Varcoe: Vote in Maine goes Enmax’s method, lets it hold U.S. utility

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Calgary’s Enmax Corp. celebrated a ballot-box victory of kinds this week, though it passed off 1000’s of kilometres from residence.

The town-owned company gained’t be compelled to unload its Maine-based firm, often known as Versant Energy, an electrical energy transmission and distribution utility that it purchased lower than 4 years in the past for US$1.3 billion.

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On Tuesday, voters in Maine soundly rejected a referendum query that might have created a brand new state-owned entity, Pine Tree Energy, to finally purchase Versant and one other foreign-held agency, Central Maine Energy (CMP), which is managed by Spanish energy firm Iberdrola SA.

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“We welcome the referendum lead to Maine,” Enmax CEO Mark Poweska mentioned in an announcement.

“It is a good final result that may have long-term advantages for patrons on either side of the border.”

About 70 per cent of voters within the state rejected the proposal behind Pine Tree Energy.

Supporters of the ballot-box query have been outspent and outraised by teams related to CMP and Versant by an element of about 40 to 1, in line with the Maine Morning Star.

Enmax and Versant contributed $16 million to the political motion committee Maine Vitality Progress, which opposed the referendum query, the state’s ethics fee web site signifies.

“Definitely, the quantity of spending on the a part of the utilities made a giant distinction,” mentioned economist Richard Silkman, who endorsed the thought of a consumer-owned utility and is CEO of consultancy Aggressive Vitality Providers in Portland, Maine.

“The intense concern of those that voted towards was the concept that we might be turning over the electrical grid — because the promoting marketing campaign drummed residence — to politicians. Not true.

“The construction that might have been created in Maine was not that a lot totally different from what Calgary has with Enmax and metropolis council.”

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Versant, previously often known as Emera Maine, is a regulated utility with 165,000 prospects within the northern and japanese elements of the New England state.

The vote would have led to the obligatory sale of CMP and Versant. It will have represented a significant setback for Enmax, which made its first main transfer outdoors of Canada by agreeing to amass Emera Maine for $1.3 billion, together with the belief of about $500 million in debt.

“The factor we have been preserving our eye on was the referendum on Versant Energy, however that didn’t cross, in order that concern for us has been alleviated,” DBRS Morningstar vice-president Tom Li mentioned Thursday.

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“If the referendum had really handed, then that might have led to fairly a interval of uncertainty for the corporate.”

One other poll field query that was overwhelmingly endorsed by voters in Maine known as for international governments and entities to be banned from spending cash in election campaigns and referendums.

For Enmax, the acquisition in Maine was initially contentious when it was introduced in 2019, with some councillors questioning why a municipally owned utility was investing outdoors the nation.

In March 2020, DBRS Morningstar downgraded Enmax’s credit standing to BBB (excessive) from A (low) because of the elevated debt it was taking over. (The company reaffirmed the score this July as secure and famous Enmax was executing its company plan to deleverage.)

On the time, Enmax touted the deal as utilizing its sturdy steadiness sheet to develop.

After the 2019 annual assembly, then Enmax CEO Gianna Manes identified the company’s dimension would enhance by about 25 per cent with the acquisition, and 70 per cent of its earnings would stream from its regulated enterprise.

Enmax’s web earnings have risen from $156 million 4 years in the past to $296 million final 12 months, helped by greater energy costs in Alberta.

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The company has additionally grown its dividend paid to the town, from $50 million in 2019 to $82 million this 12 months.

Final 12 months, Versant’s earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA) sat at $131 million, the identical as in 2021, and up from $101 million in 2020.

Coun. Andre Chabot mentioned he initially was involved with the U.S. funding however has since come to consider it’s a superb strategic transfer for Enmax.

“To be sincere with you, I wasn’t too loopy concerning the thought of us increasing outdoors of our borders, however the rationale round why they determined to do it, not solely from a diversification perspective however as a result of they have been getting right into a regulated business . . . it’s much more predictable funding,” he mentioned.

“If we have been to have offered that entity in Maine, we might have realized enormous beneficial properties.”

Nevertheless, the one solution to show that time could be by means of an precise sale.

Alberta electrical energy marketing consultant Sheldon Fulton mentioned the referendum in Maine underscores the inherent danger for Enmax — and Calgarians, because the homeowners — of shopping for one other utility out of the country.

He additionally questions if the cash would have been higher spent in Alberta.

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“The query is: Ought to a city-owned utility in Alberta be shopping for a international utility and working it? It appears to be an overreach of what their obligations are, notably again to the ratepayers in Calgary,” mentioned Fulton.

“What would have occurred if the vote had gone towards Enmax they usually have been compelled out?”

After Tuesday’s vote, we gained’t discover out.

“They need to be thrilled with the vote,” mentioned Silkman.

“That was an amazing rejection of Pine Tree Energy and that may make it harder to resurrect that initiative in some unspecified time in the future sooner or later.”

Chris Varcoe is a Calgary Herald columnist.

cvarcoe@postmedia.com

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