Oncor and Sempra file PUCT application with new financing structure

By Caroline Salls

Pittsburgh, Oct. 5 – Oncor Electric Delivery Co. LLC and Sempra Energy expected to jointly file a change-in-control application on Thursday with the Public Utility Commission of Texas (PUCT) as a key step in the regulatory review process for Sempra’s agreement to acquire Energy Future Holdings Corp., the indirect owner of 80% of Oncor, according to a release from Oncor and Sempra.

Oncor and Sempra said the application will include 47 regulatory commitments and a new financing structure under which Sempra proposes to now acquire 100% of Energy Future with no third-party equity investors or Energy Future debt.

“Since we announced our transaction in August, we have met with many stakeholders to gain their perspectives on how we can best meet the needs of Oncor customers and the state of Texas,” Sempra chairman, president and chief executive officer Debra L. Reed said in the release.

“Our application responds to their feedback and details our financing plan and regulatory commitments, as well as our approach to resolving the long-running EFH bankruptcy proceeding.

“Our goal is to keep Oncor strong, independent and well-capitalized for the benefit of Texas customers.

“Our revised financing structure also will provide long-term value to our shareholders.”

Revised structure

According to the release, Sempra expects to ultimately fund about 65% of the $9.45 billion purchase price with Sempra equity and 35% with Sempra debt.

Sempra’s original proposal was to initially acquire 60% of Energy Future, with the goal of acquiring 100% over a period of time.

While accretion will vary based on the actual closing date of the transaction and the timing and mix of equity and debt issued, Sempra said it expects the acquisition of Energy Future under the new financing structure to result in an average annualized accretion in earnings per share of roughly 10 cents to 20 cents over the next four years.

Ring-fence protections

In addition, Oncor and Sempra said in the Wednesday release that the filing was expected to include strong ring-fence protections for Oncor and its customers that will put in place financial and operational safeguards, financially separating Oncor from Sempra and its competitive affiliates.

The companies said their commitments include preserving board independence for Oncor, maintaining Oncor’s current management team, workforce and Dallas headquarters, not incurring any debt at Energy Future as part of the transaction or in the future, keeping strong ring-fence provisions to maintain both legal and financial separation among Oncor, Sempra and their affiliates, ensuring that none of the transaction costs are borne by Oncor’s customers and being supportive of Oncor’s $7.5 billion five-year capital investment plan.

Oncor and Sempra said several of the key stakeholders that likely would participate in the regulatory approval process for the transaction have indicated that, subject to review of the PUCT filing, the companies substantially addressed many of their key issues.

These stakeholders indicated they are open to regulatory settlement discussions with Oncor and Sempra, the release said.

The acquisition agreement remains subject to customary closing conditions, including further approvals by the U.S. Bankruptcy Court for the District of Delaware, the PUCT and the Federal Energy Regulatory Commission. Dallas-based Oncor is a regulated electric transmission and distribution service provider. Sempra is a San Diego-based energy services holding company.

Energy Future is a Dallas-based power generation company and utility operator. The company filed for bankruptcy on April 29, 2014. The Chapter 11 case number is 14-10979.

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