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Parent Of Texas Retail Provider & Various Retail Choice Utilities To Merge With Parent Of Texas-New Mexico Power

Merger Would Result In Affiliation Between Texas REP, TDU

October 21, 2020

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Copyright 2010-20
Reporting by Paul Ring •

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AVANGRID, the parent of two retail suppliers and various utilities, and PNM Resources announced today that their respective boards have approved the merger of PNM Resources into AVANGRID, through an all cash offer for PNM Resources shares priced at $50.30 per share (representing an equity value of approximately $4.3 billion and an $8.3 billion enterprise value)

The companies said that the merger would create the third largest renewables company in the U.S. with operations in 24 states.

Among other things, AVANGRID owns the recently launched Iberdrola Texas retail electric provider in Texas, as well as Avangrid Renewables, which operates as a retail supplier in several states in addition to owning and developing renewable energy assets. AVANGRID currently owns 1,900 MW of renewable energy and a pipeline of 1,400 MW of renewables assets in New Mexico and Texas.

The combined company would own ten regulated utilities in six states, many of which have retail choice programs, such as Texas-New Mexico Power (currently part of PNM) in Texas.

The merger would result in a current Texas retail provider, Iberdrola Texas, being affiliated with a Texas TDU (TNMP), which was formerly an incumbent provider. TNMP is not currently affiliated with any REP, with PNM having previously sold off its REP business (First Choice Power) to Direct Energy

Avangrid Networks owns eight electric and natural gas utilities, including United Illuminating, NYSEG, RGE, and Central Maine Power, serving more than 3.3 million customers in New York and New England

Ignacio Galán, chairman of AVANGRID and chairman of Iberdrola Group, said: "This is a friendly transaction, focused on regulated businesses and renewables in highly rated states with legal and regulatory stability and predictability offering future growth opportunities."

"The strategic combination with PNM Resources also provides a platform for AVANGRID to expand its renewables business in the Southwest beyond its existing 1.9-gigawatt capacity wind projects in New Mexico and Texas and 200 megawatts of wind and solar capacity in Arizona. The scope and diversity of the combined business results in greater ability to invest in energy efficiency and new technologies," PNM said

AVANGRID said, "As a result of PNM’s earnings from regulated distribution and transmission assets, it is expected that AVANGRID’s regulated earnings contribution post-transaction will exceed 80%. This proportion of regulated earnings will support AVANGRID’s fast growing renewables business over the next decade."

Dennis V. Arriola, AVANGRID’s CEO who will continue as CEO of the combined Company said: "This merger between AVANGRID and PNM Resources is a strategic fit and helps us further our growth in both clean energy distribution and transmission, as well as helping to expand our growing leadership position in renewables."

AVANGRID will add two independent board members from PNM Resources to its board of directors and one independent board member from PNM Resources will join the AVANGRID Networks board.

As a result of this transaction, PNM’s shareholders will receive approximately $4.318 billion in cash.

AVANGRID’s majority shareholder, Iberdrola, has provided the company with a funding commitment letter for the entire equity proceeds for the transaction. Iberdrola, S.A. will remain the new combined company's largest shareholder

AVANGRID said that the transaction is expected to be EPS accretive in the first full year after closing.

The purchase price represents a premium of 10% over the PNM's share price as of Tuesday 20th October and 19.3% over the average PNM share price during the 30 days prior to 21st October.

"PNM Resources operations will continue to be overseen locally and the current headquarters of the utilities in New Mexico and Texas will remain," PNM said

Pat Vincent-Collawn will step down as Chairman, President and Chief Executive Officer upon closing of the transaction. Don Tarry, current Chief Financial Officer of PNM Resources, will oversee the continuing operations of PNM and TNMP

The agreement between AVANGRID and PNM Resources is subject to approval by PNM Resources shareholders. In addition, the transaction will require approval from a number of state and federal regulators including the New Mexico Public Regulation Commission, Public Utility Commission of Texas, Federal Energy Regulatory Commission, Hart Scott Rodino Clearance, Committee on Foreign Investment in the United States, Federal Communications Commission and the Nuclear Regulatory Commission. Regulatory approvals are expected to be completed in approximately 12 months.

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