Michael D. Penner poses following an interview in Hydro-Québec’s Montreal offices on Nov. 10, 2015. Mr. Penner became Hydro-Québec’s board chairman in the fall of 2014.Christinne Muschi/The Globe and Mail
A flurry of North American public utilities have opted for privatization amid government pressure to tackle out-of-control debt levels, but for one Crown corporation, it's not even on the table.
Don't even think about Hydro-Quebec and privatization in the same sentence, the chairman of the board says.
"It's completely not on [the board's] radar screen whatsoever," Michael Penner – who took over from media baron Pierre Karl Péladeau just more than a year ago after the latter stepped down to enter provincial politics – said in a recent interview at head office in downtown Montreal.
"There's a better chance that the Egyptians would privatize the pyramids than we would privatize the dams of James Bay," he said, in reference to the giant hydroelectric utility's massive power generating facilities in northern Quebec.
The utility – by far Canada's largest – has paid dividends to Quebeckers for generations and boasts the "most advanced, clean, reliable world-class system," he said, adding: "I don't think that we would want to jeopardize that under any circumstances."
Asked how privatization would "jeopardize" that system, Mr. Penner would say only that "there is no conversation whatsoever about privatization of Hydro-Québec."
The comments come in the wake of the recent successful initial public offering of part of Ontario's hydroelectric transmission and distribution system, Hydro One, as well as comments earlier this year by former Hydro-Québec CEO André Caillé that it would make sense to privatize the utility's distribution arm.
Last year, Liberal Premier Philippe Couillard said the government would assess its options after two Quebec economic experts – Luc Godbout and Claude Montmarquette – proposed in a government-commissioned report the partial privatization of Hydro-Québec and the state-controlled liquor board. The province, they said, must take drastic measures to address its massive debt problem and avoid a credit-rating downgrade.
Hydro-Québec has been under fire in some quarters for allegedly being inefficient and bloated, with some of the highest production costs in North America, especially when compared with those in the private sector.
For example, the Quebec government leaned on Hydro-Québec to build up an impressive network of wind farms in the province despite not really needing to produce any more electricity, says energy economics expert Jean-Thomas Bernard, who is a visiting professor at the University of Ottawa.
"We know the government prodded [Hydro-Québec] to develop wind when there was surplus," he said.
The high production costs Hydro-Québec currently faces cannot be offset by the low prices the corporation fetches from exports to the United States. That market has seen prices driven down by the growth in supply of natural gas as shale gas discoveries came online, Mr. Bernard said.
Mr. Penner, 46, concedes "there have been seismic energy shifts south of the border and to a lesser extent up in Canada and shale gas has been a big part of that."
But there are opportunities in an era of heightened climate-change awareness for selling environmentally friendly hydroelectric power in the New England states and elsewhere, said Mr. Penner, a former Wall Street M&A lawyer who took over his father's textile business in 2006 and was criticized at home for investing in a North Carolina sock company about a decade after facilities in Quebec and Ontario were shuttered.
"There is an opportunity for us to supply clean energy, reliable energy, to the customer in those markets in order to support their goals to reduce global warming."