Finalist: M&A Deal of the Year
For several years, the 60,000 Texas customers of Dallas-based Sharyland Utilities paid considerably more for their electric service than their neighbors – sometimes 40 percent more.
That ended in 2017 when Oncor Electric Delivery Company announced a complex asset exchange with Sharyland valued at $400 million. The transaction reduced prices for retail customers, benefited both companies financially and received the praise of Texas regulators.
“This is one of those very rare deals that is good for both companies and for 60,000 Texas consumers,” says Oncor General Counsel Allen Nye, who is expected to become the company’s CEO later this year. “It is a deal that came about organically.”
The news media published numerous articles criticizing Sharyland, which is owned by the Hunt family, for having the highest retail power rates in Texas. Sharyland and its affiliated company, Sharyland Distribution and Transmission Services, which is owned by publicly traded InfraREIT, jointly entered into the deal with Oncor.
“The transaction represents much more than a commercial arrangement between two business concerns,” says Vinson & Elkins corporate partner Chris Rowley, who led the deal with Nye for Oncor. “It’s the manifestation of an entire industry coming together to solve a problem that seemed unsolvable.
“Allen knows how to get things done, and he knew what the terms needed to be that would be acceptable to both companies, the board of directors and state regulators,” Rowley says. “Allen very succinctly told the board the story behind the deal and why it was an important deal for Oncor to do.
“Asset swaps are not unusual in the electric utility industry,” Rowley says. “However, transactions of this size and asset mix are rare, and there are not many comparable transactions.”
Nye, Oncor and V&E are finalists for the 2017 Outstanding Corporate Counsel Award’s M&A Deal of the Year.
This is the first year that the Association of Corporate Counsel’s DFW Chapter and The Texas Lawbook have given an award for M&A Deal of the Year, which recognizes the joint work of the in-house corporate legal department and its outside counsel.
Nye grew up in Dallas. His father was legendary energy executive Erle Nye, a lawyer by training who became the CEO of TXU. The younger Nye graduated from St. Mary’s School of Law in 1993. He practiced energy regulatory law in the Dallas office of Hunton & Williams and then V&E before joining Oncor as GC in November 2010.
In 2014, Energy Future Holdings, which owns 80 percent of Oncor, filed for Chapter 11 restructuring. Oncor, which is not part of the bankruptcy proceedings, is being sold to Sempra Energy for $11 billion. One condition of the deal, which is still pending approval by the Texas Public Utility Commission, is that Nye will become Oncor’s CEO upon closing.
“One thing that will help me go from general counsel to CEO is that I grew up around the company,” Nye says.
Oncor is the largest electric utility in Texas, with 3.4 million wholesale and retail delivery customers.
“The deal with Sharyland sounded straightforward, but there were actually several complex details that needed to be resolved and the approval of various parties were required,” Nye says.
The transaction required multifaceted solutions for separating transmission and distribution assets and for transitioning customers, as well as settling rate cases involving Oncor and Sharyland on acceptable terms.
“The Hunt organization and Sharyland took a lot of arrows from customers and others for problems that really weren’t of their making,” TPUC Commissioner Ken Anderson said in approving the transaction. “They were faced with an intractable problem. This will solve that problem. Oncor didn’t have to do this. It couldn’t have happened but for the agreement of everybody.”
Nye says he chose Rowley to lead the M&A transaction and V&E partner Matthew Henry to lead the effort to get regulatory approval.
“Allen is a problem-solver,” says Henry, who is considered a finalist to replace Nye as GC at Oncor later this year. “With Allen, it starts with character and integrity. He’s honest and straightforward. He knows there are no cookie-cutter solutions. He approaches business in a no-nonsense manner, and he avoids gamesmanship.”