Texas PUC Denies NextEra Acquisition of Oncor

As first reported by EnergyChoiceMatters.com yesterday morning, the Texas PUC yesterday formally adopted an order denying NextEra Energy, Inc.'s proposed acquisition of Oncor, and a written order was issued yesterday (Docket 46238)

The final 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 final 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 final 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 final 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 final 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 final 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 final order states

With NextEra's bid for Oncor rejected (which followed an earlier rejection of the proposed acquisition of Oncor by various Hunt companies), analysts speculate that Oncor may go public via an IPO. Prior suitors for Oncor may also make new bids for the company, see RetailEnergyX.com's story today for further discussion