NextEra Hawaiian Electric Pursuit Dims as Oncor Back on Market

  • Florida utility owner may exit to pursue Oncor, analysts say
  • No regulatory decision scheduled with deal to expire June 3

NextEra Energy Inc.’s proposed $4.3 billion takeover of Hawaiian Electric Industries Inc. is looking increasingly less likely as the company gets a new chance to buy the largest power distributor in Texas, analysts said.

This month’s collapse of a deal for the Oncor Electric unit of Energy Future Holdings Corp. may prompt NextEra, North America’s largest generator of wind and solar power, to dump the Hawaii deal for a second pass at Oncor. NextEra can exit the 18-month-old deal after June 3 by paying the utility and bank owner about $95 million, Hawaiian Electric Chief Financial Officer James Ajello told investors May 4. Hawaiian utility regulators haven’t scheduled a vote on the 18-month-old offer, which has come under criticism in the state.

Opponents have questioned NextEra’s commitment to Hawaii’s goal of 100 percent renewable power by 2045 and dislike ceding control to the Florida-based company.

“These sustainability and governance concerns may trump any potential concessions NextEra is willing to offer to sweeten the deal,” Bloomberg Intelligence analyst Stacy Nemeroff wrote in research published Tuesday. “NextEra may decide to take the loss so that it can move forward with other potential acquisitions.”

Tepid Demand

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.

NextEra recently renewed its interest in buying Oncor, two people familiar with the talks said May 12 on condition they not be named discussing private negotiations.

Oncor’s power system is “a great strategic fit” for NextEra, which can afford to walk away “from the uphill battle in Hawaii,” Shahriar Pourreza, a New York-based analyst for Guggenheim Securities LLC wrote in research published Tuesday.

Darren Pai, a spokesman for Hawaiian Electric, had no immediate comment when reached before business hours there on Tuesday. A representative of NextEra didn’t immediately return calls seeking comment. Allan Koenig, an Energy Future Holdings spokesman, declined to comment.

Withdrawn Bid

A group led by Hunt Consolidated Inc. on May 18 withdrew from its agreement to buy Oncor 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.

NextEra was once considered the frontrunner for Oncor. It expressed renewed interest after Oncor parent Energy Future replaced its bankruptcy reorganization plan on May 1, according to the people, who asked not to be named discussing private negotiations.

The change freed Oncor up to be pursued by other bidders, Chief Executive Officer Robert Shapard said at a Texas regulatory hearing May 4. “We are to work with all parties interested in buying the company at this point,” Shapard said at the hearing.

NextEra Chairman and Chief Executive Officer James Robo said in December 2014 that Hawaiian Electric, which serves 95 percent of the state’s population, could be a testing ground for a transition from fossil fuels to power generated from the sun and wind.

Before it's here, it's on the Bloomberg Terminal.