(Reuters) - Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) said on Friday it agreed to pay $9 billion to buy the parent of Texas power transmission company Oncor Electric Delivery Co, stepping up its pursuit of steady profits from utilities and infrastructure deals.

Berkshire Hathaway CEO Warren Buffett waits to play table tennis during the Berkshire Hathaway annual meeting weekend in Omaha, Nebraska, U.S. May 7, 2017. REUTERS/Rick Wilking

If the all-cash purchase wins approval from federal and state regulators and a bankruptcy judge, Buffett’s Berkshire Hathaway Energy unit will assume control of one of the largest U.S. electricity transmission companies.

“Buffett views infrastructure bets as a good long-term investment,” said Steven Check, president of Check Capital Management Inc in Costa Mesa, California, which invests $300 million of the $1.4 billion it oversees in Berkshire.

“With the relatively limited opportunities available to a company of Berkshire’s size, investments such as Oncor that are likely to yield 8 to 10 percent annually are acceptable,” Check added.

The acquisition also highlights the growing prominence of Greg Abel, 55, Berkshire Hathaway Energy’s chief executive.

Investors consider him a top candidate to succeed Buffett, 86, at the Omaha, Nebraska-based parent company’s helm.

Abel and other Berkshire Hathaway Energy executives were not available on Friday for interviews. Buffett’s office did not respond to separate interview requests.

‘RECESSION RESISTANT’

Dallas-based Oncor delivers power to more than 3.4 million homes and businesses through roughly 122,000 miles (196,000 km) of transmission and distribution lines.

It is 80 percent owned by Energy Future Holdings Corp, the company Berkshire has agreed to buy out of bankruptcy.

Oncor posted $431 million of profit in 2016, and similar sums in the prior three years.

Buffett values such consistency, telling Berkshire shareholders in February that utilities generate “recession-resistant” earnings because they offer an “essential service” that generates “remarkably steady” demand.

Meanwhile, Abel said in a statement the companies “share a common goal of providing exceptional customer service and a commitment to invest in critical infrastructure.”

Abel has also been deepening his commitment to renewable energy, including wind, generating tax credits that bolster Berkshire’s balance sheet. His unit also owns HomeServices of America, a big residential real estate brokerage.

Berkshire Hathaway Energy typically generates nearly 10 percent of its parent’s profit, contributing $2.29 billion to an overall $24.07 billion in 2016.

“Buffett has always had a lot of confidence in Greg Abel, and wouldn’t mind putting a nearly unlimited number of businesses under his watch,” Check said.

TEXAS REGULATOR

The Oncor purchase requires approval by the Public Utility Commission of Texas (PUCT), which in 2016 and 2017 scuttled takeover bids by privately held Hunt Consolidated Inc and NextEra Energy Inc (NEE.N).

Regulators had asked for Oncor to be “ringfenced” so it would not assume excess debt from any acquirer, and also not pay out too much cash as dividends.

Unlike NextEra, “Berkshire might be more willing to leave the ringfence in place and allow restriction on dividends, making the approval process “a little less cumbersome,” Cowen & Co analyst Amer Tiwana wrote in a research report.

The PUCT is required by law to rule on Berkshire’s bid within six months of receiving an application.

A spokesman declined to comment on Berkshire’s prospects.

But Buffett wrote last year that regulators like Berkshire Hathaway Energy because it operates safely and efficiently and has “unlimited capital to fund whatever projects make sense,” without the need to pay dividends to its parent.

Berkshire expects to complete the Oncor purchase in the fourth quarter.

It said the transaction implies an equity value of about $11.25 billion for Oncor. Kirkland & Ellis, a law firm representing Energy Future, said the transaction’s enterprise value was about $18.1 billion.

Energy Future was created from the $45 billion leveraged buyout in 2007 of the former TXU Corp by KKR & Co, TPG Capital Management and Goldman Sachs Group Inc’s (GS.N) private equity arm.

The buyout was a bet that natural gas prices would rise, allowing for higher electricity prices. Natural gas prices plunged instead, and Energy Future went bankrupt in 2014.

UNDOING AN ‘UNFORCED ERROR’

Buffett had invested with Energy Future a decade ago, buying $2 billion of high-yield bonds.

