Warren Buffett’s Berkshire Hathaway is said to be trying for a utility takeover in Texas where energy giant NextEra Energy and the Hunt family already have failed.
Berkshire Hathaway’s energy unit is nearing a deal to buy Oncor Electric Delivery, the state’s largest electric transmission operator, from Energy Future Holdings, according to a person familiar with the situation.
That would make Berkshire the third company to come before Texas regulators asking for permission to buy a utility that they have so far highly guarded. Just a week ago, the state rejected NextEra’s $18 billion bid to buy Oncor for a third time, deciding the merger wasn’t in the public’s interest. Last year, it quashed an offer from Dallas-based Hunt Consolidated.
Meanwhile, a takeover is key to ending the bankruptcy of Energy Future Holdings, formed by KKR, TPG Capital and Goldman Sachs as part of the leveraged buyout of TXU Corp. The company’s been working since 2014 to restructure $50 billion of debt.
“We don’t know the terms of the deal, but Warren Buffett seems to have a halo around him that would allow him some deference compared to other investors,” said Paul Patterson, a utilities analyst at Glenrock Associates. Buffett is a “significant utility player, but of course the devil will be in the details.”
Jessi Strawn, a spokeswoman for Berkshire Hathaway’s energy unit, declined to comment on the potential deal. Buffett, Berkshire Hathaway’s chairman and chief executive, didn’t immediately respond to a message left with an assistant. Geoffrey Bailey, a spokesman for Oncor, said he couldn’t immediately respond to a request for comment.
The Wall Street Journal reported that Berkshire’s deal to buy Oncor would be valued less than NextEra’s offer.
Berkshire was among those identified as leading bidders for the utility last year. Buffett’s company has been pushing deeper into the utility industry over the past decade and a half, steadily acquiring power companies, pipelines and renewable energy projects in North America. In 2013, Berkshire struck a $5.6 billion deal for Las Vegas-based electricity provider NV Energy.
And Buffett is no stranger to Energy Future. Another one of the company’s subsidiaries, Texas Competitive Electric Holdings, was the source of one of Buffett’s biggest investment losses. Berkshire bought about $2 billion worth of bonds tied to the company in 2007 and then wrote them down after natural gas prices plunged, hurting the utility’s ability to service its debt.
In denying NextEra’s bid for Oncor, the Public Utility Commission of Texas expressed repeated concerns about the company’s refusal to agree to ring-fencing measures designed to protect Oncor’s credit rating and preserve control of the company’s board.