Avista (NYSE:AVA) on Jan. 17 said that it and Hydro One have received approval from FERC on the merger application that the companies filed with the commission last September.
According to the application, the companies in July 2017 entered into an agreement and plan of merger under which Avista would become an indirect, wholly owned subsidiary of Hydro One.
The agreement is by and among Hydro One, Olympus Holding Corp., a Delaware corporation and indirect wholly owned subsidiary of Hydro One (US Parent), Olympus Corp., a Washington corporation and wholly owned subsidiary of US Parent (Merger Sub), and Avista. Under the terms and subject to the conditions set forth in the agreement, Merger Sub would merger with and into Avista, with Avista as the surviving corporation, the application added.
As TransmissionHub reported, according to the merger application that the companies filed with the Washington Utilities and Transportation Commission, under the terms of the all-cash transaction, Avista shareholders would receive $53 per common share, representing a 24% premium to Avista’s last sale price on July 18, of $42.74 per share. The aggregate purchase price is about $5.3bn, comprised of an equity purchase price of $3.4bn and the indirect assumption of about $1.9bn of debt, the application noted.
According to the application filed with FERC, the proposed transaction will have no adverse effect on competition because the proposed transaction will not increase either horizontal or vertical market power.
The proposed transaction raises no horizontal market power concerns because the proposed transaction will not result in any new combination of electric generating assets in any market, the application added.
The proposed transaction raises no vertical market power concerns, the application said, noting that no combination of input assets and generation assets would result because Hydro One currently does not own or control any natural gas transportation, natural gas storage, natural gas distribution, electricity generation, sites for generation capacity development, physical coal supply sources or access to the transportation of coal supplies in the Avista balancing authority area (BAA) – or in the United States more generally.
According to FERC’s Jan. 16 order, the companies also stated in their application that the proposed transaction will not have an adverse effect on rates.
FERC said that given the companies’ commitment to hold wholesale power and transmission customers harmless from transaction-related costs, if the companies seek to recover such costs incurred prior to the consummation of the proposed transaction or in the five years after the consummation of the proposed transaction, then the companies must make that filing in a new Federal Power Act (FPA) section 205 docket and submit that same filing as a concurrent information filing in this FPA section 203 docket.
FERC noted that according to the companies, the proposed transaction will not adversely affect federal or state regulation.
FERC said that it concludes that the proposed transaction is consistent with the public interest and is authorized, subject to certain conditions.
For instance, FERC said that the companies must inform the commission of any material change in circumstances that departs from the facts or representations that the commission relied upon in authorizing the proposed transaction within 30 days from the date of the material change in circumstances.
“This marks another important milestone in bringing together Hydro One and Avista,” Hydro One President and CEO Mayo Schmidt said in the Jan. 17 statement. “As we continue on the journey to obtain the other necessary regulatory approvals, we are confident that bringing together our two companies will deliver long-term value.”
Avista Chairman and CEO Scott Morris said in the statement: “We’re pleased with FERC’s decision. Together, Hydro One and Avista would like to reaffirm our commitments to our customers, employees and communities that will provide benefits well into the future. Along with the endorsement of the Avista shareholders, this decision signifies an important step in the process to complete the transaction.”
Applications for regulatory approval of the transaction are still pending in Washington, Idaho, Oregon, Montana, and Alaska, Avista noted, adding that approval must be obtained as well from the Federal Communications Commission.
Also required is clearance by the Committee on Foreign Investment in the United States, and compliance with applicable requirements under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, as well as the satisfaction of other customary closing conditions, Avista said. The filings with those agencies will be made in the coming months, the company said.