Dive Brief:
- Hawaii residents’ opposition to the proposed $4.3 billion takeover of Hawaiian Electric Industries (HEI) by NextEra Energy (NEE) could prevent state regulators’ approval of the deal, according to a December report by UBS Financial Services, the investment research arm of Switzerland’s UBS Bank.
- "We continue to bias towards the deal breaking up given persistent consternations from an array of constituencies in Hawaii," the report said. Hawaii Governor David Ige and other state leaders oppose approval by the Hawaii Public Utilities Commission (PUC).
- Morningstar financial analyst Charles Fishman says there is a 75% chance of the deal being completed. Wells Fargo Securities downgraded its estimation of the deal going through from 75% to 50% in November.
Dive Insight:
Much of the opposition, including that from Governor Ige, comes from those who do not believe NextEra will support Hawaii’s newly enacted 100% renewables by 2045 mandate and UBS sees that as a worsening obstacle. “The debate around NEE's commitments to Hawaii's renewables-goals have been an area of concern for quite some time now; and we think the debate will intensify.”
Doubts about NextEra’s commitment to Hawaii’s renewables mandate were underscored when the PUC rejected the Power Supply Improvement Plan (PSIP) proposed by HEI’s main subsidiary, the Hawaiian Electric Company (HECO), noting “significant concerns.”
Despite commission guidance, the PUC explained, the HECO PSIP raised a long list of commission concerns about costs and risks, about failing to plan for renewables, about over-investment in liquefied natural gas (LNG) infrastructure, and about not adequately protecting ratepayers. HECO promised a response by April 1, 2016, with greater recognition of the 100% renewables by 2045 mandate.
“Cultural barriers may be too difficult for [NextEra Energy] to overcome,” Wells Fargo concluded, and “management is more than willing to walk away… NEE wants but does not need to acquire HEI.”
