Warren Buffett's Berkshire Hathaway Inc. is wasting no time trying to win over Texas regulators in its bid for Oncor Electric Delivery Co., the state's largest electric-transmission operator.
Berkshire is promising an independent board of directors with sole authority over dividends, and will shield Oncor from potential bankruptcy at other Berkshire units, according to a document provided to Bloomberg by Oncor spokesman Geoffrey Bailey. Berkshire early Friday announced an agreement to buy Oncor parent Energy Future Holdings Corp. for $9 billion in cash.
Berkshire will be the third company to come before Texas regulators seeking permission to buy a utility that they have so far highly guarded. Just a week ago, the state rejected NextEra Energy Inc.'s $18 billion bid to buy Oncor for a third time, deciding the merger wasn't in the public interest. Last year, it quashed an offer from Hunt Consolidated Inc.
"I applaud both Berkshire Hathaway Energy and Oncor for their productive efforts," Brian Lloyd, executive director of the Texas Public Utility Commission, said Friday in an emailed statement. In addition to strengthening financial "ring-fencing" requirements by the state, Berkshire and Oncor "are proposing additional assurances regarding Oncor's independence, financial integrity, and to invest in infrastructure, cybersecurity and system reliability," Lloyd said.
Berkshire's commitments were filed Friday with the court overseeing the bankruptcy of Energy Future Holdings, according to Bailey. The all-cash offer for Energy Future implies an equity value of about $11.25 billion for 100 percent of Oncor, Omaha, Neb.-based Berkshire said in a statement Friday. The offer appears to be worth about $1 billion less than NextEra's, people familiar with the situation said, asking not to be identified because the information hasn't been publicly disclosed.
"Oncor is an excellent fit for Berkshire Hathaway, and we are pleased to make another long-term investment in Texas -- when we invest in Texas, we invest big!" Buffett, chairman of Berkshire Hathaway, said in the statement. "Oncor is a great company with similar values and outstanding assets."
Berkshire has accepted limits on its control of Oncor's board that NextEra had previously rejected. Texas had demanded that NextEra give up control over who would be on Oncor's board and how much money, if any, NextEra could extract from the company. NextEra told regulators it wouldn't buy Oncor unless it can control the board and set fiscal policies.
Berkshire's commitments appear "to meet many of the objections that were raised about the NextEra acquisition," Tom Smith, director of special projects for the Texas office of Public Citizen, a consumer group, said by phone Friday. The cash offer also avoids the "innovative, weak financing" proposed by Hunt, Smith said.
A takeover of Oncor is key to ending the bankruptcy of Energy Future Holdings, formed by KKR & Co., TPG Capital and Goldman Sachs Capital Partners as part of the biggest leveraged buyout in history. The company's been working since 2014 to restructure $50 billion of debt.
Information for this article was contributed by Steven Church of Bloomberg News.
Business on 07/08/2017