Business Person of the Year 2010: Don Lowry, EPCOR
Epcor CEO Don Lowry builds a public utility that will stand the test of time
The 2010 Business Person of the Year is presented in association with the Chartered Accountants of Alberta. On the cover, Don Lowry wears a suit provided by Henry Singer.
Photography by Curtis Trent
Thirty years ago, a soft-spoken young hockey player from Brantford, Ontario, with the uncanny ability to see how a play would unfold before it actually did, began a remarkable run in Edmonton that would see him lead the Edmonton Oilers to four Stanley Cup victories in five seasons. Don Lowry, the president and CEO of Epcor Utilities Inc. and Alberta’s Business Person of the Year for 2010, shares many of the same qualities, from the reserved demeanour to that unique ability to see and understand what lies ahead. But while Wayne Gretzky made his magic on the ice, Lowry’s spent the last 12 years doing it in the boardroom on behalf of his company’s shareholder.
Between 1996 and 2008 the utility paid the City of Edmonton, Epcor’s sole shareholder, more than $1.8 billion in dividends, franchise fees and taxes. The dividend increased for nine consecutive years and reached an all-time high of $134 million in 2009, a figure that constituted approximately eight per cent of the city’s overall budget and by some estimates kept property taxes 25 per cent below where they would otherwise have to be. Epcor was a cash cow, and it was keeping the City of Edmonton well fed.
Then, in 2009, Lowry appeared to abruptly change course.
In the 14 years since its creation, Epcor’s portfolio of assets had expanded from three power plants and two water plants in Alberta to more than 50 power and water plants in Canada and the United States. That growth had fuelled the increases in the dividend, but it had also made Epcor dependent on its power generation assets. Meanwhile, without access to capital markets, the company’s balance sheets had reached their limits. It was time, Lowry decided, to move in a different direction.
That direction was the creation of an independent power generation company, Capital Power Corporation, which would be able to tap into lucrative capital markets in order to fund its continued growth. Epcor, meanwhile, would focus on the business of “water and wires,” while gradually drawing down its investment stake in Capital Power. “When we looked at our shareholder’s risk appetite, it’s very – and appropriately – low, and their need for a stable and predictable dividend with no volatility is a principal driver,” he says. “The power generation business is a growth business, but it’s a higher-risk business with higher volatility. We had grown the company such that 70 per cent of the income was coming from outside the City of Edmonton and was primarily driven by power generation. When we stacked them all up, we had to make a decision.”
While the decision attracted controversy, Lowry remains convinced that it was the right one to make. The creation of Capital Power has added another head office to Edmonton’s corporate landscape, along with all the high-value jobs that come with it. It’s not about to go anywhere, either; a social objectives clause ensures that Capital Power’s head offices will remain in Edmonton in perpetuity. More importantly, Lowry says, is the fact that Epcor’s stake in Capital Power will provide the fuel it needs to grow its new interest in electrical transmission and water management, and protect the dividend that is so important to its shareholder. “We’ve captured the value we created on power generation,” he says, “and used it as a currency to now grow the water business.”
It’s a bold move, and one that didn’t necessarily have to be taken. As Lowry points out, Epcor could have continued to milk its power generation assets for at least three or four years and conceivably increased the dividend over that period. But, he says, that kind of passive approach might have ultimately boxed the company into a corner it couldn’t get out of. “If we’d been at a point where the markets collapsed, as in 2008, and we had a major financing or a major cash call, that could have been disastrous.” His decision to move Epcor out of the power generation business was driven by the fact that it’s easier to make a choice than to have the market make it for you. “Often, the easy things to do aren’t the right things to do,” he explains. “But at a time when a company for all intents and purposes looks like it’s growing exceedingly well and things are going exactly the way they should, often that’s the time you should exit the market.”
