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Hydro Quebec and the future of the Province

The province of Quebec has two strategic advantages.  First, the province sits just North of New York State, Vermont, and Masschusset, the second is that Quebec has the most attractive and rich green energy resources of nearly anywhere in North America.  Quebec's hydrologic basin is a huge advantage that is already integrated into the US electricity grid.

In fact, Quebec's single biggest advantage is the availability of cheap and abundant electric power.

As such, Quebec's government has a massive opportunity if it plays its cards right.

It was evident many months ago that the CEO of Hydro Quebec and the shareholder had a very different perspectives as to the value of Quebec's cheap electricity.  In the end, the shareholder won and the CEO, although brilliant, had to leave (March 2023).

Quebec's economy minister has to make some hard choices and has a unique opportunity; first, the government played the COVID card as well as almost anyone in Canada where the level of vaccination is around 84%.  From this, the government has remained incredibly popular. The minister can read as well as anyone else and the USMCA shows a number of things:  (1) Mexico has a lot of smart labor and a difficult government, (2) America is withdrawing from the world and focusing in the Americas (which means Mexico), (3) Canada competes with the US in terms of sector skills and demographics -- we are the same, we compete for the same industries.

Quebec has made several mistakes in its immigration policy, but the single most important was not to push for the immigration of young people.  Quebec imported a labor force for yesterday and today, but not for the future.  Quebec must be happy that the auto industry passed it by almost entirely because that's one sector not coming back.  Quebec has a lot of Lithium and that's a big thing, for now, but the success of Lithium batteries is going to be short, there's simply not enough of it to meet the world battery demands. Plus a large percentage of material needed for current technology relies on China and Russia-mined minerals.  

Quebec excels in cheap electricity and that's where it can compete and provide real value-added, moreover, there is a limit to the amount of electricity that Quebec can sell to the US (Ontario would rather build Nuclear power plants than import electricity from Quebec, there is that level of animosity there).  So Quebec has a massive opportunity to expand industries that is energy hungry, and that's where the CEO of Hydro Quebec could not get on board.  More than a year ago she expressed that she was fundamentally opposed to the government's strategy, and fought a rear-guard battle.  I remember being at a dinner in the late spring of 2022 and this was discussed, everyone was surprised by my view that she had to go because, at the end of the day, the CEO is there to implement the views and desires of the owners!  She was no longer able to do her job to the owners' satisfaction.

 I would suspect that a large chunk of the company's senior management will be replaced sooner rather than later so that the shareholder (the government of Quebec) gets what it wants -- an industrial policy that optimizes the attractiveness of the province to Americans...

Over the next few years as America continues to repatriate economic activity away from East Asia, Quebec stands a good chance to remain a player if it plays its card right.  This energy policy is certainly going in the right direction

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