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Dec. 11-15: Sempra reaches key agreement in Oncor deal; Contura sells coal mines

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Dec. 11-15: Sempra reaches key agreement in Oncor deal; Contura sells coal mines

A look back at successes and setbacks in the energy industry.

Highs

SEMPRA — Sempra Energy announced Dec. 14 that it reached an agreement with several key Texas stakeholders in support of its bid to acquire Energy Future Holdings Corp.'s 80% stake in Oncor Electric Delivery Co. LLC. Sempra Energy on Aug. 21 officially announced its agreement to acquire the majority stake in Oncor through a reorganized Energy Future Holdings. Under the terms of the transaction, San Diego-headquartered Sempra would acquire the 80% stake in the prized transmission and distribution utility for $9.45 billion in cash, plus the assumption of about $7 billion in net debt. Under the stipulation, the parties vow that Sempra's bid "is in the public interest, meets Texas statutory standards, and will bring substantial benefits" to Texas ratepayers. Sempra on Dec. 11 secured approval from the Federal Energy Regulatory Commission to acquire the majority ownership stake in Oncor.

CONTURA — Contura Energy Inc. on Dec. 11 announced the sale of two Powder River Basin mines to Blackjewel LLC. Contura subsidiary Contura Coal West LLC agreed to sell its Eagle Butte and Belle Ayr mines in Wyoming to Blackjewel LLC for deferred consideration of up to $50 million. The deal drew a mixed reaction from industry observers, with some worried about further fragmenting the producer base and ramping up production while increasing coal pricing concerns and others calling the move a "positive harbinger for 2018." B. Riley FBR Inc. analysts commented, "One of the reasons why we consider M&A positive for the industry is that it holds the potential for further production rationalization, especially on the thermal coal side."

Between

NUCLEAR — South Carolina regulators held two hearings and said they would rule "as soon as possible" on petitions to strip revenue from SCANA Corp. utility South Carolina Electric & Gas Co., or SCE&G, and order refunds in the wake of the V.C. Summer abandonment. SCE&G's attorney told the Public Service Commission of South Carolina that "there is no right to reparations" and warned at a Dec. 12 hearing that stripping the utility of nearly $450 million in annual revenue would set forth a "quick cascade of events that would lead to insolvency, financial crisis and ultimately a bankruptcy filing." SCE&G has committed to filing for a complete regulatory review of its rates in early January. Meanwhile, Georgia Power Co. attorneys and regulatory staffers for the Georgia Public Service Commission clashed Dec. 11 at a contentious seven-hour hearing on the future of the Alvin W. Vogtle Nuclear Plant expansion. "We've gone along since 2008 without an integrated project schedule that fits any type of industry norm," the PSC's lead Vogtle analyst, Steven Roetger, testified at the hearing. A decision on the plant, majority owned by the Southern Co. subsidiary, could come before Christmas.

WILDFIRES — The California Public Utilities Commission adopted regulations Dec. 14 that require electric utilities to increase vegetation clearances for power lines and step up equipment inspections and repairs, among other measures, to help prevent wildfires in high-hazard zones. The regulations were approved in response to recent and ongoing wildfires in the service territories of PG&E Corp. subsidiary Pacific Gas and Electric Co. and Edison International subsidiary Southern California Edison Co. The investor-owned electric utilities were authorized to track the costs they incur and file applications to recover those costs until they can include future expenditures in their general rate cases.

Lows

HESS — Activist investor Elliott Management Corp. has demanded that Hess Corp. CEO John Hess step down or consider a sale of part or all of the company. Elliott, which owns a 6.7% stake in Hess, forced John Hess to resign as chairman and installed its own nominees onto the company's board of directors in 2013. "As long-term shareholders in Hess, we are frustrated by the company's continuing underperformance," John Pike, senior portfolio manager at Elliott, said in a statement distributed to media outlets. Some analysts, however, back Hess. "[Hess] unfortunately just looks to be caught in the somewhat awkward phase of significant cash flow outspend prior to bringing on a massive and very economic discovery during a time that oil [and] gas investors are clamoring for companies to spend within or less than cash flow and return cash to shareholders," Capital One analysts wrote.