Texas Opens Door for Sempra Energy's $9.45 Billion Purchase of Oncor

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Texas Public Utility Commission has approved the $9.45 billion purchase of Texas power transmission and distribution (T&D) company Oncor Electric Delivery Company LLC (Dallas, Texas) by Sempra Energy (NYSE:SRE) (San Diego, California). Oncor serves more than 10 million Texas residents, mostly in the northern and western portions of the state. Industrial Info is tracking $1.4 billion in active Oncor projects and $21.5 billion in Sempra projects.

The deal comes as part of energy company Energy Future Holdings Corporation's (Dallas, Texas) bankruptcy proceedings wind down. Energy Future Holdings was formed in 2007 as part of a leveraged buyout of TXU Corporation (Dallas), which saw the creation of Oncor as the electric T&D provider, Luminant (Dallas) as the electric generation business and TXU Energy (Irving, Texas) as the provider of retail electricity with no T&D assets. TXU Energy and Luminant already have been spun off under parent company Vistra Energy Corporation (NYSE:VST) (Irving).

Upon its formation, Energy Future Holdings gambled big that U.S. natural prices would increase, providing an edge to its mostly coal and nuclear fleet. However, with the shale gas revolution, natural gas prices crashed, forcing the company to file for Chapter 11 bankruptcy protection in April 2014.

Under the agreement, Sempra will own 80% of Oncor. The company beat out rival bids from Berkshire Hathaway Incorporated (NYSE:BRK-A) (Omaha, Nebraska) and NextEra Energy Incorporated (NYSE:NEE) (Juno Beach, Florida), among others.

In a written statement, Sempra Chief Executive Officer Debra Reed said, "We are pleased the commission has found our transaction to be in the public interest. Sempra Energy is committed to being a good partner for the state and is supportive of Oncor's mission to provide Texans with safe, reliable and affordable electric service."

Among Oncor's largest projects is the $336 million Far West Texas Project, which includes converting 69-kilovolt (kV) transmission lines to 138 kV, as well as constructing new 138-kV transmission lines in the western part of Texas, where oil and gas drilling is on the rise. Upon approval of the project in June last year, the Electric Reliability Council of Texas (ERCOT) (Austin, Texas), which operates most of the state's electric grid, said, "Increased oil and natural gas exploration in the Permian Basin area in Far West Texas has contributed to high load growth in the region. Between 2010 and 2016, the average load growth in Far West Texas was about 8%. An increase in the number of generation projects, mostly solar, being developed in this region is also a factor."

Among the larger portions of the project is the expansion of the Riverton substation near Orla, Texas, to accommodate new transmission lines between the Riverton and Moss substations, and Riverton and Sand Lake substations. The substation expansion entails adding two transformers and additional equipment to accommodate the new lines. The Riverton-Moss transmission line will include construction of 85 miles of single-circuit, overhead transmission line, while the Riverton-Sand Lake line will entail the construction of roughly 30 miles of new line. For more information, see Industrial Info's project reports on the substation expansion, Riverton-Moss line and Riverton-Sand Lake line.

In Scurry County, Texas, Oncor is planning a new transmission line and substation upgrade. The project involves constructing 22 miles of 138-kV, overhead transmission line from the Cogdell substation to the Clairemont substation. The Cogdell substation will be upgraded with new transformers and breakers to support the new line. The overall project has an estimated TIV of $32 million. AECOM (NYSE:ACM) (Los Angeles, California) is consultant. For more information, see Industrial Info's project reports on the transmission line and substation.

The purchase represents Sempra's first foray into Texas, but not its first into the T&D sector. Sempra owns San Diego Gas & Electric Company and Southern California Gas Company. Among San Diego Gas & Electric's largest transmission projects is the $480.5 million South Orange County Reliability Transmission Line in southern California. The project includes replacing four segments of 138-kV, overhead, single-circuit transmission line with 230-kV, double-circuit line. In addition, the San Juan Capistrano substation will be demolished and a new one built to accommodate the new lines. Construction is expected to kick off this summer, with completion set for late 2019. For more information, see Industrial Info's project reports on the transmission line enhancement and substation.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.