Avista selling to Canadian firm Hydro One for $5.3 billion
Spokane’s homegrown utility, Avista Corp., is being sold for $5.3 billion to a Canadian company.
The sale to Hydro One Ltd., described as a friendly acquisition, is expected to be finalized next year. The deal creates one of North America’s largest regulated utilities, but will allow Avista to remain headquartered in Spokane, operating as a subsidiary of Hydro One.
“It preserves our identity and helps us continue to chart our own course in a rapidly consolidating utility industry,” said Scott Morris, chairman of Avista, which was founded in 1889 when Washington was still a territory.
Avista’s electric and natural gas customers in Washington, Idaho, Oregon and Alaska will see little difference after the sale, which is expected to close in the third quarter of 2018, said Morris, who will keep his job as company chairman.
No layoffs are expected as a result of the sale.
Regulators and shareholders must approve the all-cash deal, which includes the assumption of Avista’s $1.9 billion debt.
The sale will not affect Avista’s pending request for a three-year rate increase in Washington. However, the merge of the two companies should help keep rates competitive in the long term, Morris said.
Avista has about 700,000 customers. After the sale, the combined company will have about 2 million. Both utilities are heavily investing in infrastructure and technology and will benefit from economies of scale, Morris said.
“We can spread out our costs over a larger customer base,” Morris said
Hydro One is Ontario’s largest electric utility and power transmission company. The Toronto Stock Exchange-traded company is heavily invested in renewable energy, including hydro, wind and solar. It also has nuclear energy in its portfolio. Ontario officially phased out the burning of coal for electric generation several years ago, said Mayo Schmidt, Hydro One’s president and chief executive.
Hydro One’s assets were once owned by the province but were spun off into a publicly traded company in 2015. The government of Ontario is the largest minority shareholder, with 49 percent of Hydro One’s stock.
Both companies have similar philosophies in terms of meeting their customers’ needs and investing heavily in the communities where they operate through charitable giving, executives said.
The purchase of Avista also gives Hydro One a toehold in the United States, Schmidt said.
“We think there are opportunities under (Scott Morris’) leadership to grow in other areas of the U.S.,” Schmidt said.
Avista is Spokane’s largest publicly traded company, with annual sales of more than $1.4 billion. The utility began as Washington Water Power Co., using the Spokane Falls to generate electricity. In 1999, it changed its name to Avista.
The company owns dams on the Spokane and Clark Fork rivers that generate about half of the electricity it supplies to customers. Avista also owns an Alaska utility, a biomass plant, natural gas-fired turbines and a share of a coal-generating plant in Colstrip, Montana. A subsidiary, Avista Development, has real estate holdings. The company has launched several spin off firms, of which Liberty Lake-based Itron is probably the best known.
About 1,700 people work for Avista. Each year, the company is responsible for about $2 million in philanthropic giving in the communities it serves, and many local investors have Avista stock in their portfolios. Utility stocks traditionally have been considered a stable investment for retirees.
Despite its large presence in the Spokane area, Avista is relatively small for a publicly traded utility. It ranks 46th out of 50 publicly traded utilities in the U.S.
“They are just at a size where they’ll be challenged to survive in a consolidating utility industry,” said Craig Hart, president and chief investment officer for Hart Capital in Spokane. “There are efficiencies of scale in every business. This is a business where scale helps.”
