Louisiana Public Service Commission Rejected Macquarie's Move to Acquire Public Utility Cleco Power LLC
Lousiana Public Service Commission (PSC), the state regulator rejected $4.85 billion dollar acquisition of utility company Cleco to Macquarie Group Ltd. PSC said it did not serve the best interest of the customers.
Cleco Power is responsible for providing electricity to about 286,000 customers in Louisiana. The company's acquisition by private investment group Macquarie was mostly negotiated behind closed doors for the past 17 months. Although the deal is beneficial to Cleco shareholders, but it has the negative terms.
According to The News Tribune, an administrative law judge analyzed the deal last week. The jugde found that sale of the utility company would not be in the interst of its customers.
If the acquisition which valued at almost $5 billion is approved, Cleco shareholders would have been able to sell their stock at 15% premium. While Australia-based Macquarie Group as the new owner would have been able to pocket taxes collected as part of the monthly rates, instead of turning them to state and federal authorities.
"I do not like the tax scheme. … If there ever was an issue you don't want the public to hear, it is this issue," PSC Chairman Clyde Holloway, R-Forest Hill said, as reported by The Advocate. Other commission members are Scott Angelle of R-Breaux Bridge, Eric Skrmetta R-Metairie, Foster Campbell D-Bossier Paris and and Lambert Boissiere III.
Moreover, Commissioner Holloway also expressed his objection of the local utility company will be owned by a group of Australian and Canadian investors. Another objection is the foreign investors planned to sell the utility within eight to ten years.
Futhermore, the $4.85 billion acquisition will use leverage financing method, The leverage financing will allow Macquarie Group to use borrowed money to borrow more money. As a result, Cleco customers will be held responsible for paying the debt.
Other commissioner Lambert Boissiere III also opposed the deal. He said that allowing the deal would give Macquarie an immediate advantage of tax breaks to borrow more money. "The minute we vote, the ratepayers are at risk," he insisted. "I don't know that I'm here to make sure Macquarie gets a good deal."
On the other hand, Cleco and investor group led by Macquarie published a statement expressing their disapointment. Bloomberg quoted the group's statement, "We are disappointed with the Louisiana Public Service Commission decision, which we believe fails to acknowledge the benefits this transaction would have provided to all Cleco stakeholders."
Furthermore, the spokeswoman for the group Robbyn Cooper added, "We will review our options and make a decision and communicate that decision at the appropriate time."
In an seven-hour meeting on Wednesday, Louisiana Public Service Commission rejected the acquisition of local utility company Cleco to Macquarie investor group. As the deal will burden the public,which also the customers of Cleco as utility company that provide electricity.