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Sempra Energy has gotten a step closer to completing the acquisition of the biggest utility in Texas, Oncor Electric Company, after the bankruptcy court for the state of Delaware confirmed a plan for the reorganization for Oncor’s parent, Energy Future Holdings.
The court approved the acquisition last September, after Sempra emerged as the preferred bidder with its US$9.45-billion offer rivaling Berkshire Hathaway and Elliott Management Corp. Berkshire’s bid valued Oncor at US$9 billion, and Elliott was prepared to offer US$9.3 billion, according to reports from the time. The enterprise value of the Sempra deal, including debt, now stands at US$18.8 billion.
Oncor, which has 10 million customers and manages 122,000 miles of distribution and transmission lines, has been operating under bankruptcy protection since 2014, with its parent having accumulated US$50 billion in debt. Oncor, however, has remained firmly in the black, booking a profit of US$431 million for 2016.
Now that the bankruptcy court has approved the company’s reorganization, the last obstacle on Sempra’s way to becoming owner of Oncor is the Texas Public Utility Commission, which blocked two previous acquisition attempts on the grounds that they were lacking in guarantees to preserve the financial integrity of Texas’ largest regulated utility.
Earlier bidders for the Dallas-based utility included NextEra Energy and a group of companies led by Hunt Consolidated Inc. NextEra dropped its offer after the Texas regulator demanded that it protect Oncor’s credit, and Hunt Consolidated left the race after the Texas Public Utility Commission asked it to adhere to conditions it found unreasonable. The consortium even sued the regulator over these conditions.
Energy Future Holdings has an 80-percent interest in Oncor. After the acquisition, Sempra expects its equity interest in the utility to come in at around 60 percent, the company said last September, after the bankruptcy court gave the deal the go-ahead.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.