NextEra Energy Inc.’s $18.4 billion bid to buy control of Texas-based transmission giant Oncor Electric Delivery cleared a major hurdle this week when the U.S. Bankruptcy Court in Delaware approved the deal.
The definitive agreement between Oncor’s bankrupt parent Energy Future Holdings Corp. (EFC) and Florida-based NextEra is part of a Chapter 11 reorganization plan. Next Era acquires 100 percent of the reorganized EFH’s equity, which includes the 80 percent ownership interested in Oncor.
"We are pleased by today's bankruptcy court ruling and view it as an important next step in the process to acquire Oncor," said Jim Robo, chairman and CEO of NextEra Energy. "Our proposed transaction provides Oncor with a financially strong, utility-focused owner that shares Oncor's commitment to providing customers with affordable, reliable electric delivery service and significant value and certainty for the EFH bankruptcy estate."
"With this important milestone behind us, we look forward to working closely with additional EFH creditors to gain their support for successful confirmation of EFH's plan of reorganization and, together with Oncor, filing our joint application for transaction approval soon with the Public Utility Commission of Texas," Robo said.
NextEra Energy also said Monday that it expects to file soon with Oncor a joint application with the Public Utility Commission of Texas requesting approval of the proposed transaction.
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.
NextEra Energy expects the transaction, which has been approved by the boards of directors of both NextEra Energy and EFH, to be completed in the first quarter of 2017. The company says its acquisition would ensure the support of Oncor's existing five-year capital plan, which includes substantial and necessary planned capital improvement projects across the state of Texas.
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. Hunt later indicated renewed interest in an Oncor deal but NextEra has stepped in with its eleven-digit financial offer.
Last month, NextEra announced it had secured financial backing from a contingent of banks. That group was led by Credit Suisse Securities and Bank of America Merrill Lynch and includes Deutsche Bank Securities Inc., Goldman, Sachs & Co., J.P. Morgan Securities, UBS Securities, Wells Fargo Securities, BNP Paribas Securities Corp., CIBC World Markets Corp., Credit Agricole Corporate and Investment Bank, KeyBanc Capital Markets Inc., Mizuho Securities USA Inc., Scotiabank Capital Inc., Sumitomo Mitsui Banking Corp., TD Securities, The Bank of Tokyo-Mitsubishi UFJ, and U.S. Bank National Association.