NextEra Ends $2.63 Billion Hawaii Deal as Regulator Says No

  • Hawaiian Electric to get $90 million breakup fee from buyer
  • NextEra also said to bid on Texas’s largest power distributor

NextEra Energy Inc. canceled its $2.63 billion bid to purchase Hawaiian Electric Industries Inc., and may now concentrate on efforts to buy the largest power distributor in Texas.

NextEra will pay Hawaiian Electric a $90 million breakup fee and as much as $5 million for expenses related to the failed takeover, the companies said Monday in a joint statement. The Hawaii Public Utilities Commission voted 2-0 Friday against the proposed transaction saying the companies failed to show it was in the public interest.

The decision may allow Juno Beach, Florida-based NextEra to focus on its pursuit of Oncor Electric Delivery Co., Bloomberg Intelligence analyst Stacy Nemeroff said Monday. NextEra, the largest wind- and solar-generation owner in North America, is said to have submitted a bid to buy the Texas utility company, according to people familiar with the talks.

“They don’t face the same regulatory challenges as they did in Hawaii,” Nemeroff said by phone. “Oncor doesn’t own generation.”

Analysts had been skeptical about the Hawaiian Electric takeover gaining state approval given that Governor David Ige, a Democrat, had questioned NextEra’s commitment to the state’s goal of reaching 100 percent renewable power by 2045. On June 29, Ige appointed Thomas Gorak as commissioner, whom analysts said could be more critical of the deal than an outgoing regulator.

Environmental and rooftop solar groups had opposed the merger, citing concerns about NextEra’s support of home solar installations and saying the company had pushed back against the systems in its home state of Florida.

Rooftop Solar

“While the acquisition would have provided NextEra with geographic diversity, we do not believe it is integral to NextEra’s above-average EPS growth prospects of 6 percent to 8 percent,” Michael Worms, an analyst at BMO Capital Markets, wrote in a note Sunday. BMO affirmed its buy rating on the stock.

Hawaii regulators raised concerns about the benefits to ratepayers, the loss of local control of the utility and the companies’ commitments to deploying rooftop solar systems.

“Instead of envisioning a 21st century grid that enables customer options like rooftop solar, NextEra wanted to double-down on its ‘build more, pay more’ monopoly business,” Hajime Alabanza, executive assistant with Hawaii Solar Energy Association, said in a statement. “The commission understood this isn’t the right direction for Hawaii’s customers.”

Missed Deadline

The commission ruling came amid a flurry of utility mergers and acquisitions as customers using more energy-efficient appliances and resources such as rooftop solar flatten electricity demand. There were more than $52 billion worth of utility deals pending or completed across the U.S. last year, the most since 2011, data compiled by Bloomberg show.

NextEra and Hawaiian Electric said June 4 that neither company had terminated their tie-up after Hawaii regulators missed a merger agreement deadline for deciding whether to approve the transaction.

When the deal was announced in December 2014, NextEra Chief Executive Officer Jim Robo said that Hawaiian Electric could be a testing ground for a transition from fossil fuels to power generated from the sun and wind.

NextEra had promised $60 million in customer savings and pledged support for Hawaii’s 100 percent renewable energy target. The company said its takeover of Hawaiian Electric had the backing of more than 100 Hawaii-based groups including chambers of commerce, labor unions and Native Hawaiian organizations.

Hawaiian regulators left the door open for NextEra or other suitors for Hawaiian Electric, saying Friday it would consider future takeovers.

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