Article published Jul 11, 2007

BBI responds to state's concerns

By RICHARD ECKE

Tribune Staff Writer

By RICHARD ECKE

Tribune Staff Writer

Babcock & Brown Infrastructure, which wants to buy NorthWestern Energy, is "better than most" companies and won't slash jobs or move services out of Montana, a company official said Tuesday.

"We don't think any other private company would do what we've done," said Michael M. Garland, head of Babcock & Brown US Infrastructure Group.

Garland, speaking Tuesday to the Great Falls Tribune editorial board, said a new, sweetened offer by Australia-based Babcock & Brown would create a strictly Montana company and maintain current benefit and staffing levels in Montana for at least two years.

"People want a Montana-based utility," Garland said. "It will have a bankruptcy-proof structure."

The Montana Public Service Commission last month said it planned to reject Babcock & Brown's request to buy NorthWestern, but, in light of the new proposal, the PSC may reconsider the move at its July 24 meeting.

Garland said Babcock & Brown used a conservative approach in writing its first offer, but got the PSC's message that Montanans wanted more specifics.

"It's a difficult process, to be candid, because you don't know what's going to satisfy people," Garland said.

Among its concessions, Babcock & Brown agreed to create a stand-alone Montana company to run utility operations in the state; hire David Gates, a NorthWestern official in Butte, as its first chief executive of the Montana concern; place the new concern's headquarters in Butte, where NorthWestern already has an outpost; and name a board of directors consisting of a majority of Montanans.

Among other features of the new deal, Babcock & Brown agreed to:

Make $380 million in capital improvements to NorthWestern's system over five years, not counting basic improvements recommended in an earlier report on system deficiencies

Invest $200 million in new power generation in Montana in the next five years

Give a prompt $20 million rate credit to customers

Slash its acquisition debt in half, from $505 million to $250 million

Spend $1 million to study potential new sources of power

More quickly boost its commitment to obtain 15 percent of its energy from renewable sources to 2012, rather than 2015, as current law requires.

Keep the company for at least 10 years

Garland said that Babcock & Brown only paid a 10 percent to 15 percent premium to buy NorthWestern. He added that NorthWestern Energy has "growth potential" in Montana, which is a big reason the company is continuing its purchase attempt.

"Where we get our return is growing the business," Garland said.

Garland also questioned whether a handful of cities in Montana could successfully form a group to buy and run the largest utility serving Montana. He said he often gets questions from Montanans about Montana Public Power, a group formed by some Montana cities that tried to buy NorthWestern but was outbid by Babcock & Brown.

Garland said public power was more attractive when cheap Bonneville Power Administration electricity was easy to obtain.

"It's much harder than people think to pull it together," Garland said, adding that attempts to create public power groups have been rare in recent years. He noted that such efforts often fall apart.

Plus, he said, the private sector often can run things more efficiently than government can.

Representatives of Montana Public Power have said they might consider making another bid for NorthWestern if Babcock & Brown fails in its attempt to buy it.