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Analysts: NextEra purchase of HEI looking less likely


    Public Utilities Commission Commissioner Lorraine Akiba, left, and commission Chairman Randy Iwase listen as Eric Gleason, president and CEO of NextEra Energy Hawaii testifies at hearings at the Blaisdell Center on Feb. 2.

NextEra Energy Inc.’s proposed $4.3 billion takeover of Hawaiian Electric Industries Inc. is looking increasingly less likely as the company gets a new chance to buy the largest power distributor in Texas, analysts said.

This month’s collapse of a deal for the Oncor Electric unit of Energy Future Holdings Corp. may prompt NextEra, North America’s largest generator of wind and solar power, to dump the Hawaii deal for a second pass at Oncor. NextEra can exit the 18-month-old deal after June 3 by paying the utility and bank owner about $95 million, Hawaiian Electric Chief Financial Officer James Ajello told investors May 4. Hawaiian utility regulators haven’t scheduled a vote on the 18-month-old offer, which has come under criticism in the state.

Opponents have questioned NextEra’s commitment to Hawaii’s goal of 100 percent renewable power by 2045 and dislike ceding control to the Florida-based company.

“These sustainability and governance concerns may trump any potential concessions NextEra is willing to offer to sweeten the deal,” Bloomberg Intelligence analyst Stacy Nemeroff wrote in research published Tuesday. “NextEra may decide to take the loss so that it can move forward with other potential acquisitions.”

Tepid Demand

Tepid power demand and mounting costs have spurred a flurry of North American utility mergers. Since last year, companies have announced $80.8 billion of U.S utility takeovers with 2015 being the biggest year since 2011, according to data compiled by Bloomberg.

NextEra recently renewed its interest in buying Oncor, two people familiar with the talks said May 12 on condition they not be named discussing private negotiations.

Oncor’s power system is “a great strategic fit” for NextEra, which can afford to walk away “from the uphill battle in Hawaii,” Shahriar Pourreza, a New York-based analyst for Guggenheim Securities LLC wrote in research published Tuesday.

Darren Pai, a spokesman for Hawaiian Electric, had no immediate comment when reached before business hours there on Tuesday. A representatives of NextEra didn’t immediately return calls seeking comment. Allan Koenig, an Energy Future Holdings spokesman, declined to comment.

Withdrawn Bid

A group led by Hunt Consolidated Inc. on May 18 withdrew from its agreement to buy Oncor after regulators said ratepayers may share in future tax savings arising from the deal. That put the company, which has about 119,000 miles of lines and more than 3 million meters, back on the market.

NextEra was once considered the frontrunner for Oncor. It expressed renewed interest after Oncor parent Energy Future replaced its bankruptcy reorganization plan on May 1, according to the people, who asked not to be named discussing private negotiations.

The change freed Oncor up to be pursued by other bidders, Chief Executive Officer Robert Shapard said at a Texas regulatory hearing May 4. “We are to work with all parties interested in buying the company at this point,” Shapard said at the hearing.

NextEra Chairman and Chief Executive Officer James Robo said in December 2014 that Hawaiian Electric, which serves 95 percent of the state’s population, could be a testing ground for a transition from fossil fuels to power generated from the sun and wind.

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  • Good. NextEra comes to Hawaii waving a business plan that it cannot replicate as proof they can save us $1 a month and expect us to buy that. And they promise no layoffs, yet admit they’re planning to gut the union leading to an even bigger brain drain. And if that wasn’t so bad, we have stark evidence of Florida politicians being bought out with literal brown envelopes to rubber stamp any legislation NextEra wants. HEI isn’t great, but NextEra lies, lies some more and lies on top of that with a history of political toxicity. We already have enough problems in Hawaii. We don’t need them to add to the mountain.

    • I agree with Gov. Ige and Choyd on this one: The attempt at a rushed sale that served the interests mainly of the HECO directors and senior management along with real questions about this Florida-based company made me nervous from the start. Let us move on…HECO is a miserable company and is very poorly run. But it is a local company after all.

      • HEI is one of the largest employers of engineers. What do you think will happen when those jobs get cut? I’m not the biggest fan of unions, but a union that employs those types of people being reduced cannot result in anything but an increase in brain drain.

        • goodday, and what happens when NextEra plans on gutting the entire work force?

          Do you seriously believe that there will be more high paying jobs for professionals after this merger?

    • Yup, because now she’ll REALLY have to work at improving the company and it’s infrastructure, and restoring the trust of it’s employees and customers. No easy $10 million in the pocket for that task. All self-inflicted, of course.

      • She and the whole cluster should resign for doing such a bad job. Anyone including Nextera could see it. Stockholders should throw her out.

        • That’s probably why she was offered that $10.6 million golden-parachute/exit money if the deal goes through. NextEra would want to put in their own management team in order to run things their way. In either case, I agree with you, the whole shebang should be replaced.

  • HECO enjoys near monopoly status in Hawaii. Periodic rate hikes are all but guaranteed by the PUC. The stock saw a significant price increase with the announcement of the NextEra deal, and will likely see a significant price decrease when and if the deal is cancelled. Get ready to back up the truck.

    • I owned quite a bit of HE stock because of the 5.5% dividend and when the deal was announced and the stock spiked, I sold. Why any company would want to buy ANY company in Hawaii with its taxes and regulations and one party system is beyond me. Let the citizens suffer–as usual!!!

      • Because the ROI is huge. The actual out of pocket costs are relatively minimal and the dilution of the shares is easily made up by the net profit that a HEI subsidiary would add. NextEra stands easily to make over 50% ROI annually on this merger.

  • HE stock was at $28 when the merger was announced in December 2014. Hit $34 in January 2015. Today HE closed at $32.85. Shareholders have also received $1.55/share in dividends since December 2014. Will a “non-merger” be an issue for shareholders?

  • Pretty much everyone in the State hates HECO and most people are against the merger. I guess its a case of better the devil you know (than the devil you don’t).

  • The evil monster named NextEra has found another bigger victim/snack to ‘munch on’ in the buffet line. Connie Lau must be crying having to kiss her $10M pay check goodbye !

    • Dont be surprised if she gets a good chunk of that 90 million from Nexerror. She is too greedy to not have something in it fer herself. And I dont think Nexteror is going away that easy. The Island is a gold mine for them with all the condos going up that can never get PV.

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