Fortis, Canada’s biggest investor owned utility, has completed acquisition of ITC Holdings. The deal was settled at $11.3 billion. The latter is the largest independent company in the business of electric transmissions. The Canadian company has earlier acquired natural gas and electric utilities in Arizona and New York in 2013 and 2014. The company presently operates in five provinces in Canada, three Caribbean countries and nine US states. American holdings presently comprise 60 percent of the $45 billion of total Fortis assets.
Consolidation the order of the day
According to Barry Perry, the Chief Executive Officer and president of Fortis, the US utility industry has witnessed a large amount of consolidation. He said Fortis could acquire about four or five more companies. He added that the Canadian company is mainly interested towards the distribution and transmission of electricity, and not the generation of power itself.
Other Canadian companies now follow Fortis. The US headquartered Spectra Energy Group is all slated to be acquired by Enbridge Inc. for about $28 billion. This purchase will result in the formation of the biggest energy infrastructure company in North America.
There are good reasons for Fortis to buy up companies. Electricity demand in US continues to be stagnant and power prices continues to be cheap. Utilities are thus searching for better economies of scale via consolidations with the other operators. This is especially valid in the regulated markets. The latter provide an environment where there are virtually assured rates of return. It also did not help that the energy markets are continuously changing as an excellent American production and cheap prices make gas to be the first choice of fuel for production of electricity. Concerns also exist about investments in solar and other kinds of renewable energy to tackle carbon emissions.
Areas served by ITC include transmission lines over 16,000 miles long. This length is adequate to cross the breadth of Canada five times and some change. Perry said that Fortis’s latest acquisition is yet another example of the Canadian company’s evolution. The company started as a utility that served St. John’s needs in 1885. The company soon started buying other utilities until it came to the point where there are no other companies to buy into except government assets. Fortis then began to concentrate towards the opportunity rich US market. It helped that government regulations were similar to Canada.