Avista Corporation Ltd. (NYSE: AVA), a U.S.-based utility that also operates several hydropower facilities, and Ontario, Canada-based Hydro One Ltd. (TSX: H), in a joint statement announced a definitive merger agreement on July 19.
Hydro One is an electricity transmission and distribution company that will acquire Avista for C$67 (US$53) per share in a C$6.7 billion (US$5.3 billion) all-cash transaction.
Avista operates through two segments: Avista Utilities, with company headquarters based in Spokane, Wash., and Alaska Energy and Resources Co. (AERC) out of Juneau, Alaska. In 2013, Avista signed an agreement giving it possession of the Alaska Energy and Resources Co. (AERC) for $170 million. AERC is the parent company of Alaska Electric Light and Power Co. (AEL&P), also located in Juneau.
Avista ranks 46th out of 50 publicly traded utilities in the U.S. and after the sale was announced, Avista’s stock rose 19% to $51.50 per share in after-hours trading.
Hydro One said completion of the offering will be subject to the acceptance and approval of the Toronto Stock Exchange.
The companies also said the acquisition will result in an entity that serves more than two million retail and industrial customers and hold assets throughout North America including Ontario, Washington, Oregon, Idaho, Montana and Alaska.
According Avista, it operates 13 hydroelectric projects in four states that have a total combined installed capacity of about 1,114 MW.
In the lower 48 states, Avista owns and operates the following:
- 10.2-MW Upper Falls
- 15-MW Monroe Street
- 15.4-MW Post Falls
- 19.5-MW Nine Mile
- 35.6-MW Little Falls
- 88-MW Long Lake
- 273-MW Cabinet Gorge in Bonner County
- 562.4-MW Noxon Rapids (Clark Fork) in Sanders County
AEL&P owns and operates four small hydroelectric plants that have a total installed capacity of 26.2 MW. Additionally, AEL&P operates the largest hydropower facility in the state. The plants include the following:
- 3.6-MW Annex Creek
- 1.6-MW Gold Creek
- 6.7-MW Salmon Creek
- 14.3-MW Dorothy Lake
- 78-MW Snettisham
- AEL&P operates this facility under a contract with plant owner, Alaska Industrial Development and Export Authority. The Snettisham hydroelectric facility is the largest in Southeast Alaska, providing 80% of the power used by Juneau and Douglas.
Following completion of the transaction, Avista said it will maintain its existing corporate headquarters in Spokane and be governed by a nine-member Board of Directors that will include members from Avista’s senior management team, directors from Avista’s current board and directors chosen by Hydro One.
According to the announcement, no workforce reductions are anticipated as a result of this transaction for either Hydro One or Avista.
“This marks a proud moment for Canadian champions as we grow our business into a North American leader,” said Mayo Schmidt, Hydro One Ltd. president and chief executive officer.
“This transaction demonstrates the power and value of the transition into an investor-owned utility, by allowing for healthy expansion into new lines of regulated utility business and new jurisdictions, such as the U.S. Pacific Northwest, which is experiencing customer and economic growth.”
Avista Chairman, President and CEO, Scott Morris, said, “For Avista, the decision to team up with Hydro One at a time of strength and growth represents a win for our customers, employees, shareholders and the communities we serve. Through this agreement, we have a unique opportunity to secure a partnership that allows us to continue to define and control, to a significant degree, future operations and opportunities in a consolidating industry landscape for the benefit of our customers.”