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Foreign Acquisitions of U.S. Utilities Get FERC Nod

Foreign Acquisitions of U.S. Utilities Get FERC Nod

The foreign invasion of the U.S. electric utility market got a big shot in the arm yesterday when the Federal Energy Regulatory Commission approved two separate transactions valued at $10-$11 billion.

The Commission okayed ScottishPower's acquisition of Portland, OR-based PacifiCorp for an estimated $7-$8 billion, as well as the purchase by Britain's National Grid Plc, the world's largest privately owned independent transmission company, of New England Electric System (NEES) of Westborough, MA, for $3.2 billion. It found that neither merger deal posed any market-power concerns.

"These transactions represent the first major mergers and dispositions of U.S. public utilities and foreign companies that have come before the FERC, yet they present little controversy," said Commissioner William Massey. "There are no competitive concerns raised by the transactions because the merging partners do not sell in the same geographic markets as the utilities they are acquiring."

The growing foreign interest in U.S. utilities, Massey noted, was to be expected. "U.S. companies have been increasingly active in the foreign investment market. Investments by U.S. utilities [have] exploded..... So it is no surprise that foreign companies are taking an interest in U.S. assets as well."

In addition to FERC, the ScottishPower-PacifiCorp deal has been approved by Britain's regulatory authorities. It still, however, requires the necessary approvals from the Securities and Exchange Commission and regulators in the six western states served by PacifiCorp, which include Oregon, California, Washington, Utah, Idaho and Wyoming.

The California Public Utilities Commission already has given a nod to the deal, and the staff for the Washington Utilities and Transportation Commission recommended on Tuesday that regulators approve the merger next fall. In Oregon, where the merger faces its biggest hurdle, the staff of the state's Public Utility Commission said it is continuing to work with ScottishPower to reach a settlement on key merger-related issues, which could clear the way for a vote on the merger by either September or October.

The National Grid-NEES transaction still requires the nod of state regulators in Massachusetts, New Hampshire and Rhode Island, as well as clearances from the SEC and Nuclear Regulatory Commission.

Under both deals, the U.S. utilities - PacifiCorp and NEES - would become subsidiaries of their respective foreign owners. PacifiCorp serves about 1.4 million customers in the six western states, while NEES and its utility affiliates serve 1.3 million customers in the New England area.

Separately, FERC yesterday also approved the merger of Central Illinois Light Co. (CILCO), a Midwest electric and gas utility, with AES Corp., a major power generation and distribution firm with operations worldwide. It concluded that the deal "will not adversely affect competition" in their respective markets.

CILCO, a wholly-owned subsidiary of CILCORP Inc., provides electric services to about 193,000 customers in central and east central Illinois, and retail gas service to approximately 202,000 customers. It also owns coal-fired and gas-fired generation facilities.

AES is engaged principally in the development, ownership and operation of electric generating plants and electric distribution firms. It owns and/or operates a diverse portfolio of power plants worldwide with a total capacity of 23,656 MW.

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