FERC approves $9.1bn merger of Wisconsin Energy and Integrys

The Federal Energy Regulatory Commission on April 7 approved an August 2014 application from Wisconsin Energy Corp. (NYSE: WEC) and Integrys Energy Group (NYSE: TEG) requesting that the commission approve a merger and disposition of assets pursuant to which Wisconsin Energy will acquire Integrys.

Wisconsin Energy has an energy utility segment and a non-utility segment. The utility segment consists of Wisconsin Electric Power Co. and Wisconsin Gas LLC (operating together as We Energies), and the non-utility segment consists primarily of W.E. Power LLC (We Power), which owns and leases generation to Wisconsin Electric. Wisconsin Electric and Wisconsin Gas serve approximately 1,128,300 electric customers and 1,079,800 gas customers in Wisconsin, respectively.

Wisconsin Electric owns or leases approximately 6,340 MW of generation, which it supplements through spot purchases in the Midcontinent ISO energy markets and through long-term power purchase agreements for 1,270 MW of capacity. We Power has designed and built approximately 2,350 MW of new generation in Wisconsin, the majority of which it leases to Wisconsin Electric under long-term leases.

Integrys is a diversified energy holding company whose wholly-owned subsidiaries provide products and services in regulated and non-regulated energy markets. Integrys owns approximately 2,730 MW of generation (summer rated capacity), consisting primarily of coal- and natural gas-fired generation, and Integrys supplements its internally generated power supply with long-term power purchase agreements, totaling approximately 190 MW of capacity.

Integrys’ electric utility segment includes the electric utility operations of Wisconsin Public Service Corp. and Upper Peninsula Power Co.

Integrys Energy Services, a direct wholly-owned Integrys subsidiary, is a diversified nonregulated retail energy supply and services company that primarily sells electricity and natural gas in deregulated markets and invests in energy assets with renewable attributes. In July 2014, Integrys and Exelon Generation Co. LLC entered into an agreement pursuant to which Exelon Generation will purchase the outstanding shares of Integrys Energy Services in a stock and cash transaction unrelated to the proposed merger Wisconsin Energy/Integrys merger. While the applicants expect this transaction to close before the proposed merger’s consummation, they have included Integrys Energy Services’ generation in their competition analysis used to win this FERC approval of the merger.

Applicants told FERC that under a June 2014 merger agreement, Integrys’ shareholders will receive common stock at a fixed exchange ratio of 1.128 Wisconsin Energy shares plus $18.58 in cash per Integrys share which, based on Wisconsin Energy’s June 20, 2014 closing price, total consideration amounts to $71.47 per Integrys share with a consideration mix of 74% stock and 26% cash, for a total value of $9.1 billion.

The commission in its April 7 approval said that this merger won’t hurt competition in the MISO market, where these companies mainly operate.

Upon completion of this transaction, the combined company will be named WEC Energy Group Inc.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.