Brian Vaasjo, the president and CEO of Capital Power, believes that Lowry’s decision to exit the power generation market before he had to epitomizes his style of leadership. “His greatest strength is clarity of purpose and direction,” Vaasjo says. “When it comes to making a decision or arriving at a conclusion and moving forward, it becomes very clear, very straightforward.” Hugh Bolton, the chair of Epcor’s board of directors, shares Vaasjo’s view, noting that this forward-thinking approach is what puts Lowry in the top tier of Alberta’s executive community. “He’s a strategic thinker,” Bolton says. “People talk about strategy and they throw the word around, but Don really understands what it means. He has that wonderful ability to peek around the corner and see what’s coming and, more importantly, to marshal his colleagues into action to deal with it.”
What Lowry sees around the corner right now, and what he has been seeing for a few years now, is the growing importance of water. “We’re very fortunate in Canada that we have a current abundance of water,” he says, “but the warning signals are there now, whether it’s [David] Schindler’s report on the Athabasca [River], whether it’s the flood from the Red River in Winnipeg, the boil water advisories, the Walkertons in Ontario – all of those early warning alarm bells are going off. Our message from Epcor is that there’s no need for them. We should be ashamed to have boil water advisories in Canada.”
There’s opportunity here too, of course. “The water business is a good, long-term, stable and regulated business,” Bolton says. “That’s why we had to get out of the electrical generation business. It requires a huge amount of patient capital, and our shareholder’s not patient. They rely on our dividend.” But if the water business is a steady and predictable one, it’s also one with a lot of untapped potential. Lowry estimates that the financial opportunities associated with water management are in the “billions and billions” of dollars. Still, it’s clear that Epcor’s interest in water isn’t entirely driven by its bottom line. “We have opportunities with our industries to lead with the deployment of technology and water,” Lowry says. “We believe that our responsibility is to take those steps and demonstrate that it can be done. The expertise and the people and the operations that we have here are poised to contribute responsibly to making Alberta better, and then taking that expertise beyond Alberta.”
Epcor is already doing that, in fact. From the rehabilitation of the Britannia Mine, one of the continent’s biggest sources of heavy metal pollution, to the wastewater treatment plant in Sooke, B.C., the company has a growing resumé of water-related projects. Back home, meanwhile, the Gold Bar Wastewater Treatment Plant, which was transferred by the City of Edmonton to Epcor on April 1, 2009, remains one of North America’s most innovative and effective such operations. “We’ve demonstrated, from the tip of Vancouver Island and our management of water treatment plants, to our first introduction of ultraviolet technology here in Edmonton, that breakthrough will come from innovation and technology,” Lowry says. “We see ourselves as positioning Epcor to be a contributor to that.” Those contributions won’t be constrained to the borders of Alberta or Canada, either. Epcor’s decision this past summer to purchase the Chaparral City Water Company in Arizona reflects the increasingly international nature of Epcor’s water-related activities.
Not surprisingly, Epcor has identified the oil sands and the companies that do business up there as a major area of opportunity for its water business. In October of 2009 Epcor inked a deal with Suncor worth $100 million that will see it provide potable water and domestic wastewater services to more than 6,000 Suncor oil sands workers through the management of three wastewater treatment plants, two water treatment plants and an assortment of collection and distribution systems. Don Thompson, the president of the Oil Sands Developers Group, is happy to see Epcor doing business in the oil sands. “We welcome somebody with Epcor’s obvious strong technical competence with respect to treatment and management of water, because of course water is one of the core issues of concern not just to the industry but all of our stakeholders.”
Thompson thinks that the opportunities available to Epcor in the oil sands could be significant. “I would think that every company in the oil sands manages water, and that means there’s a considerable market for people with water expertise.” Bolton is confident that the new front that Epcor has opened in the oil sands will be a productive one. “There are all sorts of roadblocks to overcome, but so far we’ve been making inordinate headway, not only with Suncor but several other participants in the oil sands. And really, that’s our future.”
That’s one future, at least. The other is in the residential water market, and it’s there that things get more complicated. Most of us still treat water as an inexhaustible free good, and that’s an attitude that simply has to change, Lowry says. “There’s nothing free in this world, and where we’ve seen the abuse of water and then its eventual disappearance is when it’s been a free good.” The solution to Alberta’s now-chronic water shortages, he believes, is a move towards pricing and regulating it properly. “You can’t introduce good technology, attract smart and committed people and get the capital to maintain and build great infrastructure unless you’re repaid for it. I’m not advocating that it should be a gold strike mentality where the highest payer gets all the water, but you can put in mechanisms similar to the power or telecom industries where you have lifeline users and then you price your water accordingly. You work on the demand side through conservation measures, you promote the efficient use and reuse of water and you’re going to get to a better place.”
