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Gaz Metro makes bid to merge CVPS with Green Mountain Power  

Credit:  By Anne Galloway, vtdigger.org 23 June 2011 ~~

In a surprise move, Gaz Metro is attempting to woo Central Vermont Public Service away from a deal with Fortis, Inc. Gaz Metro made a bid to buy CVPS on Thursday with a public offer of 15 cents more per share than the purchase price deal from Fortis, Inc.

Gaz Metro owns Green Mountain Power, Vermont’s second largest utility, which provides electricity to 90,000 homes, or 30 percent of the state’s ratepayers. The Montreal-based company also owns Vermont Natural Gas, the state’s only natural gas company.

CVPS, based in Rutland, is Vermont’s largest utility with 160,000 customers, 517 employees and $342 million in annual revenue. The company, based in Rutland, serves about 40 percent of the state’s ratepayers.

If the merger proposal is approved by CVPS directors, shareholders and Vermont regulators, Green Mountain Power would provide electricity to 70 percent of Vermont’s utility market.

Mary Powell, CEO of Green Mountain Power, made the announcement on Thursday in Rutland.

“This is an opportunity to secure long-term cost savings for customers of both companies, invest in renewable energy and protect local jobs, while strengthening the Vermont economy,” Powell said. “It is positive for the customers and communities served by the combined utility.”
Sources say it is the second time Gaz Metro has attempted to buy CVPS in less than a year. The company made a secret bid last fall.

CVPS President Larry Reilly responded to the announcement in a statement in which he declined to comment. “This offer requires us to convene our board of directors to evaluate the proposal in depth as soon as possible,” he said. “Until the board of directors has an opportunity to examine the offer, we are precluded from making any further comment.”

Officials from Green Mountain Power said they anticipate it could be a week or more before the CVPS board issues a response, officials from Green Mountain Power said.

Gov. Peter Shumlin, who gave the Fortis-CVPS a chilly reception, warmly welcomed the Gaz Metro deal in remarks at a press conference.

“Having glanced at the offer made by Green Mountain Power, it is my conclusion that is the best of the offers I have reviewed for three reasons: lower rates for ratepayers, it’s a company with a proven track record with renewables and is committed to renewables and the (ratepayers) in the offer become 20 percent owners in the VELCO system, which is good for Vermonters,” Shumlin said.

The governor compared the state’s rocky relationship with Entergy Corp., the Louisiana-based company that owns Vermont Yankee, to its rapport with Gaz Metro, which has been an energy player in the state since 1986 when it bought Vermont Natural Gas. The Canadian company purchased Green Mountain Power in 2006.

Shumlin said he preferred local ownership of CVPS, but barring that, he said consolidation of the two companies makes sense because it could ultimately mean lower rates.

“I’ve danced with some partners, as has the state of Vermont over the last several years,” Shumlin said. “We had Entergy Louisiana come in and buy one of our generating facilities. That’s a company that in my judgment doesn’t do business the way we do business in Vermont. Then we have experience over the last 30 years … with Gaz Metro and our experience has been that they do business the way we do business in Vermont.”

Shumlin has questioned whether the Fortis deal, which he said boosted stock values by $150 million in one weekend, is beneficial to ratepayers. Numerous sources have indicated that the governor and Vermont regulators were surprised by the Fortis purchase and weren’t informed of the agreement until after the deal was sealed. This approach, sources say, stands in stark contrast to Gaz Metro’s buyout of Green Mountain Power in 2006, in which the company informed the governor in advance and embarked on a public relations campaign the day the agreement was announced. The governor said he was briefed about the Gaz Metro offer to buy CVPS a week ago.

CVPS is Vermont’s largest utility with 160,000 customers, 517 employees and $342 million in annual revenue. The company, based in Rutland, serves about 40 percent of the state’s ratepayers.

If the merger proposal is approved by CVPS directors, shareholders and Vermont regulators, Green Mountain Power would provide electricity to 70 percent of Vermont’s utility market.

