Charles Hinson, a vice president with Tampa Electric Peoples Gas, at left, visits with Roswell Chamber of Commerce President Jim Burress, office manager Candace Lewis, Executive Director Dorrie Faubus-McCarty, and Gerges Scott, vice president of Agenda, on Tuesday at the Roswell Chamber office. Hinson and Scott were in Southeast New Mexico discussing the pending purchase of New Mexico Gas Company by the Florida-based utility company. (Randal Seyler Photo)
Officials from Tampa Electric Peoples Gas (TECO) were in Roswell on Monday and Tuesday discussing the planned acquisition by the Florida-based company of New Mexico Gas Company.
The Tampa utility firm has offered to pay nearly $1 billion for New Mexico Gas Company.
“TECO is a utilities firm, and we are in the utilities business,” said Charles D. Hinson III, vice president of government relations and economic development for TECO. “We are looking at this as a long-term investment, and we have the resources to bring economic development and growth to New Mexico Gas Company.”
Hinson, along with Gerges Scott, vice president of Agenda marketing firm, and Lloyd Hatch, market development manager with New Mexico Gas Company, are traveling the state meeting with local officials and discussing the upcoming merger.
“This is sort of a goodwill tour; we’re trying to let people know who we are, and that we are a utility company and that we are committed to the utility business,” Hinson said.
TECO has been in business for 115 years, Hinson said, and TECO provides utilities to 37 of Florida’s 67 counties. TECO reported 2013 income of $42 million or 20 cents per share.
TECO announced in May 2013 that it had entered into a definitive stock purchase agreement with Continental Energy Systems LLC, and its subsidiary New Mexico Gas Intermediate Inc., to acquire New Mexico Gas Company for an aggregate value of $950 million, including the assumption of $200 million of New Mexico Gas Co.’s debt, subject to customary closing adjustments.
Under the terms of the agreement, TECO Energy will acquire NMGI, the owner of New Mexico Gas Co. The transaction is expected to close in the first quarter of 2014, and is subject to state and federal regulatory approvals. The transaction is expected to be accretive to earnings in the first full year post-closing, 2015.
New Mexico Gas Co. serves approximately 509,000, primarily residential, customers throughout New Mexico. Upon closing of the transaction, TECO Energy subsidiaries will serve more than 1.5 million regulated electric and gas utility customers in Florida and New Mexico.
The transaction is expected to close in the third quarter of 2014, subject to customary closing conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Act, and applicable regulatory approvals from the New Mexico Public Regulation Commission.
The New Mexico Public Service Commission hearings begin March 24 in Santa Fe, and will last for a week, Hinson said. Once the merger clears the state level, it has to go to Washington for final approval. Pending government approval, TECO will take over ownership of the New Mexico Gas Company this summer.
“The purchase was approved by our board of directors, and didn’t require the stockholders’ approval,” Hinson said. “Stockholders can vote with their feet, they can sell their shares, or they can fire the board.”
The merger has faced opposition in Albuquerque, where New Mexico Gas Company is headquartered, primarily due to TECO’s plans to cut 90 jobs in the coming years.
“Most of those positions will be redundancies with jobs we have at the headquarters in Florida, and most of the cuts will be made through attrition,” Hinson said. “We see most of those people leaving either through retirement or people who were going to leave anyway.”
The Headquarters for New Mexico Gas Company will remain in Albuquerque, Hinson said, and as part of the purchase deal, TECO has promised to refund $10 million in customer credits over the next four years.
Critics have also suggested TECO is paying too much for the New Mexico utility, Hinson said, but even if that were the case, money spent in the purchase price cannot be passed on to the consumers to recoup those expenses.
TECO has an eye on the bottom line, and Hinson says the natural gas business in the U.S. and the world is having a renaissance.
“We were speaking to Roswell city officials last night, and the mayor was excited about the concept of a police fleet running on compressed natural gas,” Hinson said. “All over the world, CNG is becoming a fuel of choice for buses, trains and trucks.”
CNG also costs about $2 per gallon, compared to the average of $3.50 a gallon for gasoline.
“Ultimately, the utilities companies are businesses, and if we can lower overhead costs, then we can lower the expense to the customer,” Hinson said. “We’re buying New Mexico Gas Company because it is a good company and we see a great potential for economic growth and expansion in New Mexico.”
“We’ve really received a lot of support from business leaders and elected officials in Southeast New Mexico,’ Scott said Tuesday afternoon, after meetings in Roswell, Artesia and Carlsbad. “We are very grateful for the support we’ve received from everyone we’ve visited with in the area.”