NextEra's pursuit for Oncor dims future of Hawaiian Electric merger

Dive Brief:

Amid reports NextEra Energy is renewing its interest in the possible acquisition of Texas utility Oncor, Bloomberg reports prospects may be dimming for another of its proposed deals, the $4.3 billion acquisition of Hawaiian Electric Co.
NextEra can back out of the merger arrangement with HECO parent Hawaiian Electric Industries after June 3, though it will have pay a hefty sum to do so, Bloomberg noted.
NextEra had been the lead bidder for Oncor last year, until Hunt Consolidated proposed purchasing the utility out of Energy Future Holdings' bankruptcy. But with the Hunt deal now off the table, analysts say NextEra could change its focus.

Dive Insight:

In a kind of financial butterfly effect, Texas regulators' decision to heavily condition Hunt's plan to purchase Oncor has opened up the possibility that NextEra could back away from its proposed deal in Hawaii.

Hunt has now withdrawn its proposal, Bloomberg reported last week, after Texas regulators said the company's proposal to operate Oncor as a Real Estate Investment Trust could only move forward if the tax savings were shared with consumers. With Oncor back on the auction block, NextEra is reportedly considering leaving behind its offer for Hawaiian Electric.

NextEra can exit the deal after June 3, by paying about $95 million to the utility. The proposal has been on the table for about a year and a half, with no vote scheduled by regulators and growing concern about the company's interest in helping HECO meet a 100% renewable energy goal. Hawaii Gov. David Ige (D) has said he is opposed to the deal.

“These sustainability and governance concerns may trump any potential concessions NextEra is willing to offer to sweeten the deal,” according to Bloomberg Intelligence analyst Stacy Nemeroff. “NextEra may decide to take the loss so that it can move forward with other potential acquisitions.”

NextEra was the original frontrunner for Oncor last year, before Hunt's proposal to operate the utility as a REIT came front and center. But while that structure would have resulted in a $250 million tax savings for investors, Texas regulators only agreed to the deal if it was shared with consumers.

Bloomberg reports representatives for HECO, NextEra and Energy Future Holdings all had no comment on the merger speculation.