But he threw in the towel six years later, with an $873 million pre-tax loss. He has called that investment “a major unforced error.”

Buffett entered the energy sector in 2000 when he led a group that bought Des Moines, Iowa-based MidAmerican Energy Holdings Co, later renamed Berkshire Hathaway Energy.

He has since expanded in the central and western United States, such as with the Oregon-based PacifiCorp and Nevada-based NV Energy utilities.

Berkshire has also forayed outside the United States, now owning the AltaLink electricity transmission company in Alberta, Canada and Northern Powergrid in Newcastle upon Tyne in England.

Such bets have enabled Buffett to diversify Berkshire away from its traditional focus on insurance and stock-picking.

Berkshire now owns more than 90 businesses including the BNSF railroad, Geico car insurance, Lubrizol chemicals and Dairy Queen ice cream.

Assuming the Oncor transaction closes, Oncor CEO Bob Shapard would become executive chairman and be replaced by general counsel Allen Nye, under a previously announced plan.</s>FILE PHOTO - Berkshire Hathaway CEO Warren Buffett plays bridge during the Berkshire annual meeting weekend in Omaha, Nebraska, U.S. on May 3, 2015.

REUTERS - Berkshire Hathaway Energy, a unit of Warren Buffett's Berkshire Hathaway Inc, said on Friday it would acquire Oncor Electric Delivery Company LLC in a deal that puts Oncor's equity value at about $11.25 billion.

Berkshire Hathaway Energy said it agreed to buy reorganized Energy Future Holdings Corp (EFH), Dallas-based Oncor's bankrupt parent, for $9 billion in cash.

The deal is a bold bet by Buffett that he could win approval for the acquisition from Texas regulators, after they blocked two earlier attempts to sell Oncor, one of the largest U.S. power transmission networks, to other companies.

"By joining forces with Berkshire Hathaway Energy, we will gain access to additional operational and financial resources as we continue to position Oncor to support the evolving energy needs of our state," said Oncor Chief Executive Bob Shapard.

Texas regulators in May said they remained opposed to NextEra Energy Inc's proposed $18 billion acquisition of Oncor, a deal they said was not in the public interest.

The Berkshire Hathaway deal also represents a return to a previously soured investment for Buffett, who in 2013 lost $873 million on a $2 billion bond investment in EFH.

Shapard will assume the role of executive chairman, while Allen Nye will become Oncor's new CEO, the company said in a statement. Nye serves as general counsel for the company and the succession was announced earlier.

The transaction is expected to close in the fourth quarter of 2017.

Reuters reported on Thursday Berkshire Hathaway Energy was nearing a deal to buy Oncor.</s>Berkshire Hathaway Energy, a unit of Warren Buffett’s Berkshire Hathaway, agreed to acquire Oncor Electric Delivery Company for an equity value of about $11.25 billion, the company said in a statement on Friday.

Reuters reported on Thursday Berkshire Hathaway Energy was nearing a deal to acquire Oncor.</s>Warren Buffett's Berkshire Hathaway Inc (BRKa.N) said on Friday it would pay US$9 billion to pick up the parent of Texas power transmission company Oncor Electric Delivery Co from bankruptcy, stepping up its pursuit of steady returns in utilities.

If the all-cash deal is approved by a bankruptcy judge and Texas regulators, it will hand Berkshire ownership of one of the largest U.S. electricity transmission companies. Texas regulators shot down two previous deals to sell Oncor to other companies.

The deal also highlights the prominence of Greg Abel, 55, Berkshire Hathaway Energy's chief executive. Investors consider him a top candidate to succeed Buffett, 86, at the Omaha, Nebraska-based parent company's helm.

Buffett and Abel did not respond to requests for interviews.

Dallas-based Oncor delivers power to more than 3.4 million homes and business through roughly 122,000 miles (196,000 km) of transmission and distribution lines. It is 80 percent owned by Energy Future Holdings, which Berkshire has now agreed to acquire.

Oncor posted US$431 million of profit in 2016, and similar sums in the prior three years.

