pride in their hydro system and in their telephone system and that they see these things as sources of stability as well as sources of progress and certainly sources of a high standard of living. I think governments sometimes get distant from the entity they govern.

They may think that this is a business just like other businesses, but it is not. This is a utility that collectively engenders a great deal of pride because so many Manitoba families have had people who have worked in the corporation from the level of president to the level of the line worker. Mr. Chairperson, can we have a break for 30 seconds, with leave? Some Honourable Members: Leave. Mr. Sale: Mr. Ashton has asked if he could ask a couple of questions or raise an issue.

He has to go back into the House, and I have no problems with giving leave for him to do that, and then I will come back to conclude my remarks on

Section 12 if the committee is prepared to give leave. Mr. Chairperson: Does the honourable member have leave? [agreed] 1llr

(1450) Mr. Steve Ashton (Thompson): Mr. Chairperson, the question relates to the issue of pensions. The reason I am asking it now is because we did ask questions in Question Period. I know the minister was not in Question Period and may not be aware of this, but the Premier (Mr. Filmon) had indicated to us that he was meeting with people in regard to the pension issue. Have there been meetings taking place on the critical issue of pensions since the 12:30 adjournment?

I am wondering if the minister can indicate who he has been meeting with, because I have talked to a number of people here right now who are employee representatives who were not included in those meetings. I am wondering if he can indicate whom he has met with and why certain groups were not part of that process. Hon. Glen Findlay (Minister responsible for the administration of The Manitoba Telephone Act): I have always taken the position that this is an issue between the company and the employees, and, certainly, they have representatives.

The member probably was here when-I cannot remember who made presentation, Mr. Beatty, I believe, made representation to the committee and acknowledged that the Minister of Labour (Mr. Toews) and myself had met with those representatives. I think there were four there that day who raised concerns to us about how the negotiations were going with the company. We certainly took leadership in terms of trying to be sure the company aggressively negotiated, dealt with the different representatives to try to bring some of the issues to a conclusion.

I do know that letters have been exchanged between the president or representatives of MTS and the different union representatives. Having those letters, we met over noon hour to try to draft an addition or an amendment here that would, we hope, cross the bridge here in terms of giving greater comfort around the intent of equivalency, what equivalency would tum out to be. We are prepared when we get to that

section to have that amendment brought in. It is currently being drafted, being drawn up for the committee, but it is MTS and representatives of the government to see if we can come up with something that serves the need as we understand it. I just really want to remind the member it is between the corporation and the representatives of the employee groups to come to a resolution that we want to provide for here in this legislation. Mr. As hton: Well, I am shocked by the minister's sta tement.

We are being asked to pass a bill that indicates that persons described in subsection 2 arc deemed to consent to termination of their participation in the fund. In other words, we arc going to be passing legislation that says that the people represented, who are part of The Civil Service Superannuation Act, MTS employees and retirees, consent to the termination of their participation in the fund.

November 7, 1996 LEGISLATIVE ASSEMBLY OF MANITOBA 809 We have had many presenters at committee who have said that they did not consent to that. We have to vote on this provision, and I am glad that some meetings have gone on, but I am wondering why that would not include current employee reps and why the minister would not be part of this. The reason I am raising this, Mr. Chairperson, is because we have I ,300 recipients of MTS pensions currently. We have close to 4,000 employees. This is a major issue for them.

We were told in the House that meetings were taking place, and I have just talked to employee reps who were not part of those meetings. I know we are getting to this later, but I want to raise this now because I do not want to get to the issue of MTS pensions and be in a situation where a lot of the people who should be included in this consultation are not. I would stress again that I believe the minister should be directly involved in this.

We are going to be asked to pass legislation that unilaterally takes out the existing employees and retirees from their current pension plan and sets up an alternative pension plan. That is not an issue between MTS and the employees; it is a piece of Manitoba legislation, and I think it is a very serious, serious matter. I want to ask if the minister will ensure that employee reps-and I know, for example, there are employee reps sitting at the back, I just talked to them, representing--there are three unions at MTS-a significant number of employees in this case.

I am wondering if the minister will ensure that they are included in the process, and that the government itself will be part of the process, not just MTS, but the government because we have to pass legislation. I wonder if the minister can perhaps comment on that, and particularly whether he will at least respond to the concerns that were expressed I know just yesterday. Point of Order Mr. Marcel Laurendeau (St. Norbert): On a point of order, Mr. Chairman, this committee has been running very well all morning long. We have had very good co operation.

When we started the committee this morning, we had agreed that we would be going clause by clause. This is Clause 15(8) that the honourable member-I listened very carefully, and he has moved on to Clause 15(8). We have been asking by leave to move through to different clauses at different times, but at this time I do believe we are discussing a different one. I understood that we had given leave to continue the discussion on that clause. I do not believe the honourable member's questions are in order at this time. I would ask you to rule on that. Mr. Chairperson: Mr.

Laurendeau, you certainly do have a point of order; however, I want to indicate to you that there was leave asked of the committee to allow Mr. Ashton to put a few comments on the record. Mr. Ashton certainly has done that. There was no indication by anybody that those comments would pertain to Clause 12, which we were debating. So there was a departure allowed by the committee, and I would therefore indicate to you that it is my view that the honourable member is quite in order in doing what he is doing by leave. So I would therefore ask the minister to respond as requested. * * * Mr.

Findlay: If the member looks to the legislation, we get up on to 15(2), we talk about equivalent, equivalent in the broadest sense. I think the problem probably comes in as to how you determine that equivalent really happe ns, and so we have had discussions around an amendment that would give everybody some comfort that equivalent will be fair and reasonable for all concerned, whether it was MTS or the retirees or the future retirees. I do not think we are on any different page here. We want to be sure we have equivalency, pure and simple, that is determined by an independent analysis process.

That is what we want to move as amendments, open obviously to discussion with them at that time, but we have worked hard, the company has worked hard, to try to reach some level of understanding. Each outstanding issue has been resolved in that process. I think, down within the legislation, we see whether there would be concern that, how do you really determine, and in the fairest possible way, what equivalency is? If it is not equivalent, what do you do to bump it up? * (1 500) Mr. Ashton: I just have one further comment to the member for St. Norbert (Mr. Laurendeau). The reason I

81 0 LEGISLATIVE ASSEMBLY OF MANITOBA November 7, 1996 am raising this now is because at some point in time we are going to be dealing with clause-by-clause votes and we will be dealing with this clause. Now, I am hoping, I am really hoping that we can end up with a situation where the very real concerns that are out there can be dealt with. Ifl waited until the clause came up, I think it would be too late. That is why I raise it in advance. I also want to urge, though, that any discussions that take place be comprehensive. There are existing employees, as well as retirees, who are concerned about this.

There are three unions representing employees. I just talked to some representatives a few minutes ago who have not been part of discussions, who have written to the minister yesterday, who are not happy with the pension situation or any proposed amendments in that sense and are seeking some satisfaction on that basis, and the reason I am doing this now is to try and get this done before. I mean, no matter what happens on the sale of MTS, we will fight on that another time.

I do not want to see the pension recipients and employees suffer, and that is one of the reasons, by the way, we wanted these hearings to take place the way they are, not in the middle of the night, you know, with some notice and the rest of it. I am not trying to disrupt the committee. I just want to urge the minister-and I realize he is in the committee--if staff is dealing with it, to make sure the staff talks to some of the employee reps .

There are employee reps sitting here right now, and if the minister does not get a chance to talk to them directly, I am sure if he wishes a recess, that can be arranged, too. I would urge that that perhaps be done prior to us actually getting to any fait accompli in terms of amendments.

What I would suggest is we can perhaps go back to the other provisions, but if it takes some time before we get into pensions to deal with it, I am sure the committee will be more than willing to recess, and if we run into difficulties in terms of the House itself, in terms of the committee sitting, as opposition House leader, I can indicate our willingness to accommodate that in terms of any recesses or other sittings that would be required. Mr. Chairperson: Thank you, Mr. Ashton. Can we then now proceed with Clause 12? Mr. Findlay: Mr. Chairman, we have an amendment back in

Section 5, I believe it is. Mr. Chairperson: We have an amendment on No. 12, and the amendment has been passed. I would like to ask consideration of the committee whether we could deal with Clause 12, and then we will revert back to 5(4). Is that the will of the committee? (agreed] Mr. Sale: Mr. Chairperson, I would like to conclude my remarks on

Section 12. This is a vital

section and a central section. It is really the frrst of the major sections that attempt to maintain Manitoba's ownership of and serious stake in this future corporation. I was referencing before, when we by leave had some comments on pensions, that I think the success of MTS in retaining its base of business at a higher level than I think all others-I may be wrong by one; it may be the second best; I think it is the best though-has a great deal to do with the pride of ownership and the sense of Manitobans that they have a stake in this corporation.

Over and over again in committee, we heard people say, I have been a proud supporter of MTS. My parent worked for it or my kid works for it or something like that, and the presenters have said, while it was a Crown corporation-( interjection] If the committee would like to break for a minute, I would be glad to do so. While it was a Crown corporation, Mr.

Chairperson, they said they saw the virtue of being not just interested in good business but also being good citizens, but they indicated that the day it is a private corporation like all others, they will treat it like private corporations that are in business to make money, and they will go for the best deal and the bottom line. I think that MTS can look forward to a more difficult time at maintaining its base when it is in the private sector. Secondly, we have the government's intent to keep a head office here.

I would just remind the government that lottery jobs from a lottery corporation decamped to Ontario and to Alberta. We are still part of the Manitoba Lotteries Corporation, but a good number of the jobs that were here are not here anymore. There is still a head office here, but it is a head office more in terms of a shell than anything else. Many of the jobs are no longer here.

November 7, 1996 LEGISLATIVE ASSEMBLY OF MANITOBA 811 * ( 151 0) I think members opposite who have had a long affection for the Hudson's Bay Company, as I have, not in its current form but in its previous form, it is part of our hist ory-when I was a young boy, my great -uncle had a small number of shares in the Hudson's Bay Company, and that was how I got introduced to The Beaver magazine.

It seemed to me that it was kind of a unique company that published a history magazine and that had some sense of itself over a long period of time, and many members of this country who owned Hudson's Bay shares treated them in many ways as legacies of the country's history and believed in them. But the Hudson's Bay Company for a long time had its head office in Manitoba, at Hudson's Bay House, in fact, but everyone knew that the real head office was in Toronto. Once the company had been bought, it had the head office here.

Its corporate letterhead said it was here, but everyone knew that the main jobs were in Toronto. They were not here. The Faneuil corporation, another wonderful case in point, in which this corporation that existed in the form of some predecessor companies in the United States, was fonned as a Canadian corporation to be, according to the government's press release, headquartered in Manitoba. The public certainly thought all its senior staff would be here. The reality is that this company is, in the words of its chief executive officer, a virtual corporation. It is one ofhis favourite terms.

It is kind of high-tech jargon, but basically it means that the corporation does not really exist anywhere because it is everywhere, so it has officers in Boston and Ottawa and Chicago and Winnipeg. But, if one seeks the corporate head offices of F aneuil corpo ration, the real corporate head office, as you find when you phone of the company's branches, is in Boston. Now, legally, that is a subsidiary of the Canadian Faneuil ISG-that is the parent, but the American corporation is where the real decisions are made, the business is done and the corporate headquarters exist.

