10-4-17 7:24 PM EDT | Email Article
By Peg Brickley 

Sempra Energy Inc. has revised the financing for its $9.45 billion proposal to buy Oncor, a Texas power transmission business that is largely owned by bankrupt Energy Future Holdings Corp.

The San Diego-based power company said Energy Future creditors will still get cash in the deal for their 80% stake in Oncor, a profitable, regulated business. The financing structure, however, has been simplified in an effort to help the buyout pass muster with Texas regulators.

Sempra said it and Oncor will on Thursday begin the formal process of seeking approval from the Public Utility Commission of Texas, a regulatory body that has ended two earlier attempts to buy the transmissions business.

Instead of bringing in outside investors, as it had originally planned, Sempra will use its own equity and debt to pay for Energy Future, which owns 80% of Oncor, the company said. Additionally, some $3 billion worth of debt that was going to be left on Energy Future and paid off over time will instead be eliminated.

The financing for the Oncor deal was revised in response to Texas stakeholders, Sempra said. Active talks with stakeholders continue, as Sempra prepares to guide its Oncor buyout through the regulatory process.

If it hopes to close on the acquisition, Sempra must convince Texas regulators its deal won't add risk to Oncor's finances or complications to the utility's corporate structure.

Owner of San Diego Gas & Electric, Sempra was chosen by Energy Future to replace Warren Buffett's Berkshire Hathaway Energy Co. as Oncor's proposed owner. Berkshire had already lined up support from major Texas customers to buy Oncor but was knocked out of the running by a higher price from Sempra.

According to Sempra, key Texas stakeholders have said the revised proposal has "substantially addressed" many of their concerns, and they are open to "constructive regulatory settlement discussions."

Two earlier deals failed due to regulatory concerns, one led by Texas-based Hunt Consolidated, and one led by NextEra Energy Inc., of Florida. Both of the previous Oncor suitors ran into opposition from coalitions of major industrial power users and cities, stakeholders that weigh in regularly with energy regulators in the state.

Sempra won bankruptcy court approval to enter into a buyout agreement with Energy Future in September and began courting support in Texas, where Oncor is counted on to deliver power to 10 million people.

Energy Future has been trying to sell its Oncor stake for years, to cash out on the profitable, stable utility, and end a bankruptcy stay that began in 2014. The deals that have cleared bankruptcy court, however, have not found favor with regulators.

The Texas PUC keeps watch on Oncor's finances to make sure the utility's owners don't drain cash needed for system improvement. Regulators have insisted on "ringfencing" provisions, corporate governance and financial safeguards that kept the utility out of bankruptcy. In a release, Sempra said its application to regulators will include "strong ringfence protections."

Regulators rejected NextEra's deal for Oncor when NextEra balked at some of the ringfencing safeguards. Sempra is promising to keep Oncor a legally and financially separate company, and to support its five-year, $7.5 billion capital-spending plan.

If all falls into place, Sempra said it expects to close on its buyout of Oncor in the first half of 2018.

Write to Peg Brickley at peg.brickley@wsj.com

 

(END) Dow Jones Newswires

October 04, 2017 19:24 ET (23:24 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.
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