Warren Buffett bids $9 billion to acquire Energy Future Holdings Corp., the parent company of Texas energy giant Oncor. Berkshire Hathaway’s energy subsidiary, Berkshire Hathaway Energy is slated to take control of the financially faltering company pending the approval of the Public Utility Commission of Texas. Energy Future Holdings Corp. owns 80% of Oncor that is currently valued at a $11.25 billion equity stake in the company.
Oncor currently supplies utility services to 10 million customers in the state of Texas. The acquisition by Berkshire Hathaway Energy would double the clientele numbers of Buffett’s energy subsidiary overnight. Presently Berkshire Hathaway Energy provides utility services to 11.6 million customers spanning the Midwest and western portions of Canada and the United States. It also has consumers in Britain.
Berkshire Hathaway Energy accounted for 10% of Berkshire Hathaway’s $24 billion in net income last year. The portfolio of Berkshire Hathaway Energy includes solar and wind generators, utilities, and gas pipelines.
Buffett stated of the $9 billion bid, “Oncor is an excellent fit for Berkshire Hathaway, and we are pleased to make another long-term investment in Texas – when we invest in Texas, we invest big!”
Buffett expects the acquisition to be approved and finalized in the fourth quarter.
In 2013, Buffett bought $2 billion of Energy Future Holdings Corp. bonds and lost big. Buffett sold those holdings at a $873 million loss.
Buffett lamented at the time, “most of you have never heard of Energy Future Holdings. Consider yourselves lucky; I certainly wish I hadn’t.”
After four years of passage of time, Buffett is ready to hedge his bet on Oncor in the midst of the company’s ongoing bankruptcy.
The acquisition by Berkshire Hathaway must be approved by the bankruptcy judge currently overseeing the reorganization of Oncor. Betting against this approval is billionaire Paul E. Singer. Singer is a successful hedge fund mogul and largest creditor of Oncor. Singer has good reasons for hopes, as the Public Utility Commission of Texas has blocked the previous acquisition bids of the noted Texas energy player, the Hunt family, as well as NextEra. Singer’s hedge fund, Elliot Management currently holds $2.9 billion of Energy Future Holdings’ debt. The Berkshire deal would pay creditors such as Singer’s Elliot Management back in full.
Recent weeks have been a busy investing period for Buffett. He made $12 billion dollars and became the largest shareholder in Bank of America the last week of June. The first week of July, Buffett acquired a 9.8% stake in the real estate investment trust of Store Capital subsidiary National Indemnity that is valued at $377 million.
[Featured Image by Nati Harnik/AP Images]