Avista Corp. (AVA) announced the closure of its acquisition of Alaska Energy and Resources Company ("AERC") for $170 million. AERC’s primary business wing, Alaska Electric Light and Power Company is the oldest regulated utility in Juneau, Alaska. Avista funded the purchase by issuing roughly 4.5 million new stocks to shareholders of AERC at a price of $32.46 per share.
The AERC acquisition was first declared in Apr 2013 and Avista expects the purchase to be earnings accretive in 2015.
Avista’s latest acquisition will diversify the company’s asset base and lead to a rise in customer counts which could open new pathways for revenue accretion. The company’s electricity generation mix is primarily ruled by clean energy fuel source with Hydro capturing 48% of total share.
Alaska is one of the few economies that are seeing moderate growth trajectory as unemployment rates are declining thanks to an increase in oil and gas projects in the state. In addition, expansion of regulated business reduces risks and boost stability in cash flows while optimizing operational efficiency and rolling costs over a wide customer base.
The addition of the AERC’s assets is expected to augment Avista’s Hydro generation capabilities. This acquisition would help Avista to further expand its renewable power generation capability.
Moreover, the acquisition will bode well with the company’s future growth objectives given the pro-environment regulations that currently aim at promoting the green energy source in electricity generation.
A major utility deal that went into floors in 2014 was Exelon Corp.'s (EXC) decision to invest $7 billion to acquire Pepco Holdings Inc. (POM). Exelon aims to expand its footprint in Mid-Atlantic region through this acquisition.
Currently, Avista carries a Zacks Rank #3 (Hold). Another better-ranked utility player is Black Hills Corp. (BKH), sporting a Zacks Rank #1 (Strong Buy).