Berkshire Hathaway to pay $9bn for Oncor Electric

September 2017 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

September 2017 Issue

Berkshire Hathaway Energy, a subsidiary of Warren Buffett’s Berkshire Hathaway Inc., has announced that it has received the support of new Texas stakeholder groups in its proposed £9bn acquisition of Oncor Electric Delivery Company LLC.

The new supporters – TXU Energy, NRG Energy, the Texas Energy Association for Marketers (TEAM) and the Alliance for Retail Markets (ARM) – provide a boost to the list of influential Texas business, community and consumer groups that have already endorsed Berkshire Hathaway Energy’s bid for Oncor.

With the new additions, the total number of Texas stakeholder groups that have pledged their support for Berkshire Hathaway Energy’s proposed acquisition of Oncor is eight. Already confirmed supporters include cities served by Oncor, Texas industrial energy consumers, the Texas Office of Public Utility Counsel and Public Utility Commission of Texas staff.

The support of TXU Energy and NRG Energy is particularly important as they represent two of the largest retail electric providers in Texas. Moreover, TEAM and ARM represent dozens of Texas electric market participants. ARM participating members include Champion Energy Services, LLC, Direct Energy, L.P., NRG retail companies and TXU Energy Retail Company LLC.

Berkshire Hathaway Energy believes that having the support of these entities further distinguishes the transaction from those previously proposed, and demonstrates a growing momentum to have the largest infrastructure company in Texas (Oncor) combined with the backing and financial resources of Berkshire Hathaway Inc.

In addition to agreeing to support approval of the transaction as proposed, all of the supporters have signed a growing list of regulatory commitments proposed by Berkshire Hathaway Energy. The number of these commitments that support the successful competitive energy market in Texas currently stands at 47.

“This announcement illustrates the growing support for Berkshire Hathaway Energy’s proposed acquisition of Oncor,” said Greg Abel, Berkshire Hathaway Energy chairman, president and chief executive. “Ours is a different kind of proposal. It is one that has not been seen before and we want Texans to know that we will be a stable, long-term partner.”

Headquartered in Dallas, Texas, Oncor is a regulated electric transmission and distribution service provider that serves 10 million customers across Texas. Using cutting edge technology, more than 3700 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.

Oncor’s acquirer, Iowa-headquartered Berkshire Hathaway Energy, owns a portfolio of locally managed businesses that share a vision for a secure energy future. These businesses deliver affordable, safe and reliable service each day to more than 11.6 million electric and gas customers and end-users around the world and consistently rank high among energy companies in customer satisfaction.

“Berkshire Hathaway Energy has worked tirelessly to put together a widely supported deal for Oncor customers, one that supports growing the Texas economy,” said Bob Shapard, chief executive of Oncor. Under the terms of the proposed acquisition, Mr Shapard will become Oncor executive chairman, while Allen Nye, currently senior vice president, general counsel and secretary, will be Oncor’s chief executive officer.

The Berkshire Hathaway/Oncor transaction – although subject to counter bids such as that of Elliott Management Corp, the largest creditor of the bankrupt parent of Oncor – is expected to be completed in the fourth quarter of 2017, and is subject to closing conditions including state, federal and bankruptcy court approvals.

Mr Abel concluded: “We will continue working with the state of Texas and other interested parties to provide long-term value for Texans. Once all necessary approvals are received, we look forward to Oncor joining the Berkshire Hathaway Energy family of companies”

Fraser Tennant