You talk about where the research and development jobs are in that corporation, which is a good analog for what we are looking at, I think, because it is in the telemarketing, tel ecommunications business and it has styled itself as the highest of high-tech telemarketers and sold itself to the Manitoba government on the basis that there would be some 90 to 100 senior jobs doing high-quality research, cutting-edge research in the area of telecommunications, telemarketing, data base, mining, et cetera. There are perhaps 1 0 to 15 such jobs here, certainly not many more than that.

There are nowhere near 90, and when you inquire where the senior officers of the company are at any one time, they may be in the air somew here, but basically they are headquartered in Boston. Now it is true that the president maintains a home here. How often he is here, I do not know, he is a busy person, but he also maintains a home in Boston, and the one in Boston is somewhat more elaborate than the one in Winnipeg. So I think, I trust the government and its members are not deluding themselves by attem pting to sell Manitobans on the idea that this provides any real protection.

If they are, then they really are foolish. I think by this they are only trying to mollifY the concerns of Manitobans, and I have to say, it does not wash. Being a company in the private sector is kind of like being pregnant. Either you are or you are not, and you cannot be partly pregnant and you cannot be partly in the private sector. You are either in it or you are not in it, and once shares are on the market and have a value and investors have a sense of whe ther this is a growth opportunity or not, the shares will be traded, and they will be as widely held as AGT shares are.

As the minister pointed out earlier-and this is exactly the point, this is the Hobbesian dilemma-you cannot act to circumscribe what people can do with their private property. As long as it is legal, they can do as they please with their private property, and if that means selling it on the open market where these shares will be listed in Toronto, there cannot be any limitation who can own their shares after the government share is ext inguished.

As any stockbroker or any investment person will tell you, one of the really critical issues in any publicly owned company-by publicly, I mean publicly on a stock exchange; I do not mean publicly in the Crown corp oration sense.

Any publicly owned company must have liquidity of its capital if it is going to be an attractive company, because no investor wants to take a risk on an equity investment in which there is no market because, should you need to sell it for any reason, whet her you need to sell it to raise your capital to do something else with it or whether you need to sell it for emergency reasons or whether you just do not think it is

812 LEGISLATIVE ASSEMBLY OF MANITOBA November 7, 1996 a good thing to own anymore, you are not going to buy it in the first place if you do not think you can sell it. I know, and I am sure all the members opposite know, that when you set out to sell your MTS shares six months from now or a year from now or 10 years from now, whenever it is-you will sell them one day, or your estate will. At some point, your shares will come on the market, and indeed if the shares do not come on the market, then the company is not liquid and does not have much interest as a jointly publicly owned company.

When you sell those shares, you will not be inquiring whether it is Aunt Minnie from down the street who is buying them or whether it is John Smith from halfWay across the world. The shares will be sold through a broker, and the broker will not ask anything of the buyer except that they have the money, and that is as it should be in a publicly owned joint stock enterprise.

That is as it should be because an investor has the right to divest an equity holding, and if you tried as legislators to put some circumscription on this, to tie that up in some way, the brokers whom you are dealing with would say, wait a minute, I am not going to be able to sell these bloody things because there will not be any market for them. That is the first thing they would say to you if you said these shares are only tradeable in Manitoba and can only be held beneficially by Manitobans. The protection here is 15 days; 15 days Manitobans can get a jump and can invest as they want. Now, Mr.

Chairperson, let us not dissemble about this. There canno t be any protection that is meaningful for this corporation in terms of its Manitoba status.

You can tell AGT if it becomes a purchaser, you can tell Ontario Bell or whatever company winds up with a stake in this company or may decide when the government's share is extinguished that it is going to own 51 percent, you can tell them that you would like it to stay here as a head office, and they may for public relations purposes, undoubtedly they would for public relations purposes maintain an office here, but if you for one minute think that they are going to keep jobs here that they could more efficiently combine with other functions in their corporation or more efficiently ship to Arkansas or New Brunswick or any other place to get them done there, then you really are deluding yourself.

I do not think you mean to do that, but if you think this protects jobs or protects anything other than the symbolic logo on a building on Portage A venue, you really are fooling yourself because what will be determining how many people are inside that building and how many floors are instead sublet to other tenants will be the con dition s of the market, the return on equity, the opportunities for investment in terms of the parent corpor ation, whoever it is at the time. So, as we pass through this, let us remember that this is symbolism, that this is window dressing. I do not blame the government for doing it.

This is something that they have to do for at least public relations purposes. I do not even fault their intent, but let us not pretend that there is any substance behind the intent. *

(1520) My last comment in this area is it is kind of a reality check. It would be really instructive for the backbenchers who have not been in the cabinet as these things have been discussed to take a look at how big a Manitoba financing can be subscribed by Manitoba investors. We are not talking here about $25 million in Hydro Bonds or $75 million in HydroBonds or $150 million in HydroBonds.

If you look at the size and liquidity of the Manitoba capital market, particularly when you are thinking about individuals buying these shares, as the min ister, I think, with all good intentions, wishes to happen, the capacity of the market of Manitoba to absorb a $750-million fmancing in 15 days is about the same opportunity as the snow to melt in January and the flowers to bloom. There is no likelihood on God's green earth that this would happen. It takes a long time to market even a small bond holding on the part of Manitoba Hydro to sell enough HydroBon ds for a given year to reach the quota. Mr.

Chairperson, $750 million is $3,000 per average Manitoba family. Do we seriously think that every Manitoba fumily is going to come up with $3,000 to buy stock in this company? I mean, is that a serious thought on the part of the government? Look at the structure of Mani toba families. How many families have that capacity? And that is not a lot of money. I mean, that is not a big amount of money, but how many families are going to pony up $3,000 to buy their share amongst all of the families of Manitoba?

November 7, 1996 LEGISLATIVE ASSEMBLY OF MANITOBA 813 So we can go by this section, but we should not go by-and particularly the backbenchers should not go by on the assumption that this means anything. It is public relations.

It is justifiable public relations, but it is only public relations, and we should not pretend that having the head office here means a darn thing in terms of the number of jobs that actually stay and in particular in terms of the good jobs, the executive, high-level, decision-making, research and development jobs that are now part of MTS because, as it is held increasingly by outside corporations, particularly telecom corporations, as I am sure it will be, they will do the jobs where it is most efficient and effective for them to do them, and they will not necessarily be here. They may be. That would be good.

But to think that this is really achieving anything other than window dressing is deluding ourselves, and I hope we are not being deluded. Mr. Chairperson: Thank you, Mr. Sale. Item 12 as amended-pass. Shall we now revert to 5(4)? Is there leave of the committee? [agreed] Mr. Findlay: I move, in both officia11anguages THAT the following be added after subsection 5(5): Mines and minerals reserved 5(6) Notwithstanding the definition of "land" in subsection 1(1) and notwithstanding any other provision of this section, mines and minerals in, upon or under land referred to in this

section are reserved to the Crown in the same manner as set out in

section 4 of The Crown Lands Act. [French version] II est propose d'ajouter, apres le paragraphe 5(5), ce qui suit: Reserves relatives aux mines et mineraux 5(6) Malgre Ia definition de "biens-fo nds" dans le paragraphe 1 (1) et toute autre disposition du present article, les mines et /es mineraux qui se trouvent dans les biens-fonds vises par /e present

article sont reserves a Ia Couronne de Ia meme maniere que cel/e prevue a /'article 4 de Ia

Loi sur /es terres domaniales. Mr. Chairperson: The clerk brings to my attention that we left off 5(4). This one is dealing with 5(5). [inter jection] This one is at 5(6). However, should we deal with 5(4) first? There had been an amendment proposed under 5(4), I understand. We have not dealt with 5(4), so I would ask that we first deal with 5(4) and then deal with 5(5). [agreed] I will ask then whether the committee agree that 5 ( 4) as amended be passed. Amendment-pass; Clause 5(4) as amended-pass. Clause 5(5). The minister has read into the record an amendment on 5(5).

THAT the following be added after subsection 5(5):- An Honourable Member: Dispense. Mines and minerals reserved 5(6) Notwithstanding the definition of "land" in subsection 1 (1) and notwithstanding any other provision of this section, mines and minerals in, upon or under land reforred to in this

section are reserved to the Crown in the same manner as set out in

section 4 of The Crown Lands Act. (French version) II est propose d'ajouter, apres /e paragraphe 5(5), ce qui suit: Reserves relatives aux mines et mineraux 5(6) Malgre Ia definition de "biens-fonds " dans /e paragraphe 1 (1) et tout autre disposition du present aratic/e, /es mines et /es mineraux qui se trouvent dans /es biens-fonds vises par le present

article sont reserves a Ia Couronne de Ia meme maniere que cel/e prevue a /'article 4 de Ia

Loi sur /es terres domaniales. Mr. Chairperson: Amendment-pass. Shall Clause 5(5) as amended pass? Mr. Sale: Wait a minute, Mr. Chairperson, I do not think we have passed- Mr. Laurendeau: This is an add-on after 5(5).

81 4 LEG1SLA TIVE ASSEMBLY OF MANITOBA November 7, 1996 Mr. Chairperson: Clause 5(5)-pass. Now, shall the addition after 5(5), which will be 5(6) as proposed by the minister, pass? The amendment is accordingly passed. Mr. Sale: I am sorry, I did have my hand up before you claimed it to be passed. Mr. Chairperson: Oh, I am sony. It is not passed then. Mr. Sale: Yes, we are getting somewhere, I think. Would the minister allow counsel to address the extent of the "land" definition that is left in there?

I know this is consiste nt with the Crown Lands definition, but I do not know the Crown Lands definition as to whether it incl udes all those other things about water and water power and water resources and all those other pieces of the "land" definition. My concern was that the defmition of "land" here was a whole lot broader than it needed to be.

I understand The Crown Lands Act, but I do not know what the Crown Lands Act says, so if counsel could tell me what The Crown Lands Act says in terms of the definition of "land" there, that would help us understand whether we are still broader than we need to be or whether this is reasonable. Mr. Chairperson: I will for clarification of the committee, while the discussion is going on as to The Crown Lands Act, indicate that we did not amend 5(5), that we passed 5(5) unamended and that we are now looking at an amendment that will add another

section or another clause which will be 5(6). That is what we are discussing now. Mr. Richard Yaffe (Counsel to Province): I will give an interim response, at least. Land is not defined in The Crown Lands Act. Land is however defined in The Real Property Act, and my recollection is that the definition of land in Bill 67 is largely if not entirely taken from the definition of land in The Real Property Act and the definition of land in the current telephone legislation. Mr. Sale: Mr. Chairperson, if you would like to leave this aside until we get a little further clarification, I have no objection to that. *

(1530) Mr. Yaffe: Actually, my response has just been confirmed. The definition of land in Bill 67 was derived from the definition of land in The Real Property Act, and to the extent that that definition was not consistent with the definition of land in the current Telephone Act, elem ents were picked up from The Telephone Act, as well, to arrive at the definition in Bill 67. Mr.

Sale: I appreciate the answer but remain unconvinced that there is a reason to tranfer to this new entity things which properly apply to things like Manitoba Hydro, for example, just all of the references to water, water power, rentals, and blah, blah, blah, blah. It is a very, very extensive definition, and I do not think that any of us would have a lot of trouble when that definition applied to a Crown corporation, but when it applies to a totally arm's length private corporation, I may be seeing bogeymen under the bed, but I would rather see them now than have them leap out at me in the middle of the night.

I take the Calvin and Hobbes approach to this. So, if the committee would agree, I would like counsel to have a little further discussion about this before we agree that we have sufficiently addressed this question of the breadth of what is being conveyed. Mr. Chairpenon: Does the committee agree to that? [agreed] We will allow Crown counsel to have further discussion on it. We will then move on to 13(1). Clause 13(1). Mr. Sale: Mr. Chairperson, 13(3) I think is the real issue here, but I wanted to ask the question of how the board will be comprised as of the date of Royal Proclamation.

