With the acquisition of Oncor, NextEra Energy (NEE) can extend its regulated operations in Texas. NextEra Energy made an offer in the middle of last year to buy Oncor Electric that valued the company at $17.5 billion. This made Energy Future Holdings, the parent of Oncor, scrap the restructuring plan and hold an auction to find the right buyer. As Oncor is now available for potential buyers, NextEra Energy may chase it again.
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NextEra Energy might find the prospects of acquiring Oncor attractive, as its deal with Hawaiian Electric hasn’t moved forward due to pending regulatory approvals.
The utility sector has been on a roll this year so far and has outperformed broader equities by a huge margin. NextEra Energy (NEE), the largest utility by market capitalization, has soared more than 15% since the beginning of the year.
The US utilities (VPU) sector has witnessed plenty of mergers and acquisitions in the last couple of years. According to the data compiled by Bloomberg, the US utility sector has announced takeovers worth $80.8 billion since last year with the total deal values for 2015 being at their highest in the last five years.
Utilities are following the inorganic growth route as the industry continues to offer tepid growth opportunities. The slowing growth of electricity demand and increasing costs encouraged mergers in the utilities space. Exelon (EXC) completed the acquisition of Pepco Holdings last quarter. Dominion Resources (D) acquired natural gas company Questar (STR) early this year. Southern Company is acquiring AGL Resources while Duke Energy (DUK) is acquiring Piedmont Natural Gas (PNY).