Florida-based NextEra is set to buy Texas’ largest electric utility Oncor Electric Delivery Co. for $18.4 billion. NextEra has been trying to acquire Oncor since 2014, which shows an intention of expanding their reach in energy transmission.

The company has already reported selling two gas-fueled power plants in Pennsylvania for $760 million. Back in January, the Dallas-based energy company Energy Future Holdings was about to split into two different companies as it reached its second year in bankruptcy and a $42 billion debt forced a hard turn on the company’s creditors.

Energy Future Holdings owns Oncor, Luminant, and TXU Energy, which provide power lines, power plants, and retail power respectively. Image Credit: NextEra Energy Resources
Energy Future Holdings owns Oncor, Luminant, and TXU Energy, which provide power lines, power plants, and retail power respectively. Image Credit: NextEra Energy Resources

“We look forward to working closely with Oncor’s leadership team and filing our joint application with the Public Utility Commission of Texas,” stated NextEra Energy’s CEO Jim Robo.

Buying for profits

In the case of Oncor, the branch is not in bankruptcy and is considered to be a profitable acquisition as it registered $3.9 billion in revenue for 2015.

Without the deal coming to fruition, Energy Future Holdings accounts for 80 percent of Oncor’s ownership. Although the purchase is not yet official because of how bankruptcy deals develop, NextEra’s Jim Robo did not hesitate to express his best wishes and good intentions towards Oncor’s team of executives and workers. He let everyone know that the acquired company will retain its name alongside its local management.

A shot from the Energy Futures Holdings' headquarters in Dallas, Texas. Image Credit: Biz Beat
A shot from the Energy Futures Holdings’ headquarters in Dallas, Texas. Image Credit: Biz Beat

According to The Wall Street Journal, NextEra has been trying to buy Oncor since Energy Future Holdings went bankrupt. It was determined that energy transmission would remain as highly profitable, as Oncor managed to circumvent Energy Future Holdings’ financial abyss. Energy Future Holdings eventually gave out and listened to offers for purchase. At first, Energy Future Holdings had chosen Texas’ Hunt Consolidated Inc. as a suitor.

If the Public Utility Commission of Texas approves Hunt’s purchase, then they would turn Oncor into a real-estate investment trust. The whole process must also undergo a bankruptcy judge’s approval as Energy Future Holdings still lies in bankruptcy.

NextEra Energy plans of going big

Currently, NextEra Energy Inc. has an esteemed $82 billion on global assets. After Oncor’s acquisition, the company would then have $102 billion, while being able to reach over 8 million customers. NextEra is also the owner of Florida Power & Light Co.

The company is based in Juno Beach, Florida, and it generates revenues of approximately $17 billion. It is the third-largest U.S. utility company. NextEra has also announced plans of buying the Hawaiian Electric Co., but their offer was rebutted as it was determined that NextEra could not accomplish the goal of generating all of Hawaii’s electricity from renewable sources by 2045.

Energy Future Holdings will not see much revenue from the sale of Oncor since they must pay creditors as they lie in bankruptcy. On the stock market, a company must first pay its creditors to then pay its shareholders. The difference is that creditors lend money to the company while shareholders buy parts of it, so they can partake in administrative decisions and special benefits.

Source: Wall Street Journal