Avista Corp. and Hydro One Ltd. have abandoned plans for the Canadian utility to buy Avista.
The two companies announced the termination of the proposed $5.3 billion deal Wednesday afternoon. Hydro One’s financing for the sale expires in April and the companies were facing a March 29 deadline to complete the transaction.
Both companies concluded it would be difficult to overturn the earlier denial of the sale by Washington and Idaho regulators in time to meet the deadline.
As required by the sales agreement, Hydro One will pay Avista a $103 million termination fee. Avista will use the money to offset expenses from the proposed sale and for other company purposes.
“This one didn’t work out,” Scott Morris, Avista’s chairman and chief executive, said in a phone interview. “(Avista) stays an independent company.”
Morris announced the proposed sale at a news conference in July 2017, introducing Hydro One as a partner with corporate values similar to Avista’s. But the province of Ontario’s 47 percent ownership stake in the Toronto-based utility quickly became a target for opponents of the sale.
After newly elected Ontario Premier Doug Ford fired Hydro One’s board of directors in July and asked for the CEO’s retirement, state regulators’ review of the sale shifted to how much control the province exerted over Hydro One. Ford said he was fulfilling a campaign promise.
“I did not foresee the political upheaval, and it changed the tenor of the deal,” Morris said.
Avista Customer Group, made up of utility customers opposed to the sale, had argued that a foreign government’s influence over Hydro One made the company a poor choice to acquire Avista.
“Us attempting to show that was trumped by it actually happening,” said Norman Semanko, attorney for Avista Customer Group. “I wish Avista nothing but the best, but this Hydro One wasn’t the best fit.”
Public utilities commissions in Washington and Idaho referenced the politically motivated firings at Hydro One during hearings. The Washington Utilities and Transportation Commission denied approval of the sale in December, saying it wasn’t in the best interest of Avista or its customers.
The Idaho Public Utilities Commission denied approval earlier this month, saying the sale would violate state law.
Morris said he remains proud of the deal and thinks customers would have benefited. He said the sale terms contained “unprecedented safeguards” for Avista, allowing the company to keep its Spokane headquarters and to be run by an independent board of directors. After the sale, Avista would have continued its role in local philanthropy and economic development. The sale agreement also contained rate credits for customers.
Avista’s focus has always been on its “communities, employees and customers,” Morris said. “We followed our values. … I’m convinced, at the end of the day, they would not have seen any differences.”
After Washington regulators denied the sale, Guggenheim Securities analyst Shahriar Pourreza said Avista would remain a potential takeover target.
“We could eventually see another white knight and therefore we do not eliminate the possibility that (Avista) could be a potential take-out candidate in the future,” he wrote in a December research note. In business, a white knight refers to a company recruited for a friendly acquisition.
Morris, however, said Avista won’t be looking for another merger partner. He said Avista’s board accepted Hydro One’s offer because it represented an “extraordinary opportunity” to join with a larger utility while still keeping Avista’s Spokane roots and a high level of autonomy.
Morris said Avista has a strong balance sheet and wasn’t seeking the sale to Hydro One for financial reasons. He plans to stay on as Avista’s chairman and chief executive officer.
The utility, formerly known as Washington Water Power, was founded in 1889 when Washington was still a territory. It generated electricity from Spokane Falls.
“We have a strong desire to stay independent,” Morris said. “We’re coming up on 130 years” in Spokane.
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