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NextEra Energy to Extend Its Presence in Texas by Buying Oncor

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Aug. 2 2016, Published 5:14 p.m. ET

NextEra to buy Oncor for $18.4 billion

Just a couple of weeks after withdrawing from the Hawaiian Electric deal, renewables giant NextEra Energy (NEE) announced its decision to buy Oncor on July 29, 2016. NextEra is expected to acquire Energy Future Holdings’ Oncor Electric Delivery Company, the largest power transmission company in Texas for $18.4 billion.

NextEra Energy has had an extensive presence in Texas since 1999. It has invested nearly $8 billion in transmission, generation, and gas pipelines. Oncor serves 10 million customers in Texas through its extensive transmission and distribution network.

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Deal to help Energy Future Holdings to come out of bankruptcy

The Oncor sale to NextEra Energy is expected to help in pulling Energy Future Holdings out from its two-year-long bankruptcy. The deal is likely to pay off creditors significantly. NextEra is expected to fund the transaction with $9.5 billion in cash and shares.

Hunt Consolidated, a privately held company, abandoned its deal to buy Oncor a couple of months ago, which brought Oncor back on the market. Hunt withdrew its offer because regulators believed that the tax benefits the buyer would receive should be shared with the ratepayers.

Energy Future Holdings may still accept an offer for Oncor from other buyers. However, in that case, it would have to pay a $275 million termination fee to NextEra Energy.

This deal continues the mergers and acquisition movement in the utility space. According to the data compiled by Bloomberg, the total valuation of mergers and acquisitions in the utility space has jumped to $75.4 billion, the highest in the last five years.

In 2016 so far, Canada’s Fortis acquired ITC Holdings for $11.5 billion while Dominion Resources (D) acquired Questar (STR).

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