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Sempra’s Oncor Buyout Faces Tough Questions from Regulators

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By Editors of Power Engineering

Skeptical Texas regulators posed tough questions to Sempra officials during a hearing on the company’s proposed $9.45 billion buyout of Oncor, the Wall Street Journal reported.

Members of the Public Utility Commission of Texas, including Ken Anderson, expressed concerns about the debt Sempra will use to finance the purchase, as well as risks posed by the company’s other projects in Chile and Peru.

Anderson noted Sempra’s debt has grown from less than $5 billion in 2007 to $18 billion now, though Sempra spokesman Doug Kline said the company’s market capitalization has also grown during the same period, from $15 billion to nearly $29 billion.

“The point of this exercise is once and for all to get Oncor out from under a risky, rickety, debt ladened majority owner and into a situation where Oncor and its management can, for the benefit of its ratepayers, move forward without the nagging specter of a financially troubled parent,” Mr. Anderson wrote in a memo.

The approval process for Sempra’s takeover of Oncor and its bankrupt parent Energy Future Holdings could take months. Eighty percent of Oncor, a Texas transmission business, is owned by Energy Future Holdings.

A bankruptcy court has approved the buyout.

Texas regulators twice blocked a previous attempt by NextEra Energy to purchase Oncor, even after it was approved by a bankruptcy court. The regulators said NextEra’s $18.7 billion bid raised concerns about the loss of ring-fencing measures that would protect Oncor’s credit rating, as well as who would control the company.

The fate of Oncor encountered more twists and turns after the rulings, as Berkshire Hathaway made a $9 billion bid for the company. That bid was soon topped by a proposal by Elliott Management Corp 11, the largest creditor of Energy Future Holdings Corp., for $9.3 billion.

Sempra’s $9.45 billion bid came just hours before a purchase hearing deadline. A person familiar with the matter said Elliott’s public bid allowed Sempra to quietly work on its bid for weeks.

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