Buffett values such consistency, telling Berkshire shareholders in February that utilities generate "recession-resistant" earnings because they offer an "essential service" that generates "remarkably steady" demand.

Abel's unit has in recent years also deepened its commitment to renewable energy, including wind, entitling it to tax credits that help bolster Berkshire's balance sheet.

Berkshire Hathaway Energy typically generates nearly 10 percent of its parent's profit, contributing US$2.29 billion to an overall US$24.07 billion in 2016.

Oncor's takeover requires approval by Texas' Public Utility Commission (PUCT), which in 2016 and 2017 scuttled bids by NextEra Energy Inc (NEE.N) and privately held Hunt Consolidated Inc.

Regulators had asked for Oncor to be ringfenced so that it does not assume new debt from its acquirer and does not pay out too much cash as dividends.

"We anticipate that Berkshire might be more willing to leave the ringfence in place and allow restriction on dividends, which was a pre-condition that NextEra was unwilling to accept. This could make approval of Berkshire's bid by the PUCT a little less cumbersome," Cowen & Co analysts said in a note.

The PUCT is required by law to rule on Berkshire's bid within six months of receiving an application. A spokesman declined to comment on Berkshire's prospects.

Berkshire expects Friday's purchase to close in the fourth quarter, pending approvals by state and federal regulators and the judge overseeing Energy Future's bankruptcy proceedings.

It said the transaction implies an equity value of about US$11.25 billion for Oncor. Kirkland & Ellis, a law firm representing Energy Future, said the transaction's enterprise value was about $18.1 billion.

Energy Future was created from the US$45 billion buyout in 2007 of the former TXU Corp by KKR & Co, TPG Capital Management and Goldman Sachs Group Inc's (GS.N) private equity arm.

The buyout was a bet that natural gas prices would rise, allowing for higher electricity prices. Natural gas prices plunged instead, and Energy Future went bankrupt in 2014.

Buffett previously made a foray into the company by buying US$2 billion of high-yield bonds in 2007.

But he threw in the towel six years later, taking an US$873 million pre-tax loss. He has called that investment "a major unforced error."

Buffett entered the energy sector in 2000 when he led a group to buy the Des Moines, Iowa-based MidAmerican Energy Holdings Co, later renamed Berkshire Hathaway Energy.

He has since expanded in the central and western United States, such as with the Oregon-based PacifiCorp and Nevada-based NV Energy utilities.

Berkshire has also forayed outside the country, including with the AltaLink electricity transmission company in Alberta, Canada and Northern Powergrid in Newcastle upon Tyne in England.

Such bets enabled Buffett to diversify Berkshire away from its longstanding focus on insurance and stock-picking.

Berkshire now owns more than 90 businesses including the BNSF railroad, Geico car insurance, Lubrizol chemicals and Dairy Queen ice cream.

Assuming the Oncor transaction closes, Oncor CEO Bob Shapard would become executive chairman and be replaced by general counsel Allen Nye, under a previously announced plan.</s>Warren Buffett's Berkshire Hathaway is buying the Texas power transmitter Oncor for $9 billion, one of his biggest acquisitions.

Last year, Berkshire completed the biggest acquisition in its history, a $32-billion deal for aviation parts maker Precision Castparts.

Oncor serves about 10 million people and is the biggest regulated utility in Texas. Its parent company, Energy Future Holdings Corp., entered bankruptcy in 2014 facing more than $40 billion in debt after energy prices plunged.

Berkshire Hathaway will acquire a reorganized Energy Future, ultimately leading to the buyout of Dallas-based Oncor.

It's the third time that that an acquisition attempt has been made for Oncor. In April, Texas regulators rejected a proposed $18-billion sale of Oncor to NextEra Energy Inc. That price tag included debt, which may also double the enterprise value of the deal that Buffett is cobbling together.

The regulators failed to accept that the NextEra transaction was in the public interest — a requirement for the deal. A buyout attempt last year backed by the Ray Hunt family of Dallas also faltered.

Berkshire Hathaway already has a significant presence in Texas, which includes headquarters for BNSF Railway Co., Acme Brick Co., Justin Brands Inc., McLane Co., Berkshire Hathaway Automotive, Star Furniture Co., TTI Inc., Charter Brokerage, LiquidPower Specialty Products Inc. and Allie Beth Allman & Associates.

