Sempra reaches Oncor settlement with stakeholders, includes ring-fence protections
- Oncor Electric and Sempra Energy have reached a settlement with several stakeholders in hopes of assuaging regulator concerns and moving the acquisition closer to finally happening.
- In September, the U.S. Bankruptcy Court for the District of Delaware approved Sempra's plan to pay $9.45 billion for Energy Future Holdings Corp., the bankrupt parent of Oncor. And Sempra secured approval from the Federal Energy Regulatory Commission Tuesday. The deal has an enterprise value of about $18.8 billion.
- The settlement includes commitments to preserve the existing Oncor "ring-fence" and the independence of Oncor's board of directors, as well as to extinguish all debt currently at EFH and Energy Future Intermediate Holding Company LLC.
Protecting Oncor customers by insuring the utility's independence has been a key concern of Texas regulators, who have balked at several other plans to purchase the utility out of its parent's bankruptcy. The settlement reached by several parties this week aims to keep protections in place and eliminate debt at the parent company level.
Along with Sempra and Oncor, parties to the settlement include staff of the Public Utility Commission of Texas, the Office of Public Utility Counsel, Steering Committee of Cities Served by Oncor, and Texas Industrial Energy Consumers.
Debra Reed, chairman, president and CEO of Sempra Energy, said the company is pleased that the deal "has garnered support from several key stakeholder groups in Texas. We strongly believe that this transaction will benefit Oncor customers and the state of Texas, and we are working with the PUCT to facilitate its comprehensive review of our proposal."
Sempra and Oncor indicated they will continue settlement discussions with additional stakeholders in the coming weeks.
Oncor serves more than 10 million Texas residents and is the largest utility in the state. The list of companies which attempted to buy the utility now includes: Hunt Consolidated, NextEra Energy and Berkshire Hathaway Energy.
Under terms of the most recent proposal, Sempra will pay approximately $9.45 billion in cash to acquire Energy Future and its 80% ownership interest in Oncor. Sempra has said its equity ownership after the transaction will be approximately 60% EFH.
Financial protections for Oncor has been one point where regulators have refused to budge. NextEra Energy made three attempts to convince the PUC, but ultimately failed because the company would not back down from a proposal to rework Oncor's ringfencing provisions to give it access to dividends from the regulated utility. Before that, Hunt Consolidated had proposed to spin Oncor into an Real Estate Investment Trust but was unable to convince regulators it would benefit consumers.
"Oncor and its long list of suitors" was named "Deal of the Year" by Utility Dive. You can read more about the deal's history here.
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