Sempra outbids Buffett’s firm for Oncor
San Diego-based Sempra Energy, a utility and pipeline company, has signed an agreement to buy the bankrupt Energy Future Holdings and its Dallas-based utility Oncor, the fourth attempt in the last year to buy Texas’ largest utility.
In an eleventh-hour agreement reached Sunday and announced Monday, Sempra swept aside another bidder, Berkshire Hathaway Energy, a subsidiary of billionaire investor Warren Buffett’s Berkshire Hathaway. The winning bid came just days after Energy Future Holdings signed an agreement with Berkshire and hours before both companies were headed to bankruptcy court to seek approval for the deal.
Sempra, which runs two utilities in California and is developing an LNG export project on Texas’ Gulf Coast, would pay around $9.45 billion in cash to acquire the Irving-based Energy Future and its
80 percent stake in Oncor. The enterprise value of the deal is around $18.8 billion, Sempra said.
The bankruptcy court and the Texas Public Utility Commission must now approve the new deal. Sempra met with Oncor executives to discuss its move and decided it could more than match Berkshire’s offer of $9 billion, said Jeff Martin, Sempra’s chief financial officer.
“We thought that offer was a little bit low based on the value of the business,” Martin said. “Once we understood the strength of Oncor … then we backed into settling for a price that would draw more support.”
Berkshire confirmed that its Aug. 18 agreement with Energy Future had been terminated but declined to comment further. Energy Future Holdings agreed to pay Berkshire $270 million if the deal fell through, court documents show. Lawyers for Energy Future did not respond to a request for comment.
While critics said Berkshire’s offer for Energy Future and Oncor was too low — the company itself had valued Oncor at $11.25 billion — consumer advocates and the PUC supported the company’s efforts to make sure the deal would preserve protections for Oncor’s 10 million Texas customers.
But now that Berkshire is out, Martin said Sempra plans to honor those protections, which include maintaining a separate board of directors for Oncor.
Key among the conditions Berkshire and Sempra both agreed to is maintaining Texas’ “ring fence” policy, which prevents transmission and distribution utilities like Oncor from owning power generation assets.
All measures are meant to prevent ratepayers from incurring costs not related to the distribution of electricity and to ensure that Oncor has the resources to maintain its transmission lines.
Oncor owns and operates the grid for most of North Texas. Energy Future Holdings has been in bankruptcy for three years as it has worked to restructure its $40 billion debt.
Prior to Berkshire, there were two earlier attempts to acquire Oncor, both rejected by the PUC.
In July 2016, Florida’s NextEra Energy tried to acquire Oncor in an $18.4 billion deal that the PUC declared was not in the public interest because customers would have had to pay for 15 percent of NextEra’s $45 billion in debt. NextEra had also asked the PUC to adjust its “ring fence” policy.
NextEra’s offer came on the heels of another rejected bid, an $18 billion deal to buy Oncor led by Dallas billionaire Ray Hunt that fell apart over regulatory concerns. NextEra lost in the original bidding process to Hunt.