Sempra Bid Tops Buffett and Singer in Race for Energy Future

Munger partnership

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"Berkshire Hathaway Energy has offered a positive, simple, straightforward deal that benefits Oncor and its customers", Oncor chief executive officer Bob Shapard said in an email early Sunday that was distributed by a company spokesman.

A deal for Oncor is key to ending the bankruptcy of its parent, which has been restructuring nearly $50 billion of debt for more than three years. Sempra plans to fund the purchase through a combination of its own debt and equity, as well as third-party equity and $3 billion of borrowings by the reorganized company, it said.

Sempra Energy said it would also commit $7.5 billion over five years to expand and reinforce Oncor's transmission and distribution network. The Dallas-based Oncor holding company, formerly TXU Corp., at the the time struck agreements with key stakeholders to cut about $40 billion in debt, lower interest expenses, access additional capital "and create a sustainable capital structure for the future".

Sempra's shares were up 1.2 percent at $117.79 after hitting an all-time high of $118.78 on Monday after the company said the deal would add about 10 million of Oncor's Texas customers to its base and increase its earnings starting next year.

The merger agreement with Berkshire included a termination fee of $270 million, subject to certain conditions and court approval, according to a regulatory filing. Berkshire had signaled it did not plan to lift its bid. Over the past two years, the Ray L. Hunt family of Dallas and Florida-based NextEra Energy have separately tried to buy Oncor, Energy Future's most coveted asset. A group led by Hunt Consolidated dropped a bid past year after the state imposed conditions it found too onerous. "And we've already seen two fail in this situation".

Judge Christopher Sontchi told the bankruptcy court on Monday that the new bid was a "big change" that would clearly benefit Energy Future and its creditors. Sempra has about 32 million customers in the United States and Mexico and employs about 16,000. They own and operates almost 2,400 megawatts of renewable energy capacity with the Mexico pipeline developer IEnova.

Sempra has spent more than a decade building its gas portfolio, including liquefied natural gas export facilities, pipeline growth projects and a sizable and early plunge into Mexico. Berkshire had offered US$9 billion, while Elliott had been working on a bid that may total US$9.3 billion. Representatives for Sempra, Oncor and Elliott declined to comment. That might allow Elliott to block the Berkshire deal as a so-called dissenting impaired class of creditor under bankruptcy law.

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