posted on Tuesday, October 24, 2006 10:39 AM
by
Tracy Davis
National Grid-KeySpan and Babcock & Brown-NorthWestern Mergers Blessed
FERC announced its unconditional approval for two large mergers October 19: one between National Grid and KeySpan Corp., the other between Babcock & Brown Infrastructure Ltd. and NorthWestern Energy Corp.
Under the $11.8 billion National Grid-KeySpan deal, announced in March 2006, KeySpan - currently one of the largest natural gas distributors in the northeast United States - would become a wholly-owned subsidiary of National Grid, a United Kingdom-based company. National Grid, which is already active in electric transmission in the Northeast, has been looking to increase its presence in the U.S., particularly in natural gas markets. Of primary importance to FERC in approving the acquisition was the fact that both companies' electric generation output was already committed well into the future, and thus, the proposed transaction would not increase the merged company's market power in wholesale markets. The merger must now win the approval of New York and New Hampshire state regulators. National Grid and KeySpan have already obtained the blessings of the Federal Trade Commission and foreign investment regulators.
FERC also approved Babcock & Brown's bid to acquire NorthWestern Energy, the Montana-based electric utility. FERC found no problems with the merger, particularly since the combination would not join generating assets that would compete in the same geographic markets. Moreover, NorthWestern offered to protect wholesale sales and transmission customers by holding them harmless from rate increases for five years, and by not passing through any of its acquisition costs to them. The South Dakota PUC, one of the states with jurisdiction over the acquisition, announced last week that it had conducted extensive discussions with both parties and would approve the merger pending FERC's approval. Regulators in Montana and Nebraska will also have to approve the deal.