Louisiana clears Cleco deal

Having initially blocked the utility's $4.7bn sale, the state’s regulator has approved the takeover after the MIRA-led group of bidders further improved its commitments.

The Louisiana Public Service Commission (LPSC) has approved the sale of Cleco Corporation, the parent company of electric utility Cleco Power, to a group of institutional investors, concluding a deal that has been in the making since October 2014 and which seemed unlikely to happen a month ago.

The approval comes after the consortium, led by Macquarie Infrastructure & Real Assets (MIRA) and British Columbia Investment Management Corporation (bcIMC) improved their initial offer twice. It also represents an about-face on the part of the LPSC, which in late February found that the sale was not in the public’s interest.

In addition to MIRA and bcIMC, the group also includes John Hancock Financial and other infrastructure investors.

The latest revised offer essentially improves the rate credits which the investor group increased from a total of $100 million to $136 million. That translates into rate credits of $500 on average to every Cleco residential and small business customer compared to the $370 previously offered. This is a one-time rate credit that will be given to customers during a summer month.

“The state regulators have made their concerns for increased rate relief clear, and the investor group has adjusted their commitments in response,” the consortium said in a statement on Monday when it announced the improved package.

Current rates will remain in effect through June 2019, at which time Cleco will file for a new formula rate plan that will go into effect in July 2020.

To offset the increased rate credits, MIRA and its partners have reduced the amount they will be contributing to the state’s economic development funding from $15 million previously to $7 million. The investor group, however, has agreed to invest $6 million in Cleco’s community contribution foundation, double its original commitment.

Other terms, which the consortium had agreed to in its revised proposal earlier this month, remain unchanged. They include a commitment to maintain Cleco’s employee headcount, salaries, benefits and retiree benefits for 10 years as well as a pledge to reserve 10 percent of Cleco’s equity to allow Louisiana government pension plans to invest in the company.

Having received approval from the LPSC, the transaction is expected to close in April.

The consortium has already obtained approval from Cleco shareholders, clearance from the Committee on Foreign Investment in the US and consent from the Federal Energy Regulatory Commission.