Fortis Inc., a publicly traded Canadian energy distribution company with 2 million customers, received New York state approval to acquire CH Energy Group Inc., the parent company of Central Hudson Gas & Electric Corp., for $1.5 billion.
The deal, which was approved June 13, promises job security, fixed delivery rates and 35 new union jobs regionally as Poughkeepsie-based Central Hudson prepares to spend half-a-billion dollars in the next five years on improvements.
The New York State Public Service Commission (PSC) voted to approve the deal, which leaves Central Hudson operating as a standalone company, citing “added commitments by the companies to enhance financial protections for ratepayers, such as freezing rates for at least two years, and other community and economic development benefits.” Those adjustments became critical after a May 3 administrative law ruling opposed the acquisition as originally proposed.
“After a lengthy and thorough examination and regulatory review, it has been determined that Fortis is qualified to purchase the electric and natural gas utility Central Hudson,” said PSC Chairman Garry Brown. “As the owner of a regulated utility in New York state, Fortis will now be required to meet New York”™s stringent rules and regulations designed to ensure safe, secure, and reliable access to utility service for residential and business consumers, at just and reasonable rates.”
The $1.5 billion acquisition ”“ $1 billion in stock and the assumption of another $500 million of Central Hudson debt ”“ provides Central Hudson customers with nearly $50 million in financial benefits to moderate future delivery rates, Central Hudson reported. It will also “enhance economic development programs in the areas serviced by Central Hudson and provide further assistance to low-income families in the service area.”
Under the terms, delivery rates will be frozen retroactively from July 2012 through June 2015, two years longer than was originally proposed. Additionally, all employees of Central Hudson will retain their jobs for at least four years and an additional 35 union positions will be created. The current union contract was extended to 2017 by the deal”™s terms. Central Hudson will also maintain its current level of community support for at least 10 years and a new board of directors will have increased local representation.
The deal dates to February 2012 and has been promoted heavily by both companies since then.
“Our new association with Fortis provides substantial and lasting benefits for our customers, and the Fortis business model retains Central Hudson as a standalone company,” said Steven V. Lant, chairman and president of CH Energy Group. “In our capital intensive and increasingly consolidating industry, becoming a member of the Fortis federation of utilities ensures we are able to effectively serve our customers now and in the future. Central Hudson”™s ability to make required energy infrastructure investments, which are expected to be more than $100 million annually over the next five years, is strengthened by being a part of the Fortis federation.”
