Utilities commission staff, attorney general's consumer advocate oppose Puget Energy sale
A consumer advocate and a regulatory adviser Wednesday came out against the proposed sale of Puget Energy to a group led by Australian investment...
Seattle Times business reporter
The long march to privatizationPuget Energy's proposed takeover by Australian investment bank Macquarie and other investors must pass muster with the Washington Utilities and Transportation Commission — a protracted process.
June 18: Stakeholders such as the Attorney General Office's Public Counsel and the WUTC staff file their recommendation.
July 2: Puget Energy and potential buyers to file their rebuttals.
July 7-11: Settlement talks between the parties.
July 28-31: Public hearings.
August 13: Final briefs due.
September 2: WUTC is expected to issue a decision.
Source: Puget Energy, WUTC
A consumer advocate and a regulatory adviser Wednesday came out against the proposed sale of Puget Energy to a group led by Australian investment bank Macquarie, saying the transaction would endanger the state's largest utility without providing consumers much in return. Puget Energy is the parent company of Puget Sound Energy.
The Washington Attorney General Office's Public Counsel Section said in a statement the $7.8 billion deal announced in October by Bellevue-based Puget Energy and a group of Australian and Canadian investors "is not in the public interest" because the acquisition involves too much debt.
The agency, which represents Washington consumers, also pointed out the transaction would take the public company private, diminishing its reporting requirements with federal regulators and making it less transparent.
"At the same time, customers have no assurance that capital for infrastructure will be any more available or affordable than without the merger," Public Counsel Chief Simon ffitch said.
The staff of the Washington Utilities and Transportation Commission later Wednesday urged commissioners to reject the merger. Macquarie's debt-laden strategy of buying utilities and infrastructure plays "has a lot of potential risks," said Mike Parvinen, the WUTC's assistant director for energy.
In the Puget Energy deal, the investor consortium proposes buying the company with $3.6 billion in equity and $1.6 billion in additional debt, and will assume $2.6 billion in existing debt.
The long list of commitments Puget Energy and the potential acquirers put together to protect the utility's public-service obligations were not enough to offset the risk, nor could the commission's staff come up with additional conditions that would make the merger palatable.
The staff "could not identify enough mitigating factors or benefits to recommend anything other than denying the petition," Parvinen said.
The deal, which the utility says will strengthen its ability to raise money for capital spending, was overwhelmingly approved by Puget Energy shareholders in April. The Federal Energy Regulatory Commission also has approved the deal.
But the state utilities commission has the final word. Puget Energy and the investors requested a decision by early September, but the commission isn't obliged to do so by then.
The testimony filed Wednesday is part of the process. The commissioners will decide on the merger after hearing all interested parties, including investors and ratepayers. The tone of the testimony seems to indicate negotiations won't be a slam-dunk.
"This basically means the deal is not risk-free," said Paul Latta, an analyst with McAdams Wright Ragen.
Puget Energy and its potential acquirers have until July 2 to submit their rebuttals.
The company said that Wednesday's filings were "just one more step" in the process.
" Now that everyone has their cards on the table, we will be able to address their concerns and move forward on getting the merger approved and giving PSE the access to capital we need to carry on our business plans," said spokeswoman Martha Monfried in an e-mailed statement.
She added that two previous mergers have been approved in Washington after a similar process.
Some intervenors seemed more open to the transaction, with caveats.
An expert representing the Industrial Customers of Northwest Utilities, an association of companies that includes Microsoft and Boeing, requested that the Macquarie-led consortium raise its equity commitment by $700 million, thereby reducing the debt load that would be carried by the newly private Puget Energy.
The association also recommended restrictions in dividend payments to protect the company's credit ratings, and suggested changing the investors commitment to owning the company from five years to an "indefinite" amount of time.
The state attorney general's office and the WUTC staff opinions were released after the market closed. Shares of Puget Energy closed Wednesday at $27.87, up 4 cents. The takeover price is $30 a share.
Ángel González: 206-515-5644 or firstname.lastname@example.org
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