Puget Energy buyers will trim deal's debt by $200 million

The aspiring buyers of Washington's largest utility agreed to put an additional $200 million of their own money into the proposed $7.8 billion acquisition as part of an agreement with several groups critical of the planned sale of Puget Sound Energy.

In a settlement proposal filed Wednesday with the Washington Utilities and Transportation Commission, the investment group that has agreed to buy utility holding company Puget Energy also said it would honor the utility's labor commitments and increase assistance to low-income ratepayers.

The buyers, led by Australian bank Macquarie, promised they won't seek to raise utility rates in order to recoup the financial and legal costs of the acquisition or the 30 percent premium they will pay Puget Energy shareholders.

The proposal was endorsed by former critics of the takeover such as the Industrial Customers of Northwest Utilities and the WUTC's staff.

For the major industrial users, the settlement promises not to make any changes in the rate schedule for five years. For poor residential households, the company commits to increase its low-income customer bill assistance program to approximately $15 million per year from approximately $10.25 million.

But it's unclear whether the agreement will speed up the takeover, especially since one major objector, the state Attorney General's Public Counsel office, refused to sign on.

"This is one more step in a lengthy and complicated process," said Puget Energy's Chief Financial Officer, Eric Markell, in an interview.

Critics of the takeover had expressed concern that the Macquarie-led investors were borrowing too much money to buy the utility — potentially saddling it with debt and endangering its credit rating.

To meet those concerns, the buyers disclosed Wednesday they have agreed to reduce the size of a short-term loan from $1.425 billion to $1.225 billion, by investing an additional $200 million of their own money in the company. They also promised to refinance that loan into a longer-term deal.

After the takeover, Puget Sound Energy won't be able to make loans or transfer property to its holding company without permission from the UTC, the settlement said.

The process of negotiating the settlement was "fairly complicated" and lasted for "the better part of two weeks," said Markell. "It's a balance of a lot of important values and interests," he added.

But it was not enough to appease the state's designated consumer advocate for utility issues. In an e-mail Tuesday, Public Counsel chief Simon ffitch said that the concessions offered by the buyers "have not been able to resolve our key concerns about the level of debt being added to Puget's financial structure and the risk that creates for the company and its customers."

Markell said "the door remains open" to the Public Counsel office in case it wants to join the settlement.

The commissioners had scheduled hearings on the merger proposal in Olympia starting Monday, but the parties that filed the settlement will ask the commission to suspend those hearings. They requested a prehearing conference to be held as soon as possible.

The settlement would carry more weight if it had the endorsement of the Public Counsel office, said Paul Latta, an analyst with McAdams Wright Ragen in Seattle.

But if the state advocate is the lone voice opposing the transaction, "it is going to be hard to stop the deal," he said.