Babcock & Brown Ltd. of Australia, whose subsidiary Babcock & Brown Infrastructure sought to buy NorthWestern Energy, has seen its stock value fall
80 percent in the past year.
“I'm sure glad we're not in the middle of that,” says Public Service Commissioner Doug Mood, R-Seeley Lake. “We just don't need that kind of turmoil in Montana.”
If BBI had been allowed to buy NorthWestern, “I think we'd be facing multiple headlines about how unstable the company is that owns NorthWestern, and that they're either going to sell it to somebody else, or go bankrupt,” Mood said.
The five-member Public Service Commission, which regulates utilities in Montana, voted unanimously a year ago to reject BBI's $2.2 billion bid to purchase NorthWestern.
At the time, commissioners said they feared the takeover would create a debt-heavy company that would put NorthWestern's 320,000 Montana customers at risk.
Shares of BBI also have dropped significantly in recent months.
Three Australian banks announced this week that they won't fund purchases of Babcock & Brown stock and the company has been targeted by hedge funds betting on its stock to decline.
The Journal also reported that analysts familiar with the company are saying Babcock & Brown may have to sell some of its assets and that a management buyout or breakup of the firm “can't be ruled out.”
Babcock and Brown and its subsidiaries have been buying up many companies in recent years, but the worldwide credit crunch is making itself felt.
Commissioner Ken Toole, D-Helena, said one reason he voted “no” on the NorthWestern buyout last year is because Babcock & Brown's business model relied too much on “acquiring and leveraging” other companies.
“There was a real question in my mind if that was sustainable,” he said. “This idea that free-market economics and constant expansion are the dominant way to do everything, including delivering utility service, is questionable. I think we dodged a bullet.”
He also noted that one of the alleged selling points of the buyout was that Babcock & Brown would give NorthWestern easy access to more capital to invest in the company's infrastructure.
“What we're seeing now is that they wouldn't have had more access to capital,” Toole said. “What it tells me for going into the future is that we need to keep the utilities focused on the utility business.
“The guys who own these companies don't care at all about Montana customers.”
Commissioner Bob Raney, D-Livingston, whose district includes NorthWestern's Montana headquarters in Butte, said the $2.2 billion price offered by Babcock & Brown seemed high, and he doubted the buyers could make money off the purchase without soaking ratepayers in the future or reselling the company.
“We just smelled a rat,” he said.
Mood said the commission's goal is to have NorthWestern become and remain a reliable utility that isn't at the whims of international finance.
“I want to see NorthWestern become a very stable, even boring company,” he said.
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