Revised Sempra Agreement To Acquire Oncor Would Eliminate EFH Debt, Drop Third-party Equity Investors
Company To File For Texas PUC Approval Today
October 5, 2017 Email This Story Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • firstname.lastname@example.org
Sempra Energy announced a revised agreement to acquire Energy Future Holdings, and thus Oncor Electric Delivery Company LLC, which includes a new financing structure, under which Sempra Energy proposes to now acquire 100 percent of EFH at the close of the transaction with no third-party equity investors or EFH debt.
As originally announced in August, Sempra Energy had expected 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 had received financing commitments from RBC Capital Markets and Morgan Stanley. Sempra Energy had originally expected its equity ownership after the transaction to be approximately 60 percent of the reorganized holding company.
Under the revised agreement, Sempra Energy now expects to ultimately fund approximately 65 percent of the $9.45 billion purchase price with Sempra Energy equity and 35 percent with Sempra Energy debt. "This simpler and more conservative financing approach will eliminate the EFH debt, as well as third-party equity, enabling Sempra Energy to purchase 100 percent of EFH at the close of the transaction," Sempra said
Sempra Energy will own 100 percent of EFH, which translates to approximately 80 percent of Oncor at the close of the transaction. "This eliminates the need to take future additional steps to achieve full control of EFH. The revised structure also should provide Sempra Energy with a stronger balance sheet in the future to fund additional growth initiatives," said Jeffrey W. Martin, executive vice president and chief financial officer of Sempra Energy.
While accretion will vary based on the actual closing date of the transaction, and the timing and mix of equity and debt issued, Sempra Energy said that it expects the acquisition of EFH under the new financing structure to result in an average annualized accretion in earnings per share of approximately 10 cents to 20 cents over the next four years.
Sempra said that its application to acquire Oncor, to be filed with the Texas PUC today, includes 47 regulatory commitments
Regulatory commitments publicly announced by Sempra at this point include, as stated by Sempra
• "Preserving board independence for Oncor"
• "Maintaining Oncor's current management team, workforce and Dallas-based headquarters"
• "Not incurring any debt at EFH as part of the transaction or in the future"
• "Keeping strong ring-fence provisions to maintain both legal and financial separation among Oncor, Sempra Energy and their affiliates"
• "Ensuring that none of the transaction costs are borne by Oncor's customers"
• "Being supportive of Oncor's five-year, $7.5 billion capital investment plan"
Sempra said that several key stakeholders, subject to review of the company's formal application, have indicated that the revised deal structure addresses their key issues. Sempra said that such stakeholders include PUCT Staff, TIEC, OPUC, and several cities with original jurisdiction over Oncor