Nevada Power Co. and Sierra Pacific Resources said Thursday they will merge into a power company with a stock market value of about $2.3 billion, as a growing population raises demand for electricity in their home state.
In other utility news Thursday, PacifiCorp pulled out of its battle with Texas Utilities Co. for British power company Energy Group PLC, and Philadelphia-based Peco Energy Co. agreed to electricity rate cuts.
Under the $1.2 billion Nevada merger agreement, a Nevada Power share can be exchanged for one share of the new company, or for $26 in cash, a 7 percent premium to the company’s closing price of $24.25 Wednesday. A Sierra Pacific share can be traded for 1.44 shares of the new company, or $37.55 in cash, 9 percent more than Wednesday’s closing price of $34.44.
Nevada Power and Sierra Pacific said they expect the merger to cut costs as electricity sales become more competitive nationwide. The companies also said customers are asking for more services from their power companies, and utilities have to find ways to deliver them. The companies expect to close the transaction in about a year.
Meanwhile, Portland, Ore.-based PacifiCorp said it would not raise its current offer of about $7.2 billion for Energy Group after regulators called for both U.S. companies to submit sealed bids by Friday afternoon. Dallas-based Texas Utilities is offering about $7.4 billion.
PacifiCorp’s decision means the unusual process calling for sealed bids, ordered by Britain’s Takeover Panel on Wednesday, will be avoided.
In Pennsylvania, Peco Energy agreed to rate cuts totaling 14 percent over the next two years, ending a legal battle that could have delayed the opening of the state’s electricity market to competition.
The settlement, unanimously approved by the Pennsylvania Public Utility Commission, requires Peco to cut rates by 8 percent in 1999 and a minimum of 6 percent in 2000.
The plan was endorsed by Enron Corp., a vocal critic of past deregulation plans and Peco’s most aggressive new competitor.
