Friday, September 21, 2018
Business

Buyer of TECO is known as a diverse, rapidly expanding utility

TAMPA — J.R. Kelly was baffled when he heard late Friday that Canada-based Emera Inc. had agreed to buy the parent company of Tampa Electric and Peoples Gas.

"I'm going, 'Emera? Who the heck is that?' " said Kelly, the public counsel whose office represents consumer interests before Florida utility regulators. "I never heard of them."

Neither, undoubtedly, had many of TECO and Peoples' 1 million customers.

The purchase of TECO Energy by the Halifax, Nova Scotia, energy conglomerate for $10.4 billion would bring to Florida a diverse, rapidly expanding utility powerhouse with operations in, besides Canada, several Northeast states and four Caribbean nations. It has doubled in size since 2010 to $10 billion in assets today, and would double again to $20 billion with the TECO deal.

The company, analysts say, has shown a commitment to renewable, clean energy that includes solar, hydroelectric and wind.

Emera's CEO, Chris Huskilson, is an engineer who has commuted to his Halifax office in a battery-powered Chevy Volt. As a younger man, Huskilson cut his engineering teeth working on a project to harness the tidal power of the Bay of Fundy on Canada's Atlantic coast.

The project never produced the electricity envisioned, though a tidal-power facility still produces some energy today.

But Emera also has faced criticism in its home base from customers who have complained about electric rates that are among the highest in Canada, according to published reports.

Some, however, note that complaints about rates are part of daily life for any power company.

"I think they'll prove a pretty good owner" of TECO, said Roger Conrad, a utility analyst who operates the website Conrad's Utility Investor. "The Canadians have a pretty good track record for safety and reliability. They probably have lower expectations in terms of shareholders to placate. They have a long-term approach. All that might benefit ratepayers."

He said Emera has a reputation as a good corporate citizen that is invested in the communities it serves. And Huskilson said it would continue TECO's community engagement.

Hillsborough County leaders have expressed sadness at the prospect of TECO, a utility with a 115-year history in the city, being absorbed by out-of-towners, however well intentioned.

"They were always willing to do whatever the city needed," former Tampa Mayor Dick Greco said of TECO. "All that's going to be bygones now."

Emera said it would create a local operating board for TECO that would have a local director. But on Saturday an Emera spokeswoman could provide little detail about such a board's responsibilities. Emera did note the board would oversee engagement and corporate giving in Florida.

The company pledges to maintain strong ties to Hillsborough and other communities that TECO and Peoples serve.

The TECO sale must still be approved by federal regulators, though not by the Florida Public Service Commission. It must also be approved by both TECO and Emera shareholders. Emera said it expected the sale to be completed by mid 2016.

Buried in the hoopla over the announcement of the sale was a fact mentioned by TECO chief John Ramil in a conference call with analysts on Friday. He said TECO is still free to review other offers for the utility, though its agreement with Emera prevents TECO from soliciting bids.

Given the glowing language used by TECO and Emera in announcing the marriage, it seemed unlikely anything would scuttle the deal.

The New York law firm of Bronstein, Gewirtz & Grossman said late Friday it would investigate whether TECO's directors "breached their fiduciary duties to stockholders by failing to adequately shop the company" before agreeing to the sale. TECO confirmed it did field other offers, though it declined to identify the parties.

The law firm could file suit on behalf of TECO shareholders. TECO declined comment.

Emera's roots date to 1992 with the privatization of Nova Scotia Power, which today has 500,000 customers. The owners later formed Emera as an energy holding company. The company has since acquired other utilities. It controls Emera Maine with 154,000 customers and has power plants in Rhode Island, Massachusetts and Connecticut. It also controls utilities in the Caribbean with 179,000 customers — in Grand Bahama, Barbados, St. Lucia and Dominica.

One of Emera's Caribbean investments has caused the utility considerable bad press.

Emera acquired a controlling interest in the Grand Bahama Power Co. in 2010. Critics complained that after doing so, utility rates for 19,000 customers were excessively hiked. They accused the utility of poor management, and an independent audit by PricewaterhouseCoopers confirmed some problems.

The audit said the utility failed to investigate customer complaints about unusual hikes in electricity usage. And the audit said billing clerks "deliberately applied an excessively high estimated consumption to a customer who had received consecutive estimated bills … to get a customer who had not responded to multiple attempts to make contact to come into the office."

Emera noted these problems predated its acquisition of the Grand Bahama utility, a power company with a troubled history. In 2014, Huskilson described Emera's acquisition strategy to the Toronto Globe and Mail by saying, "We like broken things."

Not that anyone is describing TECO Energy as a broken asset.

One of the attractions of a regulated utility in Florida is the robust rate of return guaranteed by Florida regulators, in TECO's case about 10.25 percent. And TECO told analysts its customer mix, heavily concentrated in a 2,000-square-mile area that includes all of Hillsborough, provides greater profit.

Emera executives plan to discuss the deal with TECO employees Tuesday at the firm's Tampa headquarters and are expected to provide the same reassurances given reporters — no layoffs, no TECO name change and continued community involvement.

"The communities we serve," Huskilson said Friday, "are very important to us."

Times researcher John Martin and staff writer Dan Sullivan contributed to this report.

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Published: 09/21/18