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Hawaiian Electric and NextEra scrap merger plans

Steve Rogerson
July 27, 2016
 
Florida-based NextEra Energy and Hawaiian Electric Industries (HEI) have scrapped their plans to merge following the Hawaii Public Utilities Commission's (PUC) order to dismiss the companies' merger application. 
 
"As a result of the PUC's order, we have terminated our merger agreement," said Jim Robo, chairman and chief executive officer of NextEra Energy. "We wish Hawaiian Electric the best as it serves the current and future energy needs of Hawaii, including helping the state meet its goal of 100 per cent renewable energy by 2045. Looking forward, NextEra Energy remains extremely well-positioned to execute on our strategy and deliver exceptional results for our customers and shareholders."
 
Under the terms of the merger agreement, NextEra Energy will pay HEI a $90m break-up fee and up to $5m for reimbursement of expenses associated with the transaction. After payment of taxes, the net amount of $60m will help to fund Hawaii's clean energy transformation, including the 2016 plan to invest approximately $145m into Hawaiian Electric. A special, one-time cash dividend of 50 cents per share of HEI common stock, which would have been paid had the merger closed, will not be issued.
 
The spin-off of American Savings Bank (ASB) was contingent upon the completion of the combination of HEI with NextEra Energy. With the termination of that transaction, the spin-off of ASB is not contemplated at this time.
 
"We appreciate NextEra Energy's interest in Hawaii and in our company," said Connie Lau, HEI's president and chairman of the board of ASB. "All of us at HEI, Hawaiian Electric and American Savings Bank remain committed to serving our customers, and we look forward to working together with communities across our state to realise the clean energy future we all want for Hawaii and to ensure a vibrant local economy."
 
HEI has reaffirmed its financial and operational strength as a stand-alone company and its 2016 earnings per share guidance range of $1.62 to $1.75 per share. HEI further outlined its plans for the future as an independent company, following the termination of the proposed merger.
 
"While the merger would have provided significant benefits for Hawaii, HEI remains a strong company that is well-positioned to achieve our goals and provide long-term value for our customers, community, employees and shareholders," said Lau. "At Hawaiian Electric, we will continue to transform, innovate and execute on our vision to empower our customers and communities with affordable, reliable, clean energy. ASB will continue to serve and invest in Hawaii, helping residents and businesses grow and prosper."
 
Rich Wacker, ASB's president and chief executive officer, added: "Our 1200 teammates work hard every day to deliver our vision to be a great bank making people's dreams possible. ASB is proudly rooted in Hawaii, and our business has always been supporting local families and businesses. While we are disappointed to lose the benefits this opportunity presented for ASB, there is no change in our focus to operate a high-performing financial institution and to always be a great place to bank and work."
 
Hawaiian Electric continues to support Hawaii's goal of generating 100 per cent of the state's electricity from renewable sources while ensuring that it's achieved at a reasonable cost for customers and that a safe, reliable electric service is maintained. The company reached a record 23 per cent of energy needs from renewable generation in 2015 – well ahead of the 15 per cent clean energy goal. This achievement includes attaining 49 per cent renewable energy on Hawaii Island and 35 per cent renewable energy across Maui County.
 
"Even before the merger process began, the Hawaiian Electric companies were working to stabilise and reduce energy costs, modernise and improve our electric grids, support new options, such as electric vehicles, add more value for our customers, and expand a diverse portfolio of clean energy sources," said Alan Oshima, Hawaiian Electric's president and chief executive officer. "Throughout the merger process we remained focused on those plans, and that work continues, as does the work we're committed to do with our community to achieve our common objective: a clean energy future that promises benefits for everyone."
 
Hawaiian Electric has a number of clean energy initiatives in progress, subject to regulatory approval, including:

  • A proposed foundational smart grid project for modernising the company's wireless communications network, including installation of smart meters, a customer web and mobile portal, expansion of its outage management system, and other enhanced technology to improve customer service and facilitate the integration of more renewable energy;
  • Future requests for proposals for various renewable energy projects with a combined capacity of about 330MW to be developed by 2022;
  • Demand response programmes to allow customers to provide energy services to the grid to help increase the reliable integration of renewable energy while lowering customer costs;
  • Energy storage options, including both utility-scale systems, energy storage integrated with rooftop PV systems, and pilot programmes evaluating new technologies;
  • Community-based renewable energy programmes to allow customers who cannot or choose not to take advantage of rooftop solar to receive the benefits of participating in a renewable energy programme;
  • Microgrids at military facilities interconnected to the utility grid that provide resiliency and energy security for all customers by using diversified locations for firm generation. This includes a 50MW Schofield generating station, powered by a biofuel blend, scheduled to be in service by late 2017; and
  • Electrification of transportation initiatives that will facilitate the use of renewable energy as a substitute fuel for transportation, providing customer value, a clean environment and room for more distributed energy.
NextEra Energy is a clean energy company with consolidated revenues of approximately $17.5bn and approximately 14,300 employees in 27 states and Canada as of the end of 2015, as well as approximately 45,000MW of generating capacity. Headquartered in Florida, NextEra Energy's principal subsidiaries are Florida Power & Light, which serves more than 4.8 million customer accounts in Florida and is one of the largest rate-regulated electric utilities in the USA, and NextEra Energy Resources, which, together with its affiliated entities, claims to be the world's largest generator of renewable energy from the wind and sun.