Macquarie consortium in $7.4bn US utility deal

Puget Sound Energy, Washington state’s largest utility company, will be taken private in a $7.4 billion transaction by a consortium including Macquarie, the Canada Pension Plan Investment Board and British Columbia Investment Management Corporation.

Macquarie Infrastructure Partners, the Canada Pension Plan Investment Board and the British Columbia Investment Management Corporation have agreed to take private Washington utility company Puget Sound Energy in a transaction valued at $7.4 billion (€5.2 billion).

Expected to complete in the second half of 2008, the deal is composed of $3.2 billion of equity, $1.6 billion of newly issued debt and $2.6 billion of existing debt.

We are committed to supporting PSE’s strong leadership on environmental issues…

Christopher Leslie

Alberta Investment Management, Macquarie-FSS Infrastructure Trust and Macquarie Bank are also members of the investor consortium, which has promised to invest $5 billion in Puget Sound Energy over the next five years to support infrastructure needs.

The consortium also agreed to maintain the company’s current employees and management team, honor existing employee wages and benefits as well as agreements in place with unions.

Additionally, the investor group pledged to maintain the company’s commitment to the environment.

“We are committed to supporting PSE’s strong leadership on environmental issues and to help the company meet the goals it has established to increase the generation of renewable sources of energy, improve energy efficiency, and invest in secure and reliable energy infrastructure,” Christopher Leslie, chief executive of Macquarie Infrastructure Partners, said in a statement.

The deal for Washington state’s largest utility company is reminiscent of the recently completed $45 billion deal for Texas utility TXU. The buyout consortium comprised of Kohlberg Kravis Roberts, TPG and Goldman Sachs attempted to avert criticism by announcing a slew of environmental concessions along with the buyout, though it was still criticised by stakeholders including environmental groups, customers, legislators and unions in the months leading to its completion.

Macquarie Infrastructure Partners focusses on investments in North America. To Its investments include New England water utility Aquarion, Pittsburgh electric utility Duquesne Light, two Canadian port terminals and interests in four US toll roads.