About the acquisition
Last month, NextEra announced its intention to buy Hawaiian Electric Industries (HE). Once the deal is approved by regulatory authorities, the two entities will merge. NextEra will pay $2.6 billion in cash to acquire Hawaiian Electric. It will also assume $1.7 billion of Hawaiian Electric’s debt as part of the deal. So, the total value of the deal is pegged at $4.3 billion.
The Hawaiian electricity market is one of the most lucrative markets in the US. Electricity prices in Hawaii are more than three times the national average. The acquisition will give NextEra access to a highly attractive market indeed.
The deal could also be part of NextEra’s major push into distributed solar generation. Hawaii is geographically well situated to take advantage of solar energy. It also has the highest percentage of utility customers in the United States with solar generation systems. Currently, one out of ten homes in Hawaii uses a rooftop solar power system.
Many other deals transpired in 2014 in the power utility industry. One of the largest deals announced was Exelon Corporation’s (EXC) acquisition of Pepco Holdings. Exelon is part of the Select Sector Utilities Select Sector SPDR Fund (XLU).
How the acquisition could help Hawaii
Troubled by high electricity tariffs, Hawaii is ambitiously planning to derive 65% of its electricity needs from renewable energy by 2030. NextEra is the leading renewable power company in the US. The company’s expertise in renewables should help Hawaii lower its electricity costs.