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Oncor acquires West Texas power lines in $1.3 billion deal with Hunt family

By: Conor Shine |

Dallas-based electricity distributor Oncor plans to bulk up its Texas transmission network with a $1.3 billion acquisition of the Hunt family-owned InfraREIT, the companies announced Thursday.

The deal will give Oncor and its majority owner, San Diego-based Sempra Energy, control of Hunt-owned infrastructure including power lines in the Panhandle and West Texas. The company would assume about $971 million in debt held by InfraREIT as part of the deal.

Sempra executives highlighted a number of factors that made the acquisition appealing, including the continued growth of renewable energy projects, a booming West Texas oil economy and overall population growth in Texas.

Sempra also announced Thursday it was taking a 50 percent stake valued at $98 million in the Hunt-owned Sharyland Utilities, which serves South Texas. The remainder of Sharyland would still be controlled by Hunter L. Hunt and other members of the Hunt family.

If the transactions are successful, Oncor would end up with electric transmission and distribution infrastructure in central, north and west Texas, while Sharyland would retain assets in South Texas.

Together, the moves give Sempra an even greater presence in Texas’ regulated utility market following its March acquisition of Oncor in a deal valued at $9.45 billion. The Hunt family previously made an unsuccessful bid to acquire Oncor out of the bankruptcy proceedings of its parent company Energy Future Holdings.

“These assets are highly desirable and supported by strong economic growth, attractive demographic trends and increased demand for electric transmission in Texas,” Sempra’s CEO Jeffrey Martin said in a statement.

The newly-acquired assets would overlap well with Oncor’s existing service area, which covers about 3.5 million Texas customers stretching from the Oklahoma border down through the Dallas-Fort Worth metro into Round Rock and includes a separate swath of land in West Texas covering Odessa, Midland and the surrounding area.

“I think they see it as a growth opportunity. They already own assets in that area, they have a service territory … in that area,” said Geoffrey Gay, an Austin-based attorney and general counsel to the Oncor Cities Steering Committee. “It’s additional revenues and additional business opportunities.”

Sempra plans to fund the deal using proceeds from a recent sale of renewable energy projects. Texas Transmission Investment LLC, which holds a 20 percent stake in Oncor, would also make a capital contribution.

Sempra executives told investors Thursday it expects to close the deal by the middle of 2019 following a regulatory approval process that would include examining the potential impact on consumers.

Gay said it’s too early to predict how the proposed transaction will fare during the regulatory process, but he noted that the companies involved should be well-prepared after years of dealing with the Public Utility Commission of Texas.

“It may be an easy approval process, but these things always have a way of having a surprise within them,” Gay said of the regulatory approval process. “I’m sure Sempra, Oncor and Sharyland are mindful of that and will want to make sure their filing is pretty tight.”