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Seeking Texas takeout approval, El Paso Electric offers $21M bill credit

El Paso Electric Co. has offered $21 million in bill credits for customers as the utility seeks approval from the Public Utility Commission of Texas for its $4.3 billion acquisition by a J.P. Morgan Investment Management Inc.-advised investment vehicle.

In its Aug. 13 application with Texas regulators, El Paso Electric said customers would receive the credits over the course of three years and ratepayers "will not be responsible for the premium and transaction costs associated with" its deal with Sun Jupiter Holdings LLC, an affiliate of Infrastructure Investment Funds, or IIF. The utility said it would not impose "any material workforce reduction" for at least five years and will create a 20-year $100 million economic development fund for El Paso Electric's Texas and New Mexico service areas.

Moreover, El Paso said the deal will not hinder its current five-year capital expenditure plan and will help with long-term investments for renewable energy sustainability initiatives.

"The proposed transaction will not adversely affect the reliability, availability or cost of [El Paso Electric's] service," the utility said in the filing. "[The parties] are committed to providing the safe, clean, affordable and reliable electric service that customers and the Commission expect and deserve."

On June 3, El Paso Electric announced the buyout for $68.25 per share in cash, shaking up a sleepy M&A environment for utilities so far in 2019. The parties said they aim to close the deal during the first half of 2020, pending shareholder and regulatory approval. The applicants made several other regulatory filings seeking approval of the merger Aug. 13, including with the Federal Energy Regulatory Commission.

State law requires Texas utility regulators decide on a proposed transaction within 180 days after the application is filed, but there is an option for a 60-day extension.

The PUCT is one of a handful regulators that El Paso Electric and IIF will need to win over in order to approve their deal. The players in the deal will have to get approval from the New Mexico Public Regulation Commission, the city of El Paso, Federal Energy Regulatory Commission and other agencies.

Approval from multiple state regulators has been a roadblock for recent major utility deals, such as Hydro One Ltd.'s attempt to acquire Avista Corp. and attempts by several companies to buy Oncor Electric Delivery Co. LLC before Sempra Energy sealed the deal. (Texas PUC Control No. 49849)