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July 8th, 2014

Integrys Energy Services to be Sold

by Andrew Price, President & COO

Integrys Energy Group is being acquired by The Wisconsin Energy Corporation for about $9 billion. The combined company, to be called the WEC Energy Group, is primarily about creating economies of scale in the regulated electricity and natural gas utility markets of the Midwest. The new company will serve about 1.5 million electricity and 2.8 million natural gas customers in Wisconsin, Illinois, Michigan and Minnesota. Integrys Energy Services (IES), an unregulated retail electricity and natural gas supplier, will be divested as part of the transaction. IES is the incumbent supplier for many CES customers. Read on to learn what this merger means for you.

Wisconsin Energy Corporation has been clear that it does not intend to keep IES – the unregulated retail arm that provides competitive energy supply to CES customers. IES provides competitive natural gas and electricity supply in 22 northeastern states (see map). Wisconsin Energy Corporation has indicated that it is in late stage negotiations on the sale of IES and expects to close on the sale of the Integrys Energy Services division during calendar 2014. As of this writing, there have been no announcements about who the prospective buyer is.

A few key points on the announced divestiture of Integrys Energy Services:

  • All existing IES contracts will be honored. If you currently have a contract in place with Integrys Energy Services, no action is required.
  • IES is not out of the retail electricity market yet. Until a transaction is finalized, Integrys will continue to bid on new business.
  • The merger of Integrys Energy Group, the parent company of IES, with Wisconsin Energy Corporation is not expected to be completed until the summer of 2015. It is unclear how the timeline of the parent company merger might impact the sale of IES during 2014.
  • At present, and as long as IES continues to be competitive on price and terms, CES is still recommending that clients enter new contracts with IES.

CES is, of course, always completely supplier neutral. Over the past 14 years we have helped clients navigate through dozens of similar supplier mergers, divestments, expansions, contractions, and bankruptcies. The recent sale of Hess Energy to Direct Energy is a recent example. Many CES clients have executed energy contracts with Integrys over the years and we look forward to continuing the relationship under the yet-to-be-announced ownership structure. The IES team is very talented and hopefully the new ownership structure will allow Integrys to become more competitive.

Of course, supplier mergers can have a downside. If Integrys is purchased by another competitive supplier that is already serving your market, there is a risk that the sale may reduce overall competitiveness. Luckily, new suppliers with strong qualifications are frequently entering the market. If Integrys is acquired by an entity that does not currently serve your market, or by a larger supplier that allows the combined company to achieve economies of scale, competitiveness could even be improved. 

At this time we have no reason to believe that the sale of IES will have significant or lasting impacts on CES clients. CES will monitor the sale of Integrys Energy Services closely and keep you updated on any significant developments. Don’t hesitate to contact us at CES if you would like to discuss our view on the announced transaction.

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