Blog Coverage NextEra Extends Energy Future Holdings Lifeline by Buying its Stake in Oncor

LONDON, UK / ACCESSWIRE / August 1, 2016 / Active Wall St. blog coverage looks at the headline from NextEra Energy Inc. (NYSE: NEE) as the company announced on Friday, July 29, 2016, that it has acquired 80% stake of Energy Future Holdings (EFH), formerly known as TXU Corp., in Oncor Electric Delivery Company for $18.4 billion. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

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Dallas-based Oncor Electric Delivery Company LLC is the largest electric transmission and distribution service provider with more than 10 million customers across Northeast and West Texas. Oncor’s majority investor is Energy Future Holdings Corp. (EFH), a Dallas-based privately held energy company with majority holdings in TXU Energy, Luminant and Oncor Electric Company.

NextEra has come up with this deal having recently failed to acquire Hawaiian Electric Industries Inc. due to objections from the Hawaii’s regulatory authorities. NextEra’s winning bid put dampers to rival bids placed by Warren Buffett’s Berkshire Hathaway Inc. (NYSE: BRK-B), Edison International (NYSE: EIX) and Hunt Consolidated and Fidelity Investments, all of whom had shown keen interest in acquiring Oncor’s stake. This deal will enable NextEra’s to access Oncor’s 8.6 million customer accounts, 200,000 miles of power lines and $102 billion in assets.

Points to Ponder

Energy Future Holdings has been entangled in chapter 11 bankruptcy proceedings, which began in April 2014. This deal will help EFH in restructuring its debt of $50 billion. Oncor is one of the most successful companies of EFH. As part of the NextEra–Oncor deal, NextEra will help EFH’s pay off its debt of nearly $9.5 billion in a combination of cash and NextEra’s stocks. NextEra will also absorb Oncor’s debts of $ 6.7 billion reflected in its books after the takeover process is completed.

The plans for debt restructuring by EFH will enable it to emerge from Chapter 11 bankruptcy proceedings. The deal is subject to approvals from bankruptcy court, Texas regulators, the Federal Energy Regulatory Commission, etc.

Pending approvals from the regulators, EFH, in the meanwhile, can lookout for alternative options to fund its debt; however it will have to pay NextEra Energy a $275 million as termination fee if it does so. The deal is expected to be finalized in the first quarter of 2017.

“NextEra Energy’s proven track record of providing affordable, reliable electric service for customers complements Oncor’s operational strengths, and is at the core of why we believe this transaction will be a significant benefit for Oncor and for Texas,” Jim Robo, chairman and CEO of NextEra, said on an investor call.

NextEra has promised to retain the Oncor name, company management as well as keeping Dallas as its headquarters once the deal is final.

Benefits to NextEra all the way

A wave of consolidation is rising in the utility power energy sector recently as companies seek newer avenue for growth given low price of power and flat consumer demand. NextEra, which is the parent company of Florida Power & Light, has emerged as a significant and powerful player in the electric energy space. It has been acquiring units in the un-regulated renewable – energy business thus gaining a large footprint across the US in this sector.

With the Oncor deal NextEra had managed to get a lucrative asset at a cheap price and also a huge opportunity in Texas to enable it to move from coal-based energy production to natural gas and renewable energy sources like solar power. NextEra will also increase its distribution area by 25% simultaneously controlling costs thus benefitting customers in a large way.

Recent Important News from the company

NextEra has earlier announced its quarterly results on July 28, 2016, with earnings of $540 million, or $ 1.16 per share, on revenues of $3.82 billion.

Market reaction

Following the announcement, share price of NextEra rose marginally by 0.68% to end the day at $128.29, at the closing bell last Friday. A total volume of 2.33 million shares was traded. The company’s stock has surged 25.33% since the beginning of 2016.

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