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NextEra Said to Be Frontrunner for Energy Future’s Jewel (6/10/15)

NextEra Energy Inc. has emerged as the frontrunner in an auction for bankrupt Energy Future Holdings Corp.’s Oncor Electric Delivery Co., people with knowledge of the matter said.

Energy Future could name NextEra the stalking horse bidder for its 80 percent stake in Oncor, which is the biggest owner and operator of power lines in Texas, in the next few weeks, said the people, who asked not to be identified because the information is private. Oncor is worth more than $10 billion, its chief executive said in April.

Oncor is the crown jewel of Dallas-based Energy Future, which filed for Chapter 11 protection last April after taking on too much debt in a $48 billion leveraged buyout, the largest on record. Oncor is considered a prize because Texas is adding electricity customers and state regulators support power line investments. A squabble among creditors over the fate of Oncor derailed Energy Future’s plan to emerge from bankruptcy in less than a year.

“It’s a great regulated franchise and has good growth,” Kit Konolige, a utility analyst for Bloomberg Intelligence, said Wednesday in an interview. “NextEra has already done some transmission in Texas and they feel like they have some institutional knowledge in the state.”

NextEra’s pending $4.26 billion takeover of Hawaiian Electric Industries Inc., the archipelago’s power utility, shows willingness expand well beyond Florida, he said. Hawaiian Electric shareholders approved the merger Wednesday, according to a company statement.

Creditor Disagreement

Energy Future is still weighing separate proposals for Oncor and hasn’t made a final decision, one of the people said. Hunt Consolidated Inc. and some of Energy Future’s creditors have said they would convert Oncor into a real estate investment trust.

Allan Koenig, a spokesman for Energy Future, declined to comment. A representative for NextEra didn’t immediately respond to a request for comment.

The initial reorganization plan called for Oncor being spun off to a group of creditors with backing from Hunt, the energy conglomerate controlled by the Hunt family. NextEra interjected by partnering with another group of creditors and making an offer that valued Oncor at $17.5 billion. NextEra has a market value of about $44 billion.

That move prompted Energy Future to scrap its initial restructuring plan and hold an auction to select a stalking horse for Oncor. The subsequent process, which began about nine months ago, stalled as various holders of Energy Future’s more than $40 billion in debt have fought in court about how the company will pay them back.

Berkshire Hathaway

CenterPoint Energy Inc. and Berkshire Hathaway Inc. also signed non-disclosure agreements to bid for Oncor, people familiar with the matter said in September.

Stalking horses make the opening bid for assets sold in bankruptcy. They have an advantage over other bidders because they automatically win if no other bidders emerge. They can also get a breakup fee if they lose.

NextEra, based in Juno Beach, Florida, is the largest provider of electricity generated by wind and solar power in the U.S. It agreed in December to pay about $4.3 billion for Hawaiian Electric Industries inc.

http://www.bloomberg.com/news/articles/2015-06-10/nextera-said-to-be-frontrunner-for-energy-future-s-oncor-utility