Energy Company Announces $9.4b Acquisition Of Pacificorp
|PacifiCorp's Huntington Power Plant.|
In a move that will affect many local Castle Valley employees corporate executives of MidAmerican Energy Holdings announced Tuesday that it will acquire PacifiCorp from ScottishPower.
PacifiCorp presently operates as Utah Power in Utah and Idaho and as Pacific Power in Oregon, Washington, California and Wyoming.
PacifiCorp owns a network of 10 thermal power generation facilities throughout the region, including plants near Helper, Huntington and Castle Dale. The company employs 6,500 workers and supplies power to over 1.6 million customers, 703,743 of which are located in Utah.
Utah Power, PacifiCorp's subsidiary is the primary provider of power in the Castle Valley, directly supplying power to most businesses and residents in the valley. Other customers, such as those living within Price City receive power from a municipal power company, which in turn purchases most of its power from Utah Power.
MidAmerican is a privately held company which operates a system of energy generation and distribution in Iowa, Illinois, Nebraska, Ohio and South Dakota. A significant difference from ScottishPower is that MidAmerican is privately owned and not public traded. By not having a dividend policy to meet, MidAmerican expects to be able to invest more into PacifiCorp without expecting an immediate sizeable return.
The acquisition is valued as approximately $9.4 billion, which MidAmerican plans to pay in cash. In addition, MidAmerican plans to contribute approximately $1 billion annually for at least the next five years to PacifiCorp to develop capital resources.
"I'm pleased with this proposed transaction because we will be continuing to operate PacifiCorp largely as a standalone entity," said Judi Johansen, president and chief executive officer of PacifiCorp in a press conference Tuesday.
|A number of employees were in on an award PacifiCorp gave for safety in a large power plant operation in March to the Huntington Plant. They include Ken Eley, Dave Sharp, Emilio Aguayo, Pat O'Neil, Gary Denhlter, Scott Young, Ed Lee and Dale Wharram. Now all these men will be working for a new owner, although the part of the company where they will be employed will still go by the name PacifiCorp.|
"MidAmerican has a model that we think is going to work quite well here, which is to maintain the local operation and local presence, which is really important for all of our states and for our communities," Johansen continued.
"It's not about what some mergers often are, which is to put two and two together and cut out 1,000 employees. This is not about that at all," said David Sokal, chairman and chief executive officer of MidAmerican as he explained that no jobs are expected to be cut because of the merger.
Executives also explained that rates are not expected to be affected by the merger. PacifiCorp plans to continue to increases rates where it believes those increases are warranted.
"One thing we do look forward to is working with each of the states, specifically Utah, where there is a great deal of growth, to identify the right way forward," said Gregory Abel, president and chief operating officer of MidAmerican.
An area which could complicate the merger is the need to comply with the Public Utility Holding Company Act of 1935. Among other strict requirements, PUHCA requires that companies such as MidAmerican and PacifiCorp be geographically and operationally integrated.
"We're quite comfortable that the Public Utility Holding Company Act is not and impediment and will not inhibit this transaction as it goes forward," said Sokal.
MidAmerican and PacifiCorp are have as much as 350 miles between their service areas, but executives believe that because the areas are similar in nature, they can be looked at as one region. They also plan to comply with PUHCA requirements through a contractual path between the two systems.
The transaction has been approved unanimously by both companies' boards of directors and will result in a company with assets totaling more than $32 billion internationally, of which $25.3 billion are in the United States.
ScottishPower plans to return $4.5 billion from the sale to shareholders after the transaction is completed. Parties involved expect the transaction to be finalized in the next 12 to 18 months.