Macquarie buys US power company

A partnership of investors led by Macquarie Infrastructure Partners has acquired Pennsylvania power company Duquesne Light Holdings, further expanding Macquarie’s US utility portfolio.

The Macquarie led-consortium paid $1.6 billion (€1.3 billion), or $20 per share in cash—21.7 percent more than Duquesne Light’s closing price on Monday. The partners will also assume an estimated $1.3 billion in long-term debt and $148 million of the company’s preferred and preference shares, according to a statement issued by the consortium and the utility, bringing the total enterprise value of the transaction to $3.2 billion.

“Duquesne Light is a strong, stable company in a market that has displayed a consistent demand over time,” Macquarie Infrastructure Partners chief executive officer Christopher J. Leslie said in a statement. “We believe it is an excellent long-term investment for our consortium.”

During a conference call to discuss the merger, Leslie said many of the investors were pension funds or similar entities looking to “balance long-dated liabilities with long-dated cash flow.”

Sydney-based Macquarie is among the leading investors in the burgeoning infrastructure asset class, which includes toll roads, bridges, utility companies, ports, airports and other enterprises traditionally funded, or regulated, by public entities.

The firm has been aggressively pursuing opportunities around the world, and recently held a first close on its second European infrastructure vehicle, which is expected to significantly exceed its €1.5 billion predecessor. In the US, previous investments in the power and utility sector include a gas company in Hawaii, a heat supplier in Chicago and an electric transmission company in Michigan. The purchase of the Aquarion Company, a New England water utility, is pending.

The Duquesne Light acquisition is expected to close in the first quarter of next year. The utility’s headquarters will remain in Pittsburgh and existing management will continue to run the business, the companies said.

Regulators, including the Federal Energy Regulatory Commission and Pennsylvania’s public utility commission, must still sign off on the deal. The utility supplies power to 587,000 customers in Pittsburgh and the surrounding area.

Duquesne Light CEO Morgan O’Brien said the company is confident it can convince regulators the deal is beneficial to the company, its customers and the local economy once they gain familiarity with Macquarie’s business and allay concerns that the utilities’ headquarters would move out of state and take jobs with it.

“We’ve done our due diligence to convince ourselves that this is the perfect partnership for us and we think the people in Harrisburg will be convinced of that,” he said during the conference call, referring to Pennsylvania’s capital, where the state utility commission sits.

The consortium also includes Diversified Utility and Energy Trusts, a joint venture between Macquarie and Australian investment firm AMP Capital, and Industry Funds Management, a Sydney-based infrastructure investment fund.