The sale of a Montana electric and gas utility, NorthWestern Energy, to Australian banking group Babcock and Brown Infrastructure (BBI) may be held up as about a dozen groups have filed to intervene in the review of the sale by the Montana Public Service Commission (PSC).

While NorthWestern had hoped the PSC would finish its review by year-end, commission Chairman Greg Jergeson told NGI that a hearing isn’t likely until March of next year with a ruling some time afterward. Still, NorthWestern spokesperson Claudia Rapkoch said the company is hopeful that the currently “lengthy” discovery process can be expedited for an earlier completion of the review.

The Montana Consumer Counsel and others have raised concerns about the proposed sale of NorthWestern to BBI. There is some worry about the fact that BBI is an Australian group, Jergeson said. However, the majority of interest surrounds the complicated management structure of the company, he said. Further, Montanans are skeptical of big utility deals, having lived through failed deregulation that resulted in the bankruptcy of two companies, including NorthWestern, he added.

NorthWestern, which has more than 300,000 customers, said in April that it intended a sale to BBI for $37 per share, all cash, valuing NorthWestern at $2.2 billion (see Daily GPI, April 26). BBI is a utility infrastructure company based in Sydney and listed on the Australian Stock Exchange. It owns companies in electricity transmission and distribution, gas transmission and distribution, and transport infrastructure, and has ownership interests in thermal and renewable power generation.

In announcing the BBI deal Northwestern executives said it was “superior to all the others received by the company’s board,” including long-standing offers from a public-sector coalition of cities in Montana and a neighboring South Dakota energy holding company, Black Hills Corp. One feature of the BBI deal was a pledge to retain current management of Northwestern, which completed reorganization under Chapter 11 of the Bankruptcy code two years ago.

State Consumer Counsel Robert Nelson has said that the complicated management structure proposed by BBI may require new oversight rules, such as a possible limitation on payment of management fees to NorthWestern’s Australian parent. He also is seeking more details on NorthWestern and BBI’s plans as well as benefits and risks of the merger.

Under the proposed transaction, NorthWestern would become a privately owned subsidiary of a holding company. That holding company would then be owned by another, which then would be owned by BBI Ltd., which along with a trust, would form BBI. The trust would pay management fees back to the parent company that are based on the value of NorthWestern and derived from utility revenue.

The arrangement creates tax advantages and isolates NorthWestern and BBI’s other utilities in one group, according to Mike Garland, head of North American infrastructure for BBI.

Northwestern has 375,000 electric customers, 30,500 miles of transmission and distribution lines and 310 MW of power generation in Montana and South Dakota. It has 253,500 natural gas customers and operates 5,800 miles of gas distribution lines and 2,100 miles of pipelines in Montana, South Dakota and Nebraska. Northwestern’s main footprint is in Montana.

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