Florida-based NextEra Energy, moving fast after its bid for Hawaiian Electric Industries (HEI) was doomed only a few weeks ago, rebounded by cutting a deal to buy Texas’ Oncor Electric Deliver Co. from bankrupt Energy Future Holdings (EFH) for about $18.4 billion, according to reports Friday.
Under the definitive agreement, a newly formed unit of NextEra would acquire EFH’s nearly 80 percent interest in transmission-focused Oncor. The definitive agreement is part of an overall plan of reorganization that is designed to allow EFH to emerge from Chapter 11 bankruptcy, but the acquisition must be approved by the bankruptcy court.
If successful, NextEra would gain control of Oncor, which delivers power to more than 3 million Texas homes and operates about 119,000 miles of transmission and distribution lines in the state. As part of the transaction, NextEra Energy intends to fund $9.5 billion for the repayment of EFH debt, according to the company.
"We are pleased to have reached a definitive agreement to acquire EFH's 80 percent indirect interest in Oncor," said Jim Robo, chairman and CEO of NextEra Energy. "We are incredibly impressed by Oncor's management team and its employees, and we are committed to retaining the Oncor name, its Dallas headquarters and local management.”
Robo added that his company will work closely with Oncor's leadership team to file a joint application with the Public Utility Commission of Texas. Since 1999, NextEra Energy has had a presence in Texas, including Lone Star Transmission LLC, a transmission service provider.
The surprise announcement caps a whirlwind month for NextEra on the M&A front. In early July, the Hawaii Public Utilities Commission voted to not approve a two-year-old merger effort between NextEra and HEI.
The commission said NextEra and HEI failed to show the merger would be in the public's interest. Members were concerned about benefits to ratepayers and the companies' commitment to clean energy. They also were worried about what would happen if the utility lost local control.
The companies had announced NextEra's plans to acquire HEI in December 2014. The deal was valued at $2.6 billion, or $4.3 billion including the assumption of HEI’s debt.
A few days later, NextEra announced it was scuttling several planned projects on the islands.
Oncor Electric Delivery has faced an uncertain future since EFH, formerly TXU, went bankrupt with $42 billion in debt. Only a few weeks ago, reports surfaced that Warren Buffett’s Berkshire Hathaway Energy might make a bid for Oncor.
Last year, Hunt Consolidated and partners offered to buy Oncor as part of EFH’s Chapter 11 bankruptcy proceeding in an estimated $20 billion deal. However, in May Hunt informed the Texas Public Utility Commission that it was backing out of the plan.
The Hunt plan had approval from a Delaware bankruptcy judge. One alleged reason it fell through, according to some news accounts, is that Texas regulators may have required the buyer to share tax savings with customers.
Hunt said that and other regulatory caveats might scare off investors.
As of Friday, however, it looks like NextEra was the likely suitor to emerge with control of Oncor. Robo sounded upbeat about the prospect.
"We are proud to own and operate one of the most efficient, reliable and low-cost utilities in the nation, providing a value proposition for our customers that includes electric bills that are among the nation's lowest, high reliability and award-winning customer service,” he said in a statement. “We believe our deep operating expertise in Texas and across the nation, strong financial profile and experience operating in a regulated utility environment offer uniquely compelling advantages."