(From Todd Epp, Northern Plains News)
Black Hills Corp. and NorthWestern Energy announced Aug. 19 they will merge in an all-stock deal worth about $15.4 billion, according to Reuters.
Under the agreement, NorthWestern shareholders will receive 0.98 shares of Black Hills for each share they hold, Reuters reported. Black Hills shareholders will own about 56 percent of the new company, while NorthWestern shareholders will hold 44 percent, Nasdaq noted.
NorthWestern CEO Brian Bird will lead the merged company, while Black Hills CEO Linn Evans will retire after the deal closes, Montana Free Press reported. The combined headquarters will be located in Rapid City, according to Black Hills Corp.’s investor relations release.
What It Means
Investors cheered the deal — NorthWestern shares jumped about 6.3 percent after the announcement, while Black Hills shares rose slightly, Reuters reported. But for consumers in South Dakota, the outcome will depend on how regulators structure rate cases and consumer protections, Montana Free Press noted.
Key details include: the deal is expected to close within 12 to 15 months pending approvals, according to Kansas Reflector; the companies plan about $7.4 billion in capital investment through 2029, Reuters reported; and South Dakota will make up 17 percent of the combined company’s rate base, second only to Montana’s 31 percent, SD News Watch reported.
Chris Ellinghaus, an analyst with Siebert Williams Shank, told Reuters the merger will be earnings-per-share accretive in its first year and set up long-term growth of 5 to 7 percent. In investor calls, Black Hills CEO Linn Evans said the merger offers “impact on customer affordability” and “benefits of scale,” according to Kansas Reflector.
Past utility mergers show what consumers might expect
In the 2016 Exelon-Pepco deal, regulators in Washington, D.C., and Maryland approved the merger only after imposing more than 40 conditions, including $72.8 million in customer funds and $25.6 million in bill credits, Utility Dive reported.
In New Jersey, regulators required a separate merger to provide $62 million in direct rate credits, NJ Spotlight News noted.
But in New Mexico, regulators rejected the Avangrid-PNM merger in 2021 over concerns about reliability and customer risk, according to the Santa Fe New Mexican.
What to watch in South Dakota: whether the Public Utilities Commission requires direct bill credits or caps on recovery of merger costs; what commitments are made on service reliability and outage response; how costs for major industrial users are allocated compared to rural customers; and how renewable energy and emissions goals are enforced.
Bottom line: The merger is a win for Wall Street investors so far. For South Dakota consumers, the results depend on what protections regulators write into the fine print.
