Companies eyeing purchase of Maui Electric Co.

Pacific Business News - Duane Shimogawa covers energy, commercial real estate and development for Pacific Business News.

Companies are lining up to possibly buy Hawaiian Electric Co. subsidiary Maui Electric Co., the mayor of Maui County confirmed to Pacific Business News.

Maui Mayor Alan Arakawa told PBN this week that companies have expressed serious interest to him in buying MECO and working with the county to implement an independent system operator to manage the new system.

Maui Mayor Alan Arakawa speaks at the opening day Wednesday of the 4th Annual Maui Energy Conference. Duane Shimogawa - Pacific Business News

He said he isn’t involved in any negotiations between MECO and other parties.

Cliff Chen, manager of investor relations and strategic planning for Hawaiian Electric parent Hawaiian Electric Industries Inc., told PBN that he can’t confirm and won’t speak to the veracity of the mayor’s statements.

“We do not comment on rumors or speculation,” he said.

The revelation comes on the heels of a study commissioned by the county that unveiled an options analysis of alternative forms of ownership and alternative utility business models for the county’s electrical utility company.

The $70,000 study done by Oklahoma-based Guernsey noted that the county, which comprises the islands of Maui, Lanai and Molokai, should work with a private company to take over the electric grid from Maui Electric.

Arakawa, who was one of the speakers at the opening day of the Maui Energy Conference on Wednesday, said that the study did its job and certainly made an impact on the industry.

“We’re definitely still looking at alternatives,” he said. “When we hired Guernsey to do the report, it wasn’t to replace MECO. It was about what can be most beneficial to the county. What’s the best methodology to shift to. We’re looking at all the different rules and regulations in place. We’re looking at different changes to the grid system and different types of energies. All of this was a movement to explore the area of alternative energies.”

Arakawa said that, at the same time, the county has seen the electric company change from their model to now working with the community and exploring ways the community can generate their own electricity.

“Every effort we have put in to focus on this issue, we get great rewards from it,” he said.

The Guernsey report said that, under the model where a private company would take over from Maui Electric, there would be little physical infrastructure that would need to change hands, and that the capital costs for this approach are relatively low.

The private firm would need to acquire only a portion of Maui Electric’s system, including dispatch, monitoring and control equipment in order to manage the transmission/distribution system.

The majority of existing Maui Electric generation assets, along with its transmission and distributions wires would remain with the Maui utility.

Guernsey noted that this approach can be implemented regardless of the outcome of NextEra Energy Inc.’s proposed $4.3 billion acquisition of Hawaiian Electric, saying that whatever the regulated electric utility provider for Maui County might be, the utility would be subject to the jurisdiction of the private company that would take over for Maui Electric. In July state regulators rejected the NextEra-HECO deal.

“In order to purchase MECO’s assets, a third party could expect to pay from a low of $525 million to a high of $867 million depending on negotiations, [among other things],” the report said.

The island of Kauai is currently utilizing a cooperative ownership model, with the Big Island looking to go the same route through a nonprofit organization called the Hawaii Island Energy Cooperative.

The state of Hawaii also is doing a study regarding alternative utility ownership models.