The Maine Public Utilities Commission approved the sale of Emera Maine to Canadian energy company ENMAX on Tuesday. Approval of the $1.3 billion deal comes after the commission rejected a proposal to finalize the sale of Maine’s second largest electric utility earlier this month.
The commission voted unanimously to approve the deal, citing changes made to an earlier proposal the commission rejected by a 2-1 vote on March 5.
The changes include: an extension on how long Emera Maine must wait before it can raise customer rates, an increase in rate credits for customers, service quality measures the company must meet for three years and tougher restrictions on dividends paid to shareholders. ENMAX’s sole shareholder is the Canadian city of Calgary, Alberta.
The changes “do not reduce all risk,” commission Chair Phil Bartlett said. They do, however, “reduce the risk to Emera customers while also increasing the benefits,” Bartlett said.
The approval comes a year after Emera, which is also based in Canada, reached a deal to sell subsidiary Emera Maine to ENMAX.
The settlement approved by the commission on Tuesday was negotiated by ENMAX and Emera Maine, as well as the Maine Office of the Public Advocate and other nearby electric utilities, including Eastern Maine Electric Cooperative and Houlton Water Company. ND Paper, which owns mills in Old Town and Rumford, also signed on to the agreement.
“ENMAX has made a significant, long term commitment to Emera Maine’s customers, employees and Maine communities,” Gianna Manes, ENMAX President and CEO, said in a statement. “With this approval, we are looking forward to a smooth transition of ownership.”
The company added that the deal is expected to close within the next week and that Emera Maine will continue to operate as a “stand-alone” company in Bangor.
The sale is the first to occur since Maine changed its rules governing the sale of utilities last year. Previously, a buyer of a Maine utility needed only to show the deal would do no harm. Under the new rule, the buyer must show that the purchase would result in a net benefit for Maine ratepayers.
Opponents of the deal have raised concerns about ENMAX’s ability to run Maine’s second largest electric utility from across the continent. Emera Maine would be ENMAX’s first acquisition outside of western Canada. Compounding this lack of experience is the announcement that Manes, ENMAX’s CEO, is planning to step down shortly after completion of the expected sale.
“ENMAX would be experiencing a significant operational shift at the same time it has a leadership transition,” Rep. Nicole Grohoski, D-Ellsworth, wrote in a letter to the commission asking it to reject the newest agreement. “This is unlikely to have a positive outcome for Maine people.”
In the letter, Grohoski also voiced concerns about the company’s need to continue paying dividends to the city of Calgary, which totaled $36 million in 2018, despite raising rates and performing poorly. “Rate growth is no longer practical in Calgary for a variety of reasons, so ENMAX has to go outside its region” to Emera Maine, which produces high profitability on its electric rates, Grohoski wrote.
Financial ratings firm Standard and Poor’s has also had concerns about ENMAX’s financial health. In October, the firm downgraded ENMAX’s rating, noting that the company’s “highly leveraged” purchase of Emera Maine “will significantly weaken ENMAX’s financial measures.”
The agreement approved Tuesday sought to address some of these concerns and provide additional benefits for Emera Maine customers. For example, the company agreed that its contribution to dividend payments to Calgary would not exceed 100 percent of net income. This would effectively prevent Emera Maine from paying Calgary more than it was making in profit, which ENMAX has done before. In 2019, ENMAX announced it would pay out $50 million in Canadian dollars to the city of Calgary, despite making only $5 million in net income the prior year.
ENMAX and Emera Maine also agreed that the utility will not be able to increase rates until after Oct. 21, 2021. The previous agreement, rejected by the commission, had committed Emera Maine to not raising rates before April 1, 2021. In the new agreement, the company also committed $8.1 million in rate credits for Emera Maine customers, but hasn’t worked out which customers will receive the credits.
Also in the agreement, ENMAX committed to preserving current employment levels, noting that “there will be no employee layoffs.” The company also said it will retain “the existing management team of Emera Maine to the greatest extent reasonably practicable.”