State regulators have approved the sale of Puget Sound Energy for $7.4 billion to a group of investors from Canada and Australia.
State regulators Tuesday approved the sale of Puget Energy to a group of investors led by Australia’s Macquarie Group.
The Washington Utilities and Transportation Commission determined by a 2-1 vote that the $7.4 billion acquisition, which has been pending for a year, wouldn’t harm the interest of the state’s ratepayers. The order, however, added some clarifications to the settlement reached between the buyers and other stakeholders in the sale of the state’s largest utility.
In a dissenting opinion, Commissioner Philip Jones said uncertainty in the financial markets and the “opacity” of Macquarie made the deal risky.
“The recent volatility and turmoil in financial markets increase the need for caution and further analysis in evaluating this transaction, in comparison to the viability of PSE as a stand-alone utility,” he wrote.
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The Commission’s endorsement of the proposed $30-a-share acquisition should cheer shareholders of Washington’s largest utility. The stock closed at $23.17 a share Tuesday ahead of the announcement, reflecting investor uncertainty about the outcome; in after-hours trading, shares shot up 15.7 percent to $26.80..
The recent collapse of leveraged buyouts such as that of Canadian telephone company BCE made some traders speculate that the current financial turmoil would prompt either the Macquarie-led consortium or the banks that are financing the deal to balk. But Puget Energy spokeswoman Martha Monfried said Tuesday the commitment to the transaction and financing remain unchanged.
“We’re gratified that that the Commission has issued the order,” Monfried said.
Parties to the case have 10 days to review the decision and ask for a clarification or a reconsideration, or 30 days to appeal the ruling in court.
The prospect that Puget Energy, the holding company for Puget Sound Energy, would be acquired by foreign-based entities raised concern among thousands of Washington residents who wrote to the Utilities Commission in protest.
The commissioners, however, found that the new ownership structure wouldn’t radically change the amount of outside control Puget Energy now operates under, as a publicly traded company. The utility “will remain as ‘local’ a company as it is today,” the commissioners said.
The Public Counsel section of the Attorney General’s office, which serves as a consumer advocate before the WUTC, was the only stakeholder that actively opposed the merger after most parties settled. It was concerned that the buyers were taking on too much debt.
The commissioners found that “it’s not a ‘highly’ leveraged buyout,” as the buyers would commit about $3.4 billion in capital, and the transaction would only result in $850 million of additional debt. That capital, the commissioners concluded, would help Puget Energy improve its infrastructure.
The Commision did include some clarifications to its requirements in the settlement, to which the buyers must agree if they proceed with the transaction. For example, any bonuses or compensation that Puget executives will receive from the change in control won’t be recoverable from rates paid by consumers.
The Commission also said that the overview provisions included in the settlement extend its “power to protect ratepayers beyond what exists today.”
Public Counsel section chief Simon ffitch, who steadfastedly opposed the merger, expressed “disappointment” in a statement released late Tuesday.
“We remain concerned that a transaction that increases the financial risk for (Puget Sound Energy) and its customers is the wrong choice,” ffitch said in the statement. “The burden will now be on (Puget Sound Energy) and its new owners to honor their commitments to the commission and to (Puget Sound Energy)’s customers. At the same time, state regulators must be vigilant in their enforcement of the conditions, commitments and requirements that are contained in this deal.”
Ángel González: 206-515-5644 or firstname.lastname@example.org