The recently announced sale of Puget Energy struck me as curious - this is a major business event. The brevity, finality, and timing of this action all have drawn my attention.
There isn't much published detail out there - the proclaimed motivations about the need for capital may well be a factor, but these aren't folks with bad credit and they certainly aren't anywhere near bankruptcy. Their five and ten year stock performance is solid, slightly above the benchmark performance of the S&P 500, but significantly below that of other utility stocks.
PSE is highly regulated by the State Utilities and Transportation Commission - and their return is subject to law - their financials, to me, indicate a fair and effective regulatory environment - beating the S&P by 1% is certainly a good return and one not usurious, as other private utilities, in this era of Enron, may have been able to obtain. The sale will not effect this at all - it will however remove the SEC from the regulatory loop - which presumably has some relationships with local regulatory agencies.
The current chairmanship of the UTC by former Seattle City Attorney Mark Sidran is perhaps the most factually based red flag of this deal. Mark Sidran has been involved in other highly controversial public/private deals with Puget Energy legal representatives(Preston, Gates, and Ellis) - most notably the HUD distressed area financing for a downtown parking garage in an upscale shopping district.
As a blogger I am hopefully allowed a bit more room to speculate - using the motley tools of Occam's Razor (aka Keep It Simple Stupid) and my personal favorite, 'Follow the Money'.
My original thought was that this was some sort of global energy deal taking Enron's practices worldwide - perhaps with Chinese Money. Perhaps also part of the 'hedging' going on with Halliburton style engineering contracts now being considered as a part of a current proposal by another Preston, Gates, Ellis client - a potentially 157 billion 50 year deal to build light rail, and some roads based on local taxing/bonding authority.
Like me, the Wall Street Journal has published some investigative speculations into this matter. This got me to thinking about motivations of intra-family politics as opposed to global - and these factors may well be in the mix. The iconic former Puget Energy President, John Ellis, has a brother, Jim. Jim was, at the height of his game, legal counsel for Puget Energy, and perhaps the single most powerful attorney in private practice - he is the Ellis in Preston, Gates, and Ellis.
That position of status is now held by the firm's prior family law specialist, Bill Gates Sr. Microsoft is also within the firm's stable, and one has to wonder if there is perhaps some aspect of global dealings in order to build relationships that will help them stand up against the heavy oversight they are now getting in Europe. There may well also be some standing anonomosity whereas Gates was once subordinate to Ellis. Now, I'm not one to say that nepotistic legal representation should be outlawed by the SEC, but it is certainly an area worthy of investigation and a heuristic red flag for any regulator. I'd suggest looking into the relationship between Microsoft and another globally merged PGE Client, Airborne Express. Airborne (now owned by the state Monopoly, Deutsche Post and operating as DHL) held the MS air courier contract - a contract that may not have been in the best interests of MS shareholders (and certainly quite lucrative to Airborne).
I did some digging into this subject in order to quench my curiousity. Puget Energy's own statement reveals little, save perhaps the shallowness of press coverage. State Attorney General Rob McKenna's Public Counsel (a pfellow with a pfunny name, Simon ffitch) has released a statement which outlines future steps as I've done above.
Conclusion - it is not a done deal, it is still subject to regulatory and shareholder approval. Absent a more informed shareholder making claims to the contrary I will accept the assertions of Puget Energy Corporate that both steps are likely to be accomplished.
Continuing my research I looked into the lead partner, Macquarie Infrastructure. Macquarie is one of the few Investment Banks in Australia and are traded on the NYSE - stock symbol MIC. There holdings include a recently completed deal to aquire Pittsburg based Duquesne Light and a company called Atlantic Aviation Services who provide fueling services at 70 US Airports - curious of course due this being the home to Boeing Commercial. They do have some history of green power work - but nothing particulary innovative, nor for that matter is there anything particularly negative that showed up in my quick search.
Okay, so here is my conclusion as to what is going on. It is purely speculative, call it, if you will, a journalistic hypothesis, sent into the ether like a radar ping sent into the atmosphere:
There are certainly conversations among global energy providers - quite private as such are closely watched by, among others, the SEC. These business relationships probably reach into the engineering and construction firms building another Preston, Gates, and Ellis project, Sound Transit 2, and the timing may well be a power signal to those who watch, including the lower ranks in middle management (and Christine Gregoire and Patty Murray?). The removal of the SEC from regulatory link will allow a brief opportunity for PGE friend UTC Chair Mark Sidran to advance a profitable agenda in this post Enron era. The desirability of this outcome is still to be determined and close oversight will help to insure that it is positive. The UTC and the SEC, for different reasons, cannot be relied upon to provide that oversight. (The SEC loses jurisdiction when the company goes private.)
Based on my quick review I'd give Macquarie a preliminary 6 or 7 on a 1-10 scale of global corporate responsibility - maybe a shred better than the oil industry, and probably much better than companies like Haliburton and/or Blackwater. There doesn't appear to be Chinese money behind the deal, but the declining status of the US on world financial markets is noteworthy - as is the greater advantage of Chinese success accruing to Australia and British Columbia. Best case is that we will join in that advantage, but the better bet are the raising of prices to raise profitability of the utility to at least Industry standards. (Eastside Investors currently holding Puget Energy stocks or bonds may wish to investigate Macquarie as an investment.)
BTW - today(10/31) is the last day to get your free water conserving showerhead, sponsored by local utilities, including Puget Energy.
