Varcoe: Enmax to remain in Maine, as voters reject state-ownership of Calgary firm's U.S. utility

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Calgary’s Enmax Corp. celebrated a ballot-box victory of types this week, though it happened hundreds of kilometres from house.

The town-owned company received’t be compelled to unload its Maine-based firm, often called Versant Energy, an electrical energy transmission and distribution utility that it purchased lower than 4 years in the past for US$1.3 billion.

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On Tuesday, voters in Maine soundly rejected a referendum query that will have created a brand new state-owned entity, Pine Tree Energy, to ultimately purchase Versant and one other foreign-held agency, Central Maine Energy (CMP), which is managed by Spanish energy firm Iberdrola SA.

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“We welcome the referendum lead to Maine,” Enmax CEO Mark Poweska mentioned in an announcement.

“This can be a good final result that may have long-term advantages for patrons on either side of the border.”

About 70 per cent of voters within the state rejected the proposal behind Pine Tree Energy.

Supporters of the ballot-box query had been outspent and outraised by teams related to CMP and Versant by an element of about 40 to 1, in response to the Maine Morning Star.

Enmax and Versant contributed $16 million to the political motion committee Maine Vitality Progress, which opposed the referendum query, the state’s ethics fee web site signifies.

“Definitely, the quantity of spending on the a part of the utilities made a giant distinction,” mentioned economist Richard Silkman, who endorsed the concept of a consumer-owned utility and is CEO of consultancy Aggressive Vitality Providers in Portland, Maine.

“The intense concern of those that voted towards was the concept that we’d be turning over the electrical grid — because the promoting marketing campaign drummed house — to politicians. Not true.

“The construction that will have been created in Maine was not that a lot completely different from what Calgary has with Enmax and metropolis council.”

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Versant, previously often called Emera Maine, is a regulated utility with 165,000 clients within the northern and japanese components of the New England state.

The vote would have led to the obligatory sale of CMP and Versant. It could have represented a serious setback for Enmax, which made its first main transfer exterior of Canada by agreeing to accumulate Emera Maine for $1.3 billion, together with the belief of about $500 million in debt.

“The factor we had been holding our eye on was the referendum on Versant Energy, however that didn’t cross, in order that concern for us has been alleviated,” DBRS Morningstar vice-president Tom Li mentioned Thursday.

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“If the referendum had really handed, then that will have led to fairly a interval of uncertainty for the corporate.”

One other poll field query that was overwhelmingly endorsed by voters in Maine referred to as for international governments and entities to be banned from spending cash in election campaigns and referendums.

For Enmax, the acquisition in Maine was initially contentious when it was introduced in 2019, with some councillors questioning why a municipally owned utility was investing exterior the nation.

In March 2020, DBRS Morningstar downgraded Enmax’s credit standing to BBB (excessive) from A (low) as a result of elevated debt it was taking over. (The company reaffirmed the ranking this July as secure and famous Enmax was executing its company plan to deleverage.)

On the time, Enmax touted the deal as utilizing its robust stability sheet to develop.

After the 2019 annual assembly, then Enmax CEO Gianna Manes identified the company’s measurement would improve by about 25 per cent with the acquisition, and 70 per cent of its earnings would movement from its regulated enterprise.

Enmax’s web earnings have risen from $156 million 4 years in the past to $296 million final 12 months, helped by greater energy costs in Alberta.

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The company has additionally grown its dividend paid to town, from $50 million in 2019 to $82 million this 12 months.

Final 12 months, Versant’s earnings earlier than curiosity, taxes, depreciation and amortization (EBITDA) sat at $131 million, the identical as in 2021, and up from $101 million in 2020.

Coun. Andre Chabot mentioned he initially was involved with the U.S. funding however has since come to consider it’s a superb strategic transfer for Enmax.

“To be trustworthy with you, I wasn’t too loopy in regards to the thought of us increasing exterior of our borders, however the rationale round why they determined to do it, not solely from a diversification perspective however as a result of they had been getting right into a regulated trade . . . it’s much more predictable funding,” he mentioned.

“If we had been to have bought that entity in Maine, we’d have realized enormous positive factors.”

Nevertheless, the one option to show that time could be by way of an precise sale.

Alberta electrical energy advisor Sheldon Fulton mentioned the referendum in Maine underscores the inherent threat for Enmax — and Calgarians, because the homeowners — of shopping for one other utility overseas.

He additionally questions if the cash would have been higher spent in Alberta.

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“The query is: Ought to a city-owned utility in Alberta be shopping for a international utility and working it? It appears to be an overreach of what their duties are, notably again to the ratepayers in Calgary,” mentioned Fulton.

“What would have occurred if the vote had gone towards Enmax they usually had been compelled out?”

After Tuesday’s vote, we received’t discover out.

“They need to be thrilled with the vote,” mentioned Silkman.

“That was an amazing rejection of Pine Tree Energy and that may make it harder to resurrect that initiative in some unspecified time in the future sooner or later.”

Chris Varcoe is a Calgary Herald columnist.

[email protected]

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