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Draft Texas Order Denying NextEra Acquisition of Oncor To Be Considered At PUC Open Meeting Today

April 13, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Commission Advising has filed with the Public Utility Commission of Texas a draft order that would deny NextEra Energy, Inc.'s proposed acquisition of Oncor, which will be considered at today's open meeting

EnergyChoiceMatters.com had been first to report on March 30 that Commissioners of the Texas PUC agreed unanimously during the March 30 meeting that NextEra Energy's proposed acquisition of Oncor is not in the public interest, and that the PUC would prepare an order to reject the transaction on such grounds

A currently posted agenda for today's open meeting indicates that the draft order is on the consent agenda, and will not be taken up for discussion

The draft order states, "NextEra Energy’s proposal is premised on the ability to link Oncor’s credit profile with that of NextEra Energy. NextEra Energy sought to achieve sufficient financial control over the actions and resources of Oncor to enable the linkage of Oncor and NextEra Energy’s credit profiles. To accomplish this goal, NextEra Energy requested that the Commission grant NextEra Energy the ability to eliminate the following two protections from Oncor’s existing ring fence: (1) restrictions on NextEra Energy’s ability to appoint, remove, and replace members of the Oncor and Oncor Holdings boards of directors, with the exception of three disinterested directors on the Oncor board of directors, and (2) the ability of the Texas Transmission Investment shareholders to veto dividends declared by the Oncor board of directors and, in certain circumstances, capital and operating budgets."

The draft order notes that, "the debt from the proposed transactions, the total amount of consolidated debt at NextEra Energy would be about $45 billion, and Oncor would be required to support about 15% of that debt."

"In addition, Moody’s Investors Service has noted that '[t]he acquisition-related debt, without a material amount of deleveraging, would exhaust [NextEra Energy’s] debt capacity at its current rating” and “make the company more vulnerable to unforeseen events or margin shortfalls,'" the draft order notes

"The substantial amounts of leverage at NextEra Energy increases the financial risk to Oncor, particularly if Oncor’s existing ring fence is to be weakened substantially as requested by NextEra Energy," the draft order states

"In addition to exposing Oncor to the substantial amount of debt at NextEra Energy, the proposed transactions would introduce Oncor to risks associated with NextEra Energy’s unregulated businesses, including generation development," the draft order states

"The evidence in this case has shown that NextEra Energy, including its subsidiary NextEra Energy Resources, LLC, is subject to numerous risks, including, but not limited to, potential changes in renewable demand resulting from changes in climate or tax policy, commodity risks, retail electric provider risks, as well as power and nuclear generation risks," the draft order states

"These new risks, in conjunction with the high amount of leverage at NextEra Energy, increase the likelihood that unforeseen events could jeopardize Oncor’s financial stability, yet NextEra Energy suggests that the Commission weaken the ring fence protecting Oncor and its ratepayers from such financial troubles," the draft order states

"NextEra Energy ownership of Oncor would subject Oncor and its ratepayers to significant new risks. The tangible benefits to Texas ratepayers that are specific to the proposed transactions are minimal, and would do little to compensate ratepayers for any of the additional risks imposed. When the Commission weighs the additional risks and the lack of tangible benefits, combined with NextEra Energy’s insistence on eliminating two critical ring-fencing protections, the Commission finds that the proposed transactions are not in the public interest, and the application is denied," the draft order states

Docket 46238

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