NextEra Energy on July 29 said it has agreed to purchase an 80% interest in Dallas-based Oncor Electric Delivery, the largest transmission operator in Texas, for $18.4 billion. While the deal still could be topped by rival bidders and must be approved by regulators, it would allow the regulated utility's parent to emerge from bankruptcy and boost investment potential for facilities.
“NextEra Energy shares Oncor’s strategy of making smart, long-term investments in transmission and distribution to continue to deliver affordable, reliable electric service to its customers,” said Jim Robo, NextEra’s chairman and CEO.
But the deal follows by two weeks NextEnergy's failed bid to acquire Hawaii utility Hawaiian Electric, which scuttled a plan to spend hundreds of millions of dollars to convert its aging coal-fired power plants to natural gas.
Florida-based NextEra has invested more than $8 billion in transmission, power generation, gas pipelines and other operations in Texas, and its financial strength should allow Oncor to continue to execute its five-year capital plan, the company said.
Geoff Baily, an Oncor spokesman, said that 41 transmission projects are planned for construction by 2018 in west Texas alone, among other projects in the five-year plan.
“NextEra is a top-flight power company with a strong operational reputation and high credit quality. Future Oncor investments will be assisted by that,” Paul Patterson, an analyst with Glenrock Associates, said in an interview.
Texas is one of the strongest growth areas in the country, and NextEra’s strong balance sheet and reputation will help Oncor to invest to meet that growth, Patterson said. The transaction will add about 3.8 million customers to NextEra’s existing 4.8 million customer accounts.
NextEra also is a major renewable-energy developer in North America and has developed projects in Texas, Patterson said, noting, however, that Oncor is not currently a generation company.
Energy Future Holdings is not prohibited from soliciting other proposals before the court approves the NextEra transaction, but it would pay NextEra a $275 million termination fee.
The Texas Public Utility Commission also must approve the agreement. After the transaction was approved by the bankruptcy court, state regulators rejected Dallas-based Hunt Consolidated’s agreement to buy Oncor and turn it into a real estate investment trust.
The agreement to acquire Oncor comes just two weeks after Hawaii regulators rejected NextEra’s bid to acquire Hawaiian Electric for $4.3 billion.
Oncor’s headquarters will stay in Dallas, and NextEra has pledged to keep local management.
The acquisition of Oncor would allow NextEra to substantially expand its Texas footprint and grow into a larger player nationwide, according to media reports.
The Florida company already owns Lone Star Transmission and Houston-based NET Midstream and its system of natural gas pipelines in Texas, as well as more than a dozen wind farms throughout the state.