For $4.3 billion in stock, Northeast Utilities is acquiring Massachusetts-based NStar, with the new energy giant to maintain dual headquarters in Hartford and Boston.
Attorney General Richard Blumenthal requested the Connecticut Department of Public Utility Control to review the proposed merger. He wants to determine its impact on Connecticut utility customers, rates, operations, service and reliability.
Northeast Utilities owns Connecticut Light & Power, the dominant utility in Fairfield County.
Billed as a merger of equals, if approved by shareholders NStar will exchange its shares for those of Northeast Utilities without any premium from its current trading levels. NStar will formally become a subsidiary of Northeast Utilities, with current shareholders of the original Northeast Utilities owning 56 percent of the combined company”™s shares.
At the same time, Northeast Utilities and NStar expressed resolve to ensure that both companies”™ stakeholders have as near-equal say as possible. NStar CEO Thomas May will run the new Northeast Utilities, while Charles Shivery will become chairman for 18 months before relinquishing the role to May. Each company will nominate seven trustees, with Northeast Utilities assigning a lead trustee for the board.
The combined company is currently slated to have a work force numbering 9,300 people. In a letter to employees, May and Shivery did not rule out job cuts, while stating it was not a goal of the merger. In a conference call with investment analysts, Shivery also declined to discuss potential areas for savings such as job cuts.
“We haven”™t planned on that,” Shivery said, “but stay tuned.”
May downplayed any issues that may arise from the dual headquarters model, while common for partnerships such as law firms, unusual for a large corporation.
“We want to be Connecticut”™s utility; we want to be Massachusetts”™ utility; we want to be New Hampshire”™s utility,” May said. “Regulation is important to ”¦ the success of the company, and we really do believe that we can be more by being the utility in Hartford (and) the utility in Boston.
“The highway between the two cities ”“ it”™s about 90 minutes apart,” May said. “So we will be burning up the highway. I”™ll have an office in both cities. But we clearly will have some of the team in Hartford, some of the team in Boston, and we will move around.”
The combined company will operate six regulated electric and gas utilities in three states and will have nearly 3.5 million electric and gas customers. The new Northeast Utilities will have nearly 4,500 miles of electric transmission lines, 72,000 miles of electric distribution lines and 6,000 miles of gas distribution lines.
“There are going to be some very large projects, I think, that are going to go toward solving some of the energy issues of the region,” Shivery said. “We”™ve talked conceptually about some of the large ”“ we”™ve called them consortium ”“ projects, where we try to link wind generation in northern New Hampshire and in Maine to the load centers. Clearly, I think we could begin to do some of those projects on a standalone basis, but I think the combined company gives us the ability to do that even better; and clearly, from a financial standpoint, gives us the ability to do it much more effectively.”
The deal requires approval from Massachusetts energy regulators and several other government agencies, but not from the Connecticut Department of Public Utility Control. According to May, the regulatory standard to gain Massachusetts approval is “no net harm” in which the company demonstrates Bay State consumers will not suffer worse service or rates as a result of the deal.