Is it the existing board, continued? What is the mechanism? Mr. Findlay: Mr. Chairman, the existing board carries on until Proclamation. At Proclamation, a new board will be appointed by the Lieutenant-Governor-in Council. Mr. Sale: So, Mr. Chairperson, under the normal rules of a corporation, a joint stock corporation, there would be an election via a majority of shareholders operating in some kind of fashion or form.

November 7, 1996 LEGISLATIVE ASSEMBLY OF MANITOBA 815 What is the appropriate

section to ask questions about that mechanism? I will not ask them here if this is not an appropriate section, but if the minister or counsel could indicate where we might more appropriately discuss that question, if not here. Mr. Yaffe: Mr. Chairman, I think the response is you will not find another more appropriate spot in Bill 67. The Corporations Act, if you remember earlier on, there is a provision that says that The Corporations Act will apply, and there will be required annual meetings.

Under The Corporations Act, the corporation is required to have an election of directors, and subject to the provisions in Bill 67 that specifically deal with directors, The Corporations Act will apply. Mr. Chairperson: Shall Clause 13(1) pass? Mr. Sale: If that is Mr. Yaffe's answer, we might as well have the discussion about that here rather than trying to find a different

section in which to have it. Mr. Yaffe: Subsection 13(5) deals specifically with the right of the minister. Mr. Sale: Okay, let us have it there. Mr. Chairperson: Clause 13(1)-pass. Clause 13(2). Mr. Sale: Subsection (

I) we understand, nine and 15. Subject to (3), (3) is presumably going to be determined within a range of nine to 15. Am I correct? [inter jection] So the Lieutenant-Governor-in-Council will appoint between 9 and 13 people to the new board, so that is what subject to (3) means, and the board really cannot do this until it comes into being. Mr. Findlay: Until it happens. Mr. Sale: Until it happens. So the new board will be, let us say, 12 people. That is a good biblical number, and the only question is, which one is Judas, I guess, and we will not speculate on that. They could then under

Section 13(2) vary the number after they were first appointed. [inter jection] Okay, thank you. Mr. Chairperson: Clause 13(2)-pass. Mr. Benson, for clarification Mr. Julian Benson (Secretary to Treasury Board): They cannot vary the four who are there representing a special share. Mr. Chairperson: Is that clear? Thank you. Clause 13(3). The minister has an amendment. Mr. Findlay: Mr.

Chairman, I move THAT subsection 13(3) be amended by striking out "coming into force of this Act" and substituting "coming into force of this section". [French version) II est propose d'amender /e paragraphe 13(3) par sub stitution a "de Ia presente loi", de "du present article". Motion presented. Mr. Sale: Mr. Chairperson, sorry, I was looking for where 13 was referenced in terms of the three sections, the sequential coming into force. It is not referenced as one of the sections in any of the 38(1), 38(2), 38(3), so, again, I am just a bit confused about why this is needed. Mr.

Yaffe: All of the sections of the bill which are not specifically mentioned in

Section 38 will come into force on proclamation, but because we have three different times of provisions coming into force, we have-if you take a look at the proposed amendment to 38, there is one re troactive section, there is a Royal Assent section, and there is a proclamation section. Mr. Sale: I just do not understand why you would move-and this is just tec hnicalities; it does not really matter in a sense-why you would take it out of coming into force of the act and put it to a

section when there is no reference to this

section or indeed to many, many sections in 38. So if we go to 38, and I am not suggesting we do that now, but if we look at it, it does not cover the rest of the act, other than the section- 3 8(

I) says this act comes into force subject to the other two sections, which pulls the pieces out that you want to be retroactive and that you want to be into Royal Assent. * (1540 )

816 LEGISLATIVE ASSEMBLY OF MANITOBA November 7, 1996 It is just that, I guess, I do not understand why you do not leave it there, but I will not ask any more questions about it, I promise. I am sure you are right. Pass. Mr. Yaffe: Under one of the three clauses of3 8, the act may be brought into force by proclamation, different sections may be proclaimed in force at different times. So under 38 we have at least three times when sections will be coming into force. We have the one retroactive section.

We have the Royal Assent, and assuming that all of the sections to come into force on proclamation are proclai med at the same time, we have the proclaimed sections. So we have at least three different times when sections will come into force, and within the proclamation, the sectio ns to come into force on proclamation, those may be proclaimed into force at various times. Ms. Shirley Strutt (Legislative Counsel): There is no day on which the act is proclaimed. There is a series of days, and so to make sure that the

section reference is right, we say, coming into force of this section. Mr. Chairperson: Shall the amendment pass? Mr. Sale: I just want to thank the committee and staff for helping me get some understanding. I just could not see the logic of it. I do now and I apologize for holding up that section. Mr. Chairperson: Amendment-pass. Clause 38 as amended-pass; Clause 13(4). Mr. Stan Struthers (Dauphin): Mr. Chair, I am wondering how the minister is going to ensure that there is a majority of directors of the corporation resident in the province. By what means can he ensure that? Mr.

Yaffe: The response to this question really, in part, goes back to Mr. Sale's commentary about 12(2) earlier, which I was not going to respond to. One of the benefits of en suring that this company cannot continue out of the jurisd iction of Manitoba is that the legislation of the Province of Manitoba will always apply to this company. So that is a benefit which we have not talked about and I decided to remain silent. [inter jection] However, I am a lawyer. So there is a legislative requirement that the majority of the board be Manitoba residents. If and when we get to

Section 23 of the biU, you will see that there is the ability of anyone to apply to court if there is a perception that sections of the bill act are not being complied with and that would include the requirement that the majority of the board be Manitoba residents. Mr. Struthers: Is the minister looking at any percentage of the board that would be Manitoba resident, or is it just a plain majority? Mr. Findlay: A majority of 12 to me, means seven. It does not mean six and six. That is just pure arithmetic. Mr. Struthers: Okay, so it is 50 percent plus one would be the majority. Mr. Chairperson: Item 13(4). Mr.

Sale: Mr. Chairperson, I appreciate Mr. Yaffe's comments and this is not at all aimed at him. I want it to be clear. I had this comment to make whether or not he spoke. Most of us know that directors are very often plac eholders for people who have shares. Often a number of people will combine their proxies and will elect a particular director. It would be convenient to have a direc tor who lived in the province that the company does business in, but, again, as in 12, there is no substantive protec tion here against decisions being made which are not in the interests of Manitobans. I think the appearance of this

section is that Manit obans will continue to have a majority say on the board and I think to many people that is an attractive idea. They have a majority of the say on the board now by virtue of the fact that it is a Crown corporation, but I think aU of us would be aware of the fact that it does not take any great mathematics to figure out that once the shares are beneficially owned outside of Manitoba, as they undoubtedly will be even from the very beginning, I suspect a majority of shares will not be owned in Manitoba beneficially.

I hope that is not the case but I do not hold out any huge hope because I do not think Manitobans are going to come up with $350 million at an individual level over the next little while, the next 15 days.

November 7, 1996 LEGISLATIVE ASSEMBLY OF MANITOBA 817 The reality is that the directors will be elected by those who put together sufficient blocks of shares to vote at an annual meeting to elect directors. Those directors will take instruction from those who elected them and who caused them to hold their position. So, again, this has the appe arance of protection. It has the appearance of substance and when you market the company to Manitobans to get them to purchase it, you use this to say, see, we are committed to Manitobans having a majority say on the board.

Legally, they may well-half of them, in fact, in the beginning instance, 90 percent of them-may well be Manitobans and the very first board, of course, I am sure they will all be Manitobans. But to think this protects Manitobans interests down the road even a very short distance, again, is the same illusion that having the head office registered here protects the significant jobs or significant decision making on the part of the corporation. Mr. Chairperson: Item 13(4)-pass; item 13(5)-pass. Mr. Sale: Mr. Chairperson, I am sorry Mr. Benson is not here. He is not in the room, or maybe he is close.

My question is this: Mr. Yaffe earlier laid out a scenario which I actually think is quite likely, that the new owners, those who have an interest in taking a stake in this corporation, may very quickly look at the debt structure of the company owed to the Manitoba government and the rate of interest that that debt carries.

The government has made it very plain that they would be interested in retiring as much debt as possible, and I am sure it is in the interests of the company to retire high cost debt and replace it with lower cost debt, Given that commercial paper today, to this company, is probably available at around 8 percent,

whereas I think the debt structure currently is probably in the order of about nine and three-quarters or 10 percent- I think the Finance minister can probably actually give us these numbers-! suspect that very quickly a new corporation would far rather borrow money on the market or even attempt to issue further equity in the company if they could do so to pay down their corporate debt and extinguish the special share much more quickly than perhaps people might think likely, simply because interest rates have fallen so sharply over the last year that the benefit to the new company of extinguishing debt at an average of I 0-or-so percent and then taking on new debt at an average of 8- or-so percent is a significant advantage to the bottom line. *

(1550) So I would just like to ask whether the minister or staff or the Finance minister think that this is, in fact, a fairly likely scenario that there would be a faster pay down of debt than perhaps we might have thought, given interest rate moves in the last three or four months. Bon. Eric Stefanson (Minister of Finance): I would say no. As the member for Crescentwood (Mr. Sale) knows, the existing debt of Manitoba Telephone Systems does come due at different periods of time and, again, as he knows, we certainly are attempting to take advantage of these low interest rates at every opportunity.

There is a certain amount of debt that is fixed and locked in and that obviously will preclude, to some extent, some of the refinancing options, so our expectation is not that that will happen in the short term, but there are going to be, I believe, some schedules with some payments that we will see it happening over a reasonable period of time. Mr. Sale: This may not be the right

section to be asking this question, but I will do it anyway because I do not know where else to ask it. I was concerned-maybe I will wait until the Finance minister is finished his conversation because it is really a question to him. Mr. Stefanson: A little bit of additional information for all members of the committee is, again, with the filing of the prospectus. There will be a debt repayment schedule, and there will be a maximum amount of debt that can be retired in any one given year.

So that will show it over a minimum/maximum, over a minimum of a certain number of years as part of the overall prospectus, so it does mean that a certain amount of debt will be in place for at least a fixed period of time, relating back to the province. Mr. Sale: I appreciate the minister's answer. Could he indicate what that minimum period of time is? Mr. Stefanson: No, you do not have me cornered. I mean, the only reason I hesitated is, again, I mean there is this whole issue of what information will be in the prosp ectus and so on, but I believe it will be approximately four years, minimum.

818 LEGISLATIVE ASSEMBLY OF MAN ITOBA November 7, I 996 Mr. Sale: That was an area in which I was going to ask a number of questions and if the committee is prepared, I would like to ask those questions now because we are talking about the question of the special share. There are several places we could do it, but this is really the place at which I think it makes sense. Mr. Chairperson: Proceed. Mr.

Sale: I was won dering whether there were provisions for lump sum payments, as it were, where, in effect, the government allows for a lump payment regardless of whether the debenture that is being retired is, in fact, due or not. I think what the minister is saying is, yes, there is provision for lump sum payments that could have the effect of retiring a debenture that is not ready to be retired. It is like a mortgage with a fixed payment that you could make a lump sum payment at the end of the year. Am I understanding that correctly? Mr.

