Puget Sound Energy’s bid to be taken over by an international investment group is now in the hands of the three members of the Washington Utilities and Transportation Commission.
Stakeholders in PSE’s request to merge with an investment consortium led by the Australia-based Macquarie Group of Companies submitted their final briefs to the commission this week. All but one of the stakeholders supported the merger.
The Attorney General’s Public Counsel, the state office representing residential and small-business customers in utility rate cases, remained unconvinced that the merger was in the public’s best interest.
PSE filed for approval of the $7.4 billion merger in 2007. The company said the transaction will help it extend and improve its infrastructure and finance long-term growth for the company.
If the merger is approved, PSE would be owned by Puget Holdings, a limited-liability company that itself would be owned by the Macquarie-led consortium, which includes three Canadian pension funds.
WUTC staff, the NW Energy Coalition, the Industrial Customers of Northwest Utilities and Puget Sound Energy all support the merger, citing the financial benefit of partnering with “deep-pocketed” investors.
A major factor in the staff’s approval was what it called the “well-crafted” ring that fences provisions, which they believe will protect Puget Sound Energy and its ratepayers from financial troubles faced by its parent companies.
The provisions offered in the merger proposal create a “dividend trap” that prevents Macquarie from drawing dividends from PSE operations to apply to the debts of the parent company.
In the brief, Public Counsel Simon ffitch maintained that PSE could acquire financing for its growth projects elsewhere and that the merger exposes customers to too much financial risk.
“The company never satisfactorily answers the threshold question — why is the transaction needed in the first place,” ffitch wrote.
WUTC staff countered that assertion, claiming that the investors have a long and positive history of managing billions of dollars in assets and raising $71 billion of debt financing since 2007 during “a time of significant uncertainty in capital markets.”
The staff report, put together by Assistant Attorney General Donald Trotter, said Public Counsel assumes the ring fencing will be violated.
“The commission has never rejected a transaction on the assumption that the well-crafted ring fencing provisions will be violated,” Trotter wrote. “The commissioners should reject Public Counsel’s unprecedented offer to start now.”
The commission does not have a specific schedule or deadline to approve or reject the merger proposal. The original proposal requested a decision by September, but delays in the hearings have set it back.
Aaron Burkhalter can be reached at 360-416-2141 or . com.
