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Hawaii LNG import boost uncertain after merger of Hawaiian Electric, NextEra blocked

Highlights

Efforts to import more LNG to Hawaii are in doubt after a regulatory decision late Friday rejecting the proposed merger between Hawaiian Electric Co. and Florida-based NextEra Energy.

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In mid-May, Hawaiian Electric said a proposed contract to deliver 800,000 mt/year of LNG to Hawaiian Electric from FortisBC's Tilbury LNG facility in British Columbia, starting in 2021, was contingent on the Hawaii Public Utilities Commission approving the merger.

On Saturday, Fortis said in response to the commission's rejection of the merger, "FortisBC's LNG fuel supply agreement with Hawaiian Electric did contemplate the potential of this regulatory decision. At this time, all parties are reviewing the decision."

Hawaiian Electric did not immediately respond Monday to questions regarding the impact of the decision on its LNG plans.

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In May, Hawaiian Electric said the LNG project requires substantial upfront financial support that NextEra Energy can provide. Hawaiian Electric said it would still be interested in pursuing on its own the benefits of LNG if the merger was not approved, but that it would need to negotiate a new contract.

Under the plan, Fortis would send LNG from its Tilbury LNG facility to Hawaii in mid-sized LNG carrier ships.

NextEra's effort to buy Hawaiian Electric had been under review by utility regulators for months, and the merger faced strong opposition by state officials, who have been pressing utilities to use more renewables and reduce fossil fuel use.

Hawaiian Electric has told regulators that using LNG as a potential bridge fuel will facilitate a cleaner and more cost-effective transition away from fossil fuels to the state's 100% renewable energy mandate by 2045.

In its decision, the commission did not specifically cite plans to import LNG as a reason to reject the merger. But the commission said the companies had not shown the merger to be in the public interest with respect to five areas, including clean energy commitments and the effect on competition in local energy markets.

Regulators said the merger partners' commitments to meet the state's 100% renewable standard were "simply too broad and vague to satisfy the public interest standard."

The decision also cited the risks of diminishing robust competition in the state's energy markets. It said the Hawaiian Electric companies would become affiliated with numerous unregulated NextEra subsidiaries which may participate in bids solicited by the companies. Such a transformation would likely have an impact on local competition, the commission said.

Hawaii Gas, which has its own projects for importing LNG in bulk and in containers, previously told regulators that the partners could stifle competition in energy markets, including LNG-based power generation.

Hawaii Gas told regulators the merger partners were pursuing plans to develop an alternative LNG supply chain to serve themselves, potentially at the expense of other LNG users.

--Laura Brooks, newsdesk@platts.com
--Edited by Alisdair Bowles, alisdair.bowles@spglobal.com