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Sempra Takeover of Texas-Based Oncor Nearly Complete

Sempra Energy expects to receive regulatory approvals soon for its pending $9.45 billion purchase of 80% of the Texas utility giant Oncor Electric Delivery Co.'s holding company, CEO Debra Reed said Tuesday.

Following Monday's decision by the U.S. Bankruptcy Court for the District of Delaware regarding Energy Future Holdings Corp. (EFH) and its indirect, 80% ownership interest in Oncor, Reed said during a quarterly conference call that she expects to receive approval from the Texas Public Utilities Commission by next week (March 8). The transaction could be completed shortly thereafter.

Reed and CFO Jeff Martin reiterated long-term aspirations for Sempra to own all of the company instead of its 80% stake with 20% ownership held by Texas Transmission Investments LLC (TTI).

"We think TTI's interests are very much aligned with ours," said Reed. If TTI were to decide to sell its stakes, “we would definitely want to have an opportunity to consider purchasing their share.

“Over time, it would be great if they decided they wanted to exit, so we would have an opportunity to step in and own 100% of what we think is a preeminent company."

Sempra sees "great growth potential" in Oncor and the Texas market, which would not be diminished by the stakeholder settlement reached last December.

"If nothing changes, we can live with it, and over time, if we can make some changes” to the transaction. “We're more than willing to do that,” she said.

Sempra expects Oncor to expand its regulated utility base and provide future growth opportunities in the Texas energy market and the U.S. Gulf Coast region. Sempra also owns California-based utilities San Diego Gas and Electric and Southern California Gas Co.

Martin during the call outlined Sempra's view on the federal Tax Cuts and Jobs Act enacted late last year, calling it a "clear benefit" for utility customers.

"We can all agree that a strong economy benefits all businesses, and since we're strong believers in the need to invest in more infrastructure, tax reform is a clear benefit from that perspective,” he said.

"Over the next few years, we will adapt our strategy to take advantage of this new environment. In terms of our domestic utilities, lower federal tax rates will benefit customers," said Martin, adding that it also increases the value of international businesses in Mexico and South America.

Martin also said Sempra's liquefied natural gas (LNG) export terminal under construction at Cameron, LA, is estimated to be in line for $65-75 million in additional earnings from the federal tax reform.

For 4Q2017, Sempra reported a net loss of $501 million (minus $1.99/share), compared with net income of $379 million ($1.51) in 4Q2016. For 2017, net income was $256 million ($1.01/share), compared with $1.37 billion ($5.46) in 2016.

On an adjusted basis, quarterly earnings were $389 million ($1.54), versus year-ago profits of $383 million ($1.52). Adjusted 2017 earnings were $1.36 billion ($5.42/share), compared with $1.26 billion ($5.05) for 2016.

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