An electric utility business in Maine is set to be passed from one Canadian parent company to another in a debt-fueled transaction following a competitive sale process.
Alberta utility Enmax Corp., which is owned by the City of Calgary, won the auction and will pay $959 million for Emera Maine under the terms of the deal that has emerged.
Enmax will also assume some $341 million of Emera Maine's debt, bringing the total implied enterprise value to $1.3 billion.
Royal Bank of Canada ran the sale, taking first-round bids in mid-January. At the time, deal watchers had floated Avangrid, Eversource and National Grid as potential purchasers (PFR, 2/6).
Emera Energy, which is headquartered in Halifax, Nova Scotia, will use the proceeds of the sale to reduce its own corporate debt and make capital investments in its other regulated utility businesses.
With the sale of Emera Maine, Emera has hit the asset sale target it set as part of its three-year funding plan. Another major contributor to the achievement of this target was the sale of the company's New England gas-fired generation portfolio to The Carlyle Group for $590 million (PFR, 11/27/18).
For Enmax, meanwhile, the acquisition doubles its regulated rate base in North America.
CIBC Capital Markets advised Enmax on its bid and has underwritten an acquisition bridge loan to cover the $959 million purchase price. CIBC is expected to syndicate the loan to other lenders.
The permanent debt financing will take the form of private notes issued at the corporate level to institutional investors. Enmax has BBB+ and A (low) credit ratings from S&P Global Ratings and DBRS.
The placement agent or agents and the size, currency and tenor or tenors are still to be determined, says Davin Kivisto, vice president, corporate development and treasury, at Enmax in Calgary.
"Last June we refinanced one of our maturities and we had a great deal of appetite for that," he says, referring to a C$300 million 10-year offering that was priced at 3.84%. CIBC and RBC Capital Markets were the agents.
In the meantime, the bridge loan provides flexibility around the timing of financial close on the acquisition, which is subject to the approval of the Maine Public Utilities Commission and the U.S. Federal Energy Regulatory Commission, and expected by the end of the year.
Emera Maine was formed through the merger of Bangor Hydro and Maine Public Service in 2014 and serves about 159,000 customers.
Skadden and New England law firm Verrill Dana are representing Emera on the sale, while Enmax has a trio of legal advisers—New York's Bracewell, Toronto-based Blake Cassels & Graydon and New England firm Bernstein Shur Sawyer & Nelson.