Berkshire Hathaway Energy to acquire Oncor Electric from EFH

After being unable to strike a deal with Hunt Consolidated Inc. of Texas and Florida's NextEra Energy Incorporated, to sell off its subsidiary Oncor Electric Delivery Company LLC, Energy Future Holdings (EFH) is now in talks with Berkshire Hathaway Energy, a unit of Warren Buffett's Berkshire Hathaway Inc. for the same. The latter has announced its plans to buy Oncor for USD9 billion, in cash. Reportedly, including debt, the deal has an enterprise value of about USD18 billion. The acquisition would be one of Berkshire's largest ever, since the USD32 billion purchase of Precision Castparts Corporation in 2016.

Berkshire Hathaway Energy, formerly known as MidAmerican Energy Holdings Company, contributed about 9.5 per cent of Berkshire Hathaway's earnings of USD24.07 billion in 2016.

Since 2015, Energy Future has been trying to sell its 80 per cent stake in Oncor, but Texas regulators have stymied attempts at deals by Hunt Consolidated and NextEra Energy, leaving the company mired in bankruptcy. Berkshire has also been a contender for the same.

Recently, the NextEra–Oncor acquisition deal was rejected for the third time by Texas regulators. As per Texas regulators, the Hunt-led deal included excessive financial engineering, while NextEra was rejected for insisting on overriding much of the protective measures that prevented Energy Future from imposing excessive debt on Oncor, and on the fact that the unit should keep a separate Board of Directors.

The sale is key to ending EFH’s bankruptcy, which sought court protection in 2014 to restructure almost USD50 billion in debt left over from a huge leveraged buyout of the former TXU Corporation. The deal was opposed by Texas Industrial Energy Consumers, which made the same demands as during the earlier Hunt bid, that the State PUC should require NextEra and Oncor to agree to share any savings from the deal with Oncor’s customers.

The Berkshire–Oncor transaction is expected to close in the fourth quarter of 2017.

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