Quebec Inc. and Ontario renewables: was due diligence done?

Part 2: a look at Axium Infrastructure, and a review of OEB responsibilities

After reading Part 1 of this short series, you might ask, who or what is Axium Infrastructure?

From all appearances, it seems Axium was created by a group of individuals with the help of Fiera Capital Corporation. Fiera Capital Corp.* is a major Quebec-based investment manager with assets under management (AUM) of C$144.9 billion** as of March 31, 2019.   They once held a 35-percent interest in Axium Infrastructure Inc. but U.S. regulations appear to have forced them to divest their holdings, as noted in a press release of December 21, 2015.   The divesture was apparently due to Fiera’s substantial share ownership by National Bank of Canada and Fédération des caisses Desjardins du Québec and related to U.S. banking regulations. The press release stated their 35 percent ownership in Axium Infrastructure was purchased by Axium and the shares were subsequently cancelled.

Finding specific details about Axium’s capital base, financers or assets is difficult. A press release they issued January 3, 2018 claimed “Axium manages dedicated infrastructure funds having approximately C$2.8 billion in assets under management as of September 30, 2017, as well as more than C$1 billion in co-investments.” One should assume those AUM have grown since Sept. 2017.

A visit to Axium’s website starts with the following: “Created in 2008, Axium Infrastructure is an independent investment firm dedicated to investing in core infrastructure assets. The firm is employee-owned, aligning the interests of the management team with limited partners. It benefits from the capabilities of a group of professionals with extensive infrastructure backgrounds. Its management team comprises infrastructure investment specialists with decades of combined experience acquiring, developing, financing, operating and managing infrastructure assets.”

So, who are those employees and “limited partners” who own Axium Infrastructure Inc.? The “team” is identified on the Axium website for all to see, but not the “limited partners.”

The three most senior executives of the “team” are all ex SNC Lavalin employees. Axium’s President & CEO is Pierre Anctil whose bio identifies him as the co-founder of Axium and a former General Manager of the Québec Liberal Party, a position he held from 1988 until early 1994 when he was appointed to the Chief of Staff to the Quebec Premier, Robert Bourassa. Anctil’s bio goes on to note he joined SNC in 1997 and in 2001 was promoted to Executive Vice-President and Member of the Office of the President. He left SNC in early 2008 and shortly after co-founded Axium.

What came to light about Mr. Anctil in the Quebec Charbonneau Commission*** investigation into companies illegally giving money to Quebec’s political parties is interesting. This is from a CTV March 2014 report: “Yves Cadotte, a vice-president at SNC-Lavalin, testified at Quebec’s corruption inquiry that company executives and some of their spouses donated over $1 million to the Liberals and Parti Quebecois between 1998 and 2010.” The article goes on to say, “Cadotte testified former SNC Vice-President Pierre Anctil, a former strategist with the provincial Liberals, handed him the cash to give to Union Montreal fundraiser Bernard Trepanier. The fundraiser shared an electoral office with former executive committee chairman Frank Zampino.”

The Montreal Gazette on November 11, 2014 reported: “The new portions of the affidavit released Monday reveal that two former SNC vice-presidents, Normand Morin and his successor Pierre Anctil, each told police that their job included the unofficial responsibility of monitoring and arranging for political financing. The men said that former SNC-Lavalin CEO Jacques Lamarre informed them of this responsibility, and that they were in contact with businessman and Liberal fundraiser Marc Bibeau to arrange for donations to the Liberals. SNC-Lavalin’s employees acted as straw man donors, Morin and Anctil confirmed, and the company reimbursed them. There were also allegedly cash payments.”

Second in command at Axium is Stephane Mailhot, President & Chief Operating Officer. Mr. Mailhot’s biography on the site notes: “In 1999, Stéphane was named vice president of SNC-Lavalin’s Investment division where he was responsible for the evaluation, negotiation and management of investments in infrastructure and public-private partnership projects.” One of the PPP projects undertaken by SNC, referred to as MUHC (McGill University Health Centre-a $1.3 billion contract) resulted in bribery charges against several SNC employees and a February 2, 2019 CBC article noted: “when Quebec police started digging into the process that led to that contract, they uncovered what one detective called “the biggest case of corruption fraud in Canadian history.” The amount involved in the bribery case was said to be $22.5 million. Despite the police action, SNC-Lavalin sued MUHC for $330 million in respect to that contract, and in an article dated January 8, 2018 apparently agreed to a settlement of $108 million. There was no indication in any of the articles carrying the story about the MUHC bribery charges of any involvement by Mr. Mailhot.

