PNM was looking for a partner to grow – Avangrid was the only one seriously considered | Local News
The New Mexico utility company is a big beast in this state, but it’s a small guy in the utility world.
Executives at PNM Resources, the parent company of PNM, say the small size of the utility makes it difficult to purchase expensive new technologies and maximizes the use of the state’s abundant renewable energy sources such as power. solar and wind.
These factors brought PNM together with Avangrid, Connecticut, and its Spanish parent company, Iberdrola, both of whom have backgrounds in renewable energy. Electric utilities are changing rapidly, according to PNM and Avangrid, and PNM needs a strong partner to compete with in this new environment.
“This scale makes a difference,” said Dennis Arriola, CEO of Avangrid. “It helps us to be more competitive, but at the end of the day it helps our customers.”
The PNM-Avangrid merger proposal, approved by PNM executives in October, has met stiff resistance in New Mexico. Some lawyers and organizations believe the two companies are trying to bulldoze through the state’s Public Regulatory Commission.
The commission must determine whether the merger would serve the public interest. While that term is vague, some critics see the proposed merger as a benefit to shareholders and much less of a boon to the state and the people who pay PNM monthly for electricity.
The question is also whether the service under a new owner would improve or deteriorate. The Public Regulatory Commission is expected to hold Zoom hearings on the proposed merger on August 9 and 11-20, if that time is necessary. PNM and Avangrid hope the deal will close by the end of the year.
In 15 pages of PNM Resources’ description of how the merger proposal came about, the word “shareholder” comes up 40 times and “client” only eight.
Pat Vincent-Collawn, president and CEO of PNM Resources, said last week that comparing customers and shareholders was not helpful.
She highlighted the $ 50 million in customer loans, $ 7.5 million in public economic development assistance and 150 new jobs promised by the two companies as proof of public utility. “I think he’s the number one customer,” she says.
But, she said, “the customer was never really at risk” in the deal. Customers simply pay for a monthly service while shareholders put their money on the line, she said.
“Shareholder investing is really a different bucket. Investors risk their money. So they have the advantage and they have the disadvantage, ”Collawn said.
An expert witness in the proceedings, Maryland utilities attorney and author Scott Hempling, said the proposal documents show that PNM and Avangrid have largely focused on profiting PNM shareholders.
PNM “sells control of a public franchise for private gain,” said Hempling, who was an expert witness in the case for the attorney general’s office. Avangrid wanted a “platform,” or launching pad, for more acquisitions. And the board of directors of PNM Resources wanted a process that would yield a high return to shareholders, he said.
Avangrid presented an offer letter on Aug. 25 showing shareholder profit would be around 14% in the deal – $ 50.23 per share, down from $ 44.14, Hempling noted. Ultimately, both sides agreed that the share price would be $ 50.30.
“The benefits to the customer were almost irrelevant,” Hempling said. “No one has collected or presented serious information, conducted serious analysis or made any serious plan to improve PNM’s performance. The benefits to customers were irrelevant. “
The proposed merger is an $ 8.3 billion deal, with a total of $ 4.3 billion going to shareholders and Avangrid paying off $ 4 billion in PNM debt.
PNM executives say their company has not been able to acquire capital or money to improve infrastructure as easily as it could with Avangrid’s backing. Avangrid’s credit rating is better, which means PNM should be able to borrow money for less.
PNM Resources board members say in documents associated with the proposal that they wanted a partner with financial strength to help PNM grow that could gain regulatory approval and help PNM to move forward, and with the size to buy materials and equipment at a more reasonable price. rates.
Don Tarry, a senior vice president who will become head of PNM when Collawn steps down, said better credit scores and cheaper purchase prices benefit the public.
“What does this mean for customers? It means lower costs, ”Tarry said last week.
The proxy circular shows that PNM contacted at least five other companies, four of which considered the partnership and declined. The board was not interested in another business. The dance between PNM and Avangrid continued for over 18 months.
