From Hunt to NextEra to Berkshire Hathaway to Elliott Management and now, finally, to Sempra Energy.
That’s been the line-up of successive suitors – both potential and real — for Oncor Electric, the Dallas-based electric utility with 10 million Texas customers.
The very profitable transmission-and-distribution company is on the auction block because of the 2014 bankruptcy of its very unprofitable parent company, Energy Future Holdings. But because Oncor is a state-sanctioned monopoly — and because it was part of EFH — it cannot be sold without the consent of Texas regulators and a federal bankruptcy court.
Here’s a quick summary of who’s made offers for the utility so far, and how those offers have fared.
- In May 2016 EFH terminated the plans of an investment group that included Dallas billionaire Ray L. Hunt to buy Oncor. This, the first failed bid to acquire the utility, came after the Hunt consortium refused to meet Public Utility Commission demands relating to complicated tax provisions in the deal. The PUC feared those tax provisions would have harmed ratepayers — fears that were shared by the Steering Committee of Cities Served by Oncor and other consumer groups.
- In February 2017 the PUC quashed another deal — this one by Florida-based NextEra. The problem with this one was that it would have undermined existing legal protections that protect Oncor against the financial distress of its parent company. These so-called “ring fence” protections were created in 2008 with support from interested parties including the Steering Committee and other groups. They also eventually helped protect Oncor ratepayers during the EFH bankruptcy.
- On July 7 Berkshire Hathaway Energy, a unit of the investment conglomerate owned by Warren Buffett, announced it had tentatively agreed to a $9 billion all-cash deal to acquire Oncor. The Berkshire Hathaway offer was more straightforward than the previous deals and drew none of the previous objections. But Berkshire Hathaway still required approval from the federal bankruptcy court in Delaware and the PUC.
- Elliott Management, a New York City hedge fund that is the largest creditor of Energy Future Holdings, quickly signaled its displeasure with the Berkshire Hathaway deal. In early July Elliott floated a deal said to be worth $300 million more to creditors than that offered by Berkshire Hathaway.
- On Aug. 21 California-based Sempra Energy announced yet another offer, this one based on both cash and debt. Both Elliott Management and Energy Future Holdings have thrown their support to this new deal, giving it the inside track at the federal bankruptcy court. However neither the Texas PUC nor Texas stakeholders have signed off.
What comes next?
The federal court in Delaware has scheduled a Sept. 6 hearing and could approve the Sempra deal at that time.If it wins approval there, the deal still faces scrutiny from the Texas Public Utility Commission. Under agency rules, regulators have 180 days from the day the company files its application to render a decision.
Also, unlike the federal bankruptcy court, the PUC must consider whether the deal comports with the public interest.