In a move aimed at boosting its presence in the United States, St. John’s-based energy company Fortis Inc. says it is acquiring UNS Energy Corp. in a $2.5-billion (U.S.) deal.
The merger with Tuscon, Ariz.-based UNS Energy, a utility-holding company with three electricity subsidiaries in Arizona, had $1.5-billion in revenue in 2012, with $4.3-billion in assets.
Fortis says it has agreed to pay $60.25 per share in cash for UNS. The deal includes the assumption of $1.8-billion in debt.
“These are significant regulated utility assets located in the U.S. South West, a region experiencing above-average economic growth,” Stan Marshall, the president and chief executive officer of Fortis said in a press release. “The acquisition of UNS Energy is consistent with our strategy of investing in high-quality regulated Canadian and U.S. utility assets.”
The company says the deal will see Fortis’s assets grow by more than a third, totalling $23.5-billion worth of utility assets serving more than three million electricity and gas customers. Fortis says the U.S. acquisition allows it to better diversify its assets, which are still mostly concentrated in Canada.
“The acquisition further mitigates business risk for Fortis by enhancing the geographic diversification of our businesses, resulting in no more than one-third of total assets being located in any one regulatory jurisdiction,” Mr. Marshall said.
This is the second major U.S. deal for Fortis in less than a year. The company completed a $1.5-billion acquisition of New York State energy transmission company CH Energy Group Inc. in June this year. Fortis also demonstrated interest in the U.S. market through an unsuccessful bid for electric utility Central Vermont Public Service Corp.
As the biggest investor-owned gas and electric distribution utility in Canada, Fortis delivers power to 2.4-million customers across the country, as well as through the New York and the Caribbean. The UNS deal will add another 654,000 electricity and gas customers.
The deal is expected to close by the end of 2014, and is dependent on regulatory and shareholder approvals.
UNS will gain additional capital and other resources through the acquisition. That added financial strength will help the company “maintain safe, reliable and affordable service for our utility customers as we address the capital-intensive challenges facing our industry,” said Paul Bonavia, chief executive officer of UNS.
The company say the new capital could fund its plans to renew its infrastructure and diversify its power generation.
UNS management also stressed that the business will be run somewhat autonomously from Fortis as a “standalone utility.” The company’s subsidiaries will continue to be run by current management from Arizona.
The UNS board of directors unanimously approved the deal.
Although UNS’s core business is natural gas and electric service provision, Fortis is committed to UNS’s renewable energy efforts, particularly in solar power systems, UNS said in a release.
Fortis shares have fallen close to 8 per cent in the past year.