Fortis to inject $200 million into UNS to reduce greenhouse gases
The US Federal Energy Regulatory Commission (FERC) has given the go-ahead to stock pick Fortis Inc’s (TSE:FTS, Mkt cap 6.81B, P/E 19.60, Div/yield 0.32/4.01, EPS 1.63, Shares 213.20M) pending acquisition of local sector player UNS Energy Corp.
The federal energy watchdog believes that the deal, which is valued at $4.3 billion, is “consistent with the public interest.” The transaction is expected to close by the end of the year after gaining certain regulatory and government approvals, including Hart-Scott-Rodino clearance and greenlight from the Arizona Corporation Commission (ACC) and the Committee on Foreign Investment in the United States.
Shareholders of the Arizona-based utility backed the takeover on 26 March after Fortis agreed to buy its US peer in December, saying it would pay $60.25 in cash for each UNS Energy share and assume $1.8 billion of debt. After the deal closes, Fortis expects to see its assets expand by 33.5% to some $23.5 billion, with regulated utility assets representing around 92% of the total. Following the transaction, Fortis’ customer base will expand to over three million after gaining 650,000 customers in Arizona and around a third of its assets will be located in the US.
Fortis also pledged to inject $200 million into the US company to help it proceed with a planned gas asset purchase as it seeks to lower its dependence on coal-fired energy.
Fortis operates power and gas utilities in several Canadian provinces and US states. The company is hopeful that this purchase will support the geographic diversification of its business while improving its earnings per common share from 2015 onwards.
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