Hydro One Stock Hit as Doug Ford Fulfills Campaign Promise

Hydro One Ltd. (TSX:H) stock fell 3.22% on July 12 on the same day the Ontario government announced that CEO Mayo Schmidt would retire and the entire board of directors would be replaced. This fulfilled a campaign promise from Doug Ford, who promised to fire the CEO and the board if need be in an effort to combat rising hydro rates in Ontario.

It is difficult to see how the new PC government will manage to accomplish its push for lower rates while also granting Hydro One the leeway it requires as a private entity. Paul Dobson, Hydro One’s chief financial officer, will take over as CEO until a replacement is selected.

Analysts have warned that it may be difficult to fill the position with top talent with the political controversy swirling around the company. The PC government has committed to a 12% reduction in hydro bills, a move that would likely necessitate a large degree of coordination between the company and the province.

Hydro One reported a solid first quarter but these developments are troubling for investors. Owners of the stock should hold firm to see the new direction while prospective buyers may want to remain on the sidelines. Those who want to bet on the stock now can rely on its attractive 4.4% dividend yield and count on its wide moat.