Power Corporation of Canada was founded on April 18, 1925, by A.J. Nesbitt and P.A. Thomson, principal partners in the Montréal investment firm Nesbitt, Thomson and Company.
To defend and strengthen Canada’s power sector through consolidation, A.J. Nesbitt and P.A. Thomson established a public holding company – simply, but appropriately, named “Power Corporation of Canada” – that would profit from the growing demand for industrial and domestic electricity across the country, offer expert management advice to its operating affiliates, and provide technical services through a construction and engineering department. A dual-class share structure was used from the beginning to ensure that control of the company remained in Canada.
Power Corporation of Canada has certainly grown in size and range far beyond what A.J. Nesbitt and P.A. Thomson conceived in 1925. Nesbitt, Thomson and Company had begun underwriting and investing in the construction and promotion of Canadian hydroelectric utilities almost immediately after its own founding in 1912.
Rejecting the offers of a reckless Chicago speculator who was buying up utility companies across the United States, A.J. Nesbitt and P.A. Thomson instead chose to defend and strengthen Canada’s power sector through consolidation. To that end, they established a public holding company – simply, but appropriately, named “Power Corporation of Canada” – that would profit from the growing demand for industrial and domestic electricity across the country, offer expert management advice to its operating affiliates, and provide technical services through a construction and engineering department that would eventually design and build many of Canada’s most innovative power developments.
Not only did Power Corporation bring the advantages of consolidation at the executive level, it further ensured that the destiny of these vital power companies would rest in Canadian hands. While common shares carried one vote each, ten votes were assigned to each participating preferred share, the majority of which were held by the two founders, giving them control of the company. A.J. Nesbitt became the first President, but he left much of the day-to-day management to his Vice-President, James B. Woodyatt, an electrical engineer and power company executive who ultimately was to serve as Chairman of the Board from 1956 until his retirement in 1962.
With an initial common-share capitalization of $5,500,000, Power Corporation of Canada assumed control of Canada Northern Power, Ottawa and Hull Power, and Ottawa-Montreal Power, and took substantial positions in East Kootenay Power, Winnipeg Electric, Dominion Power and Transmission in Ontario, and Southern Canada Power in Québec.
At the end of its first year of operation, with results the annual report termed “particularly gratifying,” it paid out $145,453.84 in dividends from net earnings of $246,386.23.
Power Corporation’s first five years were marked by impressive growth. While Ottawa-Montreal Power was sold in 1927, Ottawa and Hull Power in 1928, and Dominion Power and Transmission in 1930, Power Corporation acquired from British investors a major stake in British Columbia Power, then one of Canada’s largest and most prosperous hydroelectric producers, serving the Vancouver-Victoria region, at the same time as it invested in Northern British Columbia Power. As well, it set up an industrial department to encourage new industries to locate near its power companies; it opened stores to sell electrical merchandise as a way of promoting mass consumption; and it put together a large and diverse investment portfolio of stocks and bonds, with positions in more than two dozen public utilities ranging from New York to Tokyo to Brazil. The most significant of these was Foreign Power Securities Corporation, incorporated in 1927, itself a holding company with large electric and gas interests throughout France.
By the year ended June 1930, Power Corporation’s affiliated companies were operating 40 power plants across Canada, which represented more than $250 million in plant and property investment and served over 1.5 million Canadians. Power’s annual net earnings had soared above $5 million. Its market capitalization, the number of its shareholders, and the value of its stock and bond holdings had also risen sharply, while its own common shares, issued at $5.00 a share in 1925, climbed to a high of $139.75 in 1929.
Within a very short time A.J. Nesbitt and P.A. Thomson had built one of the most successful enterprises in Canadian business, and proven themselves creative entrepreneurs as well as astute financiers.
By the year ended June 1930, Power Corporation’s affiliated companies were operating 40 power plants across Canada, which represented more than $250 million in plant and property investment, and served over 1.5 million Canadians.
The Great Crash and the Depression years took their toll. For more than a decade, the Corporation’s earnings either fell or remained flat. Its security holdings plunged in value, some were written off, and many more were liquidated to help pay down bank loans or cancel debentures. No dividend was paid on the common shares from 1932 to 1936. Yet, by concentrating its attention and resources on its Canadian affiliates, Power Corporation was able to stay profitable through the depths of the Depression and the upheavals of the Second World War. Consequently, it emerged in a strong position to benefit from the post-war industrial expansion that took place across Canada.
By the time of Power Corporation’s 25th anniversary in 1950, its earnings, investments and dividends were on the rise once more. The market capitalization of its common shares stood at $8 million. About 60 per cent of its investments, which then had a total estimated fair market value of around $32 million, still remained in its six core hydroelectric companies. Together they had an installed capacity of more than one million horsepower, produced more than four million kilowatt hours a year, and supplied electricity or gas to more than two million Canadians. They also operated 761 motor buses along 1,487 km of route, 689 streetcars along 550 km of line, and 33 electrical merchandise stores.
List of Officers and Directors1950
By that anniversary, however, Power Corporation had already experienced at least two portentous indications of what lay ahead. In December 1944, Canada Northern Power Corporation’s Ontario subsidiary, Northern Ontario Power, was expropriated by the Ontario government’s Hydro-Electric Power Commission for $12.5 million, paid in provincial bonds. Later, in June 1946, the government of France nationalized the public utility companies in which Foreign Power Securities Corporation was heavily invested.
Privately owned power companies had become vulnerable to political pressures around the world, and Canada would prove no exception.