There are two dates looming over the future of NextEra Energy Inc.’s proposed purchase of the state’s largest electrical utility: the merger agreement ending in June and a regulator decision that could come any day.

The Public Utilities Commission, the agency tasked with approving the deal, is taking NextEra’s application to buy Hawaiian Electric Industries for $4.3 billion under review but has not placed a deadline on its decision. The PUC could approve the sale as is, approve it with conditions or reject it.

HEI and NextEra have both said they hope the agency will have a decision before June 3 — when NextEra and HEI can legally walk away from the sale.

If June 3 passes and the PUC is still silent, the parties can extend the merger agreement until the PUC issues a decision.

“Maybe they have a sense the commission is on the verge, why not wait an extra week, why not wait an extra month,” said Consumer Advocate Jeff Ono.

If approved, HEI’s electrical utilities will have a new owner, and HEI’s bank subsidiary, American Savings Bank, will spin off as its own company. As the new owner, NextEra has said it will provide $60 million in customer savings over four years after the sale closes, accelerate the state’s goal to get to 100 percent renewable energy by 2045 and deploy smart-meter technology to customers faster than HEI could. NextEra also promised there would be no layoffs for at least two years after the sale closes.

If denied, NextEra has three options. The Florida-based company could file a motion with the PUC for reconsideration, file a motion to appeal the PUC decision with the Intermediate Court of Appeals or walk away from the now 17-month pursuit of HEI.

If NextEra appeals the decision to the court, it’s unclear how long the process would take, former PUC Chairwoman Mina Morita said.

“It really depends on the court schedule,” Morita said. “It is totally out of the PUC’s hands at that point.”

NextEra could also file a reconsideration if the PUC approved the sale with conditions the company felt were unreasonable.

“The conditions could be so onerous that it would be impossible for NextEra,” Morita said. “There is always a point where the conditions are so onerous that they would walk away from the deal or just say they can’t be accepted with those conditions.”

One issue NextEra brought up in its last formal filing with the PUC is that the company and the intervening groups disagree on the standard to which the transfer of ownership should be held. NextEra said that it should be held to a standard of no harm. The state consumer advocate and other intervenors said the standard should be that NextEra proves it will provide a net benefit.

Court option

NextEra said in a filing May 2 that many arguments against the sale are invalid because they are based on standards outside of the parameters set for the PUC review.

Ono said that NextEra could appeal a PUC rejection on those grounds.

“They could say the commission applied the wrong legal standard to the merger,” Ono said.

The court would look into whether the PUC acted in an arbitrary or capricious manner and did not base the decision on laws or facts, Ono said.

“They could still argue that the wrong standard was applied, that it should have been a much lower standard of review, it should have been a no-harm test,” Ono said.

In April 2015 the commission outlined the issues the parties should respond to. One was whether the merger provides a substantial benefit to Hawaii’s consumers and the communities HEI serves.

Many stakeholders, from HEI shareholders to former regulators, are asking what the state’s largest electrical utility would look like without NextEra. If the sale is rejected, the conditions are too lofty or NextEra just decides to wash its hands of HECO, the answer from HEI is that business will continue as usual.

Risks of failure

HEI shareholders voiced their concern at their annual meeting earlier this month. HEI said it will continue operating as a stand-alone company.

“We will still be the same company after that,” said HEI President and CEO Connie Lau at the meeting. “We would still continue forward.”

Ono said he was concerned what the company would do if NextEra fell out of the picture.

“Let’s assume this merger is rejected somehow by the commission or there are conditions put on approval that are not acceptable to NextEra,” Ono said. “How is Hawaiian Electric going to react to all of this? Is leadership at Hawaiian Electric going to change? We’re back to where we were before NextEra came into the picture.”

HECO has said it can meet the state’s goal of 100 percent renewable electric power by 2045 without the help of NextEra. But with the law put into place during NextEra’s pursuit of HEI, how the state’s electric utility would accomplish the goal as a stand-alone company is put into question.

“That’s the big question. What is the alternative?” Morita said. “I don’t think anyone has a satisfactory answer to that question.”

If HEI decides to walk away June 3, other companies can make a bid for Hawaiian Electric.

Payoff possible

Ono said if the PUC rejected NextEra, other companies can use the state’s review process of a potential owner of the electrical utility as a guideline for their bid.

“If I was another company that was truly interested in buying the assets or buying out HEI, I would look at it as NextEra did it wrong,” Ono said. “We can learn from their mistakes and do a better job.”

Kyle Datta, general partner at Ulupono Initiative, said the state would likely see many suitors because of the value that HEI’s need to shift to 100 percent renewable poses to investors.

“There is a company that wants to be acquired. That’s for sure. Because it has that much potential value, markets don’t let that sit around for very long,” Datta said.

There is a potential bonus for HEI if the deal falls through.

According to the merger agreement, NextEra is liable to pay HEI $90 million if it fails to get regulatory approval.

If there is no decision from the PUC by June 3 and NextEra decides to end the deal, NextEra would owe HEI $90 million, Lau said.