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NextEra to acquire Energy Future Holdings

Steve Rogerson
August 9, 2016
 
NextEra Energy is to acquire Energy Future Holdings (EFH), including its approximately 80 per cent indirect interest in Oncor Electric Delivery, which implies a total enterprise value of approximately $18.4bn. The agreement will be filed publicly as part of the restructuring of EFH currently before the US bankruptcy court for the district of Delaware.
 
The agreement is part of an overall plan of reorganisation designed to allow EFH to emerge from Chapter 11 bankruptcy. Bankruptcy court approval of EFH entering into the agreement is required for the agreement to be binding. The parties will request that the bankruptcy court approve EFH's entry into the agreement as soon as practicable.
 
"We are pleased to have reached a definitive agreement to acquire EFH's 80 per cent indirect interest in Oncor," said Jim Robo, chairman and chief executive officer of NextEra Energy. "We are incredibly impressed by Oncor's management team and its employees, and we are committed to retaining the Oncor name, its Dallas headquarters and local management. NextEra Energy shares Oncor's strategy of making smart, long-term investments in transmission and distribution to continue to deliver affordable, reliable electric service to its customers. We look forward to working closely with Oncor's leadership team and filing our joint application with the Public Utility Commission of Texas.
 
"We are proud to own and operate one of the most efficient, reliable and low-cost utilities in the nation, providing a value proposition for our customers that includes electric bills that are among the nation's lowest, high reliability and award-winning customer service. We believe our deep operating expertise in Texas and across the nation, strong financial profile and experience operating in a regulated utility environment offer uniquely compelling advantages."
 
Since 1999, Florida-based NextEra Energy has had a significant and established presence in Texas, including Lone Star Transmission, a transmission service provider. NextEra Energy is a contributor to the Texas economy, having invested more than $8bn in transmission, power generation, gas pipelines and other operations in Texas.
 
As part of the transaction, NextEra Energy intends to fund $9.5bn, primarily for the repayment of debt. Of that amount, it is expected that certain creditors will be paid primarily in cash with the remainder in NextEra Energy common stock. The number of shares issuable to such creditors and EFH creditors will be determined based on the estimated cash on hand at EFH at the closing of the transaction, the volume weighted average price of NextEra Energy common stock for a specified number of days leading up to the closing and other factors specified in the agreement.
 
NextEra Energy expects the transaction, which has been approved by the boards of directors of both NextEra Energy and EFH, to be completed in the first quarter of 2017.
 
Meanwhile, one of NextEra’s subsidiaries has entered into an agreement to sell its ownership interest in its Marcus Hook generating assets to an investment affiliate of Starwood Energy Group, an energy infrastructure investment firm that specialises in value-add power generation, transmission and storage energy projects.
 
The total consideration to be paid is $760m, including estimated working capital at closing. Upon closing, NextEra Energy Resources expects the sale to result in net proceeds of approximately $255m after repayment of the existing project related financing. The impact of the disposition of assets at the time of closing will be excluded from adjusted earnings.
 
The transaction includes the 790MW combined-cycle Marcus Hook Energy Center and the 50MW simple-cycle Marcus Hook 50 Energy Center. Both of these facilities are natural gas-fired power plants located primarily in Marcus Hook, Pennsylvania.
 
"This transaction is part of our on-going strategy to further optimise our power generation assets, while recycling capital into our growing long-term contracted asset portfolio," said Armando Pimentel, president and CEO of NextEra Energy Resources.
 
The transaction is expected to close in the fourth quarter of 2016, pending the receipt of necessary regulatory approvals and satisfaction of other customary closing conditions.
 
GMP Capital has agreed to acquire FirstEnergy Capital for $98.6m. Established in 1993, FirstEnergy works in the global energy sector providing financial advisory and investment services to a broad range of corporate clients and investors worldwide. Since 2008, FirstEnergy has completed over $63bn in equity financing transactions in the energy sector and has advised on 159 transactions with an aggregate value of $31bn. The firm has 91 employees in its Calgary and London offices across investment banking, sales and trading and research. GMP will operate the combined energy businesses under the GMP FirstEnergy brand.