Sempra $9.5 bln Oncor fine print bears close read

Randall Padilla
August 22, 2017

Sempra Energy (NYSE:SRE) agrees to acquire Oncor for $9.45B, moving in to snatch the power transmission company away from Berkshire Hathaway (BRK.A, BRK.B) after raising an earlier offer of $9.3B, according to multiple reports.

Under the terms of the deal, Sempra would pay $9.45 billion in cash and finance the deal with a combination of its own debt and equity, third-party equity and an expected $3 billion in investment-grade debt at the reorganized holding company.

Energy Future's board favored Sempra's bid after it also offered assurances it could get its acquisition of Oncor approved by Public Utility Commission of Texas, as well as a USA bankruptcy judge, the sources said.

In mid-July, Berkshire Hathaway had made a bid for Energy Future Holdings for $9 billion in cash, but on Wednesday the Wall Street Journal reported that hedge fund Elliott Management had acquired a particular class of debt that would allow it to block Berkshire's purchase of the company.

"With its strong management team and long, distinguished history as Texas' leading electric provider, Oncor is an excellent strategic fit for our portfolio of utility and energy infrastructure businesses", said Sempra chief executive Debra Reed.

"It's not just a question of what you're offering - it's a question of whether or not it's going to make Texas regulators feel comfortable enough to allow the deal", said Paul Patterson, a utilities analyst at Glenrock Associates LLC in NY.

Among Sempra's holdings is San Diego Gas & Electric and Southern California Gas.

Sempra is simply Oncor's latest suitor after a series of acquisition bids and rejections over the last few years. The conglomerate, which filed for Chapter 11 bankruptcy in 2014, is saddled with about $50 billion in debt. Sempra said Monday, Aug. 21, that it will also pick up $9.35 billion of the companys debt.

The transaction of the largest power distribution/transmission system in Texas should be accretive beginning next year, Sempra officials said.

Sempra said Oncor's board will retain its existing independence.

As part of the transaction, Sempra Energy has committed to support Oncor's plan to invest $7.5 billion over a five-year period to expand and reinforce its transmission and distribution network.

Reed added: "It is important for Oncor to remain financially strong". Allen Nye, now Oncor's general counsel, would be named the utility's CEO, according to a press release.

Other reports by AllAboutTopnews

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