NextEra CEO: Hawaii’s opposition to Hawaiian Electric merger not a surprise
The state of Hawaii recommended that state regulators adopt certain conditions if they decide to approve the merger
NextEra Energy Chairman and CEO Jim Robo said on Aug. 3 during the company’s 2Q15 earnings conference call that the recently filed testimony of the state of Hawaii opposing NextEra Energy’s merger with Hawaiian Electric Industries “was not necessarily a surprise.”
In July 20 testimony filed with the Hawaii Public Utilities Commission (PUC), Leo Asuncion, acting director of the state of Hawaii Office of Planning, said that the office of planning’s recommendation would be for the PUC to not approve the proposed transaction and to “have further discussion and/or resolution to the issues brought forth by the office of planning.”
Asuncion claimed that NextEra Energy, with respect to the merger, has focused on the “business side” and has provided minimal focus on the “societal side.”
NextEra Energy and Hawaiian Electric last December announced their plan to merge in a transaction valued at about $4.3 billion.
Hawaii Gov. David Ige, in a July 21 statement, said that although he welcomes capital investment in Hawaii with respect to energy, any merger must align with the state’s 100 percent renewable energy goal.
“The state respectfully opposes the merger in its current form because it fails to align with the state’s renewable energy goals,” Ige said.
During the earnings conference call, Robo noted that, while the state of Hawaii opposed the merger “in its current form,” the state offered several conditions that “would be positive for them to think about changing their view.”
Silver Spring, Md.-based attorney Scott Hempling, in July 20 testimony on behalf of the office of planning, recommended that if the PUC approves the merger, it adopt conditions that, for instance, would protect Hawaii’s utilities from NextEra Energy’s business risks, prevent inappropriate movement of capital away from the Hawaii utilities and prohibit inappropriate interaffiliate transactions.
Among Hempling’s concerns about the transaction, as proposed, are threats to competition from vertical and horizontal features of the merger.
Hempling said that, for instance, one horizontal feature of the merger would be Hawaiian Electric unit Hawaiian Electric Co.’s (HECO) ownership of much of the generation serving its customers, while a vertical feature of the proposed acquisition would be NextEra Energy’s ongoing development of a grid-tied undersea cable system that would interconnect the Hawaiian islands of Oahu and Maui.
“The cable would be an upstream input to the distribution services provided by HECO and [Hawaiian Electric unit Maui Electric Co. (MECO],” Hempling said. “It would also be a downstream vehicle by which NextEra-owned generation located on either island could reach the HECO and MECO distribution facilities controlled by NextEra.”
The undersea cable project, which is in the planning stage, would include construction of two high-voltage undersea cables and associated on-island facilities with a system transfer capability of 200 MW.
Robo said during the conference call that NextEra Energy is in the process of responding to the state’s testimony.
“We think we have a very strong case to put forward to the PUC around the benefits to customers,” he said. “We look forward to the hearings that we will have in December to make our case.”