Fortis Inc. FTS-T has sold the dominant electrical utility in the Turks and Caicos Islands to a U.S. private equity fund, exiting an investment made when domestic politicians flirted with making the Caribbean country a Canadian province.
Last Wednesday, Fortis, based in St. John’s, sold a division that provides power to more than 15,000 customers on the tourist destination to Vision Ridge Partners. The New York-based fund manager has US$5.1-billion invested in sustainable energy, transportation and agriculture projects.
Fortis and Vision Ridge declined to disclose terms of the transaction.
Exiting the Turks and Caicos raised cash and simplified the company’s strategy and structure, said analyst Maurice Choy at RBC Capital Markets in a report. He said the transaction “should directionally improve the company’s balance-sheet health as Fortis continues embarking on its long runway of growth opportunities.”
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Fortis owns one of the largest U.S. electrical-distribution networks, along with utilities in Newfoundland and four other provinces. It also owns projects in the Cayman Islands and Belize roughly the same size as the utility it just sold, which has 170 staff. The parent company has 3.5 million customers and 9,700 employees.
Vision Ridge renamed the Turks and Caicos company Pelican Energy TCI. It was previously called FortisTCI Ltd.
In 2006, Fortis acquired the utility for US$90-million, including debt. In 2012, the parent company purchased a second Turks and Caicos power provider to extend its geographic reach.
Fortis invested when federal politicians were periodically visiting the islands, often in winter, with an eye toward uniting Canada and the 40-island British Overseas Territory. The concept of joining the Great White North to the sun-kissed south dates back to then-prime minister Robert Borden, who proposed annexation in 1917.
From 1974 onward, a series of backbench members of Parliament pushed for a union between Canada and the islands. Provincial politicians also championed the cause.
In 2014, then-Saskatchewan premier Brad Wall offered to welcome Turks and Caicos to his province and called the islands “Saskatchewarm.”
Later that year, then-Turks and Caicos premier Rufus Ewing visited Ottawa on a trade mission. Former foreign affairs minister John Baird scotched the idea of a larger union, saying: “We’re not in the business of annexing islands in the Caribbean to be part of Canada.”
In August, Fortis said it plans to spend $26-billion over the next five years to expand and modernize its operations, with 58 per cent of spending earmarked for U.S. projects. The company said that roughly 60 per cent of the money it needs for growth will come from its operations, with the remainder coming for borrowing and Fortis’s dividend reinvestment plan.
Selling its relatively small Turks and Caicos utility after a 19-year investment “will serve to modestly simplify Fortis’s stock investment thesis (from previously having 10 regulated utility businesses in Canada, the U.S. and the Caribbean), and highlight the company’s proactiveness in optimally managing its portfolio,” said Mr. Choy at RBC Capital Markets.
In the Turks and Caicos, Fortis produced the bulk of its electricity from diesel generators. The company recently pledged to move from 6 per cent of power from renewable sources in 2022 to 33 per cent renewable by 2040.
Last week, Vision Ridge chief investment officer Reuben Munger said in a press release that the private equity fund will back Pelican Energy’s investment in renewable power facilities “to help ensure the reliable delivery of sustainable power.”