Canadian Companies See Opportunities South of the Border
By Jim Vess
Canadian power companies looking to expand are seeing opportunities for growth in the U.S. market due to fast-growing power demand in certain regions of the country and the economically-favorable regulatory model for U.S. utility companies.
Recently, Nova Scotia-based Emera Inc. agreed to acquire Florida-based TECO Energy Inc. for $10.4 billion. The announcement of the acquisition surprised many analysts, who had expected major Florida utilities NextEra Energy or Duke Energy to buy up TECO. Emera itself has been on buying spree over the past few years, acquiring up assets in Canada, New England, and the Caribbean.
Last October, Talen Energy Corporation agreed to sell three Pennsylvania power plants with a total combined generating capacity of 996 megawatts for $1.51 billion to Calgary-based TransCanada Corporation and Brookfield Renewable Energy Partners, headquartered in Toronto. The 704-megawatt combined-cycle natural gas-fired Ironwood plant is being sold to TransCanada for $654 million. The Holtwood and Lake Wallenpaupack hydroelectric projects, with a combined generating capacity of 292 megawatts, are being sold to a subsidiary of Brookfield Renewable Energy Partners L.P. for $860 million.
“Canadians are coming to the U.S. because that’s where the assets are,” said Kit Konolige, senior utility analyst for Bloomberg Intelligence. “It’s still North America. They’re familiar with it.”
Fortis Inc. has also been active in adding U.S. assets to its portfolio. The company acquired Poughkeepsie, New York-based CH Energy Group Inc. in 2013 and then acquired Tucson, Arizona-based UNS Energy Corp. in 2014. In July 2011, a bid for Central Vermont Public Service Corporation was terminated.
On February 9th, Newfoundland-based Fortis announced an $11.3 billion deal to acquire Michigan-based ITC Holdings Corporation in a move that would mark Fortis’ entry into the FERC-regulated transmission market. Fortis is acquiring the largest independent pure-play electric transmission company in the United States. ITC owns and operates high-voltage transmission facilities in Michigan, Iowa, Minnesota, Illinois, Missouri, Kansas and Oklahoma, serving a combined peak load exceeding 26,000 megawatts along approximately 15,600 miles of transmission line. Also, ITC is a public utility and independent transmission owner in Wisconsin.
Following the acquisition, Fortis will be one of the top 15 North American public utilities ranked by enterprise value, with an estimated enterprise value of $30 billion.
“Fortis is an outstanding company with a proven track record of successfully acquiring and managing U.S. based utilities in a decentralized manner. This transaction accomplishes our objectives by better positioning the company to have a higher level of focus on pursuing our long-term strategy of investing in transmission opportunities to improve reliability, expand access to power markets and allow new generating resources to interconnect to transmission systems and lower the overall cost of delivered energy for customers,” said Joseph L. Welch, Chairman, President and CEO of ITC.
“Fortis has grown its business through strategic acquisitions that have contributed to strong organic growth over the past decade. Our performance in 2015 is a clear demonstration of the success of this strategy. The acquisition of ITC – a premier pure-play transmission utility – is a continuation of this growth strategy. ITC not only further strengthens and diversifies our business, but it also accelerates our growth.” said Mr. Barry Perry, President and CEO of Fortis.
Canadian companies want to continue to grow and, with limited opportunities to expand their portfolios in Canada, these companies are looking south for growth.
“You could see that trend continuing,” Jennifer Stevenson, a vice-president and portfolio manager at 1832 Asset Management LP in Calgary told Bloomberg. “There’s not a lot of independent power assets for sale, or even available, up here.”