Stefanson: As I indicated, the fastest that the existing debt can be paid off is four years. I also indicated that the current debt

schedule does remain in place, so any decisions the company makes, they will have to factor in what those current interest rates and so on are. But there is a minimum annual payment. So the fastest the debt is four years, the existing debt

schedule pace, so they will have to make that business decision if they want to be paying to get out of the existing debt

schedule that applies. There is a minimum payment, so the debt could remain in place for many, many years if they want to follow the minimum payment, so I think that answers all of the questions. The fastest it can be paid off is four years. The maximum number of years, I think, would almost apply to the existing debt schedules that are in place which could take us out many years. Do you have the number ofyears? [interjection] Yes, I would not want to give an exact number, but that is the kind of thing exactly. Mr. Chairperson: Do you want to deal with 13( 5)?

Could we have a bit of order first before we leave. am not sure whether it is necessary that we are needed in the House and somebody should go find out. If we are not needed, I would ask that we continue; if we are needed, then I would ask that all members return here immediately after the vote in the House. An Honourable Member: There is a vote? Mr. Chairperson: We will go and check it out, if you want to have just a wee bit of patience. Mr. Sale: Mr.

Chairperson, I understand what you are saying, but, as a member, there are bills that are being voted on that are important to me with which I have disagreement or agreement and, as an elected member, I want my vote on the record. If there has been a recorded vote called, I want to be it there for it, so I am not prepared for this to continue. Mr. Chairperson: I understand that. If that is the case then, we will leave but we will come back here immediately after the vote. Committee will then recess till we come back after the vote. The committee recessed at 3:59 p.m .

After Recess The committee resumed at 4:4 3 p.m. Mr. Chairperson: Would the committee come back to order. If it is agreeable, by leave of the committee, we will revert to 14 ( I). Agreed? [agreed] [inter jection] We will go ahead then to 14 (1) , with leave. [agreed] Clause 14 (1) . Has the minister got an amendment? [interjection) No? Shall Clause 14 (1) pass? Mr. Sale: Mr. Chairperson, it is hard to sort of get back to where we were in terms of a flow, when we are skipping around a bit, but I would like to ask the minister if he could just run by us the intention of the various modifications in

Section 14 as a whole. I agree that 14 (

I) is totally noncontroversial. I do not have any problem with that, but there are a series of amendments under (2), et cetera, and the minister, I know, is making substantive changes in what is in 14 (3), for example, so maybe if we could just hear from the minister to refresh the committee on what the purpose of the changes in 14 are, we could then move through it. -

November 7, 19 96 LEGIS LATIVE ASSEMBLY OF MANITOBA 819 Mr. Mervin Tweed (Tur tle Mountain): Mr. Chairman, would it be better to read the amendments to all of 14 as we did in the first section? Mr. Chairperson: Do you want to read them all in? Mr. Tweed: No, no, all of

Section I. Mr. Chairperson: With leave? Is there leave to read all the amendments into the record? On 14 , from 14 (1) to 14 (3)? [agreed] Mr. Findlay: Mr. Chairman, I move THAT subsection 14 (2) be amended by adding the following after clause (b): (b .

I) the prohibition on ownership of voting shares by any government or agency thereof, other than the Crown and its agents, as set out in

section 18 .1; (French version] II est propose d'amender /e paragraphe 1 4(2) par adjonction, apres l'alinea b), de ce qui suit: b. 1) /'interdiction pour /es gouvernements et leurs organismes d'etre proprietaires d'actions avec droit de vote, exclusion fa ite de Ia Couronne et de ses mandataires, en conf ormite avec /'article 18. 1; The next one, Mr. Chairman, is THAT clauses 14 (2)(c), (

d) and (

e) be struck out and the following substituted: (

c) the suspension of voting rights in circumstances where limits or restrictions set out in

section 17 , 18 or 18. 1 are exceeded or violated; (

d) the refusal by the corporation to issue or register voting shares in circumstances where limits or restrictions set out in

section 17 , 18 or 18 . 1 are exceeded or violated; (

e) the purchase of voting shares from holders whose holdings exceed limits or violate restrictions set out in

section 17 , 18 or 18. 1; [French version] II est propose de remplacer /es a/ineas 1 4(2)c),

d) et

e) par ce qui suit:

c) Ia suspension des droits de vote dans les cas ou les limites ou les restrictions prevues aux articles 1 7, 18 ou 18. 1 sont de pas sees ou enfreintes;

d) le refu s de Ia Societe d'emettre ou d'enregistrer des actions avec droit de vote dans /es cas ou /es limites ou /es restrictions prevues aux articles 1 7, 18 ou 18. 1 sont depassees ou en freintes; e) /e rachat d'actions avec droit de vote des titulaires qui detiennent un nombre d'actions qui depasse ou enf reint /es limites ou /es restrictions prevues aux articles 17, 18 ou 18. 1. The next, Mr. Chairman, is THAT clause l4 (2)(

g) be amended by striking out "being" and substituting "be". (French version] II est propose d'amender l'a/inea 1 4(2)

g) de Ia version anglaise par substitution, a "being", de "be ". The next one, Mr. Chairman, is THAT subsection 14(3) be amended by striking out "16 , 17 , 18 , 19 , 20, 21, 22, 23, 24, 25 and 26" and substituting "16 (1) , 16 (2), 16 (3), 17 , 18 , 18. 1, 19 , 20, 21, 22, 23, 24, 25, 26, 28(a), 28(

b) and 28(b. 1) ". [French version] II est propose d'amender le paragraphe 14(3) par subs titution, a "et les articles 14 et 16 a 26 ", de ", /'article 14, /es paragraphes 1 6( 1) a 1 6(3). /es articles 17 a 26 et le alineas 28a),

b) et (b. 1) ". Those are the amendments in

Section 14. Mr. Chairperson: Clause 14 (1) -pass; Clause 14 (2). Shall the item pass? An Honourable Member: No. It has to be amended.

820 LEGISLATIVE ASSEMBLY OF MANITOBA November 7, 19 96 Mr. Findlay: I move- Some Honourable Members: Dispense. THAT subs ection 14(2) be amended by adding the fo llowing after clause (b): (b. 1) the prohibition on ownership of voting shares by any government or agency thereof. other than the Crown and its agents, as set out in

section 18. 1; [French version) II est propose d'amender /e paragraphe 14(2) par adjonction, apres l'alinea b), de ce qui suit: b. 1) /'interdiction pour /es gouvernements et leurs organismes d'etre proprietaires d'actions avec droit de vote, exclusion fa ite de Ia Couronne et de ses mandataires, en conf ormite avec /'article 18.1; Motion presented. Mr. Chairperson: Shall the amendment pass? Mr. Sale: Could the minister or counsel indicate what is accompli shed here by this? Mr.

Yaffe: Item 14 (2) is amended by including reference to the new prohibition against ownership of shares by a government, and as a result of that prohibition being inserted, everything moves down. All the cross references now refer to 18. 1 which is the new Crown share ownership prohibition. Mr. Sale: So the reference in this amendment is to the amendment further on in our package, in other words? I was thinking that it was just a typo in terms of 18. 1 in the current act, but it is the amended. I should know better than to think there are any typos here. It makes a lot more sense this way than what I was reading.

Okay. I do have some questions here, Mr. Chairperson, "by any government or agency thereof and other than the Crown and its agents", and the Crown means here the Crown in right of Manitoba presumably, not other Crowns in other provinces or the federal Crown but the Crown in right of Manitoba? This is a technical question but is that sufficiently clear? Does the meaning of "Crown" alone here convey under our

definitions all we need to convey? Mr. Yaffe: The Crown is defined in

Section 1 of the act as the Crown in right of- Mr. Sale: Crown in right of Manitoba. Okay. The issue here is obviously a very important, a very real one. The only other telco in Canada that is Crown owned is SaskTel, and those who have read SaskTel's balance sheet know that it is a very, very strong corporation and has very substantial cash assets in its balance sheet and is an aggressive player in telecommunications activities outside of Saskatchewan. It does not limit its operations to Saskatchewan, although it is principally there, obviously, but it has taken

part in projects in other parts of the world. We will always be conscious of MTX. You will always be conscious of beating us for that, and we will exchange beatings on a variety of things and we will all be bloody but not necessarily wiser. I have a problem with excluding a sister telecommunications company just because it happens to be Crown ooned in regard to the investment in shares in this Crown corporation. SaskTel is a very prof itable corporation.

It is very well run, has a very strong balance sheet and I think that it is in Manitobans interest if SaskTel chose to take a minority position in our telecomm unications system. Who can see very far down any road? None of us are blessed with that kind of insight, but I would not be the first elected official or the first Manitoban to foresee the possible day when the prairies might be a region that had some kind of identity within a greater or a lesser Canada.

I cannot foresee that, but I do not want to preclude it either. * (1 650) It would be, I think, a very, very valuable stabilization factor against the control of this corporation by foreign multinationals over a very short period of time. I am hoping the Finance minister will come back soon, but the Finance minister indicated, I believe, I do not think I am taking his words incorrectly, that the minimum period under which the special share could be extinguished is four years. I do not think that is accidental.

I was very concerned about that and I will ask a number of questions about that when we get back to it, but that does rather nicely skate us by the next election, and that kind of timing I do not think is an accidental thing. Four years in the life of a

November 7, 1996 LEGISLATIVE ASSEMBLY OF MANITOBA 821 corporation that has lived for 88 years is a very short period of time; four years in any corporate life is a short period of time. So, I wonder why we would not be open to the investment in the Manitoba Telephone System by a sister telecommunications company in Canada that has the interests of its citizens, but certainly the interests of the region at heart. Saskatchewan has no interest in having a weak prairie economy and many people have made the case that, in fact, the prairie economies as a whole are extremely complementary.

When you look at our three economies on a macroeconomic basis, you see very, very complementa ry resources from the oil and gas to the wheat lands, to the mineral reso urces to the vast hydroelectric resources that we have underdeveloped in Manitoba. As those of us who were at the presentation of Manitoba Hydro's annual report to this committee about a week or 10 days ago, we watched a very exte nsive visual presentation by its chairperson showing that only about half of our hydroelectric potential is developed. We all know that Saskatchewan uses nonrenewable resources to generate a good deal of its power.

So while I know that this government, out of hand, and I think foolishly, unwisely, peremptorily re jected the offer of Pr emier Romanow to look seriously at emerging of the prairie utilities, I know the government re jected that, but I think the government was very unwise to do so without a thorough look at the costs and benefits, the problems and the possibilities.

Now the government has made a great deal out of the notion that we would protect the location of the head office, but I think we know and the government knows that should, in four years time, this company be completel y privately contro lled, that there is no meaning to the head office protec tion. It is a symbolic protection. The government also knows that there is no meaning to the Manitoba board of directors requirement. They will be elected by those who assemble the shares to elect them, and they will be instructed by the people who assemble the shares to elect them.

So the notion that there are any protections here is symbolism. It is nothing more than symbolism. I would wonder why, if the government thinks it has a sound business case for privatization and why, if it is really concerned about the future stability and the future stake of regi onal Canadians in this entity, and why if it reads history at all. Because it will know if it reads history that political entities change over time. The Manitoba of 18 70 was a postage stamp. The Manitoba of today is a mther large geographic area.

In 18 70, Saskatchewan did not exist except as a Crown territ ory; it came into existence somewhat later. So when we look in terms of that longer time frame, it seems to me to be unwise, to be foolish to exclude the possibility that Saskatchewan might wish to invest up to the limit of an external investor-not talking about control here-but up to the limit of an external investor. So I think this is a foolish

section and we will oppose both this

section and

Section 18. 1, the new section, because it is not based on sound business decisions, it is not based on regional concern for our province in the prairie region of our country. It is based on narrow ideology, no Crown corpora tion can be a wise steward and so we must prohibit any Crown corporation, no matter who it is or where it is from, from ever owning a single share of this company because they may not be a wise steward.

