By: Mary Childs, Matthew Monks, Noah Buhayar and Mark Chediak |
CenterPoint Energy Inc., Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) and Hunt Consolidated Inc. are among companies that signed confidentiality agreements to explore bids for Energy Future Holdings Corp.’s Oncor electricity distributor, people familiar with the matter said.
NextEra Energy Inc. (NEE), which helped prompt the auction with a takeover bid this year valuing Oncor at more than $17.5 billion, also signed a non-disclosure agreement letting it conduct due diligence, said the people, requesting anonymity because the process is private. A total of 10 potential bidders have signed such pledges, according to a Sept. 19 court filing by Evercore Partners Inc., which is advising Energy Future.
Energy Future, which was taken private in a record leveraged buyout seven years ago, filed for bankruptcy in April with a plan to split off the side of the company that owns the profitable Oncor business. In July, the company bowed to pressure from lender groups to gather bids for Oncor.
Spokeswomen for Evercore, Houston-based CenterPoint (CNP), NextEra and Berkshire Hathaway Energy declined to comment, and Buffett didn’t immediately respond to a request for comment sent to an assistant. A spokeswoman for Hunt also didn’t respond to a message seeking comment.
Reuters reported on Sept. 15 that NextEra, Hunt, CenterPoint and Spain’s Iberdrola SA might be bidders, citing unidentified people familiar with matter.
Oncor, which operates the largest distribution and transmission business in Texas, delivers electricity to more than 3 million homes and businesses and serves the Dallas-Fort Worth region. The company is prized as it’s poised to take advantage of population growth in the state, and it has said it plans to invest $1 billion annually in power lines through 2018.
Second-Largest
Formerly TXU Corp., Energy Future was taken private in 2007 by KKR & Co. (KKR), TPG Capital and the private-equity unit of Goldman Sachs Group Inc. in a record $48 billion leveraged buyout. The company filed for reorganization together with about 70 affiliates. The petition listed assets of $36.5 billion and debt totaling $49.7 billion.
NextEra Energy, based in Juno Beach, Florida, is the largest North American provider of wind and solar power and has invested $7 billion in transmission and power generation in Texas. Its stock-market value of $41.1 billion makes it the second-largest U.S. utility owner behind Duke Energy Corp.
CenterPoint, with a market value of $10.3 billion, delivers electricity to more than 2 million homes and businesses around Houston and owns natural gas utilities in six states. Closely held Hunt created Sharyland Utilities and developed 300 miles of new transmission in the Texas panhandle and south plains, according to its website.
Buffett’s Bet
Berkshire entered the energy business in 2000 by buying a majority stake in an Iowa utility holding company. Expanding through acquisitions, it now operates natural-gas pipelines that stretch from the Great Lakes to Texas, electric grids in the U.K., as well as power companies in U.S. states such as Utah and Oregon. Last year it bought Nevada’s largest electric utility. In May, it agreed to purchase a transmission company in Alberta, Canada.
Buffett, 84, has said he likes owning regulated energy businesses because they require huge capital investments and can generate reliable returns. That ability to reinvest has become increasingly important as Omaha, Nebraska-based Berkshire spins off more profit. The company’s cash pile stood at a record $55.5 billion at the end of June.
Buying Oncor would bring Buffett back to the site of one of his investing blunders. The billionaire purchased about $2 billion of bonds tied to Energy Future Holdings before it filed for bankruptcy. He subsequently had to write down the securities and called the episode a “major unforced error.”
The case is In re Energy Future Holdings Corp., 14-bk-10979, U.S. Bankruptcy Court, District of Delaware (Wilmington).
