In this file photo, Michael Sabia testifies at the Public Order Emergency Commission on Nov. 17, 2022 in Ottawa.Adrian Wyld/The Canadian Press
Quebec has named federal government mandarin and business veteran Michael Sabia as chief executive of Hydro-Québec, saying his experience and strategic mindset make him the ideal person to steer the utility in what could be a challenging period ahead.
But what Canada’s current deputy minister of finance finds when he gets to the CEO suite at the provincially owned company could be unlike anything he’s dealt with before.
Premier François Legault’s government made Mr. Sabia’s appointment official in a news release Wednesday, confirming media reports from last week. He starts on Aug. 1.
“We live in a changing world that invites us to be open and evolve with it,” Mr. Sabia said in a statement. “I undertake this mandate with humility and determination, knowing that I can count on competent and committed people.”
After years at the helm of both public companies and high-profile government departments, Mr. Sabia brings a loaded résumé with him as he prepares to step into the top job at Hydro-Québec. But rarely has someone’s chops to lead a senior Crown corporation been so thoroughly dissected.
Energy experts pointed out his lack of experience in the industry. Parti Québécois politicians in Quebec City questioned whether the Ontario-born leader was “nationalist” enough. However, business administration types insisted on his work ethic and managerial prowess.
Yet there’s one obvious reason Mr. Sabia was Mr. Legault’s top choice for the job: He’s a known quantity, a big-picture thinker who has proven he can tackle multipronged problems in a way that puts Quebec interests first. As Mr. Legault tightens the reins on Hydro-Québec’s strategic direction, observers say the nomination tells us more about his intent to close ranks than anything else.
“There’s a comfort there with Sabia,” said Louis Hébert, professor of management at Montreal’s HEC business school. “He’s not someone who’s coming in with predetermined ideas about everything. It’ll be much easier to tell him ‘Here’s the mission we want you to accomplish.’ ”
Federal Innovation Minister and Quebec MP François-Philippe Champagne described Mr. Sabia as a friend and praised the Quebec utility for persuading him to lead the company.
“It’s a good catch,” he told reporters Wednesday on Parliament Hill, listing off Mr. Sabia’s many senior positions throughout his career. “Michael Sabia coming to any company I think is great,” he said. “I wish him well. You know, I think he’s going to do very well for Hydro-Québec.”
Before he joined the Finance Department in the Trudeau government, Mr. Sabia was the former CEO of the Caisse de dépôt et placement du Québec. Like Hydro-Québéc, that high-profile position also comes with a heavy dose of scrutiny and second-guessing – by business leaders, politicians and the general public alike.
And right from the start, Mr. Sabia had his doubters. The Caisse was at a low point in its history when he joined in March, 2009, having booked a $40-billion annual loss it blamed on crashing stocks and a depreciating Canadian dollar.
Once in the door, he moved swiftly to restructure the management team and reorient its investment strategy by focusing on assets anchored in the real economy. By the time he left in February, 2020, the Caisse had been delivering steady returns averaging about 10 per cent annually over the previous decade. Meanwhile, assets under management more than doubled, to about $340-billion.
Critics that were so vocal at the start of his tenure went silent.
Still, Hydro-Québec might be another ball game altogether. And it starts with managing explosive demand.
Quebec has for years used its vast and affordable hydropower resources to lure business investment and drive growth, and Mr. Legault is now linking that effort with his own obsession: Bridging the wealth gap with Ontario. But now, requests for that power are vastly outstripping supply, and companies are being told no.
How big is the demand? Over the past two decades, only one industrial project in Quebec has started that required more than 50 megawatts of power – Agnico-Eagle and Yamana Gold’s Malarctic gold mine. Now, Pierre Fitzgibbon, the province’s Economy and Energy Minister, has 50 such projects sitting on his desk waiting to be rejected or approved.
Later this month, the minister will weed out a batch of project proposals – approving some, rejecting some and negotiating delayed starts for others – and hope there’s no blowback from business.
“Some people expected … that every project would be accepted,” Mr. Fitzgibbon told reporters earlier this month. “Now, whoops, we can’t connect everybody. So there will be some skepticism as to what has happened. But we hope that the good projects, the very, very good projects, we can work with the companies to stagger [the starts] a little bit.”
Cementing future power production is also an issue. The utility predicts an end to its electricity surpluses by 2026, and adding more industrial customers beyond existing ones could require building new hydroelectric or wind projects at a cost three or four times those of existing dams. The utility’s legacy dams produce power for roughly three cents a kilowatt-hour.
Mr. Legault has mandated Hydro-Québec to update its studies on the viability of building new dams, an effort that will begin with a preliminary analysis on the hydroelectric potential of the Little Mecatina River in Quebec’s Côte-Nord region.
A five-year strategic plan laid out by former Hydro-Québec CEO Sophie Brochu also calls for stepping up energy efficiency for its residential and business customers, refurbishing existing hydroelectric stations to generate more power, and developing more wind-power projects.
In the near term, negotiations with Newfoundland and Labrador over the Churchill Falls electricity purchase contract will be a key part of the supply picture. About 15 per cent of the power the utility sells comes from the Churchill Falls hydro site in Labrador, one of the world’s largest. Hydro-Québec is a minority owner of production assets.
The two provinces are preparing for formal talks to renew the 1969 pact. Under the current contract, which expires in 2041, Quebec purchases more than 5,000 megawatts of Churchill Falls power at 0.2 cents a kilowatt-hour, a tiny fraction of the energy’s resale value.
The deal has generated decades of resentment in Newfoundland and Labrador and successive Newfoundland governments have pressed for a better agreement to no avail. Mr. Sabia and Mr. Legault will have to figure out how to salvage the relationship to forge a new pact in a way that benefits both provinces.
The former Caisse chief has engineered creative solutions to tricky problems before. His team found a palatable way to throw a lifeline to Bombardier Inc. when it was in the throes of a cash crisis in 2015, buying a 30-per-cent stake in its rail unit for $1.5-billion.
The challenges don’t end there. Mr. Sabia will have to contend with an aging grid and infrastructure system that continues to be tested by more extreme weather. He’ll have to consider whether current power rates – by which residential customers are being subsidized by commercial and industrial users – need to be changed.
He’ll also have to make sure that he maintains unity among Hydro-Québec employees, who’ve now seen three CEOs over eight years.
Externally, he’ll have to clarify Hydro-Québec’s relationships with private power producers, continue to build bridges to First Nations communities, and specify the extent to which the utility can help the decarbonization efforts of Ontario, Atlantic Canada and neighbouring U.S. states.
Mr. Sabia has transformed institutions before. This time, though, Hydro-Québec’s political masters will be heavily involved in how that plays out.
With a report from Bill Curry in Ottawa.