Hawaiian regulators rejected NextEra Energy Inc.’s $2.63 billion bid to purchase Hawaiian Electric Industries Inc., dealing a possibly fatal blow to the deal that had faced opposition from the governor.
The Hawaii Public Utilities Commission voted 2-0 against the proposed transaction, saying it failed to show that it was in the public’s interest, according to a July 15 statement. The regulatory panel raised concerns about the benefits to ratepayers, the loss of local control of the utility and the companies’ commitments to deploying rooftop solar systems.
NextEra, the largest wind- and solar-generation owner in North America, and Hawaiian Electric, which serves 95 percent of the state’s population, said in a joint statement they were reviewing the ruling.
“This highlights the risk associated with getting state approvals for utility mergers and acquisitions,” said Paul Patterson, a utility analyst for Glenrock Associates LLC. “I don’t think NextEra is going to have much appetite for coming back for more in this case.”
The decision may allow Juno Beach, Florida-based NextEra to concentrate on its pursuit of Oncor Electric Delivery Co. NextEra is said to have submitted a bid to buy the Texas utility company, according to people familiar with the talks.
Deal Skepticism
Analysts had been skeptical about the takeover gaining state approval given Governor David Ige, a Democrat, had questioned NextEra’s commitment to Hawaii’s goal of reaching 100 percent renewable power by 2045. On June 29, Ige appointed Thomas Gorak as commissioner, whom analysts said could be more critical of the deal than an outgoing regulator. Gorak abstained from signing the order.
The state’s Division of Consumer Advocacy, an arm of Hawaii’s Department of Commerce and Consumer Affairs, welcomed the decision while cautioning that it’s still assessing the impact.
“We’re not assuming that this proceeding is over yet,” Consumer Advocate Jeff Ono said in a statement, citing the comments by NextEra and Hawaiian Electric that they were still digesting the ruling. “We are reviewing the order to determine if any clarification to the order may be necessary.”
Environmental and rooftop solar groups had opposed the merger, citing concerns about NextEra’s support of home solar installations and saying the company had pushed back against the systems in its home state of Florida.
Rooftop Solar
“Instead of envisioning a 21st-century grid that enables customer options like rooftop solar, NextEra wanted to double-down on its ‘build more, pay more’ monopoly business,” Hajime Alabanza, executive assistant with Hawaii Solar Energy Association, said in a statement. “The commission understood this isn’t the right direction for Hawaii’s customers.”
The ruling comes amid a flurry of utility mergers and acquisitions as customers using more energy-efficient appliances and resources such as rooftop solar flatten electricity demand. There was more than $52 billion worth of utility deals pending or completed across the U.S. last year, the most since 2011, data compiled by Bloomberg show.
Missed Deadline
NextEra and Hawaiian Electric said June 4 that neither company had terminated their tie-up after Hawaii regulators missed a merger agreement deadline for deciding whether to approve the transaction.
When the deal was announced in December 2014, NextEra Chairman and Chief Executive Officer James Robo said that Hawaiian Electric could be a testing ground for a transition from fossil fuels to power generated from the sun and wind.
NextEra had promised $60 million in customer savings and pledged support for Hawaii’s 100-percent renewable energy target. The company said its takeover of Hawaiian Electric had the backing of more than 100 Hawaii-based groups including chambers of commerce, labor unions and Native Hawaiian organizations.
Hawaiian regulators left the door open for NextEra or other suitors of Hawaiian Electric, saying Friday it would consider future takeovers if they met certain key elements.
Source: Bloomberg.com