Puget Energy to Be Acquired for $3.5 Billion


An investor group led by Macquarie Bank agreed to buy utility Puget Energy in a deal worth $3.51 billion in the Australian bank's latest foray into the North American energy sector.

The group plans to pay $30 per share of the fast-growing Puget, more than a 25 percent premium to Thursday's close, and promised to provide $5 billion for the company's power generation and infrastructure needs.

The deal, which also calls for $1.6 billion of newly issued debt in addition to $2.6 billion of existing debt, is being led by Macquarie Infrastructure Partners, the New York-based subsidiary of Macquarie Bank that purchased Pittsburgh utility Duquesne Light Holdings for $1.59 billion earlier this year.

"This opportunity fits right in our sweet spot as far infrastructure investing is concerned," Christopher Leslie, chief executive of MIP, told a conference call.

Puget Energy is the parent of Puget Sound Energy, which has 1 million electricity customers and 720,000 natural gas customers, said current Chief Executive Steve Reynolds, and his management team will stay in place.

Shares in Puget rallied 17.4 percent to $28.11 per share on the New York Stock Exchange.

The deal must be approved by Washington state regulators, a process that D.A. Davidson analyst Jim Bellessa said was "no slam dunk."

Bellessa added that the $5 billion equity infusion should help Puget meet capital spending needs, which may be viewed favorably by regulators.

"It will probably be received well enough for Washington regulators to take a look," Bellessa said. "(Their) willingness to make a permanent investment might give confidence to regulators."

State regulators have taken a more active stance in blocking takeovers they view as potentially damaging to customers, including Montana's decision in July to block Australia's Babcock & Brown Infrastructure's proposed buy of NorthWestern Energy.

State regulators also foiled the planned link-up of FPL Group and Constellation Energy Group as well as Exelon's planned purchase of New Jersey's Public Service Enterprise Group.

Growing Customer Base

Puget Sound Energy has about 2,400 megawatts of generation capacity and purchases about about two-thirds of the power supply needed to serve its customers. It expects its service area's population to grow by 28 percent, or 1 million people, over the next two decades.

The company generates 45 percent of its power from hydro sources, 17 percent from natural gas, 34 percent from coal, and 2 percent from wind sources.

In addition to MIP, the consortium seeking to buy Puget includes the Canada Pension Plan Investment Board and British Columbia Investment Management, the company said in a statement.

Macquarie has been one of the world's fastest growing investment banks in the past decade by acquiring infrastructure assets -- everything from highways and toll bridges to airports to regulated power utilities -- around the world.

The bank makes highly leveraged takeovers of private- and public-sector assets that have low growth but promise steady returns. A pioneer in this field, Macquarie is the largest investor in infrastructure with more than $30 billion of assets held by dozens of Macquarie investment funds, many of which are publicly traded.

U.S. subsidiary MIP has 10 investments that include a stake in Aquarion, a regulated New England water utility, two Canadian port terminals and interests in four toll roads in the United States and one in Canada, in addition to Duquesne Light.