The Board of UNS Energy Corporation has unanimously approved a definitive merger agreement with Fortis, Inc. that calls for Fortis to acquire all of the outstanding common stock of UNS Energy for $60.25 per share in cash. The $4.3 billion transaction, which includes the assumption of approximately $1.8 billion in debt, would provide additional capital and new resources for UNS Energy’s subsidiaries, including Tucson Electric Power (TEP) and UniSource Energy Services (UES).
Tucson Electric Power (TEP) and UniSource Energy Services (UES) will remain headquartered in Tucson under local control with current management and staffing levels and no planned changes to existing operations or rates.
The proposed acquisition will be submitted early next year for the approval of UNS Energy shareholders. The transaction is also subject to the approval of regulators, including the Arizona Corporation Commission (ACC) and Federal Energy Regulatory Commission (FERC); the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; and the satisfaction of customary closing conditions. UNS Energy anticipates the transaction will be finalized before the end of 2014.
Fortis, based in St. John’s, Newfoundland, serves more than 2.4 million customers through its regulated utilities. Fortis owns electric utilities in five Canadian provinces and two Caribbean countries; a natural gas company in British Columbia, Canada; and a gas and electric utility in New York — Central Hudson Gas and Electric Corporation, which it acquired in June 2013.
“UNS Energy will be able to avail itself of the operational, regulatory and financial expertise throughout Fortis. The addition of UNS Energy to Fortis enhances UNS Energy’s ability to deliver safe, reliable, cost-effective energy service to its customers,” said Stan Marshall, President and Chief Executive Officer of Fortis.
The company believes that Fortis’ financial strength will improve UNS Energy’s access to capital to fund the ongoing diversification of its generating fleet as well as other infrastructure investments. Upon closing, Fortis will inject $200 million into UNS Energy to strengthen its balance sheet and help fund the planned purchase of Unit 3 at the natural gas-fired Gila River Power Plant, a transaction that will reduce TEP’s reliance on coal-fired power.
Fortis also will help UNS Energy maintain its position as an industry leader in renewable energy through support for its investments in solar power systems serving TEP and UES customers. TEP was recognized as 2012 Investor-Owned Utility of the Year by the Solar Electric Power Association. Both TEP and UES are on track to meet or exceed Arizona’s Renewable Energy Standard, which requires utilities to increase their use of renewable energy each year until it represents 15 percent of their power in 2025.