'Obtuse' policy decisions in U.S. behind the lack of big investment boom: Former CPPIB CEO
Hydro One Ltd.’s former board chairman is cautioning governments from creating unstable investing environments.
“One of the biggest benefits that governments can create, if they want investment, is to create a relatively consistent, certain environment,” David Denison, who is also the former president and CEO of the Canada Pension Plan Investment Board, told BNN Bloomberg in an interview Wednesday before his induction into the Canadian Business Hall of Fame.
“Any government that creates uncertainty around the environment by their actions, or their policies, or by changing direction on taxes, or whatever the case might be, impedes that confidence. And, there’s a price to pay for that.”
Denison had a front-row seat on how government meddling can sour a deal. A transaction he helped consummate between Hydro One (H.TO) and Spokane, Wash.-based Avista Corporation (AVA.N) was blocked by U.S. regulators after CEO Mayo Schmidt retired and Hydro One’s boardroom was overhauled at the behest of Ontario Premier Doug Ford.
In its ruling last year, Washington state regulators stated that “provincial government interference in Hydro One’s affairs, the risk of which has been shown by events to be significant, could result in direct or indirect harm to Avista if it were acquired by Hydro One.”
Denison was replaced as Hydro One’s chairman in August of 2018, two months before the Avista deal was blocked by Washington’s Utilities and Transportation Commission.
He also turned his warnings stateside, labelling the Trump administration’s policy decisions as “obtuse.”
“If you look at the U.S., where there was this expectation on the tax cuts and the ability to repatriate offshore cash [that] had been held for tax reasons, there was the expectation that there’d be a big investment boom resulting from that,” he said.
“I don’t think that’s materialized anywhere near the degree that the policymakers intended, and I think the big reason is the degree of uncertainty that they themselves have created by the, I think, obtuse policy decisions which have been made.”
He says that companies are hamstrung by a lack of predictability in government actions, particularly in the U.S.
“It’s a challenge for companies and boards, as well, because companies have to make long-term capital decisions,” said Denison, who is a director at BCE Inc. (BCE.TO), which owns BNN Bloomberg through its Bell Media division. “For these decisions, which can play out over 10 and 20 years, I think we’re in a period where particularly companies are a bit hesitant to commit long-term capital until we see a bit more clarity around what policy environment they’re going to be operating in.”