NextEra Energy’s $4.3 billion bid to buy Hawaiian Electric Industries faces big, perhaps insurmountable, obstacles before the Hawaii Public Utilities Commission, which opened the record on the deal last week.
The commission published the public filings in the case, which were overwhelmingly negative. Hawaii’s governor, David Ige, panned the deal in a press conference on July 21.
Florida-based NextEra and the Hawaiian company have said they plan to continue on with their merger (see POWER’s April 2015 issue, “NextEra Energy: A Tale of Two, and Maybe Three, Companies”). But they got almost no local support for the deal in the filings at the regulatory commission.
At his press conference, Ige trashed the merger, commenting “The merger at this point is unacceptable.” The Honolulu Star-Advertiser said, “Outside of the corporate offices of Hawaiian Electric, there is just no one hoping for NextEra to buy Hawaiian Electric. The ghost town includes almost all 28 of the PUC interveners in the case.” By one count, 17 intervening parties panned the deal, nine were neutral, and two proposed alternatives.
Hawaii’s House passed a resolution stating that NextEra “has acted in a manner that does not reflect the good faith that had been promised to ensure that the acquisition would benefit Hawaii’s ratepayers.”
When NextEra and Hawaiian Electric announced the deal last December, Ige expressed skepticism. He said in his inaugural address in January that he had charged Randy Iwase, then his nominee to head the PUC and now its chairman, “to be actively involved” in reviewing the merger proposal. Ige also said he would assign a “special counsel” to review the deal for the state government.
Hawaii’s Office of Planning hired Scott Hempling, a veteran Washington, D.C., energy lawyer and regulation expert (former head of the National Regulatory Research Institute) to be the special counsel. He reviewed the NextEra-Hawaiian Electric deal. Hempling told the PUC in his testimony, “For any state’s electric industry, the central question is this: How can we attract the best companies to help achieve our goals? NextEra and HEI did not design this transaction to answer that question. They designed this transaction to answer two very different questions. HEI asked: How can we obtain the maximum return for our shareholders? NextEra asked: How can we extend our business model—the vertically integrated monopoly—into a new territory?”
In the face of what appears to be a high wall of opposition, the two utilities are putting on a brave but anodyne face. Alan Oshima, Hawaiian Electric CEO, issued a statement after Ige made his views known in July, saying the merger “is a very important matter for our customers, our communities and the state at large.” A NextEra spokesman told the Utility Dive newsletter that the company “will listen to and work with all stakeholders to achieve what’s best.”
Wall Street has not been treating the merger news favorably. Hawaiian Electric shares dropped 6.5% during the week after Ige’s announcement and the tsunami of stakeholder scorn. For the past month, according to American Trade Journal, Hawaiian Electric underperformed the S&P 500 by 3.09%. “Investors should watch out for further signals and trade with caution,” said the investment website.
NextEra Energy shares took a brief hit the day the governor made his statement and the intervener filings became public, dropping from about $103/share to around $100.50. But the stock quickly rebounded and is now trading at close to $104/share.
The Hawaiian utility commission has set no schedule for its continued consideration of the merger application.
—Kennedy Maize is a long-time energy journalist and frequent contributor to POWER.