Oncor Electric Delivery Co. LLC earned upgrades from rating agencies, sweetening the end of its long journey of finding a new owner.
Sempra Energy closed its $9.45 billion acquisition of Energy Future Holdings Corp. and its 80% ownership interest in Oncor on March 9, a day after the Public Utility Commission of Texas approved the transaction. Prior to Sempra, companies including Hunt Consolidated Inc., NextEra Energy Inc. and Berkshire Hathaway Energy tried to acquire Oncor.
"This acquisition removes Oncor's previous exposure to the uncertainties and challenges of operating under a majority owner subject to the oversight of a bankruptcy court," S&P Global Ratings said in a March 12 report.
S&P upgraded Oncor's issuer credit rating to A from BBB+ and its first-mortgage bonds to A+ from A. The ratings outlook is stable.
Sempra will keep Oncor as a ring-fenced utility. "The ring-fencing measures limit Sempra's ability to direct the management, policies and operations of Oncor," Fitch Ratings said in a March 12 report, adding that it also "insulates Oncor from any future credit deterioration at Sempra."
In relation to that, Sempra offered to suspend dividends if Oncor's senior secured debt is rated below BBB by any of Fitch, Moody's and S&P.
Fitch also raised Oncor's senior secured debt to A from BBB+, along with upgrading the Texas transmission and distribution utility's long-term issuer default rating to BBB+ from BBB, and its short-term IDR and commercial paper rating to F2 from F3. Fitch also removed Oncor's ratings from Rating Watch Positive and assigned it a stable outlook.
Meanwhile, Moody's upgraded Oncor's senior secured rating to A2 from A3 and changed the ratings outlook to stable from positive.
"Oncor will continue to operate as the largest T&D electric utility in Texas with robust capital investment prospects and stable financial credit metrics, including a sustained ratio of cash flow to debt around 17%," Moody's said in upgrading the company on March 12.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.
