Sempra Energy gazumps Warren Buffett with US$9.45bn deal for Oncor

Sempra Energy gazumps Warren Buffett with US$9.45bn deal for Oncor

"We are disappointed our agreement to acquire Oncor has been terminated", said Greg Abel, Berkshire Hathaway Energy chairman, president and CEO.

Sempra's bid marks yet another twist in the fate of Energy Future, which was acquired by private equity firms in 2007 for a record-setting $45 billion - but quickly ran into trouble under a huge debt load.

Funding for the Oncor deal would come from a combination of debt, third-party equity and $3 billion of expected investment-grade debt at the reorganized Energy Future.

The deal is expected to close in the first half of 2018, however, it still needs the approval of the Public Utility Commission of Texas, the U.S. Bankruptcy Court of DE, the Federal Energy Regulatory Commission and the U.S. Department of Justice.

Buffett is famous for refusing to take part in bidding wars and the Wall Street Journal reported Sunday that Sempra had sweetened its initial bid of $9.3 billion for Oncor. The Dallas-based Oncor holding company, formerly TXU Corp., at the the time struck agreements with key stakeholders to cut about $40 billion in debt, lower interest expenses, access additional capital "and create a sustainable capital structure for the future". (SoCalGas) as its base, Sempra expects Oncor to expand its regulated utility base and provide future growth opportunities in the Texas energy market and the U.S. Gulf Coast region.

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Sempra's shares were up 1.2 percent at $117.79 after hitting an all-time high of $118.78 on Monday after the company said the deal would add about 10 million of Oncor's Texas customers to its base and increase its earnings starting next year.

Earlier this year, Texas utility regulators quashed an offer from NextEra Energy Inc., valued at $18.4 billion including debt, after the utility giant refused to establish ring-fencing measures to protect Oncor's credit. It expects the transaction to be completed in the first half of next year. In response to Sempra's move, however, Berkshire said it would allow Energy Future to keep an Oncor dividend, but that proposal was not enough to bridge the gap in price, according to the sources.

"It's not just a question of what you're offering - it's a question of whether or not it's going to make Texas regulators feel comfortable enough to allow the deal", Paul Patterson, a utilities analyst at Glenrock Associates LLC in NY, said by phone.

Judge Christopher Sontchi told the bankruptcy court on Monday that the new bid was a "big change" that would clearly benefit Energy Future and its creditors. It sought protection from creditors after natural gas plummeted, dragging down wholesale prices for the power the company was generating. In December, the company's IEnova unit bought wind power assets in Mexico for about $900 million, including debt. Berkshire Hathaway declined to comment on the development.

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