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Multinational Utilities Merger

Two energy utilities, Avista Corporation and Hydro One Limited, have notified the Montana Public Service Commission (PSC) of a merger agreement under which Hydro One will acquire Avista in a $5.3 billion all-cash transaction. Under the proposal, Hydro One, headquartered in Ontario, Canada, will purchase all outstanding shares of stock of Avista, which is based in Spokane, Washington.

The listed price was set at $53 per share, a 24% premium over Avista's July 18 stock market closing price. The two companies said they anticipate the transaction closing in the second half of 2018, assuming all requisite regulatory and governmental approvals and clearances are obtained by then.

Because Hydro One is a Canadian entity in which the government of Ontario holds a 49% interest, and because Avista operates in several states, the merger must be authorized not only by the Montana PSC, but also by the Washington Utilities and Transportation Commission, the Oregon Public Utility Commission, the Idaho Public Utilities Commission, the Regulatory Commission of Alaska, the Federal Energy Regulatory Commission, and the Committee on Foreign Investment in the United States.

The Montana PSC observed that the deal would create one of North America's largest regulated utilities, serving approximately two million customers throughout Ontario and the Pacific Northwest. It described Hydro One as Ontario's largest electric utility and power transmission company, while it noted that Avista serves 700,000 electric and natural gas customers in eastern Washington, Oregon, Idaho, and Alaska.

The Montana commission added that although the proposed merger would impact only a handful of Montana customers, the PSC nevertheless is required to review every aspect of the application, including any potential impacts to Avista's ownership of generating assets located in the state. According to the PSC, Avista provides service to just 32 Montanans, who reside near the company's Noxon Rapids hydroelectric facility in Northwest Montana.

The commission related that besides the 466-megawatt (MW) Noxon Rapids generating station, Avista also maintains a 15% ownership interest in Units 3 and 4 of the coal-fired Colstrip facility located in eastern Montana, which supplies power to several different utilities in the region. The commission reported that Avista's share of the Colstrip output translates into 222 MW of capacity, enough to power about 160,000 homes. (D.2017.9.71)