State regulators deny Avista sale, merger with Canada-based company

State regulators deny Avista sale, merger with Canada-based company
Avista Corporation

State regulators Wednesday denied Hydro One’s proposed acquisition of Avista Corp., saying the merger does not serve the public’s best interest.

The proposed merger agreement does not protect Avista or its customers from political and financial risk, according to the Washington Utilities and Transportation Committee. It also doesn’t provide a net benefit to customers, which is required by state law.

The commission reads:

“The proposed transaction cannot be said to be consistent with the public interest when it is evident that decisions affecting Hydro One’s and Avista’s business operations and financial integrity are subject to political considerations that may motivate one provincial leader or another to make decisions and take actions in the future that may cause harm instead of promoting the best interests of Avista, its customers, and Hydro One’s non-government shareholders.”

In Sept. 2017, Avista and Hydro One filed an application with the UTC to approve the merger agreement. Under that agreement, Avista would become a fully-owned subsidiary of Hydro One, which is headquartered in Toronto, Ontario. However, Avista would continue to operate under its same name, management team, and employee structure.

In a testimony given before the UTC in May, Hydro One described its largest shareholder — the Province of Ontario, which owns 47 percent of the company — as a passive investor that would not put any political pressure on the company. Yet, after Ontario’s general election the following month, the province and Hydro One announced an agreement that resulted in the resignation and replacement of the company’s board of directors and the retirement of its CEO.

In its order Wednesday, the UTC noted that agreement elevated the Ontario government’s political interests above the interests of other stakeholders, including investors that own the remaining 53 percent of Hydro One’s common stock. This resulted in the downgrade of credits and decreased value of stock for both companies.

The UTC also found the financial benefits for Avista customers promised by the merger would be inadequate to compensate for the risks their customers would face if its approved. It was also determined the proposal does not meet the net-benefit standard, as required by state law.

“Provincial government interference in Hydro One’s affairs, the risk of which has been shown by events to be significant, could result in direct or indirect harm to Avista if it were acquired by Hydro One, as proposed. This, in turn, could diminish Avista’s ability to continue providing safe and reliable electrical and natural gas service to its customers in Washington,” the commission stated in today’s order. “Avista’s customers would be no better off with this transaction than they would be without it.”

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