A New Orleans-based consumer group asked Thursday that state regulators reject efforts by a group of investors led by an Australian firm to buy Cleco Power for $3.53 billion.
The deal is based on shaky finances that will pay Cleco shareholders a premium but could leave the utility’s customers in parts of north shore, Acadiana and central Louisiana “holding the bag,” according to an analysis of the transaction by the Alliance for Affordable Energy.
It’s a position with which the Louisiana Public Service Commission’s consultants generally agree.
Robert Lane Sisung, the consultant hired by the PSC to analyze the deal, said in testimony circulated to the commissioners earlier this week “that that the Transaction as currently proposed is not in the public interest.” But it could be, if Cleco modifies the deal along the financial lines recommended by the PSC staff, he said.
“That obviously is an issue,” Public Service Commissioner Scott Angelle said Wednesday of the report. Whether Cleco can address those issues would go a long way in deciding how the regulators would consider the sale, he added.
“We are working through the Commission’s regulatory process for final approval,” Robbyn Cooper, Cleco Corp. spokeswoman said in emailed statement Thursday. “Our board of directors worked hard to structure a transaction that would be good for all of Cleco’s stakeholders, including our customers, employees, retirees and our communities, and bring exceptional value to our shareholders. The transaction does just that.”
A hearing on the transaction is scheduled for November, meaning the five elected commissioners probably vote on it until January or February.
The Federal Energy Regulatory Commission on July 20 approved the acquisition of Cleco, which was begun in 1914 in Bunkie and is now headquartered in Pineville, by a investment group headed by Macquarie Group Ltd., of Australia, and includes British Columbia Investment Management Corp. together with John Hancock Financial and other investors. The proposed takeover would have shareholders sell their Cleco stock at a 14.8 percent premium. The company’s stock price was $54.15 per share on Thursday.
The PSC is the last regulator whose approval is necessary for the deal to go through. Because Cleco operates as a monopoly in its service area for its 286,000 Louisiana customers, the PSC must decide if the business decisions the privately owned company makes is in the public interest.
The Alliance for Affordable Energy is concerned that the “enormous premium,” which is worth $435 million for shareholders, saddles Cleco with additional debt that its Louisiana customers “would eventually be on the hook to pay.”
Of the $3.53 billion price — Cleco values its utility plants at $3.15 billion in federal filings — an estimated $1.45 billion is new debt to be added to the company’s $1.37 billion existing debt. Cleco’s customers would be obligated to repay the debt as part of their monthly utility bills, according to the alliance.
Additionally, six corporate executives would receive a combined $47 million immediately as a result of the sale, the group’s analysis states.
Follow Mark Ballard on Twitter, @MarkBallardCNB.