New England Electric System’s pending merger with a British utility giant has taken another step toward final approval, but its proposed merger with Boston-based Eastern Utilities Associates has run into a delay that could cost upwards of $4 million. Public Utility Commission hearings into the roughly $635 million merger between New England Electric, which owns Narragansett Electric Co., and Eastern Utilities, which owns Blackstone Valley Electric Co. and Newport Electric Corp., scheduled to begin two weeks ago have been delayed until next month.
State regulators said they needed more time to prepare for the hearings after New England Electric scrapped some controversial parts of its proposed changes in electric rates days before the hearings were originally scheduled to begin.
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The Westborough, Mass., company has been pushing to secure final approval of the merger by February, but the prospects for making that deadline are looking increasingly doubtful.
Originally set to begin Dec. 14, the PUC has rescheduled the hearings to begin Jan. 20 and continue into February if necessary. The 38-day delay carries a hefty price tag for New England Electric.
The merger agreement provides that the price New England Electric has to pay for Eastern Utilities increases roughly $60,000 each day the merger isn’t completed after Nov. 17, according to New England Electric.
As of Monday, delays had increased the acquisition price by $2.5 million. And when the rescheduled PUC hearings begin in late January, the price of the merger will have grown by $4.3 million, an increase of less than 1 percent.
The price New England Electric agreed to pay for each share of Eastern Utilities is capped at $31.49. If further delays caused the acquisition price to reach that ceiling, New England Electric would have to pay nearly $10 million more for Eastern Utilities than if it had completed the merger before Nov. 17.
Meanwhile, the Nuclear Regulatory Commission in Washington, DC, recently approved the $3.2 billion acquisition of New England Electric by National Grid Group PLC of Coventry, England. The approval was required because a subsidiary of New England Electric owns minority interests in six nuclear power plants.
The majority owners and operators of the plants initially raised questions about a foreign corporation gaining control over New England Electric’s nuclear licenses. But the majority owners dropped their opposition to the merger in late October–two days after New England Electric agreed to settle an unrelated lawsuit against them. New England Electric officials have said the timing was purely coincidental.
Continued opposition to the merger from the majority owners of the nuclear power plants could have delayed final approval of the merger for months.
National Grid’s merger agreement with New England Electric stipulates that the price the British company has to pay for New England Electric’s stock increases by more than $190,000 each day the merger isn’t completed after Nov. 5, according to New England Electric.
So far, delays have jacked up the acquisition price by roughly $10 million, an increase of less than 1 percent. The price National Grid agreed to pay for New England Electric’s stock is capped at $54.35 per share, which represents more than $35 million more than the price the company would have paid if the merger had been completed before Nov. 5.
The National Grid-New England Electric merger must still receive final approval from the Securities and Exchange Commission.
