Via Financial Times

US utility groups Avangrid and PPL Corporation have held talks about a deal to combine all or parts of their business that would create a company worth more than $67bn including debt if a full merger is agreed, people close to the discussions said. 

If the two companies decide to merge their entire operations, it will form one of the largest publicly traded utilities in the US and the deal will rank as the biggest utility tie-up this year.

The companies are exploring various options to structure the transaction, the people said. One person added that it was unclear whether it would include an investment from Iberdrola, the Spanish utility company which owns more than 80 per cent of Avangrid. They cautioned that there was no certainty a deal would be reached. 

Both Avangrid and PPL said they would not comment on speculation.

Avangrid, which is based in Connecticut, provides gas or electricity to more than 3m customers across New York and New England. The company also owns a renewable energy business, made up of wind and solar farms across 22 states. Its share price has lagged the broader rally in utility stocks, and are down slightly this year, giving the company a market value of about $15bn. It has net debt of $7.1bn.

PPL, formerly known as Pennsylvania Power and Light, traces its roots to the consolidation of eight electric companies across eastern and central Pennsylvania in 1920. The company, which is now worth about $22.7bn, before net debt of $22.3bn, owns power assets across Pennsylvania and Kentucky, as well as an electric distribution company in the UK known as Western Power Distribution. The group serves more than 10m electricity customers in the two countries.

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PPL’s large presence outside of the US — the UK accounted for about 29 per cent of its $7.8bn of revenue last year — has limited its potential merger partners, according to one utility industry adviser. They added that the most logical companies to strike a deal with PPL were Avangrid, Iberdrola, or National Grid, the £31bn British power group.

But any deal is likely to be complicated, given political pressure in the UK, including calls to nationalise the power industry by the opposition Labour party. PPL could choose to spin-off its UK business if that proved a key hurdle, the person added.