McQuiston: Bidding On CVPS

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Commentator Tim McQuiston observes that in an an offer to buy CVPS,
GMP owner Gaz Metro just may have made the quintessential "offer
we can’t refuse."

Unless a whopping new bid is offered, it appears that Central Vermont
Public Service and Green Mountain Power will finally merge into one

decades of merger talks and some scary financial times for both,
CVPS, the state’s largest utility, and GMP, the second largest, are
both in relatively good health. CVPS recently had its investment
rating upgraded from junk bond status and has received national
recognition for corporate governance. Near bankruptcy in 1998, GMP
has reinvented itself into a nimble electric company relying on
low-carbon power sources.

is owned by Quebec’s Gaz Metro, which also owns Vermont Gas

Metro now wants to buy CVPS and merge the two electric companies.

and GMP customers enjoy some of the lowest electric rates in the
Northeast. GMP has the lowest overall rates in New England and CVPS
is third lowest.

a CVPS-GMP merger could result in even lower rates. GMP is saying
that through a reduction in some executive staff, other redundancies
and by moving CVPS’ headquarters to downtown, the new company will
save 144 million dollars over 10 years. Gaz Metro even envisions
making Rutland a "solar city," with new solar energy facilities.
The name of the new company has not been proposed yet. But GMP
President Mary Powell would very likely be the president of the new

Vermont utilities and their customers around the state, which are
paying upwards of 33 percent more than GMP, might be grumpy about
this whole thing, as in "buy us, too, please"- but that
ain’t gonna happen. This is a two-player deal.

meanwhile,  already has a good offer from Fortis Inc, a large
energy company also based in Canada. The Fortis deal also offers
shareholders a premium and furthermore guarantees full employment to
current CVPS staff. This puts CVPS executives in a tough spot. They
might have to recommend an offer to their board which will cost them
their jobs.

the CVPS board has a fiduciary responsibility to shareholders, the
Vermont Public Service Board, which must approve any deal, will judge
the offer based on the greater good to the public. In either regard,
however, the Gaz Metro offer does look superior, based on a slightly
better share price, the $144 million savings, a strong
commitment to Vermont’s transmission company, VELCO, and a few
other goodies thrown in.

is nothing to keep Fortis from making another offer, of course, or
even a new player from jumping in, though that seems unlikely. The
Gaz Metro offer, which Fortis calls hostile, must still be
recommended by the CVPS board, voted on by shareholders, who will
look squarely at the bottom line, and by regulators. But the Gaz
Metro offer will be difficult for Fortis, or anyone else, to top.

Mary Powell told us, who else is going to come up with $144 million?
And I say, whoever else, better hurry up.

Note:  We’ll hear another view of the CVPS bidding competition this
afternoon during All Things Considered.  For more commentaries
by Tim McQuiston, go to 


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