Berkshire Hathaway Energy on July 7 said that it has executed a definitive merger agreement with Energy Future Holdings Corp., (EFH), and that Berkshire Hathaway Energy will acquire reorganized EFH, which will ultimately result in the acquisition of Oncor.
The all-cash consideration for reorganized EFH is $9bn, implying an equity value of about $11.25bn for 100% of Oncor, and is subject to closing conditions, including the receipt of required state, federal, and bankruptcy court approvals, Berkshire Hathaway Energy said.
The transaction is expected to be completed in 4Q17, the company noted.
Effective upon closing of the transaction, if it is approved, Oncor CEO Bob Shapard will assume the role of executive chairman of the Oncor Board, and Allen Nye will assume the role of Oncor CEO, according to the statement.
“By joining forces with Berkshire Hathaway Energy, we will gain access to additional operational and financial resources as we continue to position Oncor to support the evolving energy needs of our state,” Shapard said in the statement. “Being part of Berkshire Hathaway Energy is a great outcome for Oncor. Oncor will remain a locally managed Texas company headquartered in Dallas, committed to the communities we serve, and our customers will continue to receive the safe and reliable service they have come to expect from our dedicated team of employees.”
Nye said in the statement: “We are excited to begin the regulatory approval process as this transaction has significant support across our key stakeholders. The stakeholders are eager to obtain a great outcome for Texas.”
According to the statement, Berkshire Hathaway Inc., of which Berkshire Hathaway Energy is a subsidiary, already has a significant presence in Texas with multiple headquarters in the state, including BNSF Railway Company; Acme Brick Company; Justin Brands, Inc.; McLane Company, Inc.; Berkshire Hathaway Automotive; Star Furniture Company; TTI, Inc.; Charter Brokerage; LiquidPower Specialty Products Inc.; and Allie Beth Allman & Associates.
“Oncor is an excellent fit for Berkshire Hathaway, and we are pleased to make another long-term investment in Texas – when we invest in Texas, we invest big!” Berkshire Hathaway Chairman Warren Buffett said in the statement. “Oncor is a great company with similar values and outstanding assets.”
Berkshire Hathaway Energy Chairman, President and CEO Greg Abel said in the statement, “This partnership combines the strengths of two companies that share a common goal of providing exceptional customer service and a commitment to invest in critical infrastructure that will make the Texas energy grid even stronger and more reliable.”
Abel added: “We are pleased to be working with Texas and stakeholders to ensure Oncor continues to be a strong electric transmission and distribution company. Oncor is an exceptional company with great employees and an excellent management team.”
According to the statement, more than 3,700 Oncor employees work to maintain reliable electric delivery service with the largest distribution and transmission system in Texas, which is made up of about 122,000 miles of lines and more than 3.4 million meters across the state.
Texas does not approve NextEra’s attempted purchase of Oncor
As TransmissionHub reported, the Public Utility Commission (PUC) of Texas, in a June 7 order on rehearing, said that it does not approve the purchase of Oncor Electric Delivery Company by NextEra Energy (NYSE:NEE) because the proposed transactions are not in the public interest.
As noted in the order, NextEra Energy proposed to acquire the 80.03% share of Oncor held indirectly by Energy Future Holdings in a transaction governed by an agreement and plan of merger by and among Energy Future Holdings, Energy Future Intermediate Holdings, LLC, NextEra Energy, and EFH Merger Co., LLC. Energy Future Holdings would be merged with and into EFH Merger Co., LLC, with EFH Merger Co., existing as the surviving company, and the successor to Energy Future Holdings. As a result, the PUC added, NextEra Energy would own 100% of Energy Future Holdings and its subsidiaries, including Energy Future Intermediate Holdings, and Oncor Holdings, which holds an 80.03% ownership interest in Oncor.
