Dive Brief:
- Arizona regulators have signed off on the $4.3 billion acquisition of Tucson Electric Power Co. (TEP) and UniSource Energy Services (UES) parent company UNS Energy Corp. by Canadian utility company Fortis Inc.
- The 5-0 vote on Aug. 12 was the last hurdle for the deal as federal regulators and the companies' shareholders have already agreed. The deal, which includes the assumption of $1.8 billion in debt by Fortis, is expected to close by the end of August.
- The decision approved a settlement that indicated UNS Energy will remain under local management and customers will receive $30 million in bill credits over the next five years.
Dive Insight:
What a difference 10 years makes. In 2004, the Arizona Corporation Commission (ACC) rejected a leveraged buyout of UNS Energy, at the time called UniSource Energy. The bid, led by Kohlberg Kravis Roberts & Co., was found to not be in the public interest.
Perhaps that history is where the $30 million customer credit originates. The deal initially called for Fortis to inject $200 million in equity into the utility, but the approved settlement boosts that commitment by an additional $20 million.
Under terms of the settlement approved by the ACC, TEP and UES will remain headquartered in Tucson with current management and staffing levels in place. The settlement also includes provisions intended to protect each regulated utility and its customers, including a requirement that UNS Energy be overseen by an independent board of directors, a majority of whom are Arizona residents.