Well, I have some questions here, and one of the que stions is, does this have any effect after the special share is extinguished, or is it, in effect, something that does not have any effect after the special share is extin guished and so, if you look at what is continued, what is on continuance, then

Section 14 is repealed at continuance. So, we are not going to protect this company from the potential that Saskatchewan Telephone, if it is still then a Crown corporation, from investing in this corporation probably four years from now. Why are we prohibiting their investment while it is still a Crown corporation-or it is not a Crown corpomtion-but while the special shares still exist.

It would seem to me this is a perfect opportun ity to have stable investment funds from a prairie company, that wel l-managed, profita ble company, to buy a stake, however modest, in our company that we are attem pting and we say we are attempting to maintain as a Manitoba company. I would submit that SaskTel has a lot more interest in maintaining MTS as a Manitoba company than AT&T does. It sure as heck is a lot more interested in maintaining it than Unitel, Sprint,

822 LEGISLATIVE ASSEMBLY OF MANITOBA November 7, 19 96 Ma Bell in Ontario or the baby Bells of the United States, which are far larger than any MTS. So why in the world have we such a blind ideology that says that as long as we got our nickel in there, in the debt, we are not going to let any other government put its nickel in there through a Crown corporation that says a sound and competent Crown as is SaskTel. I simply do not understand why we would lock out for four years that potential. Now I do not know what we do in terms of the bells, Mr. Chairperson.

We need to know what the vote is, I guess, but those are my comments on this and I just should tell the Chair, we intend to have a recorded vote on this issue and I would like to find out what the vote is before we go further. Mr. Tweed: In the House they have decided that they will vote in 15 minutes. It is on Bill 17 . Third reading of Bill 17 . An Honourable Member: Seventeen? Mr. Tweed: Seventeen, yes. And they also advised me, Mr. Chairman, that they would send somebody here to notifY us. Mr. Chairperson: Thank you very much. Mr.

Sale: I am sure the committee understand that we are trying to keep a process going here and so you are saying in 15 minutes. Then I would like to, I do not know what the right word is, but I need to meet with my caucus prior to the vote, so I have no problem with spending a few more minutes here now, but I would like to do that probably in about, well, no more than 10 minutes if we are saying I 5 minutes to the vote. Mr. Chairperson: Agreed. Mr.

Sale: Okay, just to conclude, I would like the minister to respond or the minister's staff to respond as to what the thinking is here because it seems to me you have said this is a real bad thing to happen while we still have got a stake in it, but it is permissible when our stake disappears. I do not understand that. Mr. Yaffe: I would like to respond not to the policy aspect of the question but rather to the technical, legal aspect of the question if I could.

Section 14 is repealed after the certificate of continuance has been issued under The Corporations Act, so although 14 will fall away, it does not do so until the certificate has been issued and that certificate is required to contain that restriction. So the restriction, the sequence will be redemption of special share, filing of articles of continuance which contain the restrictions contained in

Section 14 , and then the repeal of the sections, including

Section 14 , because

Section 14 's life will have been lived. The restrictions in 14 will already be in place in the articles of continuance at that moment. Mr. Sale: Mr. Chairperson, I appreciate that explanation. I am kind of tempted to say, "Says who?" I am not meaning to be rude at all. The certificate that you are talking about that will have all these restrictions in it, under what authority is it required to have all of those restrictions in it? I do not understand that. Mr. Yaffe: Under the authority of

Section 14 , an application will be made for a certificate of continuance under The Corporations Act.

Section 14 provides that that application must contain, as a provision, all of the restrictions contained in

Section 14 (2). Mr. Sale: I appreciate the explanation then. It is the reading of the words under 14 (2) in the heading, "shall include provisions that are approved by the Lieutenant Governor in Council with respect to the following matters." Could counsel clarifY for me what kind of a mandate that is? When I am looking at something that says "include provisions that are approved with respect to the following matters," is that mandatory in the sense that the wording has to be as is in here?

When somebody tells me to draft regulations in regard to something, I do not necessarily take it that that means that the regulations are necessarily anything other than in regard to it. They might, in fact, be in regard to it and change it. "In regard to" does not mean, to me, anyway, necessarily a mandatory obligation to word something exactly as it is in here. Maybe you could clarifY that.

November 7, 1996 LEGISLATIVE ASSEMBLY OF MANITOBA 823 Mr. Yaffe: The intention of the words "as set out in" in the case of each of those clauses is that the provisions will be repeated verbatim in the articles of continuance. The reference to the approval by the Lieutenant Governor-in-Council is intended as a safeguard, not as an escape mechanism. Mr. Chairperson: We will recess now and come back right after the vote. The Committee recessed at 5:05 p.m. After Recess The Committee resumed at 5:25 p.m. Mr. Chairperson: Shall the committee come to order. Mr. Findlay: Mr. Chairperson, I move- Mr. Chairperson: Dispense. THAT clauses 1 4(2) (c), (

d) and (

e) be struck out and the fo llowing substituted: (

c) the suspension of voting rights in circumstances where limits or restrictions set out in

section 1 7, 18 or 18. 1 are exceeded or violated; (

d) the ref usal by the corporation to iss ue or register voting shares in circumstances where limits or restrictions set out in

section 1 7, 18 or 18. 1 are exceeded or violated; (

e) the purchase of voting shares from holders whose holdings exceed limits or violate restrictions set out in

section 1 7, 18 or 18. 1; (French version] II est propose de remplacer les alineas 1 4(2)c) ,

d) et

e) par ce qui suit:

c) Ia suspension des droits de vote dans les cas oil les limites ou les restrictions prevues aux articles 1 7, 18 ou 18.1 sont depassees ou en freintes;

d) le refus de Ia Societe d'emettre ou d'enregistrer des actions avec droit de vote dans les cas oil les limites ou les restrictions prevues aux articles 17, 18 ou 18. 1 son depassees ou enfre intes;

e) le rachat d'actions avec droit de vote des titulaires qui detiennent un nombre d'actions qui depasse ou enf reint les limites ou les restrictions prevues aux articles 17, 18 ou 18. 1. Mr. Chairperson: All those m favour of the amendment? Mr. Sale: I am confused about where we were. I just do not recall, perhaps. I did not think we passed the amendment, in fuct, I am reasonably sure we did not pass the amendment l4 (2)(b)(1). Mr. Chairperson: Yes, we did. Mr. Sale: I was speaking against it. I certainly did not believe that I voted for it or agreed to its pass. We have not voted on l4 (b )(

l) as amended, is that correct? Mr. Chairperson: 14 (1) , yes. Mr. Sale: 14(1) yes, I agree, but 14( 2)(b)(1), I do not believe we voted on. Mr. Chairperson: We did vote on the amendment. You spoke right after we moved and passed the amendment. You spoke; you said you had some questions. We waited for Mr. Stefanson. That is why I asked that we deal with the other two amendments, and then we can speak to the item as amended. Then we can later on pass it, if you will, or reject it, if you will. That is up to the committee. But we did pass the first item. Mr.

Sale: So, for clarification, 14 (2) will come back to be voted on as amended? Mr. Chairperson: As amended, yes. That is right. Mr. Sale: Okay. Mr. Chairperson: That item will not pass until it has been voted on. We can have all the discussion we want on that item as per the amendment.

824 LEGISL ATIVE ASSEMBLY OF MANITOBA November 7, 19 96 Mr. Sale: So you are wanting to deal with 14 (2)( c), (d), and (

e) at this point- Mr. Chairperson: Yes, right. Mr. Sale: -to amend those. Mr. Chairperson: To amend 14 (2). Then there would be another amendment, and I would like to deal with that. Then we can speak to Clause 14 (2) as amended. Mr. Sale: Okay. Fair enough, sorry. Mr. Chairperson: At least, then, we do not have to get back into the discussion later on. Amendment-pass. Mr. Findlay: Mr. Chairman, I move THAT clause 14 (2)(

g) be amended by striking out "being" and substituting "be". [French version) II est propose d'amender l'alinea 14(2)

g) de Ia version anglaise par substitution, a "being", de "be ". Motion presented. An Honourable Member: 1bat is the wrong one. Here is the one. An Honourable Member: Wipe that off the record. Mr. Chairperson: It has been moved by the honourable minister-dispense. THAT clause 14(2)(

g) be amended by striking out "being " and substituting "be ". [French version) II est propose d'amender l'alinea 14(2)

g) de Ia version anglaise par substitution, a "being", de "be ". Mr. Chairperson: Amentment-pass. Mr. Sale: We can ask it here, and then we will not have to ask it on 14(3). If the future is as Mr. Yaffe describes it, that at on continuance, on the extinction of a special share, there is a whole raft of articles that go in the certificate of continuance which essentially, I think he is saying, repeat everything that is being repealed, but in the

article of continuance. For us lay folk, what is the point? Point of Order Mr. Laurendeau: On a point of order, Mr. Chair, I wonder if there might be leave that we do not see the clock at 5:30 for a little while, until we find out what is going on in the House. Mr. Chairperson: Is that agreed? Mr. Sale: Just for the record, I believe the agreement reached is until 6: 30, at this time. Mr. Chairperson: Can we just get the agreement? Mr. Sale: So that we not see the clock until 6: 30, I think is the agreement that is being announced in the House, more or less, as we speak. Mr.

Laurendeau: That is why I just said do not see the clock for now, until we find out what the agreement is. Mr. Chairperson: Is there leave of the committee that we do not see the clock? [agreed] Mr. Sale: Sorry, Mr. Chairperson, I do think it is impo rtant that it was not leave that we do not see the clock, it was leave that we do not see the clock until 6:30. I am not giving leave to not see the clock without limit. Mr. Chairperson: Leave has been given that we not see the clock until 6:30. Granted. • • • * (17 30) Mr.

Yaffe: The overall intent is that after the special share has been redeemed, the corporation, to the fullest extent possible, will be a Manitoba Corporations Act corporation. At that point, its articles, its constating documen ts will be the articles of continuance rather than

November 7, 1996 LEGISLATIVE ASSEMBLY OF MANITOBA 825 the act. The only exceptions to that are the few provisions that are considered to be most fundamental, which will continue to be legislated, and those are the provisions in

Section 12 and 13(4). Mr. Sale: Mr. Chairperson, I do not want to put Mr. Yaffe in a position of not serving his employer at this point, and I am not going to try to do that, but it does not seem to me to be possible to explain this without the obvio us implication that the level of protection is diminished after this certificate of continuation is issued. Most corporations, I am sure, have the right to alter their articles. The certificate of continuation becomes essentially somewhat like the letters patent of a company, just that it may be a little longer than most letters patent might be in most cases.

By resolution of the board of directors or by a resolution of the shareholders in an annual meeting, I believe it is lawful, possible, and probably happens quite frequently that provisions of articles of incorporation be changed. There are hundreds of them done when you look up the companies act on any company in a given year. It is not at all unusual to find something changed.

I cannot, for the life of me, see what in here would prevent the company from assembling lawfully and saying all those certificate of continuation provisions are interesting, and they are certainly historical, but we are going to repeal them all. We are going to do it now, thank you for the transition provisions, we have done our best but we are out of here. So, if Mr. Yaffe or Mr. Benson or anybody can tell me that that is not the case, then I will be a lot more assured than I am right now.