Arriola said there were good reasons Avangrid wanted PNM. “We believe that it is possible to develop from a [energy] point of view, ”he said. “I really believe we can do more in New Mexico.”
Collawn said the abundance of solar and wind resources in New Mexico should allow the state to export power to other states. Avangrid sees New Mexico as “a culture of plenty,” she said, and has the ability to “take our great products and develop them.”
In recent weeks, the proposal has garnered support from Governor Michelle Lujan Grisham, Attorney General Hector Balderas, former Governor Bill Richardson and some environmental and community groups.
He failed to gain the support of Bernalillo County, the City of Albuquerque, and the Sierra Club, among others.
Quality service is a key issue. Avangrid has branches in the North East, some of which have performed poorly on customer service ratings.
William Dunn, a utility consultant in Maine, said last week that a large number of people in his state supported legislation that would replace Avangrid’s subsidiary, Central Maine Power, with a utility company owned by consumers known as Pine Tree Power.
Dunn said the Central Maine service looked “pretty nasty.” The company has been at the bottom of JD Power’s customer satisfaction surveys for residential and commercial customers.
“We have the worst reliability, and I know that from experience,” Dunn said. He testified this month before a committee in the Maine Legislature for a bill that would help drive consumer-owned utility. He said taxpayers are “so angry” in Central Maine that the legislation has a good chance of being passed.
Bob Kump, deputy managing director of Avangrid, said consumer ratings go up and down. Service is vital to his business and its subsidiaries, he said. “We are setting benchmarks for reliability.”
He said Central Maine Power’s reputation suffered when switching to a new billing system four years ago, when there was a long period of difficult time. People’s bills were extremely high and the new billing document was confusing, he said.
“All of this created a level of mistrust and disbelief on the bills,” he said. “This is why we are the last of JD Power. … Again, we own it. He said Central Maine added staff to its call center and brought back an effective CEO who was gone. He said they fixed the problems.
New Mexico auditor Ashley Schannauer expressed concern earlier this month over $ 25 million in penalties imposed on Avangrid affiliates in the northeast over the past two years.
In a written order, Schannauer said it wasn’t just central Maine that had a poor customer service rating. Two of the other three also did poorly, he wrote, although the third, Rochester Gas & Electric, was ranked No.1 among 12 peers.
Michael Caron of the Connecticut Utilities Regulatory Authority had serious reservations six years ago when Avangrid took over United Illuminating in his state. Caron voted against.
“I wasn’t convinced Avangrid was bringing anything to the table,” Caron said last week. But the transition went smoothly and Avangrid retained the local leadership of United Illuminating, he said.
United Illuminating struggled during Tropical Storm Isaias last year, he said, and “left something to be desired” at that time. But a larger Connecticut utility, Eversource, did “a lot worse,” he said.
Avangrid’s acquisition of United Illuminating went well, he said. “We haven’t had anything substantial in terms of problems,” Caron said.
Back in New Mexico, Mariel Nanasi, of the Santa Fe nonprofit New Energy Economy, said Avangrid has a long way to go to gain full support. “Like so many New Mexicans, New Energy Economy was thrilled to welcome a renewable energy company to take over PNM due to its lackluster ability to transform its energy portfolio,” she said.
But given the “abysmal reliability” of the affiliates, she said she couldn’t imagine Avangrid serving the public interest here. She also highlighted a finding of fraud involving parent company Iberdrola, according to a 2015 World Bank press release.
The statement said the World Bank settled a case with Iberdrola’s subsidiary, Iberinco, over fraudulent purchases in Albania in 2004 and 2005.
Avangrid said in an emailed statement last week that there was no pattern of misconduct from Avangrid or Iberdrola. They have won national and international recognition for exemplary business ethics, the statement said.
Among these are citations for being among the Ethisphere Institute’s World’s Most Ethical Companies this year.