The Ontario government has tapped David Denison as the new chair of Hydro One, hand picking the former head of the Canada Pension Plan Investment Board to see the utility through its planned partial privatization, according to well-placed sources on Bay Street and in government.
The move to put Mr. Denison in charge in the coming weeks – replacing former senior Liberal cabinet minister Sandra Pupatello, chair since April 1, 2014 – may pave the way for a larger shakeup of Hydro One's board and management, as the province looks to make the corporation more attractive to investors.
The sudden change signals Premier Kathleen Wynne and her Liberal government's intent to push ahead on its plan to partially sell Hydro One to help fund $29-billion of new transit lines and other infrastructure. Mr. Denison is part of the council, led by former banker Ed Clark, advising the government on the sale as well as how to squeeze more money from other provincial Crown corporations, the LCBO and Ontario Power Generation.
The purpose of the move, said one source, is to show potential investors that Hydro One is a step removed from government, under the control of a business leader without Ms. Pupatello's political ties. Handing the reins to Mr. Denison, a well-respected financier and deal-maker in Canada, the United States and Europe, is also designed to give Bay Street confidence the transition to a partially-private company will go smoothly.
Sources say the change marks an important step in gaining investors' trust: The province has been criticized for meddling in ostensibly "arms-length" energy agencies, and could use the hire to reassure business people that Hydro One will have some measure of independence.
As first revealed by The Globe last month, the government's plan is to float shares in Hydro One on the stock market, ultimately diluting the province's ownership to a minority. The government would cap the number of shares any one private investor could own at 10 or 15 per cent, ensuring the province would remain the largest single shareholder.
Ms. Pupatello placed second to Ms. Wynne in the 2013 Liberal leadership race to succeed Dalton McGuinty. She was a cabinet minister from 2003 to 2011, serving six of those years as Minister of Economic Development and Trade. On top of the $150,000 per year Hydro One post, she also works as an international business consultant for PricewaterhouseCoopers Canada and is CEO at WindsorEssex Economic Development Corporation.
Sources with knowledge of the situation said Ms. Pupatello was unenthusiastic about Mr. Clark's original proposal for Hydro One, which was to hive off all its distribution businesses and sell those, while keeping its transmission assets under government control. Instead, she pushed to keep the corporation intact, and sell shares to the private sector. It is this plan that the government now appears set to follow. One Bay Street source said Ms. Pupatello is in favour of bringing in Mr. Denison, and has been consulted throughout the process.
Government officials are "very far along in the process of choosing a new board," a senior business source said. A senior government source confirmed the Wynne cabinet will be considering changing Hydro One board members to "make it the highest performing corporation possible." One source said a management shakeup will also be discussed.
Two sources said the government was happy with Ms. Pupatello's performance as chair. One source said she could be in line for another government appointment.
Mr. Denison, who did not return messages, has already been approached by the government, sources said. Highly regarded by the Ontario government, he served as chief executive officer of the CPPIB, which makes investments for the Canada Pension Plan, from 2005 to 2012.
He built the organization from 70 employees responsible for $70-billion in assets to over 850 staff and a $170-billion portfolio. He now sits as a director on several boards, including Royal Bank of Canada.
Hydro One, with an estimated value of $15-billion to $16-billion, runs both the government's power transmission lines and also controls a large local distribution network serving 1.4 million customers across the province.