Hydro One Ltd. has unveiled its new of board of directors after the utility’s previous board resigned en masse and its chief executive officer retired under pressure from Ontario’s newly elected premier.
Similar to the previous board, many of the 10 new directors have deep Bay Street connections – and a number have held senior positions at investment banks. Interim board chair Tom Woods, who was appointed by the province, spent nearly four decades at Canadian Imperial Bank of Commerce. Hydro One had an Aug. 15 deadline to name the new board.
“This highly-qualified board has strong governance and industry experience and brings with them significant electricity, business and capital markets expertise,” acting CEO Paul Dobson said in a statement. “Their oversight will help us to build on the positive momentum the company has achieved since being privatized in 2015.”
During a conference call with shareholders, Mr. Dobson stressed the board will remain “fully independent” from the government and will begin work with the management team to find a new CEO. The board will also begin to examine executive compensation, he said.
During Ontario’s provincial election this spring, Progressive Conservative leader Doug Ford, who is now premier, took aim at Hydro One’s executive compensation. Running a populist campaign, Mr. Ford argued that former CEO Mayo Schmidt, who made $6.2-million last year, was vastly overpaid, despite the fact that he earned the average for leaders at comparable private sector companies.
Mr. Ford vowed that his first job as premier would be to fire Hydro One’s CEO, a claim his campaign later walked back because the premier does not have such authority. However, the hostility created tension and it weighed on Hydro One’s stock. After being privatized in 2015, Hydro One is now majority-owned by independent shareholders, many of which are large institutions that dislike political interference.
Before Mr. Ford took action in office, Hydro One’s entire board resigned in July and Mr. Schmidt retired. Mr. Ford claimed this solution would result in “no severance,” but that claim overlooked cash payments of about $9-million that the company would have to pay Mr. Schmidt for his stock, bonuses and other compensation, according to an analysis by The Globe and Mail.
Hydro One must also pay the previous 14 directors about $4.9-million for their stock holdings.
In addition to interim board chair Tom Woods, Hydro One’s new directors include lawyer Cherie Brant, former OMERS executive Blair Cowper-Smith and former Bank of Montreal executive Russel Robertson – all of whom were provincial nominees.
The six directors appointed by Hydro One’s ad hoc nominating committee, which had representation from the utility’s largest institutional shareholders, are Timothy Hodgson, previously CEO of Goldman Sachs Canada and special adviser to former Bank of Canada governor Mark Carney; former Weyerhaeuser executive Anne Giardini; former New Brunswick Power CEO David Hay, who has also worked in investment banking; Canada Post interim CEO Jessica McDonald, who previously ran the British Columbia Hydro & Power Authority; former Sappi Fine Papers CEO William Sheffield; and Melissa Sonberg, a former executive at Aimia Inc., which is the parent company of the Aeroplan loyalty program.
The board must now name a chair and also find a new chief executive officer. That search is taking place as Hydro One seeks approval for its acquisition of U.S. power company Avista Corp. – a takeover announced under the former CEO’s leadership.
Hydro One said in July, 2017, that it would pay $4.4-billion to buy Avista, which is based in Spokane, Wash., and operates in five western U.S. states. The deal was the utility’s first major foray into the United States.
To get approval for the takeover, Hydro One must sign agreements with regulators in five states. Recently, the public utility commission in the state of Washington said it is evaluating the protections Hydro One agreed to earlier this year in order to get its acquisition of Avista approved.
Ontario initially agreed to allow a degree of independence to Avista’s leadership after the takeover, and it is unclear if that the new premier will honour the pledge. Mr. Ford has also promised to cut utility rates by 12 per cent in Ontario, a move that would affect Hydro One’s revenues.
The Washington Utilities and Transportation Commission “is evaluating the so-called ‘ring-fencing’ provisions proposed in the settlement … and whether those provisions are sufficient to protect consumers in the event of Hydro One revenue shortfalls,” spokeswoman Kate Griffith recently told The Globe. “The commission will gather more information about these provisions during the October evidentiary hearing.”
Washington was among several U.S. states that postponed hearings or pushed back approval timelines in the days after Hydro One reported on July 11 that its board had resigned and Mr. Schmidt had retired. Idaho regulators postponed an evidentiary hearing scheduled for July 23, and Washington and Oregon regulators acknowledged they could no longer meet Hydro One’s request for an Aug. 14 approval.
Washington and Oregon have now set Dec. 14 as a goal for approval, while Idaho will finalize its schedule after Hydro One has a new board and CEO in place, regulator spokesman Matt Evans recently said.
With files from David Milstead and The Canadian Press