My understanding of a certificate of continuation is that it is essentially a letters patent by another name, and that they can be repealed, changed, altered, amended. Can someone respond to that? Mr. Yaffe: You are correct in your observation. The articles of continuance become the constating documents, and they can be amended by resolution of the shareholders at a special meeting called for that purpose. Mr.

Sale: Then we are really right back at the original issue, and that is if it is reasonable for a corporation to want to attract share capital or equity capital, and one of the potential investors is a very well-managed Crown corporation in another province, in fact, the adjacent province where the notion of grids, interchanges and exchanges is not a bad idea, I think in most of our minds the Prairies are a region that strengthening the Prairies against AT&T is sure in my best interests. I have yet to meet a large multinational corporation that has my best interests at heart.

They have their best interests at heart, and that is their duty to their shareholders. I do not dispute that. I do dispute those who would say that a foreign-owned multinational has my best interests at heart. That is just a tad naive. So what is the argument, Mr.

Chairperson, through you to the minister, for not allowing SaskTel to take even a modest position, if it should choose to do so, if it is a good investment, which the minister and his government are claiming it will be, why should we not want some sign ificant equity participation from a neighbouring telephone company rather than from a foreign owned or even a Canadian-owned private sector company that is much, much, much bigger than Manitoba Tel or Sask atchewan Telephone?

It just does not make any sense to me to lock us out of that, because we know that the $750-million equity issue, or $800 million-! guess it is closer to $800 million that will be coming out, is far more than Manitobans will subscribe. It just is not credible to think that Manitobans are going to come up with that kind of money in a relatively short period of time. So what is the rationale for locking SaskTel out if they can come in after four years? Mr. Findlay: I think, Mr.

Chairman, it is fair to say there is some question about where SaskTel will be in a few years time, maybe even a shorter period of time; what decisions they might make. You had one presenter here who referred to that. Whether he is right or wrong, it is hard to say. So it was deemed appropriate at this time to do what we are doing. We are moving from a Crown to a publicly traded company, and feel we want the owners to be in the same category. I know the member says, why did we not amalgamate with SaskTel or something like that?

We are working hard to keep the head office here and a board of directors from Manitoba looking after the interests of Manitoba. I do not think that what we are doing here-now I could be wrong-prevents certain alliances of the future that might respect what he talks about in terms of prairie. We certainly have a major alliance right now, in terms of Stentor, that involves nine telephone companies. If there

826 LEGISLATIVE ASSEMBLY OF MANITOBA November 7, 19 96 are business reasons fo r the three prairie telcos to do some kind of process together, I do not think what we are doing here prevents that from happening, nor would having SaskTel as some kind of a part owner, change the ability to do that. It is just deemed at this time it would be inappropriate, given what SaskTel might do to have another Crown making an investment in this particular company. Mr.

Sale: What the minister appears to be saying is that it is is more desirable to have a fo re ign-owned multinational invest in a Manitoba company than it is to have the telco of a neighbouring province invest in a Manitoba company. I do not understand the logic of that pos ition, especially since when the certificate of continuance is issued, it will become possible fo r a neighbouring telco to invest to whatever extent they wish, if they wish to do so at all. I should underline fo r the comm ittee, I am not speaking on behalfof SaskTel here.

I do not know if they have got the fo ggiest interest in investing in Manitoba Telephone. If I were them, I would have, but I have no inside information that they are interested in being an investor. I just do not understand this ideological preoccu pation with saying it is better to have British telecom or AGT Telus or AT&T or Ma Bell or a baby Bell or goodness knows what else, Southern Telephone, come in here and take a minority interest, but it is not a good idea fo r a nei ghbouring province to be able to take a minority interest.

It just does not make sense on any grounds other than the narro west, most rigid ideological grounds that I can conceive of. It is meanness in that sense. If a prairie company would like to invest, especially a related company, surely to goodness we would welcome that investment as evidence of some commitment to this company. When you look at a company from offshore being interested in inve sting, surely we do not think that they are doing that because they are deeply committed to the Manitoba economy. They are doing it because they can make a buck.

The Prairies have an interes t, and they have always worked together at some level to try and secure their interests, often against the interests of the more economically dominant sectors of our society and our world. Why would the government rule out that happening in this case? It makes no sense. Mr. Findlay: Probably on the basic question, we will have to agree to disagree. I think the member also would notice that we have taken out the provision of a strategic partner for up to 25 percen t. That it is gone.

In terms of what you ref erred to as some British telecom , or somebody else coming and taking a large stake, that we have removed for every txxly, anybody. We have lowered the ceiling fo r any one owners hip from 15 to I 0, to get it broadly based, to promote the Manitoba concept of investing. So when you say we will allow a stake from a large outside operator, the maximum is I 0 percent and no strategic partner. We had the provision there, but over the course of time it seem ed best not to have that there, so we have taken that out. Mr. Sale: I think we may continue to disagree on this section.

I think we should have a recorded vote and move along unless my colleague wishes to make any comments on this one. Mr. Chairperson: Clause 14 (2) as amended, shall it pass? Mr. Sale: No. Mr. Chairperson: No? * (1 740) Voice Vote Mr. Chairperson: All those in favour, say yea. Some Honourable Members: Yea. Mr. Chairperson: All those opposed, say yea. An Honourable Member: Nay. An Honourable Member: Nice try, though. An Honourable Member: He almost did it, I watched him. Mr. Chairperson: Okay, recorded vote. The joke fo r the day is over. All those opposed, say nay?

November 7, 19 96 LEGISL ATIVE ASSEMBLY OF MANITOBA 827 An Honourable Member: Nay. Mr. Chairperson: I declare the Yeas have it. Formal Vote Mr. Sale: Recorded vote, Mr. Chairperson? A COUNT-OUT VOTE was taken, the result being as fo llows: Yeas 5, Nays 2. Mr. Chairperson: I declare the item carried. Mr. Sale: Mr. Chairperson, the Finance minister is back. Can we revert to 13? Mr. Chairperson: Yes, you may, or did you want to vote on 14 (3) as we ll, seeing here we have discussed, we might as wel l? Mr. Sale: Sure, we might as well do that. Mr. Chairperson: You have an amendment on 14 (3). Mr. Minister? Mr.

Findlay: Mr. Chairman, I move- Mr. Chairperson: Dispense. THAT subsection 14(3) be amended by striking out "16, 17, 18, 19, 20, 21, 22, 23, 24, 25 and 26 " and substitu ting "16(1), 16(2), 16(3), 17, 18, 18. 1, 19, 20, 21, 22, 23, 24, 25, 26, 28 (a), 28(

b) and 28(b.1)". [French version] II est propose d'amender /e paragraphe 14(3) par subst itution, a "et /es articles 14 et 16 a 26 ", de ", /'article 14, /es paragraphes 16(1) a 16(3), /es articles 17 a 26 et le aline as 28a),

b) et (b.1 )". Mr. Chairperson: amended -pass. Amendment-p ass; 14 (3) as Now, we want to move back to 13 (5). Mr. Sale: Mr. Chairperson, when we were interrupted by the first bells ringing, the Finance minister was just providing us with information about the minimum length of time. I think we had established that the longest running MTS debentures are 2,010 at this point approximat ely.

Could the minister just repeat his statements in regard to how that minimum period works and how debt could be paid down at that time, given the fact that some of those debentures are a long way out, and their current cost to government in terms of the funds it has borrowed on those debentures and the current value of them is different from their face amount obviously fo r all the reasons we all understand. How does this work? Mr. Chairperson: Just fo r the committe e's benefit, there might be a crowd walking in here. Just do not be alarmed. Mr. Stefanson: Mr.

Chairman, I am probably being repe titive, but I think the important point is to know on this, as we have already discussed, that the fastest the debt can be eliminated is fo ur years . There are minimum payments every year. The member fo r Crescentwood (Mr. Sale) is correct that approximately-I believe the

schedule is out to about 2,0 10 or thereabouts on the existing debt. So if MTS were to want to buy out the debt even quicker, obviously that would be calculated. It would have to be a premium paid for that adjustment, and so on. I am not sure there would be a great deal of incentive to do that, but who knows? There might be. They would have to factor in the fact that these debts are tied to certain schedules, and those do transfer to MTS. They could not just simplistically refinance at a lower rate and leave us with the resp onsibilit y of the higher rate, I guess is the best way to describe it.

They would have to pay a premium to get out of that higher rate debt. Mr. Sale: That was one of my questions , as to whether there was any implicit subsidy, as there is in many loans that we make as a gove rnmen t at below market, and those kinds of things. I think the minister said no, there is no implicit subsidy by virtue of an ability to refinance. In terms of the minimum payments, have the minimum payments been tied to the debenture schedu le, or do the minimum payments contemplate the same fair market valuation of the debt that is being paid back? How is that being achieved?

828 LEGISLATIVE ASSEMBLY OF MANITOBA November 7, 19 96 Mr. Stefanson: Mr. Chairman, some of the det ails on the minimum

schedule and the debt repayment

schedule I believe will be provided at the time of the prospectu s. I do not believe it is tied directly to the current debt

schedule of MTS. Mr. Sale: Do you want-1 cannot do that. I cannot listen-two ears at the same time, I am impressed. Will the payments then in some cases act essentially as a sinking fund? Is that how it would be done? Mr. Stefanson: Mr. Chairman, at the end of the day, I believe it will be a comb ination of all of that. Some of it might well end up in the sinking fimd, obviously reduc ing our net debt but then tied to our repayment schedule. Some of it will go straight on to mat uring debt; that is, coming due at that time.

But there is going to be a minimum amount that they will pay, they being MTS, each and every year . Mr. Sale: Can I ask through you, Mr. Chairperson, the minister, how is the appropriation between equity and debt being arrived at? Essentially, when dolla rs come in the door, they do not come in with a label on them, this is debt, this is equity. There is a determ ination which presumably has been embodied in the prospectus which says, this is debt, this is equity. How did you arrive at the prorat ing of the total proceeds from the equity distribution into debt and equity? Mr.

Stefanson: I just want to be sure, Mr. Chairman, you are talking about the proceeds that will come on the sale as it will relate to the existing debt and the portion that is eff ectively part of revenue fo r the Consolid ated Fund of the pro vincial government. That is what you are ref err ing to? Mr. Sale: I am not hearing the minister's wor ds, sorry. Mr.

Stefanson: You are ref erring to the proceeds that wiii be received by the government and then the allo cation between the debt that relates to that and the allocation that would be relating to equity? [i nter jection) That is why I asked that question, and Mr. Sale did say yes . Mr. Benson put a different interpret ation on it. The convers ion of the existing debt, some of it to equity, that calculation is done basically in terms of what is happening out in the industry, but that is not what you were asking. That is not the question.

I just want to be clear which it is you are asking. * (17 50) What is happening right now, is some of the existing debt of MTS will be converted to equity. At the end of the day, the new MTS will end up with a certain blend of debt and equity. That is being tied basically, more or less, to the industry norms, what is happening out there with the majority of other telcos, that conv ersion. Then to the province, obviously we will rece ive our proceeds .

There still is some rem aining debt against that, and some is the net return to the Treasury of the Province of Manitoba, but that will be tied to the discussion we have already had about how we pay down our own existing debt, a combination of some of it going into a sinking fund. Depending how much of our current debt relates to MTS, we might actually pay off some of the current debt and then, of course, whatever schedules come due in terms of the existing debt ofMTS. I have sort of tried to explain both, I guess. I hope that makes it clear. Mr. Sale: Thank you, the minister's explanation is very helpful.

