FERC approves Avista-Hydro One deal

Dive Brief:

The Federal Energy Regulatory Commission this week approved the merger of Hydro One and Avista, possibly clearing the way for the deal to close in the second half of this year.
Several other federal authorizations will be needed, and the companies said they will be making those filings in the coming months. The deal will also require approval from state regulators in Washington, Idaho, Oregon, Montana and Alaska.
The $5.3 billion all-cash deal was announced last July. If approved, Avista shareholders would receive $53 per common share, a 24% premium to the stock's closing price before the deal was announced. FERC's approval of the merger highlighted the companies' promise that Avista’s customers would be held harmless from costs related to the deal.

Dive Insight:

The Hydro One deal would give Avista a leg up in the U.S. market. Avista is one of the smallest investor-owned utilities in the nation, with 379,000 electric customers and 342,000 gas customers in eastern Washington, northern Idaho and part of southern and eastern Oregon. Hydro One is Ontario's largest electricity transmission and distribution provider with more than 1.3 million customers.

But the deal has sparked controversy back in Canada with the leader of the Progressive Conservative party, a right-of-center opposition party in Ontario's provincial parliament, criticized the utility for using ratepayer money to "buy up foreign companies."

"You’ve got hard-working Ontario families paying higher hydro bills while Hydro One now has nearly $7 billion [in Canadian dollars] to throw at foreign companies," PC leader Patrick Brown said to the Toronto Star at the time of the announcement. "Tell me how that works?"

The Ontario government once owned Hydro One and is still the largest minority owner with a 45% stake. Avista and Hydro One have defended the deal, saying it would create "clear benefits" for customers and lend the utility the ability to expand deeper into the U.S. market.

The Committee on Foreign Investment in the United States must also approve the transaction, and it must comply with requirements of the Hart-Scott-Rodino antitrust law.