The deal — which needs state, federal and Bankruptcy Court approval — is targeted to close in the fourth quarter.</s>July 6 (Reuters) - Berkshire Hathaway Inc's energy unit is nearing a deal to buy utility company Oncor, the Wall Street Journal reported on Thursday, citing people familiar with the matter.

Terms of the deal weren't disclosed, but could be announced as soon as Thursday, according to the WSJ report. (http://on.wsj.com/2sKEeYv)

Berkshire Hathaway was among the leading bidders for Energy Future Holding Corp's Oncor Electric Delivery, Bloomberg had reported in July last year.

Power producer NextEra Energy Inc had also bid for Energy Future Holdings' 80 percent stake in Oncor for $18.4 billion.

However, Texas regulators in May this year nixed NextEra's deal, saying it was not in public interest.

Energy Future had filed for Chapter 11 in April 2014 after it failed to meet its debt obligations as electricity prices weakened.

Neither Berkshire, nor Oncor did not immediately respond to requests for comment. (Reporting By Aparajita Saxena in Bengaluru; Editing by Shounak Dasgupta)</s>FILE PHOTO - Berkshire Hathaway CEO Warren Buffett plays bridge during the Berkshire annual meeting weekend in Omaha, Nebraska, U.S. on May 3, 2015.

(Reuters) - The energy unit of Warren Buffett's Berkshire Hathaway Inc (BRKa.N) is nearing a deal to acquire Oncor Electric Delivery Company LLC [TXEFHO.UL], which would allow the utility to exit a three-year-long bankruptcy, according to people familiar with the matter.

Berkshire Hathaway Energy's deal for Dallas-based Oncor would come after the Public Utility Commission of Texas (PUCT) rejected NextEra Energy Inc's (NEE.N) previous deal to buy Oncor.

Berkshire Hathaway's deal, which could be announced by Friday, would value Oncor at slightly less than NextEra's previous $18.4 billion bid, two people said. The Wall Street Journal, which reported on the deal earlier, said it could be valued at more than $17.5 billion.

The sources asked not to be identified because the deliberations are confidential. The PUCT and Oncor did not immediately respond to requests for comment. Berkshire declined to comment.

Berkshire Hathaway had been among the leading bidders for Energy Future Holding Corp's Oncor Electric Delivery in earlier auctions for the bankrupt utility, according to the sources.

Energy Future had filed for Chapter 11 in April 2014 after it failed to meet its debt obligations as electricity prices weakened.</s>New York — Berkshire Hathaway’s energy unit has reached a multi-billion dollar deal to acquire Texas energy transmission assets, which are part of the giant Energy Futures Holdings (EFH) bankruptcy, the companies announced on Friday.

Berkshire, the conglomerate chaired by billionaire investor Warren Buffett, will get energy delivery company Oncor as part of an all-cash purchase of the re-organised EFH. Oncor’s transmission and distribution network serves 10-million people in Texas.

The companies said the price of the transaction was $9bn. The Wall Street Journal, citing an unnamed source, reported the total value of the deal at $18bn, including debt. The deal is subject to approvals from Texas utility regulators as well as a bankruptcy court overseeing the three-year-old EFH proceeding, one of the largest bankruptcies to date.

EFH was a casualty of the US shale boom, having wrongly bet natural gas prices would surge when they instead sank due to copious supply.

Executives from both companies emphasised Berkshire’s plans to invest in the assets. "Oncor is an excellent fit for Berkshire Hathaway, and we are pleased to make another long-term investment in Texas — when we invest in Texas, we invest big!" Buffett said.

"By joining forces with Berkshire Hathaway Energy, we will gain access to additional operational and financial resources as we continue to position Oncor to support the evolving energy needs of our state," said Bob Shapard, CEO of Oncor. "Oncor will remain a locally managed Texas company, headquartered in Dallas, committed to the communities we serve, and our customers will continue to receive the safe and reliable service they have come to expect."

State regulators have rejected two previous attempts to buy the Oncor assets noting they were not in the public interest, but Berkshire, led by the folksy Buffett, 86, projected confidence that it would win support and has said the deal would close in the fourth quarter.

