PUCT Approves Order on Rehearing in Oncor Acquisition Case

PUCT Approves Order on Rehearing in Oncor Acquisition Case

June 8, 2017

by Margarita Fournier, Copyright 2016 by Competitive Assets, LLC.  All rights reserved

The PUCT approved the finalized order on rehearing, which addresses NextEra’s attempt to purchase Oncor Electric Delivery Co. The order in Docket No. 46238, was revised by two memos and approved at the 6/7/17 open meeting.  It reasserts the earlier finding that the transaction is not in the public interest and dismisses alleged errors raised in NextEra’s motion for rehearing. This closes the case at the PUCT, although it is possible that NextEra will opt to litigate the result. As Platts reported, “NextEra estimated that 100% of Oncor had a combined enterprise value of approximately $18.7 billion. It planned to pay $12.2 billion in order to buy the stakes of EFH and TTI, but not to pay-off Oncor’s $6.5 billion of debt. Of the $12.2 billion, NextEra was planning to raise $7.5 billion in debt funding financed at NextEra Energy Capital Holdings.” One of the problems for the PUCT was that the combined NextEra debt would be about $45 billion, of which Oncor would have to support 15% or, $6.75 billion – although at the hearing on the merits some parties argued that it could be almost double that). “The PUCT’s order quoted the credit rating agency Moody’s Investors Service as saying that the acquisition-related debt, ‘without a material amount of deleveraging, would exhaust [NextEra Energy’s] debt capacity at its current rating,’ and would ‘make the company more vulnerable to unforeseen events or margin shortfalls.’” Another issue for the Commission, which remained unresolved, was the independence of the Oncor Board.

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