Maine regulators will not review $2.5 billion acquisition of Central Maine Power parent

A divided Public Utilities Commission ruled Tuesday that Central Maine Power Co. can bypass state scrutiny of a $2.5 billion deal that would put its parent company under the full control of a Spanish energy giant.

Regulators voted 2-1 to waive a state regulatory review of the deal under which Iberdrola, based in Bilbao, Spain, will acquire the remaining 18.4% of shares in CMP parent Avangrid Inc. that it does not currently own.

Chairman Phillip Bartlett II and Commissioner Patrick Scully followed the Aug. 26 hearing examiner’s report, which found that CMP’s request for a waiver of state law calling for review was reasonable based on prior regulatory approval of the corporate structure. Commissioner Carolyn C. Gilbert opposed the waiver.

CMP is the largest electricity provider in Maine, serving approximately 635,000 businesses and homes in the southern and central parts of the state.

The utility argued that Maine regulators approved Iberdrola’s indirect ownership of CMP and Maine Natural Gas as early as 2008, when Iberdrola acquired Energy East Corp., Avangrid’s predecessor. The 2008 reorganization was “carefully litigated by multiple parties” and resulted in PUC approval with 59 conditions, Scully said. The conditions include PUC access to books and records, audit reports and tax returns, notice of adverse rulings or decisions and other matters.

Gilbert expressed concerns about the “lapse of time” since the 2008 agreement.

Scully said the 2008 terms included “extensive reporting requirements and ring-fencing provisions” to protect Maine utilities and ratepayers from financial harm under the agreement. Separating the assets or earnings of subsidiaries to limit risks or losses at the parent company.

Fitch Ratings said in a Sept. 5 note that Avangrid’s collateral is “porous” due to economic regulatory protections. The rating agency said the deal could be beneficial for Avangrid “as it can benefit from Iberdrola’s financial flexibility.”

The Iberdrola deal will make Avangrid a private company, exempt from having to file financial and operational data with the U.S. Securities and Exchange Commission. Critics of the deal, including the Office of the Ombudsman and environmentalists, have focused on this provision, saying it will make Avangrid less transparent and harder to monitor.

The Maine Natural Resources Council said extreme weather and flooding in recent years have led to growing concerns about a “supply disruption” for CMP because its owners “appear to be focused on corporate maneuvering for profit rather than its core utility business, which is designed to improve resiliency, strengthen the grid, and rapidly introduce new, clean energy to CMP’s service area in Maine.”

Scully said the deal would not have a “negative impact” on the PUC’s ability to regulate CMP and MNG “in the absence of future SEC filings at the Avangrid level.”

The latest filing with the SEC by the Connecticut-based company, whose shares are traded on the New York Stock Exchange, was in conjunction with an announcement of its annual meeting on Sept. 26.

In New England, Avangrid also operates natural gas businesses in Connecticut and Massachusetts, and a utility in Connecticut. It also operates two electric and gas companies in New York.

Connecticut Attorney General William Tong and state consumer attorney Claire Coleman have asked Connecticut regulators to review the Iberdrola-Avangrid deal. The state’s Public Utilities Regulatory Authority has opened an investigation.

“Once fully privatized, Avangrid will no longer be required to file with the U.S. Securities and Exchange Commission, will not have minority shareholders who could control risky corporate behavior, and will not be subject to the 2015 shareholder agreement entered into at the time of Avangrid’s acquisition of United Illuminating, Southern Gas and Connecticut Natural Gas,” the two Connecticut officials said.

The New York Public Utilities Commission also decided to reconsider the Iberdrola-Avangrid contract.