Hydro One Ltd., one of Canada’s largest power utilities, is searching for a new chief executive officer for the second time in four years after the current leader told the board he was leaving for another company.
Mark Poweska, Hydro One’s current CEO, was hired by the Ontario electricity distributor in early 2019 but is leaving after only three years for a “leadership position at a utility closer to his family in western Canada later this year,” Hydro One HT announced early Tuesday.
Mr. Poweska, who is 52, joined Hydro One from a leadership position at BC Hydro, where he had worked for 25 years. His departure from the Ontario utility seems to have caught Hydro One’s board by surprise because it is only now starting a CEO search to replace him. Board director Bill Sheffield will serve as the interim president and CEO while the search is conducted.
Hydro One’s stock was little changed in early morning trading on Tuesday, hovering around $32.75.
The sudden change extends the turmoil that has engulfed Hydro One during its short history as a public company. The utility used to be run by the Ontario government but was privatized in 2015 by the provincial Liberals. At the time, the decision created a political quagmire because electricity prices in the province were rising and some voters equated the two events, even though they were unrelated.
Since then, Hydro One’s leadership has been particularly tumultuous. The CEO hired to run the utility as a public company, Mayo Schmidt, only lasted three years after he was directly targeted by Ontario premier Doug Ford during the 2018 provincial election campaign. At the time, Mr. Ford was not yet premier, but he singled out Mr. Schmidt as a ‘six million dollar man’ because of a $6.2-million compensation package.
The Ontario government is Hydro One’s largest shareholder, and the suggestion was that, as premier, Mr. Ford, would not stand for taxpayer waste. In July, 2018, a month after he was elected premier, Mr. Schmidt stepped down and Hydro One’s board of directors resigned en masse.
Because of the political interference, the CEO search to hire a replacement was an arduous one and landing on Mr. Powerska took eight months. The search progress was complicated by legislation the PC government introduced to cap Hydro One’s CEO pay at $1.5-million.
Premier Doug Ford’s interference also cost Hydro One an acquisition. During Mr. Schmidt’s tenure the utility bid $4.4-billion for Avista Corp., which is based in Washington state, as part of an expansion strategy to turn Hydro One into a North American player. However, the State of Washington ultimately rejected the deal, throwing the growth strategy into disarray.
In its decision, the Washington state regulator said: “It became clear on and after July 11, 2018, [when the CEO and board left] that Hydro One’s directors cannot be considered independent and the province’s role is not limited to that of a minority shareholder in a publicly traded corporation.”
The deal’s cancellation put Ontario on the hook for a US$103-million termination fee to Avista, and Hydro One had also already spent tens of millions of dollars on legal and banking fees for the deal.
The chaos stemming from the government interference weighed on Hydro One’s shares and the utility’s stock fell to roughly $19 by late 2018, down from $20.50 during its initial public offering in 2015. However, interest rates were also rising in 2018, and higher rates tend to hurt high-yielding stocks such as utilities.
During Mr. Poweska’s tenure Hydro One threw out the utility’s expansion strategy and focused on its home province. The new strategy has paid off, and Hydro One’s share price has climbed 57 per cent since the day Mr. Powerska was announced as CEO. The stock also recently set a record high.
However, Canadian publicly-traded rivals Emera Inc. and Fortis Inc. have traded in very similar fashions, and both companies also set record high this spring.
Mr. Poweska made $1.59-million in total compensation last year, while Scott Balfour, the CEO of Emera, made $8.3-million. David Hutchens, the CEO of Fortis, made $9.1-million.
Mayo Schmidt, Hydro One’s former CEO, was named chief executive of Canada’s Nutrien Ltd. an agriculture giant, in 2019, but he exited the company this past January after only eight months. Nurtien cut ties with Mr. Schmidt after a culture clash over his imperious leadership style, among other factors, the Globe has reported.
With files from Andrew Willis, Niall McGee and Jeffrey Jones
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