The third former SNC Lavalin executive is Jean Eric Laferrière, Senior Vice President, General Counsel, Secretary and Chief Compliance Officer of Axium.   Mr. Laferrière’s position with SNC started as Legal Counsel, Legal Service, from June 2000 to Dec. 2006 and he rose through the ranks to become SVP, Legal Affairs from Aug. 2012 to May 2016 when he left and joined Axium. On April 30 2019 a story broke on the CBC related to illegal political donations to the Federal Liberal Party by SNC Lavalin employees and while Mr. Laferrière’s name is not mentioned, one of the non-executive employees commented; “Lefebvre said he understood that the president of the company at the time, Jacques Lamarre, initiated the scheme and that the legal department at SNC-Lavalin had signed off.” One wonders if Mr. Laferrière was aware of this while in the legal department of SNC-Lavalin?

From all information available, it appears none of the top three Axium Infrastructure executives have been charged by the RCMP or Quebec police for the three unrelated criminal events that seem to have taken place while they held senior positions at SNC Lavalin.

Ontario Energy Board and due diligence

It is disconcerting that Ontario’s regulator, the OEB ignored protocol by issuing the generating licence in respect to the application by Nation Rise. They should have overruled the Ministry of the Environment, Conservation and Parks for the issuance of the REA two days before the election writ was dropped. They could also have overruled the IESO for their issuance of the NTP issued before the newly elected government had even named their cabinet ministers. They could also have queried Nation Rise in respect to claiming financing had not been arranged, but appear not to have done so. The other aspect is their “due diligence” in respect to Axium Infrastructure’s majority acquisition of Nation Rise was non-existent.

One should also wonder why it took the OEB over two months to grant the generating licence to EDPR for the Nation Rise project and then only eight days after granting the licence, Axium suddenly announced the majority acquisition of the project? The obvious question is, was the party responsible within the OEB for granting the licence aware of the upcoming acquisition announcement causing them to issue it, or were they oblivious to the upcoming takeover?

Finally, after the OEB received Axium Infrastructure’s newly created subsidiary’s application why would the OEB simply tell them “the OEB does not intend to issue a notice of review of the proposal”? There was no effort made on the part of the OEB to conduct proper due diligence on this file which should be worrisome to all of Ontario ratepayers.

Ontario’s ratepayers will be sending billions of dollars to “Quebec Inc” for intermittent and unreliable renewable energy in the form of wind and solar generation, and our regulator appears to have simply blessed it. The OEB treats its “Vision” as if it doesn’t exist as their treatment in this case fails to promote “outcomes and innovation that deliver value for all Ontario energy consumer.”

There are no outcomes in this case delivering any value for Ontario’s energy consumers.

PARKER GALLANT

 

 

*Fiera Capital, subsequent to the sale of their interest in Axium Infrastructure, formed a wholly owned subsidiary that has also been buying up Ontario renewable generation as noted in an article from January 2017 announcing the purchase of solar assets from NextEra of Florida.                                                                                                                                                               **Fiera’s AUM at $144.9 billion is slightly less than Ontario’s 2019/2020 planned budget spending (before interest costs) of $150.1 billion.                                                                                                                                                                                    ***The commission was created by Jean Charest and launched in October 2011 and cost $45 million.

 

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Author: parkergallantenergyperspectivesblog

Retired international banker.

One thought on “Quebec Inc. and Ontario renewables: was due diligence done?”

  1. Interesting research, Parker.
    About the only sure thing, is that about 3 years from now, the owners will change again. Given the rapid writeoff provisions of the income tax regulations, allowing about a 30% capital investment writeoff per year, thereby ensuring that taxes are not paid, after 3 to 4 years, the company value is written off to the point that it would have to start paying tax. As a result, it will flip to a new ownership structure, and restart the tax free years. Here’s a challenge for anyone, to identify ANY wind power development that has had the same owners for longer than 4 years. Sometimes the name sounds the same, but the company structure changes slightly, changing for a corporation, to an income trust, then back to a corporation. One particular example that has done that comes to mind, even though the name sounds the same, the company and tax writeoff continues. This should be a high priority to ensure that companies can only be written off once … yet federal and provincial rules lean instead towards even higher writeoffs.

    Liked by 1 person

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