Sempra Energy Gets Bankruptcy Court Approval of $9.45 Billion Oncor Deal
September 06 2017 - 4:50PM
Dow Jones News
By Peg Brickley
Sempra Energy took a step forward Wednesday in its pursuit of
Oncor, the electricity transmissions business that has had takeover
offers from a series of suitors, including, most recently, Warren
Buffett's Berkshire Hathaway Energy.
A bankruptcy judge signed off on Sempra's proposed acquisition,
which still needs approval from the Public Utility Commission of
Texas. State regulators have squashed two earlier attempted buyouts
of Oncor, one of the largest electricity transmissions businesses
in the country.
Oncor is owned largely by Energy Future Holdings Corp., a Dallas
power company that has been operating under bankruptcy protection
since 2014. On Wednesday, Judge Christopher Sontchi authorized
Energy Future to agree to sell its 80% stake in Oncor to
Sempra.
Sempra's paying $9.45 billion for the Oncor stake, compared with
the $9 billion offered by Berkshire Hathaway. Additionally, Sempra
is in line for a $190 million breakup fee if the deal sours,
compared with the $270 million breakup fee Berkshire was
asking.
Sempra, of California, made its move on Oncor last month, days
before the end of a go-shop period on the Berkshire Hathaway
acquisition proposal.
Berkshire never got a chance to put its deal in front of Judge
Sontchi, so it didn't qualify to collect the breakup fee that was
part of that proposal. The night before a court hearing on the
Berkshire proposal, Energy Future cut a new deal with Sempra, which
owns San Diego Gas & Electric Co. and other companies.
Before its deal was scuttled, Mr. Buffett's energy company had
already gained ground in Austin, reaching agreement with Texas
regulatory staff and stakeholders over terms for the takeover.
The state PUC has protected Oncor zealously, concerned that
avaricious owners might drain the company of the cash needed to
meet power needs in Texas. Years ago, regulators established
"ringfencing" provisions, corporate governance safeguards that
protected Oncor from Energy Future's financial excesses. The
ringfence kept Oncor out of bankruptcy, and regulators want to make
sure the safeguards stay in place under a new owner.
Sempra has said it would meet the same regulatory commitments as
Berkshire, with a few exceptions. Cash-rich Berkshire agreed to pay
off all the debt sitting above Oncor. Sempra says it will pay down
the debt over time.
Judge Sontchi also granted preliminary approval Wednesday to a
chapter 11 emergence plan for Energy Future, which is counting on
the money from the sale of Oncor to pay off its debts. Both crucial
motions were easily approved in the U.S. Bankruptcy Court in
Wilmington, Del., as a New York hedge fund that controls much of
the debt in Energy Future's case, Elliott Management Corp., backs
both the sale to Sempra and the chapter 11 plan.
Elliott had threatened to block the sale to Berkshire as an
unwarranted bargain for Oncor, a profitable company positioned in a
growing segment of the Texas energy grid. When Energy Future's
energy-producing and energy-retailing segments foundered
financially because of falling prices, Oncor's steady cash
production made it the company's crown jewel.
Oncor's value became apparent months into Energy Future's
bankruptcy, which began in April 2014. NextEra Energy Inc. made a
play for the transmissions company, a move that helped upend Energy
Future's restructuring strategy.
An investment group led by Texas' Hunt Consolidated Inc. was
Energy Future's first choice as a buyer, but conditions regulators
imposed on the deal caused investors to walk away. NextEra got its
chance to try to buy Oncor, but regulators rejected the deal as not
in the public interest.
NextEra's takeover proposal carried a $275 million breakup fee,
which the Florida company is trying to collect.
Write to Peg Brickley at peg.brickley@wsj.com
(END) Dow Jones Newswires
September 06, 2017 16:35 ET (20:35 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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