NextEra Energy, Inc. (NYSE: NEE) has announced its bid to purchase the Energy Future Holdings Corp. (EFH) 80% interest in Oncor Electric Delivery Company (Oncor). The transaction is valued at $18.4 billion and comes in the form of a definitive agreement to be filed as part of the restructuring of EFH pending before the United States Bankruptcy Court for the District of Delaware.
Readers of prior posts on this topic will recall that the last purchaser of the Oncor assets was Hunt Consolidated which proposed the use of a real estate investment trust (REIT) to finance its acquisition of Oncor. While the Public Utility Commission of Texas (PUCT) eventually approved the Hunt Consolidated acquisition, the PUCT imposed conditions on the transaction which were intended to give ratepayers the benefit of the REIT structure which avoided certain taxes. Hunt Consolidated eventually withdrew its application finding that the PUCT imposed conditions made the transaction, as originally proposed, no longer attractive.
NextEra, having recently failed in its bid to acquire Hawaii Electric, apparently still had funding available for a new transaction. NextEra already has a Texas presence through its Lone Star Transmission, LLC entity. Lone Star is an electric transmission service provider in Texas. NextEra has proposed a traditional utility organizational structure for its operation of the Oncor assets (unlike the Hunt approach) and the transaction is structured as a standard acquisition of a utility holding company.
The transaction is subject to approval by the bankruptcy court as part of the approval of EFH's plan of reorganization. The PUCT will also be asked to approve the transaction, the likelihood of which is enhanced by the straightforward structure to the acquisition in contrast to the use of an REIT in the PUCT's previous consideration of the acquisition of these assets. It is anticipated that the acquisition will be completed sometime in the first quarter of 2017.
*With apologies to the "Rocky" series of movies, this is the sixth blog post involving a discussion of the acquisition of the Oncor assets.
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