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California Utility Holding Company Reaches Agreement To Acquire Texas Utility Oncor, Edging Out Berkshire Hathaway Energy

August 21, 2017

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

Sempra Energy today announced an agreement to acquire Energy Future Holdings Corp., the indirect owner of 80 percent of Oncor Electric Delivery Company, LLC

Under the agreement, Sempra Energy will pay approximately $9.45 billion in cash to acquire Energy Future and its ownership in Oncor. The enterprise value of the transaction is approximately $18.8 billion, including the assumption of Oncor's debt.

Sempra Energy said that it, "will maintain the existing independence of Oncor's board of directors, which has protected Oncor and its customers during the ongoing Energy Future bankruptcy."

As part of the transaction, Sempra Energy has committed to support Oncor's plan to invest $7.5 billion of capital over a five-year period to expand and reinforce its transmission and distribution network.

At the completion of the transaction, Bob Shapard, Oncor's CEO, will become executive chairman of the Oncor board of directors and Allen Nye, currently Oncor's general counsel, will succeed Shapard as Oncor's CEO. Both are slated to serve on the Oncor board, which will consist of 13 directors, including seven independent directors from Texas, two from existing equity holders and two from the new Sempra Energy-led holding company.

Oncor selected Sempra's offer over a prior $9 billion offer from Berkshire Hathaway Energy (BHE), a subsidiary of Warren Buffett’s Berkshire Hathaway Inc.. BHE's offer had run into opposition from EFH debt holder Elliott Management Corp.

Elliott Management Corp. has stated it supports the proposed sale to Sempra.

Sempra Energy expects to fund the $9.45 billion transaction using a combination of its own debt and equity, third-party equity, and $3 billion of expected investment-grade debt at the reorganized holding company. Sempra Energy has received financing commitments from RBC Capital Markets and Morgan Stanley. Sempra Energy expects its equity ownership after the transaction to be approximately 60 percent of the reorganized holding company.

The transaction is expected to be accretive to Sempra Energy's earnings beginning in 2018.

The transaction is subject to customary closing conditions, including the approval of the Public Utility Commission of Texas, U.S. Bankruptcy Court of Delaware, Federal Energy Regulatory Commission and the U.S. Department of Justice under the Hart-Scott-Rodino Act.

Sempra Energy said that it expects the transaction to be completed in the first half of 2018.

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