The joint applicants also sought PUC approval of a transaction in which NextEra Energy would acquire Texas Transmission Holdings Corporation’s indirect 19.75% ownership interest in Oncor in a transaction governed by an agreement and plan of merger by and among Texas Transmission Holdings Corporation, NextEra Energy, and NextEra Energy affiliate WSS Acquisition Company. The PUC added that WSS Acquisition would merger with and into Texas Transmission Holdings, with Texas Transmission Holdings existing as the surviving company. As a result, NextEra Energy would own 100% of Texas Transmission Holdings Corporation and Texas Transmission Investment, LLC, including the latter’s 19.75% interest in Oncor, the PUC said.
The application also addressed NextEra Energy’s privately negotiated agreement to purchase the remaining 0.22% minority interest in Oncor held by Oncor Management Investment LLC, subject to closing the proposed transaction with Energy Future Holdings, the PUC said.
NextEra Energy intended to fund $12.2bn in order to obtain 100% of Oncor, and of that amount, $9.8bn would be used to obtain the 80.03% stake in Oncor currently held indirectly by Energy Future Holdings, the PUC said. The financing of the $9.8bn was to include about $7.5bn in debt funding financed at NextEra Energy Capital Holdings, the PUC said, adding that in addition to the $9.8bn, $2.4bn would be used to obtain the 19.75% interest held by Texas Transmission Holdings, and NextEra Energy proposed to pay for that acquisition in cash.
As TransmissionHub reported, the PUC, in an April 13 final order, denied the joint report and application, noting, for instance, that the proposed transactions would introduce Oncor to risks associated with NextEra Energy’s unregulated businesses, including generation development.
NextEra Energy filed a motion for rehearing on that April order on May 8.
Following the PUC’s June 7 order on rehearing, NextEra Energy on June 27 filed a second motion for rehearing, claiming, “While the commission has issued an order on rehearing that clarifies and corrects some of the deficiencies in the original final order, the order on rehearing neglects other errors and further introduces new errors in attempting to rectify the shortcomings of the earlier order.”
Among other things, NextEra Energy said in its second motion that the PUC on rehearing should ask whether it is truly reasonable to conclude that NextEra Energy is a financially risky company, and whether there is a genuine likelihood under bankruptcy law that Oncor would be consolidated into a highly unlikely NextEra Energy bankruptcy.
At a minimum, the PUC should recognize that, because its order on rehearing does not and could not find that transferring Oncor’s ownership from EFH to NextEra Energy will adversely affect Oncor’s provision of service, the PUC has an obligation under the plain language of Public Utility Regulatory Act (PURA) §§ 39.262 and 39.915 to issue an order on rehearing approving the proposed transaction with EFH even if that approval is contingent upon conditions the PUC deems appropriate, NextEra Energy said.
NextEra Energy claimed that the order on rehearing fails to evaluate the ring fencing and other financial protections presented in the company’s 73 regulatory commitments.
The company also noted that the PUC should reconsider its assertion of jurisdiction over the proposed transaction with Texas Transmission Holdings Corporation, claiming that the order on rehearing does not accurately describe the rights held by Texas Transmission Holdings’ subsidiary, Texas Transmission Investment, which holds only a 19.75% minority ownership interest in Oncor.
EFH and Energy Future Intermediate Holdings Company (referred to as the debtors in their filing) on June 27 filed an amicus curiae brief in support of NextEra Energy’s second motion, saying, in part, “Although the debtors are not parties to this proceeding, its outcome is of the utmost importance to them, as ensuring the best outcome for Oncor will also ensure the best outcome for the debtors’ creditors.”
PUC Commissioner Kenneth Anderson Jr., in a June 29 memorandum to PUC Commissioner Brandy Marquez, said that he remains unpersuaded by NextEra Energy’s “regurgitation of essentially the same arguments.”
According to Anderson, almost every intervenor in the case urged the PUC to deny the application and supported the PUC’s original decision.
“Accordingly, I will move to deny the most recent motion for rehearing at this open meeting because it raises no new issue not considered previously,” Anderson said. “It is time to bring this chapter in the EFH bankruptcy to a close and consider other options more suitable to Oncor and its ratepayers as well as ERCOT and its market participants.”
The PUC on June 29 issued an order denying NextEra Energy’s second motion for rehearing.