(BRK.A), (BRK.B)
Forget Berkshire Hathaway as the next owner of Energy Future Holdings’ power distribution subsidiary Oncor.
Back in September 2014, Berkshire Hathaway Energy and several other energy companies, including NextEra Energy and Hunt Consolidated, signed confidentiality agreements for the purpose of exploring the acquisition of Oncor, which was up for auction due to the April 2014 bankruptcy of electric utility Energy Future Holdings. The company went under after being burdened with $40 billion in debt from a 2007 leveraged buyout.
A Texas-Sized Asset
Oncor is a quite a prize. The company is a regulated electric transmission and distribution service provider that serves 10 million customers across Texas. The company has the largest distribution and transmission system in Texas; with approximately 119,000 miles of lines and more than 3 million meters across the state.
The End of the Waiting Game
After originally pushing back the auction of Oncor from November 2014 to March 2015, it now looks like no auction will ever happen. Instead, the creditors in the holding companies Energy Future Intermediate Holdings and Energy Future Holdings will take ownership of Oncor.
U.S. Bankruptcy Judge Christopher Sontchi has agreed to a plan by Hunt Consolidated that will see the company take ownership with Oncor’s current management remaining in place.
One that Got Away
Back in June 2014, Warren Buffett proclaimed he was ready to put at least $15 billion into energy generation and transmission assets, and Oncor, with a value of roughly $17.5 billion looked like a good fit.
Transmission lines have been high on Berkshire Hathaway Energy’s wish list of late. In April 2014, the company made a $2.9 billion purchase of Canadian company AltaLink from SNC-Lavalin Group Inc.
Berkshire Hathaway Energy currently has $70 billion in assets, including one of the largest portfolios of renewable energy in the world.
Unfortunately, when it comes to Oncor, this one got away.
© 2015 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.