NextEra Gives Texas 14 Reasons to Revisit Oncor Takeover

Updated on
  • Seeks rehearing on deal that regulators blocked last month
  • Utility owner cites ‘serious errors that require correction’

NextEra Energy Inc. has 14 reasons why Texas utility regulators came to the wrong conclusion when they rejected its $18.4 billion acquisition of Oncor Electric Delivery Co., the state’s biggest transmission operator.

The Public Utility Commission of Texas applied a new, more stringent interpretation of what’s in the public interest and cherry-picked concerns about credit ratings among 12 other errors identified by NextEra in a request for a rehearing on Monday. The commission has 30 days to consider the application.

The sale of Oncor is key to ending the bankruptcy of parent Energy Future Holdings Corp. NextEra didn’t make any changes to the original proposal in the filing, a sign that it still holds out hope of winning over skeptical regulators.

“This may just be a way to reopen discussion and negotiate a compromise,” Andrew Bischof, an analyst at Morningstar Inc., said in an interview. “There aren’t a lot of potential buyers out there that could handle a deal of this size.”

NextEra gained 0.5 percent to $134.95 in New York. The stock is up 13 percent this year.

“Rehearing should be granted because the order contains a number of serious errors that require correction,” Juno Beach, Florida-based NextEra said in its filing.

Texas demanded that NextEra have no control over who would be on Oncor’s board or how much money, if any, NextEra could extract from the company. NextEra had previously told regulators it wouldn’t buy Oncor unless it could control the board.

Other analysts weren’t convinced that a rehearing would be granted, especially since NextEra wasn’t offering any concessions.

“This is more of a procedural matter,” Paul Patterson, an analyst at Glenrock Associates LLC, said in an interview. “It wouldn’t surprise me if the commission sticks to its original decision. They studied the offer and their decision was unanimous.”

It marked the second time Texas regulators have struck down an Oncor deal, after a previous takeover attempt from a group backed by Hunt Consolidated Inc. failed last year when Texas imposed conditions that the would-be buyers found too onerous.

Figuring out what to do with Oncor is the single biggest hurdle in ending the high-profile bankruptcy of Energy Future. Formed by KKR & Co., TPG Capital and Goldman Sachs Capital Partners as part of the biggest leveraged buyout in history, Energy Future has been working to restructure almost $50 billion in debt since it filed for Chapter 11 in 2014.

(Updates shares in fifth paragraph.)
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