Bob Sandford, the Epcor chair of the Canadian Partnership Initiative in support of the United Nations’ “Water for Life” Decade, thinks Lowry is ahead of his time when it comes to his views on water management. “I think he understands both the local issues with respect to water and the fact that Canadians take water for granted, but he also understands the global water circumstance, and I think he understands fully how those global circumstances are going to present themselves here over time,” Sandford says. “I think that’s a valuable asset for a leader to have.” Sandford, who got to know Lowry through the invite-only Rosenberg International Forum on Water Policy, which was held in Banff in 2006, says that Lowry is highly respected within the global community of experts and academics who study water policy. “He was the first ever private-sector speaker to open the conference. It’s usually a head of state, so that gives you some idea of how well respected he is internationally.”
Lowry remains optimistic that sound leadership and good policies could be enough to change our spendthrift approach to water, although he concedes that it may take a crisis to truly alter people’s attitudes. Sandford believes that Lowry is one of a half-dozen people in senior executive positions in this country with the leadership capacity to avoid that moment of crisis, but Bolton is a bit more pessimistic. “I say he’s an awful good CEO, but he’s not the messiah. People take water for granted, and to get people to change their attitude, I think, will require a crisis.”
If it comes to that, though, Lowry will be ready. “You can make that crisis a launching pad, or you can make it your Waterloo,” he says, noting that the reinvention of Epcor itself was a response to a crisis of another sort, the deregulation of the Alberta electricity market. Bolton, who has seen his fair share of CEOs operate in the heat of battle, believes in Lowry’s ability to rise to the occasion. “He’s very sentimental, he’s very family-oriented, and yet in a real crisis he’s as stoic and as calm and as clear-thinking as anybody you’d want to know.”
That orientation is what has kept Lowry grounded throughout his career. While it’s common to hear about executives willing to lay just about anything, from their own health to that of their family life, at the altar of professional success, Lowry isn’t willing to make those sorts of sacrifices. Success, he says, is the ability to create a balance between family, health and work. “It’s like juggling three balls,” he says, “and you can never let your family or your health ball drop. Work, you know, you can drop that from time to time and get another job or modify it. Where I’ve seen things go wrong is when people have compromised on the first two. You just can’t.”
– Click here for a behind the scenes photo gallery from the Business Person of the Year photoshoot.
He’s not perfect, mind you. “He’s got one fault,” Bolton says. “He is terribly modest and shy, and he hates going out and selling the Epcor story. He hates going out and glad-handing at cocktail parties. He hates visiting clients and chitty-chatting about nothing. He really struggles doing those sorts of things.” The Epcor story, Bolton says, deserves a wider hearing. “Have we told the Epcor story properly to the citizens of Edmonton? The answer is no. The average Edmontonian has no idea of all the good Epcor does to this city, over and above the financial return.”
Don’t expect Lowry to turn into a cheerleader any time soon, though. Instead, he’s content to continue moving Epcor towards its future in water and wires, while building a company whose influence extends beyond its bottom line. “Whether it was on the power or the water side, people here got a sense that we weren’t just building a company to pay a dividend. It’s not just a job. It’s not just a financial statement. We’re doing interesting things.”
The School Of Fish
Don Lowry didn’t grow up dreaming of a corner office on the 28th floor. Instead, he had designs on a career that would have kept him closer to ground level. “When I was growing up, I was going to become a limnologist,” he explains. “That’s the study of fresh water biology.” But if that’s an unusual childhood aspiration for a corporate titan, it’s also one that led him, in a roundabout way, to the world of business and the job he has today.
