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Warren Buffett’s Berkshire Hathaway is bidding to buy Oncor Electric Delivery from bankrupt parent Energy Future Holdings, Bloomberg reports. The bid would follow utility giant NextEra Energy’s own effort to buy Oncor, and although the financial details of those bids are not public Energy Future Holdings reportedly is seeking value of about $18 billion for the transmission and distribution company.
Oncor delivers power to more than 3 million homes and operates about 119,000 miles of power lines.
Last August, Hunt Consolidated and partners offered to buy Oncor as part of Energy Future‘s Chapter 11 bankruptcy proceeding in estimated $20 billion deal. However, in May Hunt informed the Texas Public Utility Commission that it was backing out of the plan.
The Hunt plan had approval from a Delaware bankruptcy judge. One alleged reason it fell through, according to some news accounts, is that Texas regulators may have required the buyer to share tax savings with customers.
Hunt said that and other regulatory caveats might scare off investors. The investors included Anchorage Capital Group, Arrowgrass Capital Partners, BlackRock and the Teacher Retirement System of Texas, among others.
Energy Future Holdings was known as TXU when a group led by legendary private equity firm KKR & Co. and Texas Pacific acquired it for $45 billion in 2007. The deal was the largest leveraged buyout in U.S. history, eclipsing the KKR acquisition of health-care giant HCA earlier that year. Previously, KKR’s $31 billion leveraged buyout of RJR Nabisco was made famous in the book, “Barbarians at the Gate.”
The deal saddled TXU-Energy Future with billions in debt. The Chapter 11 deal also likely wipes out KKR’s investment in the company.
The Oncor acquisition will need ultimate approval from the Public Utility Commission of Texas, federal regulators, the Internal Revenue Service and the U.S. bankruptcy court.
Oncor’s system serves from the Texas-southern Oklahoma border through Dallas-Ft. Worth south to Waco and east to Tyler. The company operates another service area in west Texas including the Midland-Odessa region.
Berkshire Hathaway entered the energy utility sector about 16 years ago when it bought Iowa-based MidAmerican Energy for about $9 billion. Since then, Berkshire Hathaway Energy has expanded, including buying Nevada-based NV Energy in 2013.
The parent Berkshire Hathaway’s “A” stock has a market cap about nearly $400 billion. Buffett himself is worth about $65 billion.