The book Electric Rivers the story of the James Bay Project by Sean McCutcheon, Black Rose Books, Montreal and NY, 1991 was set in the 1970’s. The time was one where everyone thought we could do anything for in 1969 man had stepped on the moon. When the James River Project was proposed in was big and sexy and it fit into the political world of the government. There was very little not to like about it. It turned out to be very costly costing billions of dollars, it hurt the credit rating of Quebec, but then oil prices went up (the end of cheap oil) and the hydro plants turned into a cash cow for the province. Not only did the people benefit from lower rates, most of the hydro could be exported to New England and New York areas where the hydro companies could close their oil hydro plants and use Quebec’s hydro thus saving money. Not sure if the lower rates were passed on to the users, but the companies were saving money and it was clean energy. As Quebec built the first phase and it went into operations, they looked around and saw more rivers to be tapped and continue to  tap as many rivers as possible. If you look at their construction cycle the expectations are construction for 2 -10 years and operate for 100 years, with a minor renovations along the way. In terms of the investor – generate income for 90 plus years with each project.

As a company, Hydro Quebec generates income into the provincial coffers and this is where investors have to watch out. In Quebec’s case, their politicians need or want to fund all sorts of programs and services, the first place they look is to Hydro Quebec for money. If not continually pushed back, the politicians want to spend the money and as long as hydro rates remain low, voters tend to allow them to do what they wish to do. In an investor owned utility, the free flow cash gives ideas to many in the firm who wish to be involved with vertically or horizontally integrated companies. It takes strong shareholders to curb ambition, for big companies like to do big projects.

Linking to dividend paying stocks, as an investor often you wish the company would do the minimum as long as the income continues to flow – the company is profitable and can pay a dividend. All managements have dreams and pressures place on them to do something, to create more, to do more. As an investor you occasionally need to temper the ambition of management to do and your desire to maintain the dividend.

There are more questions than answers, till the next time – to raising questions