Divesting Hydro-Québec: Realizing Compelling Value vs. Continuing Misplaced Idolatry

Crown Corporations, Ian Madsen, Valuation

Hydro-Québec, (HQ), is the electric power utility for Quebec, Canada’s largest province by area, and is owned entirely by the provincial government. It could theoretically be worth as much as $162B were it divested; or, far less if investors believe that its operations cannot be improved or expanded, or that they are constrained by government or corporate policy. As a business, its value, on a fully taxed basis (as a Crown corporation, it pays no tax, now), is estimated between $42.2B to $54.4B. Using peer Canadian and US-listed renewable electric utility firms and other Canadian utility firms, the range is $35.4B to $54.1B. It could approach the highest figure if it shows clearer signs that it is evolving towards optimizing free cash flow and away from heavy reinvestment in expansion of dubious merit.

Read the entire Valuation here: VS15_HQ-Valuation_NV1918_F1