Dallas business leaders urge regulators to approve Hunt's Oncor plan

Dive Brief:

A group of 16 Dallas business leaders have sent a letter to state utility regulators urging them to ensure that Hunt Consolidated eventually winds up owning Oncor, the state's largest utility, which Hunt is attempting to purchase out of bankruptcy.
Hunt Consolidated filed a request for rehearing last week after the Public Utilities Commission of Texas gave broad and conditional approval to an arrangement to operate Oncor as a Real Estate Investment Trust.
Business leaders said in the letter they were "initially pleased" with the commission's vote, but now understand that "unique and unprecedented conditions" will make it impossible for the deal to close. They asked the commission to grant the rehearing.

Dive Insight:

Hunt Consolidated appears to be rallying support for its bid to purchase Oncor, with more than dozen influential business leaders lobbying regulators on the company's behalf.

In the April 27 letter, the group argues it is unfair for the commission to include "new regulatory accounting concepts and procedures, after so many new controls and commitments have already been made by the Hunts and their coinvestors."

The group includes: former U.S. Senator Kay Bailey Hutchison; real estate developer Ross Perot, Jr.; Energy Transfer Partners CEO Kelcy Warren; Carl Sewell, chair of Sewell Automotive Companies; Robert Rowline, CEO of TRT Holdings; Richard Fisher, the former president of the Federal Reserve Bank of Dallas; and Stephen Mansfield, president and CEO of Methodist Health System.

"While we were initially pleased upon hearing of the 3-0 vote in favor of the Hunt proposal, we now understand that the unique and unprecedented conditions attached to the approval will make it impossible to close the transaction with those conditions in place," they wrote. "Given this new piece of information, we strongly urge you to grant the purchasers' motion for rehearing, allowing an opportunity to correct or rescind the most onerous conditions placed upon the transaction."

The commission will consider Hunt's rehearing request next week.

Texas regulators moved swiftly to issue a decision on Hunt's plan for Oncor in an effort to meet a March 27 deadline for the transaction. But in doing so, they placed stipulations on the company's projected tax windfall and set some details aside for later determination. That led investors to inform regulators that "the transaction as currently configured will not close based on the order as written."

Hunt's investor group told the PUCT that if the deal does not close, "the matter will be returned to the bankruptcy court for an indefinite period of time, with all of the uncertainties inherent in a lengthy and contentious proceeding and no assurance that a new plan will be superior to the one before the commission in this proceeding."

Hunt proposed that first lien creditors of Texas Competitive Electric Holdings Company (TCEH), the merchant energy subsidiary of Energy Future Holdings, will receive TCEH's assets in a tax-free spinoff. That portion of the deal will satisfy approximately $25 billion in claims. Following that, the consortium would acquire EFH and its 80% ownership stake in Oncor. The newly restructured REIT would be owned by the consortium and managed by Hunt.

Regulators have suggested that the tax windfall resulting from the new structure might be shared with customers in the form of bill credits to lower energy costs.