Growing up in a family of modest means that couldn’t afford to buy horses for their kids and wasn’t particularly interested in dogs, Lowry set his sights a little lower when it came to choosing a pet. He became a guppy enthusiast. “I went to the pet store one day, and there were these really fancy guppies but they cost a buck each,” Lowry explains. “I didn’t know until then that we were poor, because he [his father] said that I could have whatever fish I wanted but that I had to find a way to pay for them.” The young Lowry quickly figured out that the best way to pay for these high-end guppies was to make more of them and sell them back to the very same store.
It wasn’t long before he was supplying all of his local pet stores with guppies and other kinds of tropical fish, and it was a pursuit that provided him with both entertainment and extra cash. More important, he says, are the lessons that he learned from them about how the world works. First and foremost among those is the importance of water, a lesson that now informs Epcor’s own mission. “It might sound a little bizarre,” he says, “but if you are into fish, one thing you learn is the importance of water. It’s a base ingredient, and unless your water is clean, it has all the chemical elements, trace and otherwise, and is the right temperature and the right turbidity and flow, your fish will not thrive and propagate.”
His fish have even taught him a thing or two about leadership, including the importance of being patient. “Don’t expect your fish tank to be magnificent overnight, with the coral reef and the diversity of species,” he explains. “You have to work with it, and it’s the same with your business. You have to work at your business every day, and be wary of those that say you can hit it out of the block with an investment tomorrow or that suddenly everything’s going to change just through working hard at it for a week or a month. Great things in business, as in life, don’t happen quickly.”
Meanwhile, that carefully cultivated balance can be upset in a nanosecond. “Your aquarium can be upset by a power failure, you can have an intrusion of a pathogen through a new fish, you can have a broken filter – you have to be ready with your fish to accept that you’re going to have to work with them continually to keep that environment pure.
It takes years to build culture, it takes 10 years to build a business, and it can be upset in a nanosecond. That’s one fish lesson for you.”
While Don Lowry is proud of the financial contributions that Epcor has consistently delivered to its shareholder, he’s quick to point out that the utility is more than just the sum of its dividend payments. What follows are just a few of the ways in which Epcor’s presence in and influence on communities across Alberta is felt.
Epcor is a major supporter of arts and cultural functions and facilities in Alberta. In Calgary, that support is highlighted by its investment in the Epcor Centre for the Performing Arts, while in Edmonton it includes the Epcor Amphitheatre at downtown’s Churchill Square and its role as the 2010/11 season sponsor at the nearby Citadel Theatre. Other events and organizations that receive support include the Works Festival, Capital Ex and the Canadian Finals Rodeo.
Epcor’s philanthropic reach extended all the way to Vancouver last spring, where its fundraising efforts helped support Canada’s athletes as they competed at the 2010 Winter Olympics. Epcor’s support of our Olympic athletes began back in 2005, when Epcor signed on as a title sponsor of the Gold Medal Plates program, a series of national fundraising dinners that support both the Canadian Olympic athletes and the competing chefs in their respective quests for excellence. Those dinners continue to provide nourishment for both Canada’s Olympic and culinary communities.
Epcor and its employees participate in a number of fundraising and philanthropic campaigns, from the Comedy Cares program that visited Canmore, Fort McMurray, Okotoks and Strathmore in 2009 to the Donate-A-Ride program and Boyle Street Community Services. Epcor’s employees also engage in charitable activities, and they outdid themselves in 2009 by donating a record $421,826 to the United Way in a joint campaign with Capital Power (including a corporate contribution of $125,000). Canmore’s Emily Munro, meanwhile, received $2,500 to attend the 2009 National Circus School’s Summer Camp in Montreal through Epcor’s Sports Excellence and Youth Excellence awards program.
LEEDing the Way
If there’s one neighbourhood in particular that’s glad to have Epcor around, it’s the hardscrabble patch of downtown Edmonton that sits on the edge of the city’s Chinatown. A landscape defined by abandoned storefronts and bars with noon-hour drink specials, it is a monument to inner-city decay. But that will almost certainly change with the arrival of Epcor’s new corporate headquarters.
The new 28-storey Epcor tower, located near the northeast corner of 104 Avenue and 101 Street, is the first office tower to be built in downtown Edmonton in 22 years, and one that’s expected to earn LEED-silver certification for low energy, water and resource use upon its completion.