CH Energy Group, Inc. (NYSE: CHG), parent company of Central
Hudson Gas & Electric Corporation, and Fortis Inc. (TSX:FTS)
today filed a letter with the New York State Public Service
Commission offering additional enhancements to the package of
significant customer benefits contained within a Joint Proposal
regarding their merger that was filed on January 28, 2013. The
enhancements respond to the public input received since that time,
including the Recommended Decision that was issued by the
Commission on May 3, 2013. The Commission’s approval is the only
remaining requirement to close the transaction, which was first
announced 15 months ago.
“We appreciate the strong support that we have received from so
many of our stakeholders, and today we proved that we have also
listened to requests for additional enhancements to the Joint
Proposal,” said CH Energy Group Chairman Steven V. Lant. “We know
this merger is in the best interests of all we serve, and we are
committed to delivering its many benefits to our customers.”
Fortis Vice President, Finance, and Chief Financial Officer
Barry Perry said that Fortis is equally committed to serving the
best interests of the communities of the Hudson River Valley.
“Central Hudson is a well-run utility that is dedicated to serving
its customers and its communities.
“The unique Fortis federation model ensures Central Hudson will
remain a locally run company with customers receiving the benefits
offered by this transaction. We look forward to receiving the
Commission’s approval in order to begin providing those benefits to
Central Hudson customers,” he said.
The highlights of the Joint Proposal and enhancements offered to
the Commission for its consideration include the following:
- Customers will receive $49.25 million
of real, tangible, hard-dollar benefits, which can be used by the
Commission to cover previously incurred storm costs, to invest in
economic development, to support low income programs and to
implement other rate-mitigation measures.
- The freeze in customer delivery rates
will be extended by an additional year, meaning that rates will not
change for a three-year period from July 1, 2012, through July 1,
2015. Central Hudson will make $215 million in capital expenditures
during this period, including an estimated $50 million which will
have a “storm hardening” effect on its infrastructure – all without
any increase in utility delivery rates.
- Central Hudson’s unionized workers now
fully support the merger, following an agreement to retain all
jobs, to provide an additional year of contract stability and to
add approximately 35 new jobs. The same effective four-year “no
layoff” commitment has also been made to non-unionized employees,
bringing greater job security to all 875 Central Hudson
employees.
- The commitment to continue Central
Hudson’s strong community relations support will be at least
doubled from five to a minimum of 10 years. This will ensure that
Central Hudson’s involvement with the community will continue as it
has for generations.
- Central Hudson’s name, headquarters and
staff will all remain unchanged by becoming part of the Fortis
federation model of operating utilities. As a further commitment to
local governance, the minimum number of independent Central Hudson
directors who reside or do business within the service territory
will also be increased to two members.
- With Commission oversight, $5 million
will be allocated toward economic development and low-income
programs.
- Customers will benefit through Fortis’
strong credit rating, greater scale and access to capital to
finance an estimated $600 million in infrastructure investments
during the next five years. The greater access to capital will
improve Central Hudson’s ability to participate in Governor Cuomo’s
Energy Highway initiative, which will improve service reliability,
reduce costs and bring more renewable energy into the Hudson
Valley.
“In today’s consolidating utility industry, Central Hudson’s
future is very uncertain without Fortis as a partner,” said Lant.
“No alternate transaction could likely ensure that Central Hudson
would remain an independently operated company. Absent Fortis, our
customers will be deprived of nearly $50 million in benefits and we
will need to seek near-term delivery rate increases in order to
fund our capital investments. That undesirable and uncertain
alternative must be avoided.”
In their letter, Lant and Perry requested that the Commission
approve the merger transaction at its next scheduled meeting on
June 13, 2013. Once ordered by the Commission, both companies will
be contractually required by law to fulfill all terms of the
agreement.
“The terms of the merger, especially as enhanced, provide a
compelling outcome that significantly exceeds the required ‘net
positive benefit’ test and one that is truly in the public
interest,” Perry said. “We have listened, worked cooperatively and
reached deeply to extend this offer. Central Hudson, its customers
and employees will all benefit if the company becomes a member of
the Fortis federation of utilities. We look very much forward to
that day.”
About CH Energy Group, Inc.: CH Energy Group, Inc. is
predominantly a regulated transmission and distribution utility,
headquartered in Poughkeepsie, NY. Central Hudson Gas &
Electric Corporation serves approximately 300,000 electric and
about 75,000 natural gas customers in eight counties of New York
State’s 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. CH Energy Group also operates Central Hudson
Enterprises Corporation (CHEC), a non-regulated subsidiary composed
primarily of Griffith Energy Services, which supplies energy
products and services to approximately 56,000 customers in the Mid
Atlantic Region, as well as several renewable energy
investments.
Forward-Looking Statements
Statements included in this news release and any documents
incorporated by reference which are not historical in nature are
intended to be, and are hereby identified as, “forward-looking
statements” for purposes of the safe harbor provided by Section 21E
of the Exchange Act. Forward-looking statements may be identified
by words including “anticipates,” “intends,” “estimates,”
“believes,” “projects,” “expects,” “plans,” “assumes,” “seeks,” and
similar expressions. Forward-looking statements including, without
limitation, those relating to CH Energy Group’s and Central
Hudson’s future business prospects, revenues, proceeds, working
capital, investment valuations, liquidity, income, and margins, as
well as the acquisition by a subsidiary of Fortis Inc. and the
expected timing of the transaction, are subject to certain risks
and uncertainties that could cause actual results to differ
materially from those indicated in the forward-looking statements,
due to several important factors, including those identified from
time to time in the forward-looking statements. Those factors
include, but are not limited to: the possibility that various
conditions precedent to the consummation of the proposed Fortis
transaction will not be satisfied or waived including regulatory
approvals of the proposed Fortis transaction on the timing and
terms thereof; the impact of delay or failure to complete the
proposed Fortis transaction on CH Energy Group stock price;
deviations from normal seasonal weather and storm activity; fuel
prices; energy supply and demand; potential future acquisitions;
legislative, regulatory, and competitive developments; interest
rates; access to capital; market risks; electric and natural gas
industry restructuring and cost recovery; the ability to obtain
adequate and timely rate relief; changes in fuel supply or costs
including future market prices for energy, capacity, and ancillary
services; the success of strategies to satisfy electricity, natural
gas, fuel oil, and propane requirements; the outcome of pending
litigation and certain environmental matters, particularly the
status of inactive hazardous waste disposal sites and waste site
remediation requirements; and certain presently unknown or
unforeseen factors, including, but not limited to, acts of
terrorism. CH Energy Group and Central Hudson undertake no
obligation to update publicly any forward-looking statements,
whether as a result of new information, future events, or
otherwise. Given these uncertainties, undue reliance should not be
placed on the forward-looking statements.
Additional Information about the Fortis Transaction and Where
to Find It
In connection with the proposed acquisition of CH Energy Group
by Fortis, CH Energy Group filed a definitive proxy statement with
the SEC on May 9, 2012, and has filed other relevant materials with
the SEC as well. Investors and security holders of CH Energy Group
are urged to read the proxy statement and other relevant materials
filed with the SEC because they contain important information about
the proposed acquisition and related matters. Investors and stock
shareholders may obtain a free copy of the proxy statement, and
other documents filed by CH Energy Group, at the SEC’s Web site,
www.sec.gov. These documents can also be obtained by
investors and stockholders free of charge from CH Energy Group at
CH Energy Group’s website at www.chenergygroup.com, or by
contacting CH Energy Group’s Shareholder Relations Department at
(845) 486-5204.
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