Canada power firm buys Central Hudson

Fortis agrees to acquire electric, gas company; will lock in rates for year

POUGHKEEPSIE–Central Hudson Gas and Electric Corporation is set to become the first acquisition in a Canadian company’s foray into the “regulated U.S. electricity marketplace.”

Central Hudson, the electric company serving most of Ancram (1,091 customers) and Gallatin (411 customers), and its parent company the CH Energy Group, entered into a “definitive merger agreement” with Fortis, Inc., the largest investor-owned distribution utility in Canada, according to Central Hudson Director of Media Relations John E. Maserjian.

Anyone who has something to say about the acquisition can still comment on the plan. The Public Service Commission (PSC) has designated two dates next week for public comments at a hearing before an administrative law judge.

State Senator Terry Gipson (D-41st) wrote to the PSC asking for a 90-day extension of the public comment period and that Central Hudson and Fortis representatives answer questions from local residents. The PSC agreed to a 45-day extension and the addition of two hearings, but will not require representatives from Fortis and Central Hudson to respond to the public.


In a April 2 statement Senator Gipson said, “The ability of hardworking men and women to provide for their families and small businesses to create good, local jobs, depends on their knowing that they will not be crushed by potentially arbitrary, unfair energy costs. The PSC’s decision is a small step in the right direction, but if Fortis remains silent about responding directly to the people of the Hudson Valley, I am not optimistic that they will be able to provide our community with the service it needs.”


A February 2012 press release about the agreement indicates that Fortis will acquire CH Energy Group for an aggregate purchase price of about $1.5 billion (all amounts are U.S. dollars) , including the assumption of about $500 million of debt. The all-cash transaction will provide $65/share to common shareholders of CH Energy Group, an approximate 10.5% premium above the energy group’s closing stock price on the last trading day before the announcement; a premium of 13.1% above its most recent 20-day trading average of $57.49; and about 10.4 times its 2011 earnings before interest, taxes, depreciation and amortization.


Fortis, Inc., describes itself as the largest investor-owned distribution utility in Canada. Its regulated holdings include electric utilities in five Canadian provinces and two Caribbean countries and a natural gas utility in British Columbia. It owns non-regulated hydroelectric generation assets across Canada and in Belize and upstate New York. It also owns hotels and commercial real estate in Canada.


CH Energy Group shareholders approved the transaction last June, and several other required regulatory approvals by U.S. federal agencies were subsequently received.


“CH Energy Group and Central Hudson were not seeking a buyer, rather Fortis approached us with an offer that would benefit Central Hudson customers and shareholders,” Mr. Maserjian said in an email. “All transaction costs will be paid for by Fortis and not Central Hudson customers. In other words, nothing is expected to change operationally. The transaction benefits customers, and the transition would be transparent,” he said.

Central Hudson will continue to operate as a standalone company, with little change in day-to-day operations. Fortis has said it will retain all employees and continue Central Hudson’s support of local community organizations.


“Power would continue to be supplied by the same sources as today (through the New York state energy market), and Central Hudson would continue to be regulated by the New York State Public Service Commission,” Mr. Maserjian said.

Subject to regulatory approvals, the transaction is expected to close in the second quarter of 2013.


Board Chairman and CEO of CH Energy Group Steven V. Lant said in a press release that the company would “become the first U.S.-based member of the Fortis federation of utility companies,” and he reiterated the view that the deal “is good for our shareholders, customers and employees alike.”


Fortis President and CEO H. Stanley Marshall, said in the release that the acquisition of Central Hudson is “the first step in our strategy to add value for Fortis shareholders by selective acquisitions within the United States of well-run, promising regulated electric and natural gas utilities.” He said his company already has “2 million gas and electricity customers … served by our existing Canadian utilities.”


Under the terms of the proposal filed with the PSC January 28, the indirect acquisition of Central Hudson by Fortis would be approved subject to a number of conditions, which include:

*Financial measures intended to protect the financial integrity and credit standing of Central Hudson

*A freeze on Central Hudson electric and gas delivery rates through July 1, 2014

*A guarantee of $9.25 million in savings to ratepayers over five years

*Provision of $35 million to cover expenses that would normally be included in rates, such as storm restoration costs associated with Superstorm Sandy

*Establishment of a $5 million Community Benefit Fund for economic development and low income customer assistance programs

*Continuation of customer service, reliability and safety mechanisms with increased negative revenue adjustments for failure to meet targets

*Adoption of provisions to ensure that funds provided in rates for planned maintenance and capital improvements are timely expended

*Establishment of a pilot program to test ideas for economically expanding gas service to new customers

*Assurance of local representation on the Central Hudson board of directors and a requirement that any proposed relocation of Central Hudson headquarters outside the service territory is approved by the PSC.


CH Energy Group, Inc., which is headquartered in Poughkeepsie, serves 300,000 electric and 75,000 natural gas customers in eight counties in the Mid-Hudson River Valley, delivering natural gas and electricity in a 2,600-square-mile service territory that extends north from the suburbs of metropolitan New York City to the Capital District at Albany.


Upcoming public statement hearings will be held Wednesday, April 17, Common Council Chambers, Municipal Building, Third Floor, 62 Civic Center Plaza, Poughkeepsie, (free parking available in parking garage), 7 p.m.; and Thursday, April 18, Council Chambers Kingston City Hall, 420 Broadway, Kingston, 7 p.m.

Comments may also be entered at the PSC website:


To contact Diane Valden email .

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