Sempra Energy Beats out Buffett for Oncor

The utility operator will acquire Oncor's bankrupt owner for $9.45 billion, adding Texas' largest power transmission system to its portfolio.
Matthew HellerAugust 21, 2017

Sempra Energy has agreed to acquire Texas power transmitter Oncor for $9.45 billion, topping a bid by Warren Buffett that had run into opposition from a creditor of Oncor’s bankrupt owner.

As Reuters reports, the deal is a rare setback for Buffett, who had offered $9 billion for Oncor in July after two previous attempts by Energy Future Holdings to sell it were blocked by Texas regulators. Energy Future, which filed bankruptcy in 2014, is the indirect owner of 80% of Oncor.

Sempra will take control of Oncor by buying a reorganized Energy Future out of bankruptcy. Including the assumption of Oncor debt, the deal has a transaction value of about $18.8 billion.

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“Our proposal will help bring a satisfactory resolution to Energy Future’s bankruptcy case, keep Oncor financially strong, and protect Oncor customers, while addressing the needs of Texas regulators, creditors and the U.S. Bankruptcy Court,” Sempra CEO Debra Reed said in a news release.

Buffett had banked on an acquisition of Oncor to bolster the energy business of his Berkshire Hathaway conglomerate. Oncor serves 10 million customers across Texas through the state’s largest power distribution and transmission system.

But Energy Future’s biggest creditor, Elliott Management Corp., opposed Buffett’s offer, arguing it undervalued Oncor. Berkshire said last week it would not be raising its bid.

“Elliott is supportive of the proposed Sempra transaction, which provides substantially greater recoveries to all creditors of Energy Future than the proposed Berkshire transaction,” a spokesman for Elliott told Reuters.

Sempra Energy owns utilities in California and Mexico and is developing a liquefaction-export project on the Gulf Coast of Texas. It previously operated 10 power plants in the Texas electric market.

“With its strong management team and long, distinguished history as Texas’ leading electric provider, Oncor is an excellent strategic fit for our portfolio of utility and energy infrastructure businesses,” Reed said.

She added that the deal “is expected to enhance our earnings beginning in 2018 and further expand our regulated earnings base, while serving as a platform for future growth in the Texas energy market and U.S. Gulf Coast region.”

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