Dive Brief:

• A group of investors led by Hunt Consolidated has filed a proposal with the Public Utilities Commission of Texas (PUCT) to purchase Oncor, the state's largest T&D utility, for about $18 billion.
• Under the proposal, Hunt would split the utility into two companies — an asset firm and an operations firm — in order to reorganize it into a real estate investment trust (REIT).
• The filing could signal an end to a year-long saga to find a buyer for Oncor. Texas commissioners have 180 days to review the deal.

Dive Insight:

NextEra Energy, Warren Buffett's Bershire Hathaway and investment firm Fidelity were all listed as frontrunners at some point to purchase Oncor, but in recent months Hunt Consolidated has held the momentum. 

The Dallas-based oil and gas company owned by real estate mogul Ray Hunt was tapped last month by Energy Future to buy Oncor, its prized asset, for about $18 billion. 

If Texas regulators approve the deal, Hunt would convert Oncor to operate as a real estate investment trust, a mechanism for diverting tax liability away from a corporation to its shareholders, the Dallas Morning News reports. 

To do so, Hunt would first restructure Oncor into an asset company, which would operate as a subsidiary of the REIT, according to a company release. The asset company would own all of the grid infrastructure currently owned by Oncor and would be owned and managed by Hunt. 

Then, Hunt would create a new operating company responsible for running and maintaining the electrical grid on a daily basis. This company would keep the Oncor name, its headquarters in Dallas and its operational staff. The asset company would lease the transmission and distribution assets to the operating company.

That ownership structure has already raised some eyebrows in the power sector, since the REIT structure has never been tried by a utility of this size. Current Oncor CEO Bob Shapard filed testimony with regulators yesterday saying that while he supports Hunt's bid, he is concerned about the possible impacts the REIT structure would have on the utility's borrowing ability and risks to the company's retirees.

“Under no scenario should there be material risk to the continued existence of Oncor’s employee pension plan,” he said, the Morning News reports. Similar concerns were raised by Moody's analysts and PUCT commissioner Ken Anderson after Hunt released preliminary details of the purchase plan last month.

Energy Future Holdings filed for Chapter 11 bankruptcy last year, saying that low wholesale power prices and debt taken on during a leveraged buyout in 2007 had led it to seek protection from creditors. 

Texas utility commissioners have 180 days to review the proposal and rule on the deal.