Oncor to Acquire Infrareit; Sempra Energy to Acquire 50% Stake in Sharyland Utilities

Source Press Release
Company Sempra Energy 
Tags Corporate Deals, Deals, Refining & Marketing Activities
Date October 18, 2018
  • Acquisition Expands Oncor’s Transmission Footprint
  • Transaction Expected to Be Accretive to Sempra Energy

Sempra Energy (NYSE: SRE) and Oncor Electric Delivery Company LLC (Oncor) today announced that they have entered into agreements whereby Oncor will acquire 100 percent of the equity interests of InfraREIT, Inc. (NYSE: HIFR) (InfraREIT), including all the limited-partnership units in its subsidiary InfraREIT Partners, LP, for approximately $1.275 billion, or $21 per share (or partnership unit), excluding certain transaction costs, and, concurrently,  Sempra Energy will acquire a 50-percent limited-partnership interest in a holding company that will own Sharyland Utilities, LP (Sharyland) for approximately $98 million.

Sempra Energy owns an approximate 80-percent ownership stake in Oncor.

“This transaction advances our growth strategy and will expand our Texas regulated utility platform,” said Jeffrey W. Martin, CEO of Sempra Energy. “These assets are highly desirable and supported by strong economic growth, attractive demographic trends and increased demand for electric transmission in Texas. We expect these acquisitions to be accretive to earnings. We also look forward to working with Sharyland on further developing electric transmission and related infrastructure in Texas.”

“The purchase of InfraREIT gives us access to high-quality transmission assets that are adjacent to our service territory and are a great fit for our portfolio,” said 
Allen Nye, CEO of Oncor. “As growth continues across Texas and new generation projects continue to come online, this acquisition positions us to make future investments in transmission infrastructure that will better serve the ERCOT market and our customers. We pride ourselves on building safe, reliable, state-of-the-art transmission infrastructure, while providing our customers the lowest rates of any investor-owned utility in Texas.”

“We believe that Oncor’s acquisition of InfraREIT will bring tremendous benefits to Texas and the ERCOT market,” said Texas Transmission Investment LLC (TTI), minority owner of Oncor, in a statement.

Oncor plans to fund its acquisition of InfraREIT with capital contributions proportionate to their ownership interests from Sempra Energy and TTI.  Sempra Energy expects to utilize the proceeds from pending asset sales to fund its capital contribution of approximately $1.025 billion to Oncor, excluding certain transaction costs, and also to purchase the 50-percent interest in Sharyland for approximately $98 million.   

In addition, the transaction by Oncor includes InfraREIT’s outstanding debt, which, as of June 30, 2018, was approximately $945 million.

            The transaction requires approvals by the Public Utility Commission of Texas (PUCT) and Federal Energy Regulatory Commission, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the satisfaction of other regulatory requirements, certain lender consents and other customary closing conditions. Additionally, the purchase of InfraREIT requires approval by its shareholders and is subject to a go-shop provision whereby InfraREIT can solicit superior bids. If all such closing conditions are satisfied,  Sempra Energy and Oncor expect to close the transaction in mid-2019.

            As part of the transaction, a subsidiary of InfraREIT will exchange certain assets with Sharyland, with the end result being that, after Oncor’s acquisition of InfraREIT, Oncor will own InfraREIT’s electric transmission and distribution business in Central, North and West Texas, and Sharyland will own assets in South Texas.

            Financial advisors for the transaction are Lazard for  Sempra Energy and Barclays for Oncor; legal advisors for the transaction are White & Case LLP for  Sempra Energy and Vinson & Elkins LLP for Oncor.

SEMPRA ENERGY

Table A

RECONCILIATION OF SEMPRA ENERGY 2018 ADJUSTED EARNINGS-PER-SHARE GUIDANCE RANGE TO  SEMPRA ENERGY 2018 GAAP EARNINGS-PER-SHARE GUIDANCE RANGE (Unaudited)

Sempra Energy 2018 adjusted earnings-per-share guidance range of $5.30 to $5.80 excludes items as follows:

▪   $(965) million in impairments, net of $554 million income tax benefits and $46 million attributable to noncontrolling interests, of certain assets and equity method investments

▪   $(22) million impacts, net of $21 million income tax expense, associated with Aliso Canyon litigation

▪   $(25) million income tax expense to adjust TCJA provisional amounts

▪   $340 million - $370 million estimated gain on sale, net of $128 million - $139 million income tax expense, of U.S. solar assets that is expected to close near the end of 2018

Sempra Energy 2018 adjusted earnings-per-share guidance is a non-GAAP financial measure (GAAP represents accounting principles generally accepted in the United States of America). Because of the significance and/or nature of the excluded items, management believes this non-GAAP financial measure provides additional clarity into the ongoing results of the business and the comparability of such results to prior and future periods and also as a base for projected earnings-per-share compound annual growth rate.  Sempra Energy 2018 adjusted earnings-per-share guidance should not be considered an alternative to earnings-per-share guidance determined in accordance with GAAP. The table below reconciles  Sempra Energy 2018 adjusted earnings-per-share guidance range to  Sempra Energy 2018 GAAP earnings-per-share guidance range, which we consider to be the most directly comparable financial measure calculated in accordance with GAAP.

Source: EvaluateEnergy® ©2019 EvaluateEnergy Ltd