Ontario’s partly privatized power-transmission utility, Hydro One Ltd., has unveiled a new strategy that abandons plans to buy up other utilities across North America and pledges instead to focus on the company’s own backyard.
Hydro One’s new chief executive, Mark Poweska, outlined an Ontario-focused direction this week, saying the company will not “actively pursue” acquiring companies outside Ontario for the next five years and that its previous efforts had “distracted” Hydro One.
“It’s time for Hydro One to focus in on the things that matter,” he told investment analysts on a conference call. “It’s time for us to build on our strengths and seize opportunities right here in Ontario.”
Hydro One, which is 49-per-cent owned by the Ontario government, also said this week that its net income for the third quarter of 2019 was $241-million, up from $194-million in the same quarter in 2018, working out to 40 cents in earnings per share.
The company says the boost comes from increased distribution rates, but also from $11-million in lower “corporate support costs.”
In an e-mail, a company spokesman credited those savings to “productivity initiatives.” The company says a small portion of the savings came from a reduction in executive pay.
Those salary changes were prompted by Ontario Premier Doug Ford. In last year’s election campaign, Mr. Ford labelled then-Hydro One CEO Mayo Schmidt the “$6-million man,” and called for a new CEO with a reduced salary.
The push resulted in Mr. Schmidt’s departure last summer – with $9-million in incentives and stock options upon his retirement – along with the entire Hydro One board. The company was later forced to adopt the Premier’s demands on executive pay, capping CEO wages at $1.5-million and also reining in cheques for other senior brass. Other executive departures came after.
Hydro One was partly privatized by the previous provincial Liberal government, with a strategy to grow by acquiring other energy companies. But in January, U.S. regulators rejected Hydro One’s $6.7-billion bid to acquire Avista Corp., based in Spokane, Wash., citing Mr. Ford’s political interference in the Ontario utility. The aborted deal cost Hydro One $185-million in break fees and commissions.
While Hydro One’s stock price has since recovered its value and stabilized at a level well above its price tag at its 2015 initial public offering, financial analysts who follow the company says its shares trade at a discount due to political risk.
Sydney Stonier, a spokeswoman for Ontario Energy Minister Greg Rickford, said the government had confidence in Hydro One’s new CEO.
“We’re confident that Hydro One’s new leadership and direction will move Hydro One forward in a way that will help Ontario reduce system costs and bring trust back to our electricity system,” she said.
Meanwhile, Mr. Ford has still failed to deliver on his promise to lower the province’s hydro rates.
In its fall economic statement this week, Ontario said it remained committed to cutting bills, and listed its moves to cancel green-energy contracts, slash Hydro One’s executive pay and centralize power-conservation efforts. The government said it will spend at least $4-billion this year subsidizing power bills, continuing the previous government’s policy.
Energy consultant Tom Adams says Hydro One’s new Ford-friendly, stay-at-home strategy makes more sense than trying to grow bigger through international acquisitions, given the company’s ownership structure.
“Hydro One is trying to get to be boring again,” Mr. Adams said. “… Utilities are supposed to be boring."
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