Entries in Deals: Energy (3)

Tuesday
Dec142010
DateTuesday, December 14, 2010 at 2:31PM

NextEra FiberNet to Acquire Grande Communications Assets

NextEra Energy Affiliate to Acquire Grande's Fiber Networks

On November 18, 2010 Grande Communications Networks (Grande) and NextEra FiberNet (NEFN) filed an application with the FCC seeking approval to transfer control of certain assets and customer contracts from Grande to NEFN.  Financial terms of the transaction were not disclosed.

Among the assets to be transferred are assets related to the operation of Grande’s regional long-haul broadband transport business in Texas, Arkansas, Louisiana and Oklahoma, fiber networks, and certain resold interstate circuits in those states, as well as customer contracts for primarily wholesale carrier customers and a limited number of retail end users. 

NEFN is a wholly owned subsidiary of FPL Group Capital, which is itself wholly owned by NextEra Energy (NYSE:NEE).  NextEra Energy is a clean energy company with more than 15,000 employees in 28 states and Canada.  Through its subsidiaries—NextEra Energy Resources and Florida Power & Light Company—the company uses natural gas, nuclear, wind and other renewable resources to generate electricity, with nearly 43,000 megawatts of generating capacity.  NextEra Energy also owns FPL FiberNet, a competitive LEC that provides wholesale and enterprise telecommunications services in Florida and Atlanta, Ga. 

JSICA Observations:  Grande is in the process of building a fiber optic network in Texas, and judging by the company’s website, the company is shedding “non-core” wholesale assets in order to focus on serving residential and business customers.

NextEra Energy already owns fiber assets in Florida and Georgia (through subsidiary FPL)—which it leases to telephone, wireless, Internet and other telecommunications companies—and this deal represents a doubling-down of its investment.  NextEra promotes itself as “America’s top producer of energy from the wind and the sun,” and prides itself on being a “clean-energy company.”  Purchasing the fiber assets from Grande may be a precursor to entering the smart grid arena.

In other competitive LEC news, DISH Network (Nasdaq:DISH) subsidiary DISH Media is seeking approval from the FCC to acquire control of Denver, Colo.-based Liberty-Bell Telecom for an undisclosed sum. Pursuant to the terms of the deal, DISH will purchase shares and acquire majority ownership and control of Liberty-Bell, including the right to appoint a majority of the board of managers, 90% of the equity interests, and 93.1% of the voting interests in Liberty-Bell. Liberty-Bell provides competitive LEC and long-distance services in Colorado, and has limited operations in New Mexico and Utah.

Finally, EarthLink (Nasdaq:ELNK) announced on December 8, 2010 it has completed its acquisition of ITC^Deltacom (OTCBB:ITCD) in a transaction valued at $524m.  This is another deal where fiber is the motivating factor— although ITCD is widely thought of as a CLEC, ELNK is primarily interested in the 16.4k mile fiber network. By acquiring ITCD, ELNK is transforming itself into an “IP infrastructure and services company” focused more on business and enterprise customers and less on its historical residential customer base.

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Tuesday
Nov302010
DateTuesday, November 30, 2010 at 10:39AM

Hancock Telecom to Merge with Central Indiana Power

Indiana-based Telecom and Electric Cooperative to Merge Operations

On November 1, 2010, Hancock Telecom announced its members had voted to approve of the plan of merger with Hancock County Rural Electric Membership Corporation d/b/a Central Indiana Power.  Members voted to approve the merger with a total of 699 for and 121 against. 

Based in Greenfield, Ind., Hancock Telecom serves approximately 7,500 access lines.  The company began exploring a merger with Central Indiana Power in September 2009, but had to wait for a change in state law that would allow a telecommunications cooperative to merge with an electric cooperative.   The legislation became effective on July 1, 2010. 

Central Indiana Power, also based in Greenfield, Ind., serves nearly 12,000 customers in Hancock, Madison, Hamilton and Rush counties with over 950 miles of energized power lines.  The merger is expected to close January 1, 2011. 

JSICA Observations: This unique deal is only the second of its kind in the U.S.  No money is changing hands– the companies expect to realize synergies by consolidating billing and using Hancock Telecom’s 24-hour call center (Central Indiana Power currently uses a Minnesota company), resulting in lower fixed overhead expenses.  This deal will put the combined company on stronger financial footing, and by joining forces, Hancock Telecom and Central Indiana Power will have the opportunity to be a leader in smart grid technology.

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Wednesday
Mar312010
DateWednesday, March 31, 2010 at 10:24AM

ENERGY DEALS: US Energy Partners

PAETEC Expands Energy Offerings

On March 1, 2010, PAETEC Holding Corp. (Nasdaq:PAET) announced it has acquired Amherst, N.Y.-based U.S. Energy Partners, LLC, for approximately $3m in cash.  U.S. Energy Partners is a privately-held competitive electric supplier that sells electricity to more than 3,500 customers in Western New York State. 

Fairport, N.Y.-based PAETEC provides voice, data, Internet, enterprise communications management, network security solutions, and managed services to businesses. “We have over 44,000 medium and large business customers nationwide, and we’ve found that our average customer spends four times as much on energy as they do on telecommunications,” said PAETEC coo E.J. Butler, Jr. “Now that customer data centers and IT departments have become a primary user of energy, both telecom and energy are becoming increasingly complimentary. We’ve seen a trend towards energy decisions being made by the office of the CIO, and this acquisition further supports that strategy.” 

In 2008, PAETEC acquired energy company Varo Technologies.  Through its PAETEC Energy division, the company offers energy-related services to its customers, including research, analysis, supplier negotiations, impact assessments, and fixed and variable pricing on electricity and natural gas. 

JSICA Observations:  At first glance we figured PAETEC was buying U.S. Energy Partners in hopes of converting the energy customers into telecom customers.  A closer look, however, revealed a larger strategy aimed at diversifying and growing PAETEC’s revenue streams. Not only do many businesses spend significantly more on energy than telecommunications each month, but 14 states have restructured electricity markets that allow for competitive resale– and all of these markets are within PAETEC’s telecommunications footprint. 

PAETEC hopes to create “stickier customer relationships that compliment the company’s core strategy,” and price volatility in energy markets has created an opportunity– the cost of powering an IT department is at best unpredictable, and small mistakes can be very expensive.  PAETEC can offer fixed energy prices to companies that need to maintain a very strict budget with little risk, or variable pricing for companies with flexible budgets that hope to benefit when prices drop. The company also offers advisory services to help customers determine the correct energy-product mix, be it electricity, natural gas, or renewable energy such as wind power. 

Additionally, this deal will position PAETEC to be at the forefront of “smart grid” initiatives in the future.  PAETEC paid approximately $857 per customer.

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