The head of the Canadian company that plans to buy Emera Maine said Monday that the company won’t have to borrow the full purchase price of $959 million to complete the deal.
The earlier proposal from Calgary, Alberta-based ENMAX to fully finance its purchase of Maine’s second largest electric utility through debt had prompted concerns from the state’s utilities regulator and others that ENMAX would not have the capacity to invest in Emera Maine’s network, and would instead have to raise rates and cut jobs to make debt service payments.
But Gianna Manes, ENMAX’s president and CEO, said at a “meet-and-greet” event in Ellsworth that her company now expects to have some cash it can put toward the purchase of Emera Maine. She did not go into detail about how much cash it expected to have, nor its source.
Earlier this month, the state’s Public Utilities Commission had raised concerns about ENMAX borrowing the entire amount it needs to buy Emera Maine. In a report, the commission’s staff said that taking out a loan for the full purchase price could lead ENMAX to reduce infrastructure-related investments, as well as operations and maintenance budgets, in order to meet its debt requirements stemming from the acquisition.
ENMAX would buy Emera Maine from its Nova Scotia-based parent for $959 million U.S., or about $1.29 billion Canadian. The Public Utilities Commission would have to sign off on the purchase, and under a new state law, the transaction would have to provide a net benefit to Maine consumers to secure regulatory approval.
Regardless of how much cash ENMAX might put toward the planned purchase of the utility that serves much of northern and eastern Maine, Manes said the firm has the financial resources to buy Emera Maine and to maintain and invest in its share of the grid.
“It’s well within our ability to [borrrow the full purchase price],” said Manes, who is in Maine this week for “meet-and-greet” events in Ellsworth, Bar Harbor and Bangor, and to meet with Emera Maine employees.
ENMAX is looking at its purchase of Emera Maine as a long-term investment, she said.
The Maine utility will be renamed, and it will be based in Maine, Manes said, without saying what the new name will be. The arrangement will be similar to the current way the utility, a subsidiary of Nova Scotia-based Emera, is managed now, she said.
“This will boost our business by 25 percent,” Manes said of the acquisition.
As ENMAX looks to buy Emera Maine, it would be taking over a utility with a less-than-stellar record of reliability.
Emera has had an “extremely low level of performance in avoiding customer interruptions,” and it hasn’t appeared to make improving reliability a priority, Larry Holloway, a Kansas-based consultant Maine’s public advocate hired to review the sale, testified to the Public Utilities Commission in early September.
If ENMAX, which is smaller than Emera Maine’s parent company, borrows the full purchase amount and is faced with high costs to run the distribution network, it “could stretch the financial capability of ENMAX” and its ability to pay off the debt stemming from the purchase, he said.
“The financial ability of ENMAX to make the necessary expenditures to maintain, operate and improve the Emera Maine electric transmission and distribution service must be considered when evaluating the public interest of this acquisition,” Holloway said. “The condition of the Emera Maine assets will directly affect the amount of operating, maintenance, administration and capital expenditures necessary to provide the expected level of service.”
Emera officials said Monday evening that they have stepped up efforts to improve reliability by focusing on the top cause of outages: falling trees and tree limbs. It now trims trees more frequently, on a 5-year cycle instead of a 6-year cycle, and is more aggressively removing trees that are in declining health or at risk of toppling.
“Over the last few years Emera Maine has made targeted investments to improve reliability and is committed to further improvements over the long term,” Emera Maine spokeswoman Judy Long said.
The union that represents Emera Maine employees, Maine legislative leaders and U.S. Rep. Jared Golden, a Democrat representing Maine’s 2nd District, have also weighed in with concerns about the sale.
In a letter to commission Chairman Phil Bartlett earlier this month, Golden wrote that Emera Maine is currently “understaffed” and that he is “deeply concerned” ENMAX might not have the financial wherewithal to both purchase Emera Maine and serve customers’ needs.
“Unfortunately, most companies find the most likely means to [pay off debt] is through worker consolidation, increased rates, or both,” Golden wrote.
A public hearing on the proposed sale is scheduled for 6 p.m. Monday, Oct. 21, at the Wells Conference Center at the University of Maine in Orono. The hearing will be linked by live video conference to University of Maine at Presque Isle’s MMG Center, allowing people to also participate from that location.