Warren Buffett's Berkshire Hathaway Will Not Buy Bankrupt Oncor

Warren Buffett's Berkshire Hathaway Will Not Buy Bankrupt Oncor

Sempra Energy announced a bid for Energy Future Holdings, the parent company of Texas utility Oncor, after EFH abandoned a $9 billion bid from Warren Buffett's Berkshire Hathaway.

This will be Sempra's largest acquisition since it was formed in 1998. The deal is expected to close in the first half of next year.

An agreement for Oncor is key to ending the bankruptcy of Energy Future, which has been restructuring nearly US$50 billion of debt for more than three years. Sempra said it has received financing commitments from RBC Capital Markets and Morgan Stanley, with Sempra expected to hold about 60% of the reorganized company. Berkshire had said that it wouldn't raise its bid and was prepared to walk away. 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 almost 4,000 employees.

The proposed merger would need the sign-off of the DE judge overseeing Energy Future Holdings' bankruptcy, along with approvals from the Public Utility Commission of Texas and federal regulators.

In May 2016, an $18 billion deal to buy Oncor led by Dallas billionaire Ray Hunt fell apart over regulatory concerns. "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 US Bankruptcy Court". A group led by Hunt Consolidated Inc. dropped a bid a year ago after the state imposed conditions it found too onerous.

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"It's not just a question of what you're offering - it's a question of whether or not it's going to make Texas regulators feel comfortable enough to allow the deal", said Paul Patterson, a utilities analyst at Glenrock Associates LLC in NY.

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.

That turned out to be Sempra, which is based in San Diego and provides power to 32 million customers. They own and operates almost 2,400 megawatts of renewable energy capacity with the Mexico pipeline developer IEnova. These statements are based upon Berkshire Hathaway Energy Company's current intentions, assumptions, expectations and beliefs and are subject to risks, uncertainties and other important factors.

"We are disappointed our agreement to acquire Oncor has been terminated", Greg Abel, the chief executive officer of Berkshire's energy unit, said in a statement.

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