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Southwest Gas/Oneok Merger Aces Nevada PUC

Southwest Gas/Oneok Merger Aces Nevada PUC

Oneok's proposed merger with Southwest Gas received a big shot in the arm yesterday, as the Nevada Public Utilities Commission (PUCN) unanimously approved the deal two months ahead of schedule. Although approval is still needed from Arizona and California regulators as well as Southwest Gas shareholders, both companies are confident the merger will be completed in the previously announced fourth quarter 1999 timeframe.

"Nevada's utility regulators have carefully scrutinized our merger proposal and determined that it serves the public interest," said Michael Maffie, CEO of Southwest Gas. "This is the first of three state utility regulatory approvals that we must obtain before we can complete the combination of our two companies. We expect that Nevada's endorsement of our merger will set the tone for regulatory consideration by the Arizona Corporations Commission (ACC) and California Public Utilities Commission." The merger already has been cleared by the SEC.

Oneok and Southwest first agreed to a deal last December (See Daily GPI, Dec. 16). The combined company will be the primary gas distribution company in Arizona, Kansas, Nevada and Oklahoma and will also have a strong presence in California. It will also be the nation's largest gas distribution company, serving 2.6 million people.

A Southwest Gas spokesperson, who wished to remain anonymous, said the merger's easy passage of its first regulatory approval affirms the company's choice to join with Oneok instead of Southern Union, a Missouri-based utility that made a competing offer for Oneok last February. Southwest turned Southern Union down in late April (See Daily GPI, April 27, 1999).

"When we rejected Southern Union," the spokesperson said, "one of the main reasons was that our board believed a Southwest Gas/Southern Union combination would not proceed through the regulatory process without experiencing delays and caveats to the agreement. As you can see from the Nevada results, the Oneok deal offers smooth regulatory sailing."

One of the main attractions of a combined Oneok and Southwest Gas company is the mix of Oneok's strong balance sheet with Southwest's growth and capital expenditure program. "In order to grow, Southwest Gas has become highly leveraged," the spokesperson explained. "Oneok has the balance sheet to improve our debt rating. In fact, one of the stipulations in the merger agreement is that Oneok must help Southwest raise its debt rating from a triple B- to a triple B+. Southern Union is also a heavily leveraged company, and our board didn't think they would be able to help out with our debt as much as Oneok."

Southwest and Oneok will tackle the Arizona commission next, the spokesperson said. There is dialogue between the merging companies and the ACC, but no schedule has been set.

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