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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.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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