NextEra Energy Inc. executives reinforced April 21 that they will try again to acquire Oncor Electric Delivery Co. LLC but also told investors they would be fine without a deal.
Texas regulators on April 13 rejected NextEra's proposed $18.7 billion transaction to acquire Oncor, finding that the transaction was not in the public interest. Lawyers for NextEra and Oncor's bankrupt majority owner, Energy Future Holdings Corp., told a judge April 17 that their companies are attempting to salvage the deal.
John Ketchum, NextEra's executive vice president of finance and CFO, said on an April 21 earnings call that the company will file a motion for rehearing with the Public Utility Commission of Texas some time in the next few weeks.
"We are disappointed by the recent ruling," Ketchum said. "However, if we are ultimately unsuccessful with the transactions, we continue to believe that we have one of the best growth opportunity sets in our industry."
This message of NextEra's confidence in its adjusted EPS growth range of 6% to 8% through 2020 was repeated several times by company chairman, president and CEO James Robo as multiple analysts probed about Oncor.
"We're very comfortable with our organic growth prospects. We do not have to do anything. I love our stand-alone prospects. I love our two businesses," Robo said in reference to subsidiaries Florida Power & Light Co. and NextEra Energy Resources LLC. "They have tremendous opportunity to deliver growth for shareholders and also tremendous opportunity to do good things for customers."
But he did acknowledge, "M&A is hard. I think we've seen in the last month in our industry how hard it is."
Adding to this difficulty is NextEra's requirement, both during and after PUCT merger hearings, that certain ring-fencing protections for Oncor be removed and for NextEra to have greater control over who sits on the utility's board. The PUCT and other stakeholders sought stronger ring-fencing provisions than what NextEra preferred.
Robo maintained this position during the earnings call, saying, "Obviously we can't pay $18.7 billion for a utility that we can't run and we can't control the board and we can't have access to dividends. It's just bad business to do anything other than that."
"And so you can expect that we will not be accepting any conditions that would not allow us to appoint the majority of the board or have access to the dividends," he said. "We've been very clear about that from the beginning on this transaction and we continue to be very clear on it."
Both Ketchum and Robo said they would be "disappointed" if NextEra is not able to hit the top of its adjusted EPS growth range through 2020, especially if the Oncor deal does not close.
"Just to be very clear, we will have very strong credit metrics in 2020, even with the growth that we expect out of both FPL and Energy Resources through 2020," Ketchum said. "No need to do M&A to rebalance the balance sheet."
"Just to put that to bed, hopefully once and for all," Ketchum added.