While Montana’s Public Service Commission (PSC) turned down its $2.2 billion bid for NorthWestern Energy (see Daily GPI, May 24) and the state’s governor later told it to get out of town, Australia’s Babcock & Brown Infrastructure (BBI) is going back to the PSC with a revised offer for South Dakota-based gas and electric utility NorthWestern, the companies said Monday.
BBI and NorthWestern filed a petition with the PSC proposing “several new provisions that would benefit Montana customers” if the PSC were to approve a merger. Among the new provisions:
Further, the Montana utility would have a Montana-based management team with a separate board of directors composed mostly of Montana residents. The utility would not make any distributions in a calendar year that exceed its net earnings without PSC authorization. It also would maintain its own financial metrics and maintain minimum liquidity at the end of each quarter of at least $75 million while making all reasonable efforts to obtain and maintain an investment-grade credit rating on its secured debt. Finally, it would commit to the the 15% renewable resource portfolio standard of the state by 2012, three years earlier than the law currently requires.
“We believe that this proposal represents a substantial and quantifiable benefit to Montana consumers, and it deserves a careful review by the intervenors and the PSC,” said NorthWestern CEO Mike Hanson. “We look forward to working with the intervenors to consider this proposal as the PSC works toward its final order on this matter.”
The companies also proposed to waive and supplement certain provisions of their April 25, 2006 merger agreement.
Montana administrative procedure calls for a 10-day public comment period on a request for rehearing before the PSC acts on the request.
Earlier this month, Montana Gov. Brian Schweitzer left no doubt as to his and the PSC’s sentiments about BBI and its bid for NorthWestern. “This is an order that says pack your bags and get on your kangaroo and ride out of here because you’re not going to be in Montana,” he told local reporters.
In a 5-0 vote, PSC commissioners in May declined to approve BBI’s acquisition of NorthWestern, which serves 640,000 natural gas and electric customers in Montana, South Dakota and Nebraska. The Montana PSC was the last remaining regulatory hurdle for the merger.
“It offers no tangible benefits to the ratepayers, but puts them under much more risk,” said Commissioner Bob Raney. The offer “was mostly what BBI could do, rather than what it would do.”
In April 2006, NorthWestern and BBI announced a definitive agreement under which BBI would acquire NorthWestern in an all-cash transaction at $37/share (see Daily GPI, April 26, 2006). The transaction followed NorthWestern’s emergence from bankruptcy and a decision in November 2005 to seek strategic alternatives for the company. The agreement required shareholder and regulatory approval at both the federal and state level. The Federal Energy Regulatory Commission approved the sale last October (see Power Market Today, Oct. 20, 2006), and the purchase also had been given a thumb’s up other state regulatory officials.
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