The acquisition would be Berkshire’s third largest. Buffett’s other holdings include major assets in real estate and insurance. He is also the biggest shareholder in both Bank of America and Wells Fargo.</s>Warren Buffett's Berkshire Hathaway is buying the Texas power transmitter Oncor for $9 billion, one of his biggest acquisitions.

Oncor serves about 10 million people Texans. Oncor's parent company, Energy Future Holdings Corp. entered bankruptcy in 2014 facing more than $40 billion in debt after energy prices plunged.

Berkshire Hathaway will acquire a reorganized Energy Future, ultimately leading to the buyout of Oncor, based in Dallas.

Berkshire Hathaway already has a significant presence in the state, which includes headquarters for BNSF Railway Co., Acme Brick Co., Justin Brands Inc., McLane Co., Berkshire Hathaway Automotive, Star Furniture Co., TTI Inc., Charter Brokerage, LiquidPower Specialty Products Inc. and Allie Beth Allman & Associates.

The deal, which requires state, federal and bankruptcy court approval, is targeted to close in the fourth quarter.</s>Warren Buffett's Berkshire Hathaway Inc. is wasting no time trying to win over Texas regulators in its bid for Oncor Electric Delivery Co., the state's largest electric-transmission operator.

Berkshire is promising an independent board of directors with sole authority over dividends, and will shield Oncor from potential bankruptcy at other Berkshire units, according to a document provided to Bloomberg by Oncor spokesman Geoffrey Bailey. Berkshire early Friday announced an agreement to buy Oncor parent Energy Future Holdings Corp. for $9 billion in cash.

Berkshire will be the third company to come before Texas regulators seeking permission to buy a utility that they have so far highly guarded. Just a week ago, the state rejected NextEra Energy Inc.'s $18 billion bid to buy Oncor for a third time, deciding the merger wasn't in the public interest. Last year, it quashed an offer from Hunt Consolidated Inc.

"I applaud both Berkshire Hathaway Energy and Oncor for their productive efforts," Brian Lloyd, executive director of the Texas Public Utility Commission, said Friday in an emailed statement. In addition to strengthening financial "ring-fencing" requirements by the state, Berkshire and Oncor "are proposing additional assurances regarding Oncor's independence, financial integrity, and to invest in infrastructure, cybersecurity and system reliability," Lloyd said.

Berkshire's commitments were filed Friday with the court overseeing the bankruptcy of Energy Future Holdings, according to Bailey. The all-cash offer for Energy Future implies an equity value of about $11.25 billion for 100 percent of Oncor, Omaha, Neb.-based Berkshire said in a statement Friday. The offer appears to be worth about $1 billion less than NextEra's, people familiar with the situation said, asking not to be identified because the information hasn't been publicly disclosed.

"Oncor is an excellent fit for Berkshire Hathaway, and we are pleased to make another long-term investment in Texas -- when we invest in Texas, we invest big!" Buffett, chairman of Berkshire Hathaway, said in the statement. "Oncor is a great company with similar values and outstanding assets."

Berkshire has accepted limits on its control of Oncor's board that NextEra had previously rejected. Texas had demanded that NextEra give up control over who would be on Oncor's board and how much money, if any, NextEra could extract from the company. NextEra told regulators it wouldn't buy Oncor unless it can control the board and set fiscal policies.

Berkshire's commitments appear "to meet many of the objections that were raised about the NextEra acquisition," Tom Smith, director of special projects for the Texas office of Public Citizen, a consumer group, said by phone Friday. The cash offer also avoids the "innovative, weak financing" proposed by Hunt, Smith said.

A takeover of Oncor is key to ending the bankruptcy of Energy Future Holdings, formed by KKR & Co., TPG Capital and Goldman Sachs Capital Partners as part of the biggest leveraged buyout in history. The company's been working since 2014 to restructure $50 billion of debt.

Information for this article was contributed by Steven Church of Bloomberg News.
Berkshire Hathaway Inc. agrees to pay USD $9 billion to buy the parent of Texas power transmission company Oncor Electric Delivery.