Acquisition of El Paso Electric
By: Alfredo Medrano
Brief Background of El Paso Electric:
El Paso Electric Company was formed in 1901 and is a private entity in which a municipal or government entity is not in control of the corporation. El Paso Electric Company is a private corporation which is owned by shareholders and its electric utility services span to cities such as Van Horn, Texas and as far west as Hatch, New Mexico. Spanning across state lines and multiple jurisdictions this private corporation is classified as a regulated monopoly. Things such as a high cost of capital and high barriers of entry make integration into the market difficult to say the least. As a result, there is ultimately one entity or corporation that is able to provide these goods or services to the consumers who need them. In this case, El Paso Electric is a monopoly that is regulated by an agency or government entity that overlooks and sets certain constraints and rates to keep them in line. In order for El Paso Electric to change rates they must go through regulators either in the state of Texas, New Mexico and some cases the Federal Energy Regulatory Commission to prevent things such as price discrimination. Also, because El Paso Electric is a publicly traded company on the New York Stock Exchange, they are regulated by The United States Securities and Exchange Commission.
El Paso Electric Company was formed in 1901 and is a private entity in which a municipal or government entity is not in control of the corporation. El Paso Electric Company is a private corporation which is owned by shareholders and its electric utility services span to cities such as Van Horn, Texas and as far west as Hatch, New Mexico. Spanning across state lines and multiple jurisdictions this private corporation is classified as a regulated monopoly. Things such as a high cost of capital and high barriers of entry make integration into the market difficult to say the least. As a result, there is ultimately one entity or corporation that is able to provide these goods or services to the consumers who need them. In this case, El Paso Electric is a monopoly that is regulated by an agency or government entity that overlooks and sets certain constraints and rates to keep them in line. In order for El Paso Electric to change rates they must go through regulators either in the state of Texas, New Mexico and some cases the Federal Energy Regulatory Commission to prevent things such as price discrimination. Also, because El Paso Electric is a publicly traded company on the New York Stock Exchange, they are regulated by The United States Securities and Exchange Commission.
Acquisition of El Paso Electric:
The Infrastructure Investments Fund that is advised by JPMorgan is an entity that purchased the publicly traded stock of El Paso Electric Company for $4.3 billion in order to become the single owner of the company. The only thing that will change is "the ownership in terms of the company in The United States Securities and Exchange Commission" says Adrain J. Rodriguez the Interim Chief Executive Officer of El Paso Electric. The regulatory bodies and agencies of Texas and New Mexico still regulate how much El Paso Electric can charge and bill consumers, and as well as utility rates. There will be no relocation of the headquarters of El Paso Electric which is a special case some electric companies do not have the luxury of experiencing. In other words, the 1,100 employees of El Paso Electric will be able to stay with their families, friends and loved ones in El Paso, Texas. In the contract it is also discussed that "The Infrastructure Investment Fund has included in their offer a $100 million economic development fund, $21 million in customers credits over the next 3 years, and the tentative matching of charitable contributions to non-profit organizations and universities for $1.2 million a year for the next 3 years" says Rodriguez. As the progression of the regulatory process begins, these aspects of the acquisition will be part of the regulatory requirements that will and must be approved by the regulators.
The Infrastructure Investments Fund that is advised by JPMorgan is an entity that purchased the publicly traded stock of El Paso Electric Company for $4.3 billion in order to become the single owner of the company. The only thing that will change is "the ownership in terms of the company in The United States Securities and Exchange Commission" says Adrain J. Rodriguez the Interim Chief Executive Officer of El Paso Electric. The regulatory bodies and agencies of Texas and New Mexico still regulate how much El Paso Electric can charge and bill consumers, and as well as utility rates. There will be no relocation of the headquarters of El Paso Electric which is a special case some electric companies do not have the luxury of experiencing. In other words, the 1,100 employees of El Paso Electric will be able to stay with their families, friends and loved ones in El Paso, Texas. In the contract it is also discussed that "The Infrastructure Investment Fund has included in their offer a $100 million economic development fund, $21 million in customers credits over the next 3 years, and the tentative matching of charitable contributions to non-profit organizations and universities for $1.2 million a year for the next 3 years" says Rodriguez. As the progression of the regulatory process begins, these aspects of the acquisition will be part of the regulatory requirements that will and must be approved by the regulators.