7 thoughts on “Hawaiian Electric deal begging for deeper reporting”

1. t December 4, 2014 at 10:30 am

   try Google the following word:

   “NexTerror”

   this is only 1 aspect of NextEra, but it is interesting.
   employee reviews are here:

   http://www.glassdoor.com/Reviews/Employee-Review-NextEra-Energy-Inc-RVW3594326.htm

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2. maunawilimac December 4, 2014 at 11:06 am

   Re: HECO unions, the S-A story quotes an electrical union official as being quite enthusiastic. But given Next Era’s stance in Florida, there is indeed reason for concern. However, we have an electrical engineer as our new governor who has promised “due diligence.”
   What is historically ironic about this is HEI’s origins. The powers-that-were wanted to keep inter-island barge service ownership control within the state and Hawaiian Electric was approached because it was a local public utility. HECO agreed to take over Young Brothers if a financial outfit, American Savings, was allowed to be acquired under the HEI’s umbrella as well. With time, however, Young Brothers was allowed to be spun off to a Seattle maritime operator. Remember when Matson was allowed to be acquired by A&B to resolve a “Big Five” anti-trust issue back in the LBJ era because the Burns Administration considered it crucial to maintain ownership within the state?

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3. Old Native December 4, 2014 at 3:47 pm

   Re the MarketWatch article – when a law firm pops up with an “investigation” after a merger is announced, there is usually an attempt to shakedown a few bunch of legal fees for themselves with little, if anything, for the shareholders.

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4. rlb_hawaii December 5, 2014 at 7:01 am

   that was my thought, Old Native.

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5. Allen N. December 5, 2014 at 12:26 pm

   When PUC holds hearings on this matter, NextEra offcials will have many questions to answer. But the following two are especially important:

   1) Will your company commit to letting HECO customers hook newly installed PV systems up to the grid via a process that takes no longer than 30 days?

   2) Will your company commit to supporting rebates or tax credits to to make it easier for residents to afford PV systems?

   If a NextEra official cannot offer a straightforward answer with specifics and gives an evasive response to either question, then you can assume that this company will not support renewable energy initiatives that will save residential consumers money.

   If anyone doubts me and buys into NextGen’s PR fluff about how they are a “clean energy leader” w/o any specific promises and assurances of increasing consumer access to solar energy savings, then you’ll be sorry later on.

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6. compare and decide December 6, 2014 at 4:27 pm

   From a very useful source, Green Tech Media.

   http://www.greentechmedia.com/articles/read/Buying-Hawaiis-utility-seems-like-a-good-idea

   Aloha: Hawaii’s Utility HEI Acquired by NextEra for $4.3 Billion

   A brilliant idea: acquiring the troubled HEI and transforming it into a renewable energy powerhouse

   Eric Wesoff, December 3, 2014

   NextEra Energy is about to get some Aloha spirit.

   The energy giant just acquired Hawaiian Electric Industries in a transaction valued at $4.3 billion, which includes the assumption of $1.7 billion in HEI debt and does not include the bank owned by HEI. HEI shareholders will receive a premium of approximately 21 percent on the share price.

   Citigroup Global Markets, which has some experience in this area, served as the financial advisor to NextEra Energy. J.P. Morgan Securities advised HEI.

   NextEra owns and operates about 17 percent of installed U.S. wind capacity, about 14 percent of installed U.S. utility-scale solar, and eight nuclear reactors. As of year-end 2013, the utility giant had revenues of approximately $15.1 billion, approximately 42,500 megawatts of generating capacity, and approximately 13,900 employees in the U.S. and and Canada. As Hawaii’s utility, HEI supplies power to almost half a million customers on Hawaii, Oahu and Maui. Hawaii has the nation’s highest electricity prices and roughly 75 percent of the island’s electrical power comes from imported oil. The entire island chain of Hawaii has just 2,400 megawatts of generating capacity

   HEI also owns American Savings Bank, which will be spun off to HEI shareholders and established as an independent, publicly traded company. Hawaiian Electric Industries shareholders will receive 0.2413 NextEra Energy shares per Hawaiian Electric Industries share and a one-time special cash dividend payment of $0.50 per share.

   Jim Robo, CEO of NextEra Energy, comments, “We are proud that Hawaiian Electric has agreed to join our company in large part because of our shared vision to bring cleaner, renewable energy to Hawaii, while at the same time helping to reduce energy costs for Hawaiian Electric’s customers. Today, Hawaiian Electric is addressing a vast array of complex and interrelated issues associated with the company’s clean energy transformation. We believe our strengths are additive to Hawaiian Electric’s, creating an opportunity to enhance value for Hawaii’s strategically important energy industry.”

   The deal is subject to Hawaii PUC approval and approval by HEI shareholders.

   Greentech Media reports here on the troubled state of the solar industry in Hawaii. Here’s an article suggesting that an HEI acquisition might be a good idea.

   MJ Shiao, GTM Research solar director, comments, “With one in every ten customers with solar and thousands more PV systems set to be interconnected, HEI is the living case study for high-penetration PV and the potential benefits and pitfalls of advanced PV integration regulations and technology. It will be interesting to see whether NextEra’s acquisition will influence the ongoing development of requirements in Hawaii, as well as to see how HECO’s experience will translate to [NextEra company] Florida Power & Light, which has seen relatively little distributed solar since Florida’s ARRA-backed incentives ended.”

   In an investor call this afternoon, CEO Robo said that NextEra would “find Hawaiian solutions to Hawaiian problems.”