What I am essentially getting to, and maybe I can just ask it directly now that I think I understand the rest of it, wiU the book value of the company as current ly embodied in MTS's annual statement which shows a total deprecia ted value, not counting the pension funds because obviously they do not count in regard to the compa ny's bottom line equity-1 am not sure what that is called, but there is a term fo r it-will the book value of equity be recovered by the provi nce; that is, the difference betw een the current debt and the current value of the company as carried on the books and reported in Volume 3 and other places?

Is that the equity we will rece ive which will go into the stabilization fund, or is it some other figure? Mr. Stefanson: As we all know, the final proceeds received by the province will be reflected on the final pricing of the issue, any costs against that issue, but, yes, we expect the equity to exceed the book equity of MTS today .

November 7, 19 96 LEGISLATIVE ASSEMBLY OF MANITOBA 829 Mr. Sale: I am glad to hear that because I think the value of the company substantially exceeds the book equity. The book equity is a very low value in terms of what ought to be reflected here. I just reflect, Mr. Chairperson, we have invested some $750 million in the last five years in this company alone, in terms of improvements, fibre optics and whatever.

If you go back and add up the capital spending from statements over the last five years, let alone any of the debt retirement, which should be going straight to the bottom line in terms of equity improvement, the government has, and I have said this before, and I say it again, provided good stewardship for this company. The debt-equity ratio has improved. On top of that debt-equity ratio, we have invested $750 million of Manitoba ratepayers' money in this company in just five years.

I was very distressed when I heard that the company might only fetch something in the order of $800 million in proceeds, plus the assumption of some fraction of debt. What we are asking people to believe is that that last five years of investment is virtually the whole of the proceeds from a cash perspective from this company. I think that everyone around this table knows that we have been investing in Manitoba telephone company's capital improvement programs for decades now. We started putting digital switching in 20 years ago. We completed the digital switching program not that long ago.

We have very large real estate holdings, which are essentially being carried at zero on the books right now. They really do not have any value at all. When you start transferring major land holdings on Corydon Avenue, Portage Avenue, and in the heart of downtown Selkirk, these are not assets with little value. Part of my opposition to privatization is that I think yet, once again, the hard-earned dollars of Manitoba ratepayers, not Manitoba taxpayers because the government has not subsidized this corpor ation, ratepayers have paid the freight all the way along.

The hard-earned dollars of ratepayers are going to be sold at a depreciated value. I do not believe that the depreciated value of this company is its true value at all. I would shudder to think what the replacement cost is of this company. Even the replacement cost, even the undepreciated book rather vastly understates the replacement cost of the company. You could not build this company today for less than many billions of dollars. It has troubled me ever since I started to study this company.

The minister and others opposite know that the notion, for example, that the copper twisted pairs are worth zero, which was essentially the argument made in the sale of the cable company, that these assets had been depreciated to zero on the books of the company and they were not worth anything, is belied by the fact that we were earning $3.8 million a year on them. One does not earn $3.8 million a year on something that is valueless. That does not make any sense. When you have a return on equity, it is not unreasonable to say that return is at least in the order of 10 percent.

I mean, the implied value of the return on equity is at $37 million for the cable assets. That does not put anything in for strategic value. So I am glad to know the minister thinks he is going to get more for the company than the book equity, but I am really distwbed that we are thinking we are getting a fair deal by selling this company at the kind of price that we are selling it at. Now, that is the conundrum of privatization. You can only sell it for what the market will bear. The judgment of government is the market will bear roughly $800 million plus the debt that is going to be carried.

I think that is undervaluing. I think what is going to happen on issue, is that shares are going to rise between $1 and $2 very quickly, and the market will then have told the government that this company was in effect worth another $14 0 million, and we will have given that money away. That is essentially a straight transfer to the holders of the shares. It is an absolutely straight implicit subsidy from the public sector to the private sector, because the company is worth more than it is carried for on the books. The market, given the way these shares are to be issued, I think cannot help but rise.

That is the conundrum of privatization: overprice the iss ue and it will not sell; if you do not give investors a quick flip, they will not buy. But the price of giving them a quick flip is that Manitobans provide a subs idy to the relatively small proportion, perhaps l 0 percent of Manitobans, who will actually invest in this company. Now, I hope it is more, but it will not change the equation. There will still be a substantial, implicit

830 LEGISLATIVE ASSEMBLY OF MANITOBA November 7, 19 96 subsidy ofb etween $60 million and $12 0 milli on. If it is as the case of Te1us in Alberta, the share prices in Telus have doubled since issue. So eff ectively, over five years, or fo ur and a half years, that company, not because it is better run, not because it is making a higher return on its equity than any other telco, simply because the real underl ying assets of that company are more valuable than they were valued at the time of privatization. So I understand what the minister is saying. He has given straight answers to the questio ns.

I cannot dispute the answers , and we can pass this section, Mr. Chairperson, but I wish the backbenchers opposite would reco gnize that what we are doing in this process is shoving $60 to $12 0 million into Manitobans' pockets who buy these shares at the expense of all the rest of Manitobans who, as the government is never, ever tired of saying, own the debt. So we will not pay down our debt to between $60 and $12 0 milli on because of this privatization. We will esse ntially write off a bunch more debt at everybod y's cost to benefit the fe w who buy the shares. Mr.

Chairperson: Clause 13 (5}-pass; Clause 13 (6)-pass; Clause 13( 7}-pass; Clause 13 (8)-pass. We will now move back to 15 (1) . Shall Clause 15 (1) pass? Mr. Findlay: Mr. Chairman, I have an amendme nt. I move THAT the def mition "fund" in subsection 15 (1) be amended, in the English version, by striking out "the Civil" and substituting "The Civil". [French version] II est propose d'amender Ia definition de "f und' au paragraphe 15(1) de Ia version anglaise par substitution. a "the Civil", de "The Civil". Mr. Chairperson: Amendment -pass. * (1 800) Mr. Findlay: Mr.

Chairman, might I ask the members of the committee if we could just leave this

Section 15 fo r the time being. There is still some major discussion going on befo re we cmclude here, and that we move over to the next section. Mr. Sale: Mr. Chairperson, I am reluctant to give leave. I am reluctant fo r some, I think, pretty good rea sons. We, too, have had discussions with employees , employee groups and unions over the last number of days, and let me be blunt and say that the only reason that there are discussions going on right now with the employees is be cause of this committee and because of the time line and because the gov ernme nt has got itself in a jackpot on this bill.

It not only did not do its homework on time, it did not do its homework in a colla borative and co operat ive way. Now, the government may wish to say that it had expe cted that its officers and servants in the Manitoba Telephone System would do what they should have done which is to work out these very, very comp lex and difficult issues in the appropriate time and at the appropriate time, so that we would not be sitting in commi ttee accepting yet more amendments on this

section on the basis of very pressured meetings that have been taking place since noon today . I think it is important to recognize for the record that there are only two reasons why these meetings are taking place. One is that the minister, fmally the other day in commi ttee, said that he had given instruction that this thing bloody well gets solved. I appreciate that and the employees appreciate that The other reason that they are taking place is that the minister knows and we know that they have not been solved at least as of an hour ago.

Now, we are being asked to sit here and wait fo r more amendments at the end of a session on a bill on which the homework was not done-it has been jammed at the end of the session-Qn which there was ample time to do this work and on which there was ample time to have public hearings and do aU the other things that would have made this procedura lly reaso nably smooth sailing, though we would have ob jected to the principle of the bill and fo ught the bill, but we would not be sitting in the kind of situation that we are sitting in at this time. So I think that I will not give leave at this point.

I will ask fo r a recess fo r five minutes to co nsult my caucus to see whether it is the will of our caucus that we get into -

November 7, 19 96 LEGISLATIVE ASSEMBLY OF MANITOBA 83 1 this

section and see what there is to do in it or whether we do, in fact, give further leave to let this process continue. The reaso n I do that is that I do not like processes that are jammed at the point where vital decisions involving 4,50 0 pensioners and current employees are concerned. I know that rural members and all of our members, at least, have been petitioned by pensioners of MTS to recognize the serious problems, and I think the minister has recognized the problems, but at least as of an hour ago they were not solved to anybody's satisfaction.

In fact, there was some suggestion that some of the suggestions made it worse, not better. So I would like to ask committee for a short recess to consult my colleagues, but, otherwise then, we will get into 15 now. Mr. Chairperson: There has been a request for a short recess. Is there leave? [agreed] Let us make it 10 minutes, till a quarter after the hour. The committee recessed at 6:05 p.m. After Recess The committee resumed at 6:24 p. m. Mr. Chairperson: Can the committee come back to order again. The hour being 6: 30, would committee rise. The committee recessed at 6:25 p.m.

After Recess The committee resumed at 7:30p .m . Mr. Chairperson: Would the committee come to order, please. We will be dealing with 15 (1) where we left off in which we had one amendment too that was passed. So I would call the question on the next amendment if there is one. If not, I will entertain Mr. Minister. Mr. Sale: Could you just identifY the actual

section which we are now discussing? Mr. Chairperson: We are now discussing 15(1) , page 15 of the bill, Employee benefit

definitions. We had passed an amendment to the bill that read: THAT the definition "fund" in subsection 15 (1) be amended, in the English version, by striking out "the Civil'' and substituting "The civil." An Honourable Member: So we are on the next amendment. Mr. Sale: We are on the next amendment. Mr. Stefanson: Mr. Chairman, I think when we last broke, the minister had suggested that we go past this

section to the next

section and carry on and then return to this section. The member for Crescentwood said that he needed time to have a discussion with some of his colleagues. I think it would be the appropriate thing to do at this stage, if there is agreement, to go past this section. I think, as he indicated, discussions have been going on and off all day long and a meeting has just recently taken place, and I think we can find a solution that hopefully we can all be comfortable with within a matter of a very short period of time. I would hope that there would be a co-operation agreement to go beyond this

section and carry on and then return to this

section very shortly. Mr. Sale: We will give leave to do that. We have all been operating in good faith today and we are all getting weary, so I hope the good faith will continue as our fatigue level increases. I do need to though put on the record that we have met with the employee representatives and unions. We understand that an agreement has been reached. I do not know the substance of the agreement except in the very broadest of terms. I did not ask for details. I simply asked whether they were satisfied, and they appear to be satisfied.

So I would offer our support for that and I think, though it may not have worked in a pretty fashion, the democratic process has worked to the advantage of the employees and the retirees, and I think some justice has been done which was in danger of not being done. Now that having been said, we would like to see the memorandum on the table. We would like it read into the record because I do not expect and I do not think it is reasonable to expect that we will be able tonight to deal

832 LEGISLATIVE ASSEMBLY OF MANITOBA November 7, 1996 with amendments to the extent that we might need to deal with them on this. I have four amendments on this

Section 15 , for example, which go to the concerns that the employees raised. I do not want to put those amendments because it does not make any sense if we are going to have a package. On the other hand, we cannot pass what we have. I think everybody understands that so let us get that memorandum in here as quickly as we can, get it read into the record and then see what is available to us in terms of procedures that we can use. We would then move, Mr. Chairperson, I would understand, to

Section 16(1). Mr. Chairperson: That is correct. Leave has been granted to the committee that we set aside all of

Section 15 and that we move to

Section 16( 1). I will ask the question whether Clause 16(1) shall pass-pass; Clause 16(2). Mr. Sale: There is no problem with the clause per se. I do want to ask counsel and the minister why they believe that it was inappropriate or impossible to make the memorandum of offering, the prospectus in its final form, as a draft, available. Many times we have seen prospectuses which have the constant clause in them, if, as and when. I mean any prospectus I have ever read for shares always has if, as and when in it.

