Louisiana PSC approves Cleco takeover
- Louisiana Public Service Commission (PSC) on Monday approved utility Cleco Corp.'s takeover by a group of international investors led by Australia-based Macquarie Infrastructure & Real Assets, SNL Energy reports.
- The PSC intially voted against the $4.7 billion deal in February, saying it wasn't in the public's best interest despite Cleco's attempts to win over their approval by significantly boosting customer credits.
- Two of the commissioners who previously voted against the $4.7 billion deal in February said the investor group's new set of commitments — $136 million in customer credits and a promise to not seek a rate increase until 2019 — made the deal more "palatable."
In the span of less than a week, two utility mega-mergers that appeared to be in their death throes have surprisingly won approval in jurisdictions where opposition seemed strongest. Approval from Louisiana regulators was the last remaining hurdle before the deal could close. Cleco said in a statement that it expects the transaction to close sometime in April. The other deal, Exelon's acquisition of Pepco, closed after D.C. regulators approved the deal on the third try before the commission.
The increase in value to ratepayers and a promise to not seek a rate increase for the next three years appeared to win over regulators in Australian investor firm Macquarie's attempt to take Cleco Corp. private.
In order to woo support for the deal, the companies offered to increase customer rate credits above what staff suggested, which was $125 million over 15 years. Customers will receive an estimated $1.2 million per year in cost-of-service savings from the deal, which the investor group believes will bring total customer savings to approximately $143 million in the next decade and a half.
On March 22, Cleco and the investor group asked the Commission to reconsider their rejection, and came out with a new set of commitments, including boosting their customer credits from $125 million to $136 million and not seeking a rate increase until 2019.
"It's a hell of a deal," said Commissioner Foster Campbell, who took credit for securing the concession to delay seeking a rate increase—something he considered key to approval. "I've listened to it, and we've added some things to it; it has become palatable to me."
Not all Commissioners were pleased. PSC Chairman Clyde Holloway remained steadfast in his opposition. Previously, he told the New Orleans Advocate that Cleco was "in great shape today."
"So why in the world do they need to sell?" he asked. "Wall Street greed."
Casey DeMoss, CEO of customer advocacy group Alliance for Affordable Energy criticized how the rate case moratorium came about, saying the decision was "running fast and loose with public policy." DeMoss also pointed to concerns intially raised by a Louisiana Administrative Law judge.
Before the February rejection, a a Louisiana Administrative Law judge recommended greater scrutiny over the proposal to take Cleco private, casting doubt on customer benefits and a loan scheme that would move tax money into the pockets of investors.
One of the judge's main concerns was an inter-company loan that would create deductions and ultimately result in about $30 million in funds collected as taxes that would remain with the company.
Follow Krysti Shallenberger on Twitter