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Sempra Reaches Stakeholder Settlement on Oncor Acquisition

Sempra Energy and its acquisition target, Oncor Electric Delivery Company LLC, have reached a settlement agreement with Texas stakeholders, including the Public Utility Commission of Texas (PUC).

The two companies said Thursday that they will continue other settlement discussions and plan to close their $9.45 billion deal in the first half of 2018.

Earlier this month, the Federal Energy Regulatory Commission issued an order authorizing Sempra's acquisition of Energy Future Holdings Corp. (EFH), including EFH's 80% indirect ownership of Oncor.

Besides PUC staff, Sempra and Oncor also settled with the Texas Office of Public Utility Counsel, a steering committee of Texas cities served by Oncor, and Texas Industrial Energy Consumers, which represents the state's largest energy users, aside from electric generation plant operators.

Sempra and Oncor described the latest settlement as a significant step forward in Sempra's effort to acquire a majority stake in Oncor, the largest utility in Texas. Sempra plans to maintain the existing independence of Oncor's board, which has protected the electricity company and its customers during the ongoing EFH bankruptcy that has dragged on for three years.

In September, the U.S. Bankruptcy Court for the District of Delaware approved EFH's merger agreement with Sempra. The next month, Sempra and Oncor filed a joint change-in-control application to the PUC. State regulators then set a procedural schedule to complete a review of the joint application by early April 2018.

Also in October, Sempra filed a revised financial structure for its proposed EFH purchase. During a quarterly earnings conference call, Sempra management expressed confidence that the deal to buy EFH would be approved by Texas regulators.

Following the Sempra-EFH merger agreement, the latest settlement includes regulatory commitments that preserve the existing Oncor ring-fence and the independence of Oncor's board. "To protect Oncor, its customers and employees, the commitments also include extinguishing of all debt currently at EFH and Energy Future Intermediate Holdings Company LLC," a Sempra spokesperson said.

Parties to the new settlement agreed that the acquisition is in the public interest, meets Texas legal standards, and will bring what the stakeholders called "substantial benefits." The signatories will ask the PUC to approve the acquisition.

Sempra CEO Debra Reed said the proposed transaction has "garnered support from several key stakeholder groups in Texas," which goes along with her argument that the deal is good for Oncor customers and for the state overall. Oncor CEO Bob Shapard said Sempra has "demonstrated its ability to be a great partner for Texas" by being willing to work with stakeholders across the state since the deal was announced in August.

"If approved [by the PUC], our partnership with Sempra Energy will result in a strong well-capitalized Oncor that will help Texas continue to grow and invest in a safer, smarter, more reliable electric grid," Shapard said.

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