FERC denied a merger proposal in which Bridgepoint tried to buy a 19.9% stake in Energy Capital Partners, saying it did so without prejudice because the first firm failed to disclose its relationship with a third company — Blue Owl (EC24-2). 

ECP is a private equity firm that owns interests in Calpine Corp., Terra-Gen Power Holdings, Convergent Energy and Power, and Pivot Energy, while Bridgepoint has a similar business model, but with more assets outside of FERC’s purview. 

Blue Owl owned stock in both firms but told FERC only about its shares in Bridgepoint, saying part of the deal would involve executing an irrevocable deed under United Kingdom law to restrict its actual voting shares below 10%, which is the commission’s threshold that triggers affiliate regulations.  

Public Citizen intervened in the FERC case to note that in requesting approval for the deal from U.K. regulators, the firms said that Blue Owl also owns 19.3% of ECP’s share. That information was never filed at FERC. 

“We find that, based on the record in this proceeding, applicants have not shown the voting restriction is sufficient to eliminate a potential affiliation between Blue Owl and Bridgepoint and that applicants did not provide information as to the holdings of Blue Owl for the purposes of the commission’s competition analysis,” FERC said. 

FERC staff would have normally reached out to the applicants and asked them to file information related to Blue Owl’s overlapping holdings, but the rejection (without prejudice) shows the commission is running out of patience when sophisticated players do not reveal required information, said Public Citizen’s Energy Program Director Tyson Slocum. 

“FERC is a regulator that relies almost exclusively on self-reporting,” Slocum said. “They heavily rely on companies to just come to the table and put all of their cards on the table. And FERC apparently perceived that they didn’t do that here.” 

Because the deal was rejected without prejudice, Bridgepoint said March 4 that it would shortly refile the application with the previously missing information and hoped to close the deal for nearly a fifth of ECP by the second quarter of this year. 

“I think FERC is trying to navigate this space of dealing with increasingly complicated financial structures that are getting into the utility business,” Slocum said. 

ECP is a dominant player in FERC-jurisdictional markets while Bridgepoint owns a great deal of energy infrastructure in Europe, so their combination would be huge. While the deal involves just $1 billion in cash, Slocum said the fact that two top executives at ECP are getting voting rights at Bridgepoint makes this “a merger of equals.” 

FERC is looking at how it regulates investments in the utility with a Notice of Inquiry (AD24-6) announced late last year, which Slocum said will see comments later this month. (See FERC Reconsidering Blanket Authorizations for Investment Companies.) 

Part of the reason for the NOI is the growth in “passive” investors like Vanguard and Blackrock that have put money behind multiple utilities but are not supposed to be active in their governance. 

“Blackrock is a little unique in that it doesn’t just passively manage these funds on behalf of folks’ retirement accounts,” Slocum said. “They also have an actively managed fleet of private equity vehicles that go in and buy up majority stakes in infrastructure assets.”