Backers of a sale of the state's largest utility company, Puget Energy, offered Wednesday to sweeten the proposed deal for consumers by taking $100 million off any potential rate increases over the next 10 years.
Backers of a sale of the state’s largest utility company offered Wednesday to sweeten the proposed deal for consumers by taking $100 million off any potential rate increases during the next 10 years.
The international consortium of investors bent on acquiring the parent of Puget Sound Energy also committed to forgo collecting dividends from the company if the utility’s earnings drop to a level that threatens its credit rating.
The concessions came in reaction to criticism by a state consumer advocate and the staff of the state utilities commission, which last month called the $7.8 billion purchase, led by Australian investment bank Macquarie, too risky for ratepayers.
The critics said the highly leveraged takeover would saddle the Bellevue-based utility with excessive debt, making it more expensive to run and potentially resulting in costlier electricity and gas for Washington consumers.
Most Read Business Stories
- 55,000 in Washington state may have to pay back thousands in jobless benefits
- FAA safety engineer goes public to slam the agency's oversight of Boeing's 737 MAX
- 1 house, 45 offers: Homebuyers in Western Washington hard-pressed as supply remains scarce
- Boeing CEO gave up millions in pay; here's what he and other top execs earned
- Jeff Bezos gets fraction of legal fees from girlfriend’s brother
“We think that we’ve not only been responsive to what they’re asking, we went above and beyond,” said Puget Energy Chief Financial Officer Eric Markell in an interview.
The utility and the investor group offered to give up $8.8 million a year in earnings to help reduce customers’ bills.
They also proposed passing along to ratepayers the $1.2 million a year the utility will save by not operating as a public company.
Additionally, the utility promises to ramp up alternative energy investments, with the goal of becoming carbon neutral by 2050.
The investors also disputed an assertion by the state Attorney General’s Public Counsel office that the acquisition would increase the utility’s indebtedness by 50 percent.
Macquarie’s filing Wednesday said the company’s consolidated debt would only increase by $1.05 billion, or 34 percent.
“We’re quite comfortable that the business has the financial capability to service that debt and provide for the other needs of the business,” said Andrew Chapman, managing director of Macquarie Capital Funds.
Critics were also concerned that taking the company private would eliminate the reporting requirements it currently must meet as a publicly traded firm. The utility said it was committed to filing the same reports after the takeover.
Public Counsel chief Simon ffitch said his office hadn’t yet reviewed Wednesday’s submission. He said a news release from the proponents “does add a few things, which will need to be studied.”
“We’ll have to evaluate them to see whether they really are the type of thing that can offset or mitigate the risks that have been identified,” ffitch said.
The WUTC staff, which in June said it couldn’t envision any changes that would make the takeover proposal acceptable, declined to comment until it has reviewed the documents.
Puget shareholders in April overwhelmingly approved the deal, which would pay them $30 a share, a 25 percent premium over the previous value of their stock.
Puget serves more than 1 million electric customers and 735,000 natural-gas customers, mainly in Western Washington.
It argues that as a private company, with owners focused on long-term results, it will be easier to raise money for its massive investment needs.
But the WUTC has the last word, which it will give at the end of a lengthy examination that includes additional testimony from parties such as Industrial Customers of Northwest Utilities, which represents large firms such as Microsoft and Boeing.
For the deal to be approved, the commission must establish that Washington residents won’t be harmed by it.
The investors asked for a decision by Sept. 2, but the commission doesn’t have to abide by that deadline.
Ángel González: 206-515-5644 or firstname.lastname@example.org