PSE Merger approved at deadline 12/31/2008

I am not 100% sure what this merger sucess will mean to me personally and my group here in Tacoma, the New Construction Division of PSE, yet I am positive and excited about the changes it will bring. Sad to lose the stock investment option in the company I am employed with, yet time to diversify anyway. Didn't ENRON teach us anything?
Here is what the Seattle Times had to say on December 31, 2008:

Wednesday, December 31, 2008
State approves Puget Energy purchase by foreign group
'Creates too much risk,' dissenter says
By BILL VIRGIN, P-I REPORTER
The Utilities and Transportation Commission has approved the purchase of Bellevue-based natural gas and electric utility Puget Energy Inc. by an Australian-Canadian investment consortium, saying the conditions it is imposing "reasonably assure" that the deal "will not harm the public interest."
The proposed purchase by an Australian investment banking group and three Canadian pension funds was controversial from the day it was announced in October 2007 and remained so up to Tuesday's announcement.
UTC commissioners approved the deal by a 2-1 vote, with Commissioner Philip Jones writing in dissent that the deal "creates too much risk, and potential harm, for ratepayers and stakeholders." He said the debt levels being taken on by the new Puget "will place great pressure on the commission to approve the necessary large and frequent rate increases on a consistent basis." But Commissioner Mark Sidran, who is leaving the UTC early next year, and Commissioner Patrick Oshie wrote in their majority opinion that the Puget deal is less leveraged than others the commission has approved. They also said that the agreement includes protections for ratepayers and that regulation by the UTC won't change even though the utility's ownership structure has.
"There is at least as much risk, and probably more, facing PSE and its customers if the settlement is rejected," they added. "We believe that the transaction not only does no harm, it offers affirmative benefits to ratepayers and to the region."
Puget Energy Chief Executive Steve Reynolds said the decision, and the additional conditions imposed by the UTC, will have to be reviewed by the company and the acquirers. If both accept the decision, the purchase could close in 15 business days.
"I'm very pleased we finally have a decision," Reynolds said.
Reynolds said tumultuous conditions in the debt and equity markets in recent months, shutting off access to capital for many businesses, make the acquisition even more attractive now than when it was first announced.
Puget Energy (the subsidiary utility operates as Puget Sound Energy) contends it needs to find partners with deep pockets of available capital because of its huge capital needs to expand and maintain its natural gas and electrical-distribution systems and to add new power-generation facilities such as wind-turbine farms; however, it doesn't say that having the new owners would make that capital any less expensive than seeking it on its own.
"This transaction keeps us in a really good position to be a financially sound provider" to its customers, Reynolds added.
That was a point emphasized by the commissioners who approved the deal. "The investor consortium represents very large pools of 'patient capital' that invest in utility companies like Puget Energy expecting relatively stable long-term returns that are a good fit with the relatively long-term liabilities of pension funds and endowments," the majority opinion said. "There is no evidence in our record that the consortium intends or desires to 'flip' its investment in Puget Energy in the near term or at any particular point in time."
Presuming that the deal closes as scheduled early next year, it won't mean any immediate changes for the utility's customers in the region. In fact, the settlement among Puget, its would-be buyers and most of the intervenors in the case includes a provision for some rate credits over the next 10 years.
The biggest immediate effect will be felt by those who own Puget's common stock. Even though the investment group will pay $30 a share for Puget, doubt in the market about whether the deal would actually be approved or completed kept its stock price well below that. In trading Tuesday, Puget closed at $23.17 a share, down 5 cents. The decision was released after the close of regular-hours trading. In after-hours trading, shares shot up nearly 16 percent to $26.80.
PUGET ENERGY INC.
Headquarters: Bellevue
Ticker symbol: PSD (NYSE)
Chief executive: Steve Reynolds (named 2002)
Gas customers: 737,000
Electric customers: 1.05 million
Employees: 2,600
2007 revenue: $3.2 billion
Buyers: Macquarie Infrastructure Partners (31.8 percent); Canada Pension Plan Investment Board (28.1 percent); Macquarie Capital Group Ltd. (15.9 percent); British Columbia Investment Management Corp. (14.1 percent); Alberta Investment Management (6.3 percent); Macquarie-FSS Infrastructure Trust (3.7 percent). Percentages do not add to 100 because of rounding.
Structure of the deal: Acquirers to pay $30 a share for Puget stock. Funding includes $3.4 billion in cash, $2.6 billion in assumed debt, $1.45 billion of new debt ($600 million to replace or refinance existing debt).
ON THE WEB
To view the UTC's order and dissent, utc.wa.gov/072375
To view the statement from the Attorney General's Office Public Counsel Section, goto.seattlepi.com/r1895The acquisition does eliminate one more publicly traded company from the list of those based in Washington. Just in 2008 alone, companies such as Safeco and Getty Images dropped from the list of exchange-listed companies that have headquarters in Washington.
Among the concerns raised in four public hearings the UTC held were the acquisition of Puget by foreign entities and the potential loss of local control and the utility's local character. "While this sense of identification is entirely understandable, we note that as a publicly traded company today PSE is owned by many shareholders, the vast majority of whom are in no sense 'local,' " Sidran and Oshie wrote. "The concept of PSE as a 'local company' depends then, not on who owns it, but on who operates it and, most importantly, who regulates it."
That regulation will stay with the UTC, they added. "The settlement not only preserves the commission's existing authority over PSE, it extends some of that authority to the holding company level and increases the commission's power to protect ratepayers beyond what exists today."
Puget, the acquirers and intervenors, including industrial, environmental and conservation groups, in July reached a settlement that included 63 commitments, conditions and protections on subjects ranging from where Puget will keep it headquarters (it has to be within its service territory) to financial measures that have to be met for Puget to pay dividends to its owners. The two UTC commissioners who approved the deal added some clarifications and modifications to some of the settlement's provisions "to strengthen their protection of the public interest."
The one party that didn't agree to the settlement was the public counsel section of the Attorney General's Office, which represents consumers in utility cases before the UTC. In a statement late Tuesday, Simon ffitch, public counsel section chief, said the settlement provisions "do not do enough to address public interest concerns with the sale."
While he, too, is reviewing the order, ffitch said: "Our initial review leads to disappointment. We believe the thousands of Puget Sound Energy customers who voiced their opposition to this sale will feel the same."
UTC Commissioner Jones also raised objections to the deal, particularly the complexity of investment-group-lead Macquarie and present turmoil in the financial markets. "I don't believe it is prudent at this financially volatile time to approve an arrangement with essentially a new type of infrastructure asset ownership for a utility, one that hasn't yet been fully tested and evaluated," he wrote.
Sidran and Oshie, however, said it's time to make a decision on a case that was formally filed in December 2007. "We are fully aware of what is going on in the world and the latest developments in the financial crisis do not meaningfully change the nature of the issues before us," they wrote. "Furthermore, in a time of uncertainty and fluidity there may be no end of changing circumstances about which one could argue we need to know more. Due process requires that at some point the record be closed and the parties be given a decision to which they are entitled."
The UTC said participants in the case have 10 days to ask the commission to reconsider its decision or 30 days to appeal to a superior court within Puget's operating territory.
Should the deal be completed, Reynolds plans to stay on as chief executive. William Ayer, chief executive of Alaska Air Group, will serve as nonexecutive chairman of Puget Energy and the utility subsidiary.