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Big Move: Sempra Energy Agrees to Buy Oncor

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Big Move: Sempra Energy Agrees to Buy Oncor PART 1 OF 5

Sempra Energy Beat Berkshire Hathaway in a Bid to Buy Oncor

Fourth attempt to sell Oncor

On August 20, 2017, California-based Sempra Energy (SRE) declared its agreement to buy Texas-based Oncor Electric from Energy Future Holdings for $9.45 billion. Energy Future Holdings went bankrupt in 2014. It’s an indirect owner of Oncor with an 80% stake. After several failed attempts to sell Oncor, Energy Future Holdings might be able to come out of its three-year long bankruptcy.

Sempra Energy’s offer to buy Oncor at $18.8 billion, including debt, beat Berkshire Hathaway’s bid. NextEra Energy (NEE), the largest utility by market capitalization in the sector (XLU), was also on the verge of acquiring Oncor. However, Texas regulators called off the deal and said that it wasn’t in ratepayers’ interest.

Sempra Energy Beat Berkshire Hathaway in a Bid to Buy Oncor

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More about Oncor

Texas is one of the fastest growing states in the country. Oncor is a regulated electricity transmission and distribution utility in Texas that serves more than 10 million customers. It has 122,000 miles of transmission and distribution lines in Texas—the largest in the state. Oncor reported a net profit of $431 million in 2016.

Sempra Energy expects the transaction to be completed by early 2018. Then, its earnings growth will likely accelerate. However, the deal hasn’t received regulators’ approval yet.

At $29 billion, Sempra Energy is the second-largest utility by market capitalization in California. It also has a significant presence in South America. PG&E (PCG) and Edison International (EIX) also operate in California. CenterPoint Energy (CNP) has a significant presence in Texas.

In the next part, we’ll see how Sempra Energy stock reacted and how it’s positioned for the future.

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