Judge OKs Sempra’s $9.45B deal with Oncor

There are still hurdles remaining but Sempra Energy’s massive acquisition of the company with the largest electric transmission and distribution system in Texas took a big step toward becoming reality Wednesday.

A judge in U.S. Bankruptcy Court in Delaware approved a merger agreement Sempra entered into with Energy Future Holdings Corp., the bankrupt parent of Oncor Electric Delivery Company.

In a deal last month that received national attention, Sempra swooped in and bested an offer from legendary billionaire Warren Buffett’s Berkshire Hathaway investment firm by promising to pay $9.45 billion in cash to pick up Oncor.

Berkshire Hathaway had offered $9 billion.

“Oncor is a well-managed, top-tier utility, operating in one of the strongest U.S. growth markets,” Debra Reed, Sempra CEO said in a statement after the judge signed off on the deal. “We believe it will be an excellent strategic fit with our portfolio of utility and energy infrastructure businesses, while opening up a new avenue for our long-term growth.”

Next up for Reed and Sempra executives is receiving approval from the Public Utility Commission of Texas, which has blocked two other offers made by prospective suitors.

The San Diego-based Fortune 500 company and Oncor are expected to make a regulatory filing with the commission in October in a joint application.

Under the terms of the deal, Sempra will acquire Energy Future and its 80 percent ownership stake in Oncor. Energy Future, based in Dallas, filed for bankruptcy in 2014, beset by low natural gas prices that made its company debt unsustainable.

However, Oncor has been called a “jewel asset” by some energy analysts for its steady performance. In 2016, Oncor posted $431 million of profit and earned similar returns in three years prior.

Sempra officials hope to complete the transaction in the first half of 2018 and add to earnings at the start of next year. Executives have received financing commitments from RBC Capital Markets and Morgan Stanley to help fund the acquisition.

Sempra has promised to keep Oncor in Dallas, maintain the independence of Oncor’s board of directors and will keep in place “ring-fence” measures to help insulate Oncor from Energy Future’s bankruptcy proceedings.

The deal is the biggest ever for Sempra, which was founded in 1998. Sempra, whose subsidiaries include San Diego Gas & Electric and Southern California Gas, had 2016 revenues of more than $10 billion.

Oncor employs nearly 4,000 workers and delivers power to 3.4 million homes and businesses in Texas, with transmission and distribution lines covering some 122,000 miles.

rob.nikolewski@sduniontribune.com

(619) 293-1251 Twitter: @robnikolewski

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