By Joshua Jamerson and Peg Brickley
NextEra Energy Inc. announced two transactions that would, when combined with a previously announced deal, give the company complete ownership of the electricity-transmission business Oncor Electric Delivery Co.
NextEra on Monday said it reached an agreement for an affiliate to merge with Texas Transmission Holdings Corp. for about $2.4 billion, a deal that would include Texas Transmission's 20% interest in Oncor. NextEra also will buy a 0.22% interest in Oncor, which is owned by Oncor Management Investment LLC, for about $27 million.
Florida-based NextEra is in the process of buying the 80% of Oncor that is owned by Energy Future Holdings Corp., which is operating under chapter 11 bankruptcy protection. NextEra has agreed to pay $4.4 billion in cash and pay off $5.4 billion worth of bankruptcy financing to get Energy Future's Oncor stake.
Assuming both deals close, one of the largest electricity transmissions businesses in the country and a significant piece of Texas' power infrastructure will be in the hands of the Florida company. On Monday, NextEra said it applied to the Public Utility Commission of Texas for approval to go ahead with the deals, which it promised the regulatory body would leave Oncor on firm financial footing and responsive to local concerns.
Some commissioners have fretted publicly about possible conflicts created by NextEra's ownership of other power businesses in the market. Rival energy generators need to know that NextEra won't favor its affiliates in decisionsabout the transmissions network, they said. NextEra's application is designed to assuage those concerns and assure regulators that Texas ratepayers will benefit from the takeover, the company said.
"Like any other regulatory proceeding, there's a kind of elegant dance that goes on," said John Bartlett, a portfolio manager at Reaves Asset Management, a big NextEra shareholder.
NextEra on Monday also said profit fell 14% in the third quarter amid higher expenses and as earnings growth in its Florida power business was offset by declines in its clean energy business.
Overall, for the September quarter, NextEra Energy reported a profit of $753 million, or $1.62 a share, down from $879 million, or $1.93 a share, a year earlier. Excluding items, such as merger-related expenses and market-to-market effects, per-share earnings were $1.74. Revenue decreased 3% to $4.81 billion.
Analysts polled by FactSet expected per-share profitof $1.67 and revenue of $4.84 billion.
The company's Florida Power & Light Co. reported that its earnings rose 5.3% to $515 million. At the company's NextEra Energy Resources business, earnings declined 18% to $307 million.
Overall expenses rose 1.5% to $3.53 billion.
Shares, which have risen 22% in the past 12 months, closed Monday at $128, up 1.8%.
NextEra has been chasing ownership of Oncor since the summer of 2014, pursuing the regulated, cash-producing electricity carrier through a bankruptcy auction process that was never completed.
In 2015, Energy Future and a wide collection of its creditors agreed to back an Oncor takeover by Hunt Consolidated Inc., a Texas company. That deal fell through after the Public Utility Commission of Texas put conditions on it that changed the economics for investors.
Energy Future revived the competition for Oncor, and, this time, NextEra prevailed.
Energy Future, the former TXU Corp., filed for chapter 11 bankruptcy in April 2014, pulled into trouble by falling energy prices. Its Luminant power generating and TXU Energy power retailing businesses have won court approval to exit bankruptcy as property of their senior lenders.
Write to Joshua Jamerson at email@example.com and Peg Brickley at firstname.lastname@example.org
(END) Dow Jones Newswires
October 31, 2016 18:09 ET (22:09 GMT)
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