NextEra Energy announced on Wednesday a deal to purchase Hawaiian Electric Industries, which includes utilities serving Oahu, the Big Island and Maui County, for $2.63 billion. The overall transaction, valued at $4.3 billion, includes the assumption of $1.7 billion in debt.
Under the deal, American Savings Bank will be spun off into an independent, publicly traded company.
“Today is a historic day for Hawaiian Electric Industries,” said Connie Lau, CEO of HEI, at a press conference announcing the deal. “Separating American Savings Bank and Hawaiian Electric is an opportunity to unlock the value of two strong local companies for the benefit of our customers and local communities.”
The boards of both HEI and NextEra have unanimously voted in favor of the transaction, according to company officials. However, the deal must still be approved by the Hawaii Public Utilities Commission and Federal Energy Regulatory Commission, in addition to gaining other regulatory approvals — a process that is expected to take about a year.
Hawaiian Electric Industries, the parent company for the electric utilities and the bank, will be dissolved. Hawaiian Electric will keep its name and continue to be based in Honolulu, and there will be no layoffs of the company’s 2,800 employees for at least two years after the transaction closes, according to company officials.
The deal was hailed as a positive development in Hawaii’s push for adopting more clean energy by both HEI and NextEra officials.
“The opportunity for Hawaiian Electric to partner with a national leader in clean energy will allow us to move faster to reach an affordable clean energy future,” said Jeff Watanabe, chairman of the board for HEI, during the press conference.
Hawaiian Electric has set goals of achieving 65 percent renewable energy by 2030, while tripling the amount of solar and reducing electricity bills by 20 percent.
NextEra Energy, a publicly traded company headquartered in Juno Beach, Florida, has expertise in both utilities and renewable energy development. Its two primary subsidiaries are Florida Power & Light Company and NextEra Energy Resources, one of the country’s major developers of solar and wind energy.
NextEra Energy has combined revenues of about $15.1 billion.
The company is not new to Hawaii. It has been pursuing a 15-megawatt solar farm in Waianae and was looking to bring solar and wind energy from Maui to Oahu via undersea cables.
News of the pending sale comes after several years of scrutiny by state regulators and clean energy advocates about whether the Hawaiian Electric companies have an adequate business model in place that will allow the island utilities to profitably move forward in adopting increasing amounts of renewable energy.
The PUC rejected Hawaiian Electric’s five-year energy plans in April while criticizing the utility for failing to come up with a “sustainable business model.” Hawaiian Electric has since submitted new plans to the PUC, which are awaiting approval.
The utility has also come under heavy criticism from lawmakers, the solar industry and regulators for failing to accommodate the increasing demand for more rooftop solar power, particularly on Oahu.
The pending sale was met with mixed reactions from leaders in Hawaii’s renewable energy sector.
Jeff Mikulina, executive director of Blue Planet Foundation, a clean energy advocacy firm, said that NextEra “brings an exceptional promise of positioning Hawaii as a global clean energy leader.”
However, the deal comes on the heels of criticism that Florida Power & Light Co. helped gut Florida’s energy efficiency goals and solar rebates in an attempt to thwart rooftop solar and battery storage technologies that could provide consumers with energy independence.
“I’m hoping that decision makers will ask questions about their support of rooftop solar in Hawaii.” — Robert Harris, Alliance for Solar Choice
Florida Power & Light Co. and two other Florida utilities successfully lobbied state regulators to cut the energy efficiency goals and solar subsidies, the Tampa Bay Times reported last week.
“They have been hostile to rooftop solar in Florida,” said Robert Harris, who was speaking on behalf of the Hawaii-based Alliance for Solar Choice, but is also the local public policy director for Sunrun, a national solar power firm. “I’m hoping that decision makers will ask questions about their support of rooftop solar in Hawaii. The utility is supposed to act in the public interest and the widespread popularity of solar is in the public interest.”
Jim Robo, CEO of NextEra Energy, said during the Wednesday press conference, that the cost of solar power had declined to the point that Florida’s solar rebates were no longer necessary. As for the state’s energy efficiency requirements, he said many of them had already been superseded by new federal rules.
Florida Light & Power Co. has about 3 percent solar energy on its grid and relies on natural gas to power about 65 percent of its energy needs, said Robo. By comparison, Hawaiian Electric’s energy portfolio includes 11 percent solar energy.
Robo said that NextEra was well positioned to work on the technological challenges in Hawaii that have hindered adding more rooftop solar to the islands’ electric grids.
Robo said that NextEra hasn’t decided whether it will pursue a business model that relies on the utility developing and owning renewable energy generation facilities or whether it will focus more on transmitting and facilitating renewable energy from independent power producers.
“We have no preconceived notion on that,” he said. “We are open to both models. That is something we will be looking for stakeholder input on.”
This isn’t the first attempt to buy HEI. In 2011, a company called Kuokoa formed to purchase the utility, take it private, and sell off American Savings Bank. Kuokoa had aggressive renewable energy goals that relied heavily on developing geothermal energy, but the deal ultimately fell through.
“I am confident that the Public Utilities Commission and the State Consumer Advocate will review the purchase agreement in its entirety.” — Gov. David Ige
Lau said Wednesday that while HEI had not been for sale, NextEra approached the company about the merger. She said that HEI hadn’t been in discussions with any other buyers.
NextEra’s $2.6 billion offer equates to about $33.50 a share, or a 21 percent premium as of the close of trading Tuesday.
News of the pending sale caused HEI’s stock to jump about 17 percent to $33 a share during Wednesday trading. Shareholders will also be paid a one-time special dividend of 50 cents per HEI share.
Hawaii Gov. David Ige said in a statement that the state government will work to ensure the sale will be in the best interest of Hawaii ratepayers.
“I am confident that the Public Utilities Commission and the State Consumer Advocate will review the purchase agreement in its entirety to fully examine all the details,” Ige said. “Since Hawaiian Electric Company, Inc. was founded by King David Kalakaua, the state will work to maintain the spirit and values that are consistent with the King’s legacy and honors our culture for future generations.”
Further details of the deal can be found in NextEra’s news release here, and in a fact sheet below: