Houston, San Francisco: Sempra Energy said it won’t add new debt to the parent of Texas power-line utility Oncor Electric Delivery Co under revised deal terms aimed at winning over regulators.
Sempra will acquire all of Energy Future Holdings Corp, which owns an 80 percent stake in Oncor, instead of relying on third-party investors for its $9.45 billion (Dh34.7 billion) takeover, according to a statement Wednesday. The revised terms will eliminate $3 billion of debt at Energy Future, which was a concern of key stakeholders in Texas.
“We made a conscious decision to make this change after we got a lot of stakeholder input,” Sempra Chief Executive Officer Debra Reed said during an investor call Wednesday. “And one of their greatest concerns was the holding company debt, and so we felt we could address those issues upfront and that would allow us to improve our chances to get regulatory approval.”
Sempra said it was to file its application Thursday with the Public Utility Commission of Texas, the first step toward getting a stamp of approval and completing the deal. Texas regulators have quashed earlier takeover bids from NextEra Energy Inc and a group led by Hunt Consolidated Inc. The sale is key to ending the bankruptcy of Energy Future, which has been restructuring nearly $50 billion of debt for more than three years.
Credit profile
Sempra said it will fund its purchase with 65 percent of equity and 35 percent with debt. The new terms will improve the company’s long-term credit profile and result in a four-year average annual earnings-per-share boost of 10 cents to 20 cents, Chief Financial Officer Jeffrey Martin said during the call.
“Sempra is taking steps to address potential issues that may concern various parties in Texas,” Paul Patterson, an analyst at Glenrock Associates LLC, said by phone Wednesday.
The acquisition will be Sempra’s largest since it was formed in 1998, based on data compiled by Bloomberg. The deal would expand its US utility territory beyond California, where it owns natural gas and electric distribution utilities.
The San Diego-based company topped an offer by Warren Buffett’s Berkshire Hathaway Inc to clinch Oncor in August. The biggest power-line operator in Texas promises to provide Sempra with a steady stream of earnings in a high-growth state.
