NextEra Energy announced on July 18 that it has terminated plans to merge with Hawaiian Electric Industries (HEI).
Not surprisingly, NextEra Energy said the decision was driven by the Hawaii Public Utilities Commission’s (PUC’s) 2–0 decision on July 15 to dismiss the Joint Application for the Change of Control filed by the companies.
“As a result of the PUC’s order, we have terminated our merger agreement,” said Jim Robo, chairman and CEO of NextEra Energy. “We wish Hawaiian Electric the best as it serves the current and future energy needs of Hawaii, including helping the state meet its goal of 100 percent renewable energy by 2045.”
In its decision, the PUC said that although NextEra is fit, willing, and able to step into HEI’s shoes without hurting the company’s performance, the application was not in the public interest. Specifically, it concluded that the application had not demonstrated a benefit to ratepayers, mitigation of risks posed by NextEra’s complex corporate structure, adequate clean energy commitments, a positive effect on local governance, or a benefit to competition in local energy markets.
The PUC was careful to clarify that its decision did not mean that it would not approve a future merger, acquisition, or other application for change in control of HEI.
The deal had been under heavy scrutiny since being announced in early December 2014. Public filings in the case—published by the PUC—were overwhelmingly negative and Gov. David Ige (D) publicly criticized the deal, reportedly calling it “unacceptable.”
Ige came under fire earlier this month, however, when he appointed Thomas Gorak as an interim PUC commissioner. State lawmakers were reportedly considering legal action because the change was made without Senate confirmation.
Reports also surfaced last week that an anonymous complaint had been filed with the Hawaii Supreme Court’s Office of Disciplinary Counsel. According to Hawaii News Now, the complaint alleged that Gorak violated legal ethics while serving as the PUC’s top lawyer and that he had a conflict of interest because he served as a challenging litigator during the NextEra-HEI merger hearings. In Friday’s action, Gorak abstained from signing the decision and order, resulting in the 2–0 vote.
Under the terms of the merger agreement, NextEra Energy will pay HEI a $90 million break-up fee and up to $5 million for reimbursement of expenses associated with the transaction.
“We appreciate NextEra Energy’s interest in Hawaii and in our company,” said Connie Lau, HEI’s president, CEO, and chairman of the boards of Hawaiian Electric and American Savings Bank (a subsidiary of HEI). “All of us at HEI, Hawaiian Electric and American Savings Bank remain committed to serving our customers, and we look forward to working together with communities across our state to realize the clean energy future we all want for Hawaii and to ensure a vibrant local economy.”
Wall Street seemed to yawn at the news, with the stock prices for both companies beginning the day about 0.5% higher in fairly light trading.
To learn the history of NextEra Energy and more information about the deal, see “NextEra Energy: A Tale of Two, and Maybe Three, Companies” from the April 2015 issue of POWER.
—Aaron Larson, associate editor (@AaronL_Power, @POWERmagazine)