   No real details were provided on the regulatory challenges ahead with Hawaii’s PUC.

   Robo spoke of using NextEra’s renewable capabilities in Hawaii, deploying more energy storage and considering an undersea cable between the islands.

   The comments are also worth reading.

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7. compare and decide December 8, 2014 at 11:14 am

   Green Tech Media points to this article as evidence that the buyout of HECO by NextEra might be a step in the right direction.

   http://www.greentechmedia.com/articles/read/I-Almost-Bought-Hawaiis-Electric-Utility-For-6B-and-Made-It-a-Renewables

   I Almost Bought Hawaii’s Electric Utility for $6B and Made It a Renewables Paradise

   Eric Wesoff, June 3, 2014

   I have a confession to make. In 2011 I became involved, in a small way, in a multi-billion-dollar scheme to buy out HECO, Hawaii’s electric utility, and take it private. The plan was to shift HECO from its reliance on fossil fuels and allow the island to instead be powered by its natural gifts of geothermal, solar and wind resources. The crazy part of this story is that the deal came pretty close to actually getting done. I’ll make a long story short. Hawaii has the nation’s highest electricity prices, and the situation will only get worse in the years to come. Roughly 75 percent of the island’s electrical power comes from imported oil. A solution HECO developed back in 2011, The Hawaii Clean Energy Initiative, allowed the utility to continue its tradition of burning stuff such as uneconomical biofuels.

   Actually, The Hawaii Clean Energy Initiative was enacted in 2008 by the State of Hawaii and the US federal government, seemingly against the will of HECO. From the wiki on ‘Energy in Hawaii’: “On January 28, 2008, the State of Hawaii and the US Department of Energy signed a memorandum of understanding [5] and announced the Hawaii Clean Energy Initiative, which has a goal to use renewable resources such as wind, sun, ocean, geothermal, and bioenergy to supply 70 percent or more of Hawaii’s energy needs by 2030 and to reduce the state’s dependence on imported oil.”

   Kuokoa, the group I worked with, proposed a solution that would transition the island [sic] away from its petroleum habit toward baseload geothermal along with solar and wind on a modernized grid. Our analysis showed that the cost of green electricity could be kept flat and was certainly lower than anything HECO could offer over the next 50 years. Like many investor-owned utilities, HECO is boxed in. Making any significant grid overhaul requires enormous capital outlays — which is at odds with quarterly expectations or raising already high retail rates. Additionally, HECO’s fleet of legacy generation units will require billions in clean air standards upgrades. At the same time, deep PV penetration is reversing load growth and destabilizing the grid.
   …
   The entire island chain of Hawaii has just 2,400 megawatts of generating capacity with 95 percent of the population served by a single utility. It’s feasible that a willing utility and a team of entrepreneurs could effect some real change on a grid of this scale. You would think that a utility blessed with significant solar, wind, ocean, and geothermal energy resources would already be leading that transformation today. But a certain amount of institutional inertia, aggravated by decades of dependence on oil, is delaying an epochal opportunity. A certain amount of cultural inertia is at play as well. In past decades, local Hawaiians might have taken a dim view of using the island’s geothermal resources. That stance has softened, however. The plan would have taken advantage of the Big Island’s geothermal resources to provide baseload power to Oahu.

   The plan factored in the grid upgrades necessary to support the shift to renewables. It was an audacious $6 billion showcase deal that meant going after a regulated utility in one of the more idiosyncratic U.S. states. Still, private equity firms and banks buy and sell utilities and power firms every week — deal sizes in this range are not out of the ordinary. That was the plan.

   The acquisition offer

   Anyway, we had a real plan that penciled out — and all we needed to do was to track down $6 billion in debt and equity. … We eventually connected with a banking behemoth that found the proposed deal credible enough to study further. And curiously enough, after a lot more analysis, the bank gave the nod to provide the debt for a slightly scaled down version of the project. I’ll repeat that: the big bank with a name you’d recognize said it was in for several billion dollars. It gets weirder. The transaction would require an equity piece as well. A few stellar introductions and some skillful analysis later, and we had a global private equity firm known for leveraged buyouts that was also in for several billion dollars. The PE firm’s analysis was detailed, deliberate and thorough. I read through the financial analysis again last night, and it’s hard to find a stone left unturned.

   In the case of HECO and the offer, our top-tier private equity entity had longstanding back-channel relationships with members of the board of HECO. Our rockstar private equity representative made the dramatic, multi-billion-dollar, transformative offer to HECO’s decision-makers. And was promptly turned down. End of story.

   It is unusual that HECO sold out for $4 billion in 2014 when it turned down a $6 billion sale in 2011. This could mean that HECO’s own confidence in its future has been shattered. No one really knows where energy production is heading. In fact, this could be why NextEra wants to purchase HECO, as a test case of how to deal with transformational disruption that now seems inevitable (I believe NextEra specializes in natural gas, and has been cool to solar). More than any other place, solar in Hawaii has gone beyond the point of no return, so NextEra’s plan does not involve regression and retrenchment. It has no choice but to move forward with solar, not just in Hawaii but eventually in Florida.

   The author has an oddly cavalier attitude toward a $6 billion takeover attempt that almost succeeded (in fact, despite his expectations of early failure). As amateurish as his team seemed to be, they did raise an astounding $6 billion. A frightening thought: None of these people in the business elite – HECO, NextEra, Kuokoa – really know what they are getting into (a bit like Wall Street in the 2000s). But, at least nowadays, they know that they do not know.

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