Energy consultant: Bill would make NorthWestern a more attractive purchase

Mergers, acquisitions not common

By: - April 15, 2021 7:24 pm

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NorthWestern Energy would look like a pretty good company to buy.

That’s one scenario that hasn’t been talked about much in relation to a bill that aims to help NorthWestern and its ownership of the coal fired plants in Colstrip, according to an energy industry consultant.

On the one hand, supporters of Senate Bill 379 argue it’s essential to shore up the utility’s assets in Colstrip, said John Mues, who spoke this week to the House Energy, Technology and Federal Relations Committee. On the other hand, he said, opponents allege the legislation is a form of corporate cronyism.

“If you add that up, what it means is that the company itself becomes far more attractive,” said Mues, with energy consulting firm Cyan H2. “And we have some very large players looking at Montana that would find that (utility) to be an interesting purchase.”

Mues spoke this week as an informational witness on the bill, one of several proposed in the Montana Legislature to help monopoly power utility NorthWestern Energy. At the hearing Wednesday, several parties, including current and former elected members of the Montana Public Service Commission, testified about the damage Senate Bill 379 could do to customers as it bolsters the power company.

“The bill was obviously conceived by NorthWestern, and of all the frankly self-serving and anti-consumer bills that I’ve seen this company push over the years, this is the worst one yet,” said former Commissioner Roger Koopman.

Mues, who also shared comments Thursday in a phone call, said he wasn’t testifying in favor or in opposition to the bill. Rather, he was speaking as a party who wanted to alert both supporters and opponents to a scenario that hasn’t been in the spotlight, that another company would step in to buy NorthWestern.

“From our perspective, it was the one thing that wasn’t really being discussed,” said Mues, who described Cyan H2 as a limited liability corporation that does energy consulting and looks at clean energy opportunities in Montana and bordering states.

If the bill goes through, it pumps up NorthWestern’s balance sheet, he said. The power company is worth some $3.4 billion, and ratepayers would be responsible for some $2 billion of that amount, or 60 percent. So if liabilities drop, or even remain the same, and equity goes up, NorthWestern becomes a prime target for acquisition.

“Somebody would find that very interesting from a value perspective,” said Mues (he ran as a Democratic candidate in the U.S. Senate primary in 2020).

But a sale doesn’t guarantee the Colstrip generation facilities stay open either. A new owner might see value in owning the utility, possibly for transmission capacity, but not see value in Colstrip Units 3 and 4, he said. So a new owner could make the purchase, provided one is approved, then shut down the plants, and still earn a profit from ratepayers on the shuttered facility.

“I don’t want to say that this is probable,” Mues said. “The reality is there aren’t a lot of acquisitions in the world. But it’s a scenario that folks need to consider, including those people who support SB379, because our sense is they support it because they want to maintain jobs and baseload power in Colstrip. But we’re not convinced that would actually happen. The opposite effect might occur.”

Cyan H2 believes the entities that own NorthWestern have a history of mergers and acquisitions, so the possibility of a future sale could use more scrutiny, he said: “We don’t have a neat answer for that. But again, we just saw that this was a hole in the analysis on both sides.”

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Keila Szpaller
Keila Szpaller

Keila Szpaller is deputy editor of the Daily Montanan and covers education. Before joining States Newsroom Montana, she served as city editor of the Missoulian, the largest news outlet in western Montana.