JP Morgan-advised vehicle to buy El Paso Electric in USD-4.3bn deal

Wind park in Texas. Author: Rockin'Rita. License: Creative Commons, Attribution-NonCommercial-NoDerivs 2.0 Generic.

June 5 (Renewables Now) - An investment vehicle advised by JP Morgan Investment Management Inc has struck a deal to acquire Texas-based regional electric utility El Paso Electric Co (NYSE:EE), or EPE, at an enterprise value of USD 4.3 billion (EUR 3.8bn).

More specifically, the Infrastructure Investments Fund (IIF) will pay USD 68.25 in cash per EPE share, which is a 17% premium to EPE’s closing price on May 31, 2019, the last trading day before the announcement. The transaction is seen to close in the first half of 2020, subject to shareholder and regulatory clearance.

“This is a tremendous opportunity to scale and prepare the Company for a clean energy future that is local and sustainable,” said Mary Kipp, President and CEO of El Paso Electric.

El Paso Electric provides generation, transmission and distribution service to about 428,000 retail and wholesale customers in west Texas and southern New Mexico. The company has been operating as a coal-free utility since July 2016 and its current generation mix includes about 70% natural gas, 30% nuclear power and less than 1% of renewables. In 2018, EPE's energy sources included 12% purchased power and of that, renewables accounted for 20%. Solar purchased power amounted to 74 MW.

In Texas, EPE is required to obtain an amount of renewable energy based on the ratio of its local sales compared to total sales in the state. The number has averaged some 5%, according to a recent presentation.

In New Mexico, the utility is currently required to meet 15% of its retail energy sales via renewables and that share will rise to 20% in 2020.

The deal with IIF comes just a few days after EPE released a Request for Proposal (RfP) through which it seeks to procure renewable energy resources for New Mexico in order to comply with the state’s Renewable Portfolio Standard (RPS) requirements. Based on a preliminary determination, EPE will need about 141,000 MWh of additional renewable energy per year beginning in 2020.

The acquisition agreement includes commitments to retain EPE’s current workforce.

Lazard and Baker Botts LLP are acting as financial advisor and legal advisor, respectively, to EPE. At the same time, BofA Merrill Lynch serves as exclusive financial advisor to IIF and Skadden, Arps, Slate, Meagher & Flom LLP is acting as its legal advisor.

(USD 1.0 = EUR 0.888)

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Ivan is the mergers and acquisitions expert in Renewables Now with a passion for big deals and ambitious capacity plans.

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