Too much debt to allow sale, says state AG's Public Counsel.

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The state consumer advocate reiterated Tuesday before regulators its opposition to the proposed purchase of Puget Sound Energy by a consortium of international investors, saying it carried too much risk despite recent concessions.

Simon ffitch, the Attorney General’s Public Counsel chief, said the Washington Utilities and Transportation Commission (UTC) should maintain the status quo — a publicly traded, investment-grade utility “with improving financial health and low business risk.”

“Puget customers and Washington’s economy are better off with what they have now,” ffitch said in a statement. The $7.8 billion Macquarie-led transaction — which includes a $300 million investment made last December by the potential buyers — is an “inferior choice,” he said.

The deal, which represents a 25 percent premium on the stock of utility-holding company Puget Energy, has won the blessing of shareholders and federal regulators. On Monday, the Federal Trade Commission gave its nod.

But the UTC has the last word. To approve the deal, the commissioners must determine Washington customers will not be harmed.

The original deal proposed by the consortium drew fire from participants in the regulatory process, such as the UTC’s staff and organizations representing ratepayers.

Critics worried the transaction, largely financed by debt, would weaken the financial standing of Washington’s largest utility.

Most parties agreed last month to settle their grievances when the buyers said they would put up an extra $200 million of their own money in the deal, among other commitments.

Now Public Counsel remains the main opponent of the transaction. But that doesn’t mean it has enough clout to block the deal, especially if all the other major parties are in favor.

“At the end of the day, the commission will make its own decision,” said Paul Latta, an analyst with McAdams Wright Ragen.

Puget Energy spokeswoman Martha Monfried said the company “will continue to work with the Public Counsel and explain the importance of the merger.”

The buyers will file their rebuttal to the counsel’s stance next Tuesday. Initially the company had expected to hear a UTC decision by Sept. 2, but according to the latest schedule, final briefs are due Sept. 19.

In testimony filed with the UTC on Tuesday afternoon, Public Counsel’s expert witness Stephen Hill said that the buyers’ concessions were not enough to offset the potential risk created by the deal.

The $200 million in additional capital promised does not make much of a difference, and it could actually be a disguised loan from Macquarie, he wrote.

Also, the $100 million over 10 years in credits for ratepayers is a modest commitment that does not address Public Counsel’s main worry — indebtedness.

The buyers also committed to restrict the dividends they would take from the company if its credit ratings drop to dangerous levels. For Public Counsel, this is a moot point.

A restriction “is only necessary because of the large amounts of debt that accompany the proposed transaction and the resulting increased potential for bond rating downgrades,” Hill said.

Ángel González: 206-515-5644 or agonzalez@seattletimes.com