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Hunts officially file to take over power utility Oncor (9/29/15)

A group of investors led by Dallas energy and real estate mogul Ray L. Hunt Hunt made official Tuesday its campaign to take over Texas’ largest power utility Oncor.

In an application filed with the Texas Public Utility Commission, the Hunt group laid out plans to buy the utility from bankrupt parent company Energy Future Holdings in a deal that values Oncor at between $18 and $19 billion.

The filing begins what is expected to be at least a six month review of Oncor’s rates and the group’s financial strategy for managing the utility. If successful, it will mark the end of a near decade pursuit by Hunt, chairman of Hunt Consolidated, and his son Hunter to get control of Oncor, which delivers electricity to more than 3 million customers across North and West Texas.

The deal comes out of Energy Future’s ongoing fight with creditors in U.S. Bankruptcy Court in Delaware. The former TXU Corp. filed for Chapter 11 last year, seeking protection from $40 billion debt following a leveraged buyout in 2007 by private equity firms KKR & Co. and TPG.

A restructuring plan filed by Energy Future in July laid out plans to spin off its power plants and retail business TXU Energy to senior creditors and sell its 80 percent ownership stake in Oncor to the Hunt group, which also includes a myriad of investment firms tied engaged in the bankruptcy and the Texas state teachers’ pension fund.

Opposing creditors have grappled with the company over the risk the PUC might not grant the Hunts the rates they need to complete the deal. But Energy Future scored a critical victory earlier this month when a federal judge ruled the plan was ready to go to trial, with a start date set for Nov. 3.

“We believe our proposed plan represents the best path forward for Oncor, its employees and the communities they serve,” Hunter Hunt, co-CEO of Hunt Consolidated, said in a statement Tuesday.

Here in Texas, the PUC must decide whether to continue Oncor’s existing rate structure under new owners. The Hunts have proposed operating Oncor under what is termed a real estate investment trust, a mechanism for diverting tax liability from the corporation to its shareholders.

Such a structure has never been used by a utility of Oncor’s scale, and ratepayer advocates are expected to press state regulators to reward at least some of those savings to customers.

So far, utility commissioners have been vague on what they plan to do. In a memo last week, Commissioner Ken Anderson wrote he did not have a problem with Oncor operating as a REIT, “so long as ratepayers either benefit, incur no unrewarded risk, or otherwise suffer no harm.”

http://bizbeatblog.dallasnews.com/2015/09/hunts-file-to-take-over-power-utility-oncor.html/