Nextera Energy (NEE) to Merge Affiliate with Texas Transmission Holdings

October 31, 2016 6:47 AM EDT

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NextEra Energy, Inc. (NYSE: NEE) announced it has reached an agreement for an affiliate to merge with Texas Transmission Holdings Corporation ("TTHC"), including TTHC's approximately 20 percent indirect interest in Oncor Electric Delivery Company LLC ("Oncor"), for merger consideration of approximately $2.4 billion, subject to adjustment. In addition, NextEra Energy has reached an agreement to acquire the remaining 0.22 percent interest in Oncor that is owned by Oncor Management Investment LLC ("OMI") for total cash consideration of approximately $27 million. If approved, these transactions, when combined with NextEra Energy's previously announced transaction to acquire Energy Future Holdings Corp.'s ("EFH") approximately 80 percent interest in Oncor, would result in NextEra Energy owning 100 percent of Oncor.

"We are very pleased to have reached an agreement for one of our affiliates to merge with TTHC, including its approximately 20 percent indirect interest in Oncor," said Jim Robo, chairman and chief executive officer of NextEra Energy. "We appreciate TTHC's commitment to reaching this agreement and believe this transaction further affirms our long-term commitment to partnering with Oncor for the benefit of its customers and the state of Texas. We, together with Oncor, look forward to filing our joint application by Nov. 1 with the Public Utility Commission of Texas seeking approval of our proposed acquisition of Oncor."

Rhys Evenden, Head of Infrastructure (North America), GIC, said, "As a long-term investor GIC is proud to be associated with Oncor, a like-minded partner whose focus on discipline and value puts it in good stead for the future. We wish the company and its highly dedicated team every success."

"For the past eight years, OMERS has greatly valued our relationship with Oncor's employees, management team, customers, regulators and our fellow investors. Oncor has been an important investment for OMERS helping us to create long-term value for our active and retired members. Oncor is one of the top performing utilities in the nation and with the support of NextEra Energy, we are confident that the company will continue to provide reliable and affordable electric service to its customers and the state of Texas," said Ralph Berg, Executive Vice President & Global Head of Infrastructure, OMERS Private Markets.

"We're appreciative of the important role our minority investor has played during the past eight years," said Bob Shapard, CEO of Oncor. "As both shareholders and board members, their support has been key to our ability to navigate what has been a financially challenging period for EFH. If the current proposal is approved, looking forward, Oncor will be backstopped by a very strong balance sheet and will have a partner in NextEra Energy that is committed to continuing our efforts to build a safer, smarter, more reliable electric grid."

Transaction details

Under the terms of the TTHC merger agreement, NextEra Energy will pay 100 percent of the merger consideration in cash. As a result of the transaction, no debt will reside at TTHC or Texas Transmission Investment LLC ("TTI") upon close of the merger. NextEra Energy expects to fund the merger consideration through a combination of debt and equity, consistent with the company's commitment to maintaining its strong balance sheet and credit ratings. The transaction is not subject to any financing contingencies.

NextEra Energy expects that its transactions with EFH, TTHC and OMI, which would result in its 100 percent ownership of Oncor, if approved, would be meaningfully accretive to earnings, enabling the company to grow at or near the top end of its previously announced 6 percent to 8 percent per year adjusted earnings per share growth rate through 2018, off a 2014 base. The transactions are consistent with NextEra Energy's focus on investing in regulated and long-term contracted assets and leverage many of the company's core competencies, including investing smartly to improve operations, creating long-term value for both customers and shareholders. NextEra Energy remains committed to maintaining its strong balance sheet and expects that its credit ratings and its subsidiaries' credit ratings will be maintained post-closing.

Approvals

The TTHC merger agreement contemplates approval by the Public Utility Commission of Texas. NextEra Energy, together with Oncor, expects to file by Nov. 1 a joint application for merger approval. The proposed TTHC transaction is also subject to approval by the Federal Energy Regulatory Commission, the expiration or termination of the waiting period under the Hart-Scott-Rodino Act, the receipt of any required third-party approvals and other customary closing conditions. NextEra Energy expects the TTHC transaction, which has been approved by the boards of directors of both NextEra Energy and TTHC, and the TTHC shareholders, to be completed in the first half of 2017. The completion of the other transactions also is subject to conditions specified in the definitive agreements for those transactions.

Advisors

Credit Suisse Securities (USA) LLC and Bank of America Merrill Lynch are serving as lead financial advisors to NextEra Energy. Chadbourne & Parke LLP is serving as lead legal counsel to NextEra Energy.



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