EFH Bankruptcy Merger Approval Sought


Energy Future Holdings (EFH) filed with the U.S. Bankruptcy Court a motion for an order authorizing the EFH/Energy Future Intermediate Holdings (EFIH) Debtors to consent to Oncor’s entry into the Sharyland merger agreement.

The motion notes, “On July 21, 2017, Oncor and Sharyland signed an agreement that provides for an exchange by Sharyland and its affiliates of approximately $401 million in electric transmission and distribution assets for approximately $380 million of Oncor’s electric transmission assets and approximately $27.5 million in cash….In 2016, key Texas-based regulatory stakeholders, including the PUCT staff and the office of the Public Utility Counsel, collectively the ‘Key Stakeholders’ began discussions with Oncor to gauge Oncor’s interest in potentially acquiring Sharyland’s electricity distribution business….The Sharyland Merger Agreement contemplates an exchange of Sharyland and Oncor assets and is structured to qualify in part, as a simultaneous tax deferred like kind exchange of assets to the extent that the assets exchanged are of ‘like kind’.”

In addition, “Specifically, pursuant to separate mergers: (a) Oncor is to receive electricity transmission and distribution-related assets and liabilities of SDTS and SU; (b) SDTS will receive certain portions of Oncor’s electricity transmission-related assets and liabilities (consisting of approximately 258 miles of transmission lines) in addition to $21 million in cash; and (c) SU will receive approximately $605 million in cash.”

The motion continues, “Specifically, under the Rate Case Stipulation, the signatories agree to authorize a 7.44% weighted average cost of capital, a 9.8% return on equity, and a capital structure consisting of 42.5% equity and 57.5% long term debt (a 2.5% increase in equity as compared to the existing authorized maximum regulatory equity/debt ratio.)…..The EFH/EFIH Debtors, in consultation with their respective Boards and their advisors, believe that then minimal risk of tax triggering in any material amount is substantially outweighed by the benefits the EFH/EFIH Debtors stand to realize from Oncor’s consummation of the Sharyland Merger Agreement and the resulting Rate Case Stipulation.” The Court scheduled a September 19, 2017 hearing to consider the merger agreement, with objections due by September 12, 2017.

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