Sempra Energy announced an agreement to acquire Energy Future Holdings Corp. (Energy Future), the indirect owner of 80 percent of Oncor Electric Delivery Company, LLC (Oncor), operator of the largest electric transmission and distribution system in Texas.
Under the agreement, Sempra Energy will pay approximately $9.45 billion in cash to acquire Energy Future and its ownership in Oncor, while taking a major step forward in resolving Energy Future's long-running bankruptcy case. The enterprise value of the transaction is approximately $18.8 billion, including the assumption of Oncor's debt.
The transaction is expected to be accretive to Sempra Energy's earnings beginning in 2018.
"Both Sempra Energy and Oncor share more than 100 years of experience operating utilities that deliver safe, reliable energy to millions of customers," said Debra L. Reed, chairman, president and CEO of Sempra Energy. "With its strong management team and long, distinguished history as Texas' leading electric provider, Oncor is an excellent strategic fit for our portfolio of utility and energy infrastructure businesses. We believe our agreement with Energy Future will help ensure that Texas utility customers continue to receive the outstanding electric service they have come to expect from Oncor and provide stability to Oncor's nearly 4,000 employees."
"For investors, this transaction is expected to enhance our earnings beginning in 2018 and further expand our regulated earnings base, while serving as a platform for future growth in the Texas energy market and U.S. Gulf Coast region," said Reed.
Sempra Energy expects to fund the $9.45 billion transaction using a combination of its own debt and equity, third-party equity, and $3 billion of expected investment-grade debt at the reorganized holding company. Sempra Energy has received financing commitments from RBC Capital Markets and Morgan Stanley. Sempra Energy expects its equity ownership after the transaction to be approximately 60 percent of the reorganized holding company.
As a result of the transaction, it is anticipated that Oncor's underlying financial strength and credit ratings will improve. Sempra Energy also will maintain the existing independence of Oncor's board of directors, which has protected Oncor and its customers during the ongoing Energy Future bankruptcy.
"It is important for Oncor to remain financially strong," Reed said. "Our proposal will help bring a satisfactory resolution to Energy Future's bankruptcy case, keep Oncor financially strong, and protect Oncor customers, while addressing the needs of Texas regulators, creditors and the U.S. Bankruptcy Court."
As part of the transaction, Sempra Energy has committed to support Oncor's plan to invest $7.5 billion of capital over a five-year period to expand and reinforce its transmission and distribution network.
At the completion of the transaction, Bob Shapard, Oncor's CEO, will become executive chairman of the Oncor board of directors and Allen Nye, currently Oncor's general counsel, will succeed Shapard as Oncor's CEO. Both are slated to serve on the Oncor board, which will consist of 13 directors, including seven independent directors from Texas, two from existing equity holders and two from the new Sempra Energy-led holding company.
The transaction is subject to customary closing conditions, including the approval of the Public Utility Commission of Texas, U.S. Bankruptcy Court of Delaware, Federal Energy Regulatory Commission and the U.S. Department of Justice under the Hart-Scott-Rodino Act.
Sempra Energy expects the transaction to be completed in the first half of 2018. Lazard and Morgan Stanley are acting as financial advisors to Sempra Energy and, White & Case LLP, as legal advisor.
Sempra Energy plans to webcast a conference call for investors, financial analysts, news media and the general public later this week, with details to follow.
Headquartered in Dallas, Oncor is a regulated electric transmission and distribution service provider that serves 10 million customers across Texas. Using cutting-edge technology, more than 3,700 employees work to safely maintain reliable electric delivery service with the largest distribution and transmission system in Texas; made up of approximately 122,000 miles of lines and more than 3.4 million meters across the state.
Sempra Energy includes San Diego Gas & Electric, Southern California Gas Co., Sempra South American Utilities, Sempra Mexico, Sempra Renewables and Sempra LNG & Midstream. Sempra LNG & Midstream currently is developing the Port Arthur LNG liquefaction-export project on the Gulf Coast of Texas. Sempra Energy formerly owned and operated 10 power plants in the Texas electric market and currently maintains a 200-person office in Houston to support marketing and development activities.
Sempra Energy, based in San Diego, is a Fortune 500 energy services holding company with 2016 revenues of more than $10 billion. The Sempra Energy companies' more than 16,000 employees serve approximately 32 million consumers worldwide.
This press release contains statements that are not historical fact and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by words such as "believes," "expects," "anticipates," "plans," "estimates," "projects," "forecasts," "contemplates," "assumes," "depends," "should," "could," "would," "will," "confident," "may," "can," "potential," "possible," "proposed," "target," "pursue," "outlook," "maintain," or similar expressions or discussions of guidance, strategies, plans, goals, opportunities, projections, initiatives, objectives or intentions. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Future results may differ materially from those expressed in the forward-looking statements.
Sempra South American Utilities, Sempra Infrastructure, Sempra LNG & Midstream, Sempra Renewables, Sempra Mexico and Infraestructura Energética Nova, S.A.B. de C.V. (IEnova) are not the same as the California Utilities, San Diego Gas & Electric Company (SDG&E) or Southern California Gas Company (SoCalGas), and are not regulated by the California Public Utilities Commission.
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