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 Central Vermont Public Service 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 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.
Green Mountain Power CEO Mary 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.
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 June 20, 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.