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Termination of Proposed Acquisition by Hydro One Termination of Proposed Acquisition by Hydro One (Notes)
12 Months Ended
Dec. 31, 2018
Business Combinations [Abstract]  
Business Combination Disclosure [Text Block]
BY HYDRO ONE
On July 19, 2017, Avista Corp. entered into a Merger Agreement that provided for Avista Corp. to become an indirect, wholly-owned subsidiary of Hydro One, subject to the satisfaction or waiver of specified closing conditions, including approval by regulatory agencies. Hydro One, based in Toronto, is Ontario’s largest electricity transmission and distribution provider.
At the effective time of the acquisition, each share of Avista Corp. common stock issued and outstanding, other than shares of Avista Corp. common stock that are owned by Hydro One and its affiliates, were to be converted automatically into the right to receive an amount in cash equal to $53, without interest.
Denial by Regulatory Commissions
The closing of the acquisition was subject to various conditions, including, among others, receipt of regulatory approval from the WUTC, IPUC, MPSC, OPUC, and the RCA.
Washington - On March 27, 2018, Avista Corp. and Hydro One filed an all-parties (including the WUTC Staff), all-issues settlement agreement with the WUTC recommending approval of the acquisition of the Company by Hydro One. The settlement agreement was subject to WUTC approval.
On December 5, 2018, the Company and Hydro One received a decision from the WUTC, denying the proposed acquisition. On December 17, 2018, the Company and Hydro One filed a petition requesting that the WUTC reconsider its December 5, 2018 order denying approval of the acquisition, together with a petition requesting that the WUTC rehear the matter to accept new evidence. Under Washington State law, the WUTC had 20 days to act on the petition for reconsideration.
On January 8, 2019, the WUTC provided notice of its deemed denial by operation of law of the filed petition to reconsider the denial of approval for the acquisition. The WUTC did not take action on the petition within the required 20 days of its filing so the petition was automatically denied under the state's Administrative Procedure Act. In the same notice, the WUTC also denied the petition for a rehearing on the basis that it does not apply.
Idaho - On April 13, 2018, Avista Corp. and Hydro One filed an all-issues settlement agreement (to which the IPUC Staff was a party) with the IPUC recommending approval of the acquisition of the Company by Hydro One. The settlement agreement was subject to IPUC approval.
On January 3, 2019, the Company and Hydro received a decision from the IPUC, finding that the proposed acquisition was not permitted by Idaho law. Avista Corp. and Hydro One had until January 24, 2019 to file a petition for reconsideration with the IPUC, which they did not file.
Oregon - On May 25, 2018, Avista Corp. and Hydro One filed an all-parties (including the OPUC Staff), all-issues settlement agreement with the OPUC related to the Oregon merger proceeding. The settlement agreement was subject to review and approval by the OPUC.
On January 15, 2019, due to the denial of the acquisition by the WUTC and IPUC, the OPUC issued an order suspending indefinitely the procedural schedule in its merger docket until Hydro One and Avista Corp. informed the OPUC that they had sought a reversal of the denial decisions through appeal or other means that would provide a justiciable issue for the OPUC to address.
Termination of the Merger Agreement
On January 23, 2019, Avista Corp., Hydro One and certain subsidiaries thereof, entered into a Termination Agreement indicating their mutual agreement to terminate the Merger Agreement, effective immediately. Pursuant to the terms of the Termination Agreement, Hydro One paid Avista Corp. a $103 million termination fee on January 24, 2019. The termination fee will be used for reimbursing the Company's transaction costs incurred from 2017 to 2019. The balance of the termination fee remaining after payment of 2019 transaction costs and applicable income taxes will be used for general corporate purposes and reduces the Company's need for external financing.
Other Information Related to the Terminated Acquisition
Due to the termination of the acquisition, all the financial commitments that were included in the various settlement agreements with the commissions for the proposed acquisition will not occur.
The Company incurred significant acquisition costs associated with the acquisition consisting primarily of consulting, banking fees, legal fees and employee time, and these costs are not being passed through to customers. When the Company was assuming the transaction was going to be completed, a significant portion of these costs were not deductible for income tax purposes. Now that the transaction has been terminated, the Company expects more of the previously incurred transaction costs to be deductible so it expects additional tax benefits from these costs in 2019.
See Note 20 for discussion of shareholder lawsuits filed against the Company, the Company’s directors, Hydro One, Olympus Holding Corp., and Olympus Corp. in relation to the Merger Agreement and the proposed acquisition.