ENERGY
PRC examiners recommend sale of New Mexico Gas Co. to Louisiana private equity firm
The full three-member commission must still vote on the $1.25 billion sale to Bernhard Capital Partners
Hearing examiners for the state Public Regulation Commission recommended on Wednesday the $1.25 billion sale of New Mexico鈥檚 largest gas utility to a Louisiana private equity firm.
The full three-member commission must still vote on the sale of New Mexico Gas Co. to Bernhard Capital Partners. The hearing examiners鈥� encourages them to do so.
鈥淭he proposed transaction is, at its core, a change in upstream ownership 鈥� rather than a sale of NMGC鈥檚 operating utility assets or a merger of NMGC into another utility,鈥� the decision reads.
Executives at Emera Inc. 鈥� the publicly traded Canadian company that has owned New Mexico Gas Co., or NMGC, since 2016 鈥� announced the sale in August 2024. State regulators have been reviewing the deal since.
As in similar deals, this one offers customers rate credits, low-income assistance and economic development funding. But, like the proposed $11.5 billion sale of TXNM Energy to Blackstone Inc., the deal also has its share of opponents to private equity ownership of public utilities.
In December, New Mexico Attorney General Ra煤l Torrez filed a motion in the case raising concerns about affordability, transparency and accountability risks in the deal.
Torrez鈥檚 office did not respond to requests for comment on Wednesday regarding the hearing examiners鈥� recommendation.
In recommending the sale, Elizabeth Hurst and Patrick Schaefer, the hearing examiners on the case, say they have addressed some of those concerns by putting certain conditions on their approval. They say the sale is ultimately in the public interest.
The PRC鈥檚 staff asked that applicants commit $12.5 million into a severe weather fund instead of into economic development and charitable causes. NMGC and New Mexico Department of Justice representatives would create a working group for the fund. But the hearing examiners rejected the proposal.
PRC staff had suggested adjusting the benefits flowing from asset management agreements and gas storage contracts that NMGC customers receive, versus what the company receives. Currently, ratepayers receive 70% of the money from those contracts while NMGC receives 30%. The PRC staff recommended that ratepayers retain 85% of the proceeds from those agreements. But the hearing examiners also rejected the idea.
Bernhard and NMGC have committed to maintaining their current employee headcount of 740 over the next three years, while adding another 20 as part of the deal.
The proposed post-acquisition structure would be layered so that Bernhard鈥檚 infrastructure funds would indirectly own NMGC through a series of intermediary companies. Under these vertical layers, Bernhard would not itself own NMGC but would 鈥減rovide investment management services to the relevant fund entities,鈥� hearing examiners wrote.
The companies said the structure would protect NMGC鈥檚 assets from debt incurred by Bernhard or its affiliates. But opponents of the deal say the layers of affiliates, as well as the fact that a private equity firm and not a publicly traded company is behind the purchase, add complexity to the ownership structure at the expense of transparency.
Hearing examiners say that the ring-fencing requirements in the agreement 鈥� which include prohibitions on Bernhard affiliates using NMGC assets for nonutility purposes or as collateral for debt 鈥� 鈥減rovide sufficient protection against improper subsidization of non-utility activities.鈥�
Patrick Rodriguez, a PRC spokesperson, said a vote by the full commission has not yet been scheduled. Commissioners will place it on the agenda for a future open meeting, Rodriguez said. In the meantime, parties in the case can object to all or parts of the recommended decision.
In a statement, Bernhard, NMGC and Emera said the transaction will bring 鈥渁pproximately $87 million in benefits to New Mexico Gas customers and to communities across the state, as well as retaining a strong, locally focused utility in New Mexico.鈥�
鈥淥nce all required approvals are in place, NMGC, Emera and Bernhard will work diligently to facilitate a seamless transition of ownership,鈥� the statement continued. 鈥淣MGC customers will continue to receive service from the same team of employees, with no impact to service as a result of this sale.鈥�
Editor鈥檚 Note: A previous version of this article incorrectly stated that the PRC鈥檚 hearing examiners wanted to change how much New Mexico Gas Co. ratepayers receive from certain storage contracts and management agreements and to put money into a severe weather fund. The PRC鈥檚 staff made the suggestions, which the PRC鈥檚 hearing examiners rejected.
Justin Horwath covers tech and energy for the Journal. You can reach him at jhorwath@abqjournal.com.
