Texas’s Biggest Power-Line Company Is Up for Sale (Again)

  • Oncor back on the market after Hunt-led Group Withdraws Bid
  • Sale key step in Energy Future’s emergence from Bankruptcy

The biggest electric transmission operator in Texas is up for grabs once more after the collapse of a deal to take over the most profitable asset of Energy Future Holdings Corp.

A group led by Hunt Consolidated Inc. on Wednesday pulled out of the purchase of Oncor Electric Delivery Co. after regulators said ratepayers may share in future tax savings arising from the deal. That put the company, which has about 119,000 miles of lines and more than 3 million meters, back on the market.

"Pretty much anyone would be looking at Oncor and thinking about it now," Kit Konolige, a Bloomberg Intelligence utility analyst in New York, said by telephone. "We have seen a lot of utilities bought by other utilities or infrastructure funds and certainly from offshore interests as well."

Oncor’s sale is seen as crucial to Energy Future’s efforts to emerge from bankruptcy after two years of restructuring. It filed for bankruptcy reorganization in April 2014, with nearly $50 billion in debt, much of which was racked up by its record leveraged buyout seven years earlier by KKR & Co., TPG Capital and Goldman Sachs Capital Partners. That bet went bad when natural gas prices plunged.

“We’ll see what other interest develops in what up until now has been a hot market for utility properties," Paul Patterson, a New York-based analyst at Glenrock Associates LLC, said in a telephone interview.

Tepid power demand and mounting costs have spurred a flurry of North American utility mergers. Since last year, companies have announced $80.8 billion of U.S utility takeovers with 2015 being the biggest year since 2011, according to data compiled by Bloomberg.

Door Open

Hunt’s withdrawal may leave the door open for NextEra Energy Inc., which recently expressed renewed interest in buying Oncor, people familiar with the matter said last week. NextEra, based in Juno Beach, Florida, didn’t immediately return a call seeking comment. It was the frontrunner to buy the company last year, people with knowledge of the matter said at the time. 

There was also other interest initially. CenterPoint Energy Inc. and Berkshire Hathaway Inc. also signed non-disclosure agreements to explore bids for Oncor, people familiar with the matter said in September 2014. A spokeswoman for CenterPoint declined to comment Wednesday on whether it would bid. Buffett didn’t immediately respond to a request for comment sent to an assistant.

Tax Hitch

Oncor was worth more than $10 billion, Chief Executive Officer Robert Shapard said in April last year. Energy Future eventually canceled the auction and agreed to sell the unit to Hunt and creditors as part of a bankruptcy proposal.

Hunt’s deal began to unravel almost as soon as it was approved with conditions by the Public Utility Commission of Texas in March. It wanted to create a real estate investment trust to operate Oncor and investors were resistant to having to potentially share tax savings with ratepayers. Then, Energy Future filed a new reorganization plan on May 1, freeing up the company to consider other offers for Oncor.

"It’s not unusual for regulators to put up obstacles, and in this case the buyers couldn’t get it through, so this development opens it up again," Konolige said.

The Hunt-led group said in a filing on Wednesday that the transaction as approved by regulators in March won’t close under the conditions set. It said it may refile a new application to buy Oncor if it can muster the necessary support.

Geoff Bailey, a spokesman for Oncor, said by phone that the company may issue a statement Thursday. Energy Future spokesman Allan Koenig declined to comment Wednesday.

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