Thursday, January 14, 2016

NorthWestern May Not Omit Greenhouse Gas Proposal

By R. Jason Howard, J.D.

The SEC’s Division of Corporation Finance has responded to a request for guidance in connection with NorthWestern Corporation’s intention to omit a shareholder proposal from the company’s 2016 proxy statement and form of proxy relating to its annual meeting of shareholders tentatively scheduled for April 20, 2016.

Proposal. The proposal requests that NorthWestern prepare a report describing how it could adapt its business model to increase deployment of distributed low-carbon electricity generation resources through equipment NorthWestern owns or provides to its customers through a partnership with third-party installers as a means to reduce greenhouse gas emissions.

NorthWestern’s reasons for omission. Northwestern cited Rule 14a-8(i)(7), which permits a company to exclude a shareholder proposal from its proxy materials if the proposal relates to the company's “ordinary business operations.” NorthWestern suggested that by focusing on the specific resources to be offered to customers to generate electricity, the proposal relates to NorthWestern's ordinary business operations by addressing the offering of products and services to the company's customers and the company's choice of technologies.

Noting that the proposal included some of the language with respect to which the staff had previously concluded does not warrant exclusion under Rule 14a-8(i)(7) pursuant to DTE Energy Company (January 26, 2015), NorthWestern explained that the proposal included additional language regarding products, services and technology that was not present in the DTE Energy proposal.

NorthWestern believed that the proposal’s focus on the supporting statement on revenue models for customer-sited solar, company-owned equipment, and services provided pursuant to a partnership with third-party installers was a significant difference that distinguished the proposal from DTE Energy. Taking the proposal and its supporting statements as a whole, NorthWestern believed that the company may exclude the proposal pursuant to Rule 14a-8(i)(7).

Decision. The Division staff determined that it was unable to concur that NorthWestern may exclude the proposal under Rule 14a-8(i)(7). In the view of the Division, the proposal focuses on reducing greenhouse gas emissions and, accordingly, the staff does not believe that NorthWestern may omit the proposal from its proxy materials in reliance on rule 14a-8(i)(7).