Fortis’ $11.3B Acquisition of ITC Holdings Marks Foray into U.S. Regulated Markets

Canadian utility Fortis wants to acquire ITC Holdings Corp., the largest independent electric transmission company in the U.S., to benefit from “low-risk” regulated power markets.

The deal valued at about $11.3 billion will allow Fortis to enter the U.S. regulated power market overseen by the Federal Energy Regulatory Commission (FERC), providing a “unique, highly diversified, low-risk regulated energy transportation platform,” said Barry Perry, Fortis’ president and CEO, on February 9.

“The predictable returns of a transmission business, with no commodity or fuel exposure, are very compelling,” he said.

Fortis owns regulated utilities that serve more than three million customers across Canada, the U.S., and the Caribbean. It also owns hydro generation assets in British Columbia and Belize.

Novi, Mich.–based ITC Holdings owns and operates high-voltage transmission facilities in Michigan, Iowa, Minnesota, Illinois, Missouri, Kansas, and Oklahoma, serving a combined peak load exceeding 26,000 MW along approximately 15,600 circuit miles of transmission line. The company is also a public utility and independent transmission owner in Wisconsin.

“ITC has grown its average rate base at a compounded average annual rate of approximately 16% over the last three years and, as of September 30, 2015, ITC had assets of US$7.4 billion,” a joint press release issued on February 9 noted.

The deal, approved by boards of directors of both companies, still needs to be approved by shareholders, as well as federal and state regulators. It will also need approval from the U.S. Committee on Foreign Investment and the U.S. Federal Trade Commission/Department of Justice (under the Hart-Scott-Rodino Antitrust Improvement Act).

The companies expect that the deal will close in late 2016.

If completed, ITC will become a subsidiary of Fortis and about 27% of the common shares of Fortis will be held by ITC shareholders.

For ITC, the deal presents the opportunity to better position itself “to have a higher level of focus on pursuing our long-term strategy of investing in transmission opportunities to improve reliability, expand access to power markets and allow new generating resources to interconnect to transmission systems and lower the overall cost of delivered energy for customers,” said ITC CEO and President Joseph L. Welch.

Merger and acquisition activities in the U.S. and Canada have kicked up over the past year owing to a number of factors, including the oil price tumult and low power demand.

Sonal Patel, associate editor (@POWERmagazine, @sonalcpatel)