Sempra snatches Oncor
from Buffett with $9.45 billion bid: sources
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[August 21, 2017]
By Greg Roumeliotis
(Reuters) - Bankrupt Texas utility Energy
Future Holdings will abandon a deal to sell power transmission company
Oncor to Warren Buffett's Berkshire Hathaway Inc for $9 billion and will
accept a $9.45 billion bid for Oncor by Sempra Energy instead, people
familiar with the matter said.
The development represents a rare blow for Buffett, who avoids bidding
wars for companies and had swooped in two months ago to buy Oncor after
two previous attempts by Energy Future to sell it were blocked by Texas
regulators.
It is also a defeat for Greg Abel, the 55-year-old chief executive of
Berkshire's energy unit who many investors consider a top candidate to
eventually succeed Buffett, 86, at the Omaha, Nebraska-based parent
company's helm.
Energy Future's board decided to make the switch on Sunday after Sempra
also offered assurances it could get its acquisition of Oncor approved
by the Public Utility Commission of Texas (PUCT), as well as a U.S.
bankruptcy judge, the sources said.
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Berkshire had issued a statement last week to say it would not be
raising its offer for Oncor. However, in response to Sempra's bid,
Berkshire offered to allow Energy Future to keep an Oncor dividend, but
that proposal was not enough to bridge the gap in price, the sources
added.
The sources asked not to be identified because the decision has not yet
been officially announced. Sempra and Berkshire did not immediately
respond to requests for comment. Oncor and Energy Future declined to
comment.
The bidding war for Oncor underscores how power generation is becoming
more commoditized and less lucrative in the eyes of utilities, which
have become wary of their exposure to volatile energy prices. Instead,
many utilities are now hungry for electricity distribution assets with a
growing demographic base and stable cash flows.
Dallas-based Oncor delivers power to more than 3.4 million homes and
businesses through roughly 122,000 miles (196,000 km) of transmission
and distribution lines.
Hedge fund Elliott Management Corp, which is Energy Future's biggest
creditor, had opposed the sale to Berkshire, arguing it undervalued
Oncor and threatening to veto the deal. Elliott had also been trying to
put together its own bid for $9.3 billion to buy Oncor.
Sempra decided to make an offer for Oncor in the last three weeks, after
seeing the opposition that Berkshire faced from Elliott as an
opportunity to interlope, according to the sources.
Elliott has now indicated it will support Oncor's sale to Sempra, one of
the sources said. Elliott did not immediately respond to a request for
comment.
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![](../images/082117pics/busine29.jpg)
Berkshire Hathaway CEO Warren Buffett visits the BNSF booth before
the Berkshire Hathaway annual meeting in Omaha, Nebraska, U.S. May
6, 2017. REUTERS/Rick Wilking/File Photo
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Berkshire had told the PUCT it would accept "ringfencing" on its acquisition of
Oncor, restricting its ability to extract cash from the company or add more debt
to it. Sempra has now indicated it that will make similar concessions on
ringfencing, according to the sources.
Based in San Diego, Sempra owns and operates electric and gas utilities in the
United Sates and South America, including San Diego Gas & Electric and SoCalGas
in California, Luz del Sur in Peru, and Chilquinta Energía in Chile. It has a
market capitalization of $29.2 billion.
Sempra is no stranger to Texas. Earlier this year, it signed a memorandum of
understanding with Korea Gas Corp for the development of a liquefied natural gas
liquefaction project in Port Arthur, Texas.
PREVIOUS ONCOR DEALS SHOT DOWN
Earlier this year, the PUCT shot down the sale of Oncor to NextEra Energy Inc
because it considered the proposed financial structure too risky for ratepayers.
A separate plan to sell Oncor to a group of creditors and investors led by
privately held Hunt Consolidated Inc of Texas collapsed in 2016, after hitting
obstacles at the regulator.
As a result, Energy Future has been stuck in bankruptcy since it filed for
Chapter 11 protection in 2014, as plans to sell Oncor, repay creditors and fund
its exit collapsed under regulatory scrutiny.
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Buyout firms KKR & Co LP <KKR.N>, TPG Capital LP and Goldman Sachs Group Inc's <GS.N>
private equity arm took Energy Future private in 2007, in the biggest ever
leveraged buyout with a deal size of $44 billion, including debt.
But the debt pile placed on the company proved unsustainable, as Energy Future
was hit by a steep decline in natural gas prices that in turn led to depressed
power prices.
(Corrects preposition in paragraph 7)
(Reporting by Greg Roumeliotis in New York; Editing by Mary Milliken and Richard
Pullin)
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