It says shares will be issued if, as and when and one has a chance to review the prospectus and to see the disclosure and the details and for everybody to tmderstand the exact basis on which this is being put forward. It seems to me that this is an inordinately complex piece of business, and yet it has been done before. It is not maybe inordinately complex in our history in Manitoba, but it is not unheard of to do this.

Our understanding is that the draft prospectus is ready to be filed with the Securities Commission, but unless there has been extensive negotiations with the commission, it would be unusual for them to issue it the same day it was filed, unless it has already been precleared and the Securities Commission is at least reputed to have said on the record that they have not received the prospectus; they have not had a filing. *

(1940) Now, I know it is not unusual for organizations to be in nego tiation, to clarify the ground and to find out what is acceptable and what is not acceptable. Where are the landmines going to be? What do we need to be careful about? What level of disclosure are we likely going to have to do?

So that kind of negotiation goes on, but if the prospectus is at the point where it is in draft form to be submitted to the Securities Commission tomorrow morning, then it was certainly in sufficiently clear form that an offering memorandum, which does not require the detail of a final prospectus, could have been made available, or at least a green sheet could have been made available so that the public could understand what was being done.

I wonder if the minister can tell us why this kind of preocc upation with a linear process, which really means that we in the Legislature are being asked to pass something, the details of which we may learn about maybe by tomorrow and maybe not for several weeks, depending on when the commission clears the prospectus. The thing that I think everybody finds distasteful is that broke rs are punishing their lists. I mean they are just pmmding the pavement marketing this thing, signing up people for allotments of shares big and small on the basis of promises that they think this is going to be a really good deal.

But when you ask them, are you working from a prospectus, they say no, we are just-I guess we have had some meetings among brokers and somebody has maybe put out a green sheet. I do not know; I have not seen one. But I think everyone around this table knows that thousands of Manitobans have had calls saying, you have got to get this in your portfolio, it is going to be a good one. It seems to me you cannot have it both ways. Either there is information out there that is sufficient to market this thing in a responsible manner, or the brokerage firms are being very irresponsible.

If the brokerage firms are being irresponsible, what the heck is going on with the lead group of the three big names, Gundy being the runner? What is going on with them that this kind of massive marketing is going on before the public can see the basis? So we are very upset about this. I think Mani tobans should be very upset about it, that we read some sketchy details in a press

article on the basis of somebody having shown somebody something and nobody knows what it is. I do not think that is the way to

November 7, 1996 LEGISLATIVE ASSEMBLY OF MANITOBA 833 do business, and I would appreciate some reaction to that. Mr. Yaffe: You have raised several points, and they are all valid points. First of all, under securities regulation, it is inappropriate for any disclosure document, prospectus or a green sheet, a term sheet, to be distributed prior to filing. We have made every effort, obviously unsuccessfully-it carne to our attention yesterday morning-to maintain absolute confidentiality with respect to the disclosure document, the prospectus, because that is what our obligation is under the law.

The document will be filed as a preliminary prospectus and a receipt will be issued for the preliminary prospectus. It is after that point typically that comments would be received from the Securities Commission and those comments would then be incorporated into the ultimate document, which is the final prospectus, and that is the document that would be signed before any shares are actually sold. A document had been precleared simply to ease the process but, again, the preclearing process was done on the basis of absolute confidentiality with the Securities Commission.

So the short answer is that we were not in the position to distribute any sort of disclosure document. Mr. Sale: First, Mr. Chairperson, I really appreciate Mr. Yaffe's forthrightness and direct answer. This is an embarrassment for the government and an embarrassment for us as part of the elected officials of government. Clearly, this should not have happened according to you. My view is a little bit different. My view is that you should have made public and available a great deal more information about your intentions and plans than you have done, and now you have the worst of all possible worlds.

You have bad information out there or incomplete information out there, but you also have very little information out there, so we kind have got the worst ofboth worlds now. Can the government indicate, Mr. Chairperson, what it is planning to do to remedy the problem that we have got at this point? Mr.

Yaffe: In terms of the regulatory process, I was on the phone personally with staff of the Securities Commission yesterday morning at 8:30, as soon as the commission opened, after I saw the front page of each of the morning papers, and in terms of the regulatory process, I can assure you that I and the province and all parties involved are most unhappy about the lapse. In terms of damage control, in terms of a sort of practical, pragmatic response, I would take the position that there is really not a lot of damage that has been done.

Nothing is going to happen until all of the information is avai lable to everyone. No selling can take place. No applications will be available to be filled out until everybody has access to the same information. Mr. Sale: Mr. Chairperson, when does the 15-day period for-I am sorry, Mr. Benson is indicating puzzle. The question of the preference time for Manitobans, he indicated that approximately 15 days was what was contemplated at this point. When does that period take place? Mr. Benson: That could take place after the Securities Commission issues the interim receipt.

One really has no way of knowing how soon that receipt will be issued. You have to file a prospectus and then wait for the receipt to be issued, and you cannot do anything until there is a receipt. Is that not correct, Richard? Mr. Yaffe: That is right. Mr. Benson: So you are really in the hands of the commission. Mr. Sale: Mr.

Chairperson, I guess the answer is that once the prospectus has been passed on-1 did not know the technical term, but a receipt is issued-then it becomes a public document available for a review wherever, and the 15-day period would begin at that point, or the 15- day period would be specified in the prospectus as a window from some point to some point or up to, let us say, December 15 or some such date that the shares will be available only to? Is that how that would work? Mr. Yaffe: The document will specify an end date. guess that answers your question. * (1 950) Mr.

Benson: Richard may have covered this before, but you had mentioned an offering memorandum, and that really is a different type of document than a prospectus.

834 LEGISLATIVE ASSEMBLY OF MANITOBA November 7, 19 96 Usually an offering memorandum is fo r a private placement as opposed to a public offering, so there is quite a distinction between the two. You mentioned that a few minutes ago; you mentioned an offering memorand um. This circumstance that we are in is not an offering memorandum-type transaction. Mr. Sale: Mr. Benson has a lot more experience in this than I do.

I just specifically remember that the request from the Jets LP prospectus was that the commission proceed by way of approving an interim memorandum of offering and that a final prospectus would be issued at a later date, and that investors who undertook to buy shares in the limited partnership offering would have 48 hours under The Securities Commission Act to review the final prospe ctus and to decide whether or not to then avail themselves of the subscription that they had signed up fo r.

It seemed, at least in that case, the commission was persuaded that because of the complexity and disclosure requi rements of the final prospectus and because of the time line involved that they would agree that marketing could be done on the basis of an initial memorandum of offering and be superseded at a later date by a final prospect us. I wondered yesterday in the House and I am clarifYing again here as to whether that is the route that is being fo llowed because of this perceived time pressure. I think Mr.

Benson's answer is no, we are going fo r a full prospectus with full disclosure, and that is what is being submitted to the com mission very short ly, whether that is tomorrow or whenever, but very shortly. Is that the answer? Mr. Benson: That is correct. Mr. Sale: I want to go back to the concern that I have, and I do not want to raise blame or anything like that, but the gov ernment clearly wanted this bill passed very badly, very quickly. The tactics used to try and jam the committee were unacce ptable, and ultimately democracy won out and they did not work.

I hope that all honour able members will rec ognize that we have a better bill today as a result of that than we would have had if commi ttee had been jammed on whatever evening that was that turned out to be the next day.

I think we are in a dilemma not of our making but a dilemma perhaps due to comp lexity, perhaps due to whatever, but certainly due to the fact that government did not get its work done in time to facilitate what needed to be done and had not arrived at an equitable agreement with its employees or its pensioners that reflected the kind of justice that they are entitled to in the time frame that was available to it. So we suddenly see in this last wee k, in fact, I can tell you that it was a week ago today that I had the call from the person who administers my RRSP saying, can I put you down fo r shares?

It is going to be a good one; you re ally should invest. I did not get any infor mation from him that I thought was ter ribly useful except a guess at what the offering price would be, but that does not really help you a whole lot if you do not know anything else. Subsequently, I have an indication of an initial dividend guarantee; I have an indication of subscription amounts , an initial subscription instalment of $6 and a fmal payment of $6. But who knows when? Six months from now, a year from now, three months from now.

How in the world can you calculate a rate of return based on a 72 cent indicated first-year dividend when you do not know whether you are putting six bucks up fo r the year or nine bucks or $12 or whatever it is? So what are you going to do to call off these bloody brokers and say to them, this is not the selling of Moose Lake Mines, this is not penny stock we are peddling here, fo lks, this is a telephone company? What are you going to do to stop the hasty marketing of something fo r which people do not have information, because, Mr.

Chairperson, you have said on the record-and I take it through you to the minister-that you want ordinary Manitobans to buy these shares? You want the shareholders of Ma Bell, who are always reputed to be the widows and orphans of the world-they are not, in fact-you want ordinary investors to sign up fo r shares , but you will not give the ordinary investors the inform ation they need and yet your brokers are peddling this thing like it was bloody snake oil. Now you have the power to call those fo lks off and to say to them, this is undue speed. We are not-un less there is some deal cooked here, Mr.

Benson and Mr. Minister , if there is a deal cooked here to preclear this prospectus tomorrow morning and tomorrow afternoon, you can bet that the opposition will be bloody mad that we have been hoodwi nked in this committee, and I trust that we have not been hoodwink ed-going to jam a prospectus through -

November 7, 19 96 LEGIS LATIVE ASSEMBLY OF MANITOBA 835 the Securities Commission so that brokers can start selling shares in earnest on Monday morning. The press has said that; the press has leaked real details-and Mr. Yaff e knows-from a real prospectus, so there is a draft prospectus out there that is ready to go, ready to be submitted. If it has been precleared, then it could be cleared by Monday or Tuesday or Wednesday or whatever, but if it is as complex as it ought to be, then the Securities Commission ought not to clear it in two or three days or a week.

They ought to take the same amount of time they take on any complex document, and on this one they ought to take more time because this is both big, complex and serious in terms of the government's credibility and Manitobans' rights. So I say to you, tell us what you can do to call off this massive process until those ordinary investors you want to sell stuff to have the inf ormation they need to make a wise decision. Call off the process. Mr. Findlay: I just want to use some of the same words that the member opposite has used.

We are bloody upset that individuals have, I guess, taken the liberty to prejudge, jump the queue. But I can tell the member, the prospectus has not been filed, will not be filed until such time in the future as the bill has passed and it has legal effect to be able to do it. It is unacceptable what has happened. We are upset, disappointed. It was not to happen that way, but in terms of the technical aspect, I will ask Mr. Yaff e to comment. I just want to concur that we are no less upset than the members opposite in terms of what some individuals have chosen to do by speculating, or whatever happened.

I mean, he said, call them off I guess, I do not know in a technical way how you do that. People have some freedom to do what they want, speculate what they want. They may be misleading some of their people they are talking to because they do not have the authority at this time, in my

interpretation. I will ask Mr. Yaff e to comment further on the technical aspect of it. Mr. Yaffe: In terms of the procedure fo r filing prospectuses wit

Document details

Collection	Manitoba — Debates (Hansard)
Citation	36-2-pu15
Type	hansard
Volume / chapter	36th 2nd hansardpdf pu15.pdf
Language	en
Format	pdf
Source	PROVINCIAL
Identifier	f38e994bb09bcc3d7d930ed9ec1fd733457f102e

Source file is stored in the law ingest library (pdf).