NM PRC Hearing Examiners Order Blackstone and PNM to Explain Potentially Illegal Stock Transaction
Organizations Press Release – From Prosperity Works and New Energy Economy
Santa Fe, NM — In a major development in the proposed takeover of Public Service Company of New Mexico (PNM), Hearing Examiners at the New Mexico Public Regulation Commission (PRC) have granted a motion requiring the Joint Applicants—PNM, TXNM Energy, and Blackstone’s Troy Parentco—to show cause why a $400 million stock transaction was not unlawful under New Mexico law.
The ruling comes after a motion seeking that relief was filed by Prosperity Works and joined by the New Mexico Department of Justice. The motion was supported by multiple intervenors, including New Energy Economy, the Center for Biological Diversity, New Mexico Consumer Protection Alliance and PRC Staff.
The motion asked regulators to order the applicants in the merger case to explain why a $400 million stock purchase by a Blackstone affiliate, which was negotiated as part of the proposed merger, should not be declared void. Under New Mexico law, such transactions require prior Commission authorization, which was neither sought nor obtained.
In their order issued March 11, the Hearing Examiners found that the motion raised an important and consequential statutory question of whether the stock acquisition required prior approval from the Commission under NMSA 1978 § 62-6-12.
They also found that Prosperity Works’ position “presents a compelling and facially supportable reading of the statutory text sufficient to warrant further examination.” They emphasized that protecting the public interest requires scrutiny of transactions undertaken in connection with utility mergers.
The order grants the motion and directs the Joint Applicants to appear and show cause why the stock purchase should not be deemed unlawful and void under New Mexico law.
This decision represents a significant setback, at least procedurally, for large private equity firm Blackstone in its quest to acquire PNM and its parent company, TXNM Energy.
The order sets a briefing schedule and contemplates a full legal and evidentiary hearing on the legality of the stock transaction prior to consideration of the proposed merger.
A status conference is set for March 16th to address the schedule going forward. Consumer advocates say the decision reinforces the principle that utility acquisitions must strictly comply with New Mexico law.
Steve Michel, the attorney for Prosperity Works, said he believes “TXNM and Blackstone’s affiliates violated an obvious statutory requirement to get PRC approval before buying 8 million shares of TXNM stock for $400 million.
“We are pleased the hearing examiners recognized the importance and seriousness of this likely violation, and are ordering TXNM and Blackstone to explain themselves as part of a new, formal investigation.”
Mariel Nanasi, Executive Director of New Energy Economy, stated, “This is a significant victory for the rule of law and for the people of New Mexico. Blackstone and PNM attempted to push through a massive $400 million stock transaction tied to this merger without first obtaining the approval that New Mexico law clearly requires. That is exactly the kind of maneuver the Legislature sought to prevent when it enacted the prior-approval statute.
“Today the Hearing Examiners made clear that these questions are serious and must be answered. Public utilities are not ordinary corporations. They are monopolies that serve millions of people and are granted extraordinary privileges under the law. Because of that, the law requires transparency, accountability, and strict oversight when control of these companies changes hands.
“If the applicants ignored the law and executed a stock transaction that required prior approval, the consequences are clear: the statute states that such transactions are void and of no effect. This order ensures that the Commission will confront that question directly before allowing this takeover to proceed.
“New Mexicans deserve an energy system that serves the public interest—not private-equity financial engineering. Today’s ruling is an important step toward ensuring that the law is followed and that the public interest comes first.”
(Copies of Orders Can Be Read Below.)
NM PRC Hearing Officers’ Order Setting Status Conference
NM Hearing Officers’ PRC Order Granting Motion For Order Directing Joint Applicants To Show Cause
NM PRC Hearing Officers’ Order Granting Motion For Order Directing Joint Applicants To Show Cause