The CEO of Green Mountain Power, Mary Powell, is scheduled to make the announcement in Rutland at 11 a.m.

In a statement released this morning, Powell said the deal will bring significant benefits to Vermont ratepayers.

“This is an opportunity to secure long-term cost savings for customers of both companies, invest in renewable energy and protect local jobs, while strengthening the Vermont economy,” Powell said. “It is positive for the customers and communities served by the combined utility.”

Sources say it is the second time Gaz Metro has attempted to buy CVPS in less than a year. The company made a secret bid last fall.

“This offer requires us to convene our board of directors to evaluate the proposal in depth as soon as possible,” CVPS President Larry Reilly said. “Until the board of directors has an opportunity to examine the offer, we are precluded from making any further comment.”

According to Green Mountain Power officials, the Gaz Metro deal would save $144 million for the combined utilities – and ratepayers – over the next 10 years. The agreement would result in continued savings into the future, an official said, because of the long-term consolidation of redundant services.

The savings would come from operational efficiencies, staffing changes over time due to turnover and retirements, reduced regulatory and public company costs, lower expenditures on facilities and better coordination of existing line crews, according to a press release from Green Mountain Power.

Fortis, a $13 billion holding company based in St. John, Newfoundland, offered $700 million to purchase CVPS’ assets and to buy out shareholders at a rate of $35.10 per share on May 30.

The CVPS-Fortis agreement, which must be approved by shareholders and Vermont regulators, has been widely viewed as beneficial to investors who would stand to earn more than $10.78 per share over the strike price of $24.32. Directors of the company stand to make millions of dollars as a result of the deal.

Gov. Peter Shumlin has questioned whether the Fortis deal is beneficial to ratepayers. Numerous sources have indicated that the governor and Vermont regulators were surprised by the Fortis purchase and weren’t informed of the agreement until after the deal was sealed. This approach, sources say, stands in stark contrast to Gaz Metro’s buyout of Green Mountain Power in 2006, in which the company informed the governor in advance and embarked on a public relations campaign the day the agreement was announced.

CVPS must obtain approval from the Vermont Public Service Board to move forward with the agreement. That process could take six months to a year.

Gaz Metro’s offer comes with a large-scale solar energy development project in Rutland and the establishment of a new southern Vermont headquarters for the combined company in the city.

In addition, Green Mountain Power would effectively donate 30 percent of its VELCO stock ownership (the utility’s share of the transmission utility) to the state of Vermont through a public trust, called the Vermont Low Income Trust for Energy. Dividends from the stocks, which now are about $1 million per year, would be used to lower electric rates for elderly and low-income customers in the state.

If CVPS directors walked away from the Fortis deal, the Vermont utility would have to pay a $20 million breakup penalty. Gaz Metro, an official said, would likely pay the fee.

There would be no layoffs among utility workers as a result of the Gaz Metro-CVPS merger, an official said. Senior management at both companies would be “realigned,” however.

Gaz Metro has 180,000 customers in Quebec. The company owns Northern New England Energy Corporation, which owns Vermont Gas and Green Mountain Power.

Fortis is the largest investor-owned utility in Canada. It serves 2 million gas and electricity customers in five Canadian provinces and two Caribbean countries. The deal with CVPS would give the company a toehold in the United States. Fortis also has non-regulated generation assets in Belize and New York State, and the company owns hotels, commercial office and retail space in Canada.

On Monday, the government of Belize expropriated Fortis ownership of Belize Electricity Limited. The Canadian corporation lost its 70 percent stake in the Belize utility, which represents about 2 percent of its total assets. Fortis also owns Belize Electric Company Limited, which operated three hydro electric generating facilities in Belize. The government has not ordered expropriation of the Belize dams. Critics say one of the dams has caused the flooding of a rich ecosystem downstream and has led to fish die-offs.

[videos and links at source]

Source:  By Anne Galloway, vtdigger.org 23 June 2011

This article is the work of the source indicated. Any opinions expressed in it are not necessarily those of National Wind Watch.

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