While the written order for the five-zip rejection last month by state regulators of an Australian investment firm’s bid for NorthWestern Energy has yet to be issued, Gov. Brian Schweitzer left no doubt as to its message, commenting to local reporters: “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.”

The major parties, NorthWestern and Babcock and Brown Infrastructure, say they are waiting to see the written order backing up the vote by the Montana Public Service Commission (MPSC) before deciding on their next step.

The Montana commission staff says the order won’t be out until late June or early July because key staffers involved in the case are out of the office for most of June. In the vote taken May 22, the three Democratic and two Republican commissioners joined in rejecting the $2.2 billion offer (see NGI, May 28).

“It offers no tangible benefits to the ratepayers, but puts them under much more risk,” Commissioner Bob Raney said at the time. The offer “was mostly what BBI could do, rather than what it would do.” A key concern was the set-up for upstreaming “every available penny” from the utility to the parent company with no guarantee the parent would adequately fund the utility’s operations.

The question is whether the proponents of the buyout will seek rehearing or appeal the utility commission’s order, revise their offer or drop the bid. A Babcock and Brown spokesperson said the company was “evaluating its options.” The company’s strategy is to set up deals for assets or projects and then sell equity interests to third parties.

Questioned as to whether a bid by a coalition of municipal utilities in the region, which had been ignored and rejected earlier by NorthWestern management, might be revived, a utility commission source suggested that “part of what the commissioners were saying was that they wanted a financially stable utility; they don’t want one with too much leverage.” The municipals bid “would be entirely leveraged.”

Montana has had some experience with unfortunate buyouts. After selling off its generation assets with deregulation in 1997, what was then Montana Power sold the rest of its utility assets to NorthWestern Energy. The utility assets were moved up to the parent company level and were included in Northwestern’s bankruptcy.

The company has been recovering in recent years, and observers point to the recent signing of a new law reversing deregulation that will enable to utility to build its own power plants. Schweitzer said the new law gives NorthWestern the chance to “more effectively” seek longer-term, low-cost contracts, but it also gives state consumers “a small measure of protection” from what he called NorthWestern’s penchant for placing “its profits above the economic health of this state and its people.”

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