Company Quick10K Filing
Quick10K
Oncor Electric Delivery
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-07-29 Earnings, Officers, Exhibits
8-K 2019-05-23 Off-BS Arrangement, Exhibits
8-K 2019-05-16 M&A, Off-BS Arrangement, Regulation FD, Exhibits
8-K 2019-05-09 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-05-07 Earnings, Exhibits
8-K 2019-05-03 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-02-12 Officers, Exhibits
8-K 2018-12-14 Officers
8-K 2018-12-10 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-11-30 Off-BS Arrangement, Exhibits
8-K 2018-11-20 Other Events
8-K 2018-11-07 Earnings, Regulation FD, Exhibits
8-K 2018-10-29 Other Events, Exhibits
8-K 2018-10-18 Regulation FD, Other Events, Exhibits
8-K 2018-10-18 Enter Agreement, Exhibits
8-K 2018-08-10 Off-BS Arrangement, Exhibits
8-K 2018-08-06 Earnings, Exhibits
8-K 2018-07-16 Officers
8-K 2018-06-28 Regulation FD, Exhibits
8-K 2018-03-26 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-03-08 Enter Agreement, Control, Officers, Exhibits
8-K 2018-03-06 Earnings, Exhibits
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ISDR Issuer Direct 46
THST Truett-Hurst 0
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C311 2019-06-30
Part I. Financial Information
Item 1.Financial Statements
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-2.A c311-20190630xex2_a.htm
EX-10.D c311-20190630xex10_d.htm
EX-10.E c311-20190630xex10_e.htm
EX-31.A c311-20190630xex31_a.htm
EX-31.B c311-20190630xex31_b.htm
EX-32.A c311-20190630xex32_a.htm
EX-32.B c311-20190630xex32_b.htm

Oncor Electric Delivery Earnings 2019-06-30

C311 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 c311-20190630x10q.htm 10-Q Oncor_20190630 Q2_Taxonomy2019

 





 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

____________________



FORM 10-Q



[] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2019



― OR ―



[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

____________________



Commission File Number 333-100240



Oncor Electric Delivery Company LLC

(Exact Name of Registrant as Specified in its Charter)





 

Delaware

75-2967830

(State of Organization)

(I.R.S. Employer Identification No.)



 

1616 Woodall Rodgers Fwy., Dallas, TX  75202

(214) 486-2000

(Address of Principal Executive Offices)

(Registrant’s Telephone Number)

____________________



Securities registered pursuant to Section 12(b) of the Act:



 

 

Title of each class

Trading Symbol

Name of each exchange on which registered

None

None

None



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes          No  √      



Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes    √     No ____



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ____    Accelerated filer ____    Non-Accelerated filer  √         

Smaller reporting company___ Emerging growth company ___



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes___ No___



Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes___ No  √   



As of August 2, 2019, 80.25% of the outstanding membership interests in Oncor Electric Delivery Company LLC (Oncor) were directly held by Oncor Electric Delivery Holdings Company LLC and indirectly by Sempra Energy, and 19.75% of the outstanding membership interests were held by Texas Transmission Investment LLC.  None of the membership interests are publicly traded.







 

 


 

 

TABLE OF CONTENTS



Page

GLOSSARY

PART I.      FINANCIAL INFORMATION

Item 1.        Financial Statements (Unaudited)

Condensed Statements of Consolidated Income —
Three and Six Months Ended June 30, 2019 and 2018

Condensed Statements of Consolidated Comprehensive Income —
Three and Six Months Ended June 30, 2019 and 2018

Condensed Statements of Consolidated Cash Flows —
Six Months Ended June 30, 2019 and 2018

Condensed Consolidated Balance Sheets —
June 30, 2019 and December 31, 2018

Notes to Condensed Consolidated Financial Statements

10 

Item 2.        Management’s Discussion and Analysis of Financial Condition and Results of Operations

35 

Item 3.        Quantitative and Qualitative Disclosures About Market Risk

49 

Item 4.        Controls and Procedures

51 

PART II.    OTHER INFORMATION

52 

Item 1.        Legal Proceedings

52 

Item 1A.     Risk Factors

52 

Item 2.        Unregistered Sales of Equity Securities and Use of Proceeds

52 

Item 3.        Defaults Upon Senior Securities

52 

Item 4.        MINE SAFETY DISCLOSURES

52 

Item 5.        Other Information

52 

Item 6.        Exhibits

53 

SIGNATURE

56 





Oncor Electric Delivery Company LLC’s (Oncor) annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports are made available to the public, free of charge, on the Oncor website at http://www.oncor.com as soon as reasonably practicable after they have been filed with or furnished to the Securities and Exchange Commission.  The information on Oncor’s website or available by hyperlink from the website shall not be deemed a part of, or incorporated by reference into, this quarterly report on Form 10-Q.  The representations and warranties contained in any agreement that we have filed as an exhibit to this quarterly report on Form 10-Q or that we have or may publicly file in the future may contain representations and warranties made by and to the parties thereto as of specific dates.  Such representations and warranties may be subject to exceptions and qualifications contained in separate disclosure schedules, may represent the parties’ risk allocation in the particular transaction, or may be qualified by materiality standards that differ from what may be viewed as material for securities law purposes.



This Form 10-Q and other Securities and Exchange Commission filings of Oncor occasionally make references to Oncor (or “we,” “our,” “us” or “the company”) when describing actions, rights or obligations of Oncor and/or its subsidiaries.  These references reflect the fact that the subsidiaries are consolidated with Oncor for financial reporting purposes.  However, these references should not be interpreted to imply that Oncor is actually undertaking the action or has the rights or obligations of any subsidiary or that the subsidiary company is undertaking an action or has the rights or obligations of its parent company or of any other affiliate.





 

2


 

 



GLOSSARY



 





 

When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below.



2018 Form 10-K

Oncor’s Annual Report on Form 10-K for the year ended December 31, 2018

AMS

advanced metering system

ASU

Accounting Standards Update

CP Program

commercial paper program

Credit Facility

revolving credit facility

DCRF

distribution cost recovery factor

Deed of Trust

Deed of Trust, Security Agreement and Fixture Filing, dated as of May 15, 2008, made by Oncor to and for the benefit of The Bank of New York Mellon Trust Company, N.A. (as successor to The Bank of New York Mellon, formerly The Bank of New York), as collateral agent, as amended

EECRF

energy efficiency cost recovery factor

EFCH

Refers to Energy Future Competitive Holdings Company LLC, a former direct, wholly-owned subsidiary of EFH Corp. that was dissolved in connection with the Vistra Spin-Off and was, prior to the Vistra Spin-Off, the parent of TCEH, and/or its subsidiaries, depending on context.

EFH Bankruptcy Proceedings

Refers to voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code filed in U.S. Bankruptcy Court for the District of Delaware on April 29, 2014 (EFH Petition Date) by EFH Corp. and the substantial majority of its direct and indirect subsidiaries, including EFIH, EFCH and TCEH.  The Oncor Ring-Fenced Entities are not parties to the EFH Bankruptcy Proceedings.

EFH Corp.

Refers to Energy Future Holdings Corp., a holding company, and/or its subsidiaries, depending on context.  Renamed Sempra Texas Holdings Corp. upon emergence from the EFH Bankruptcy Proceedings and closing of the Sempra Acquisition. Its major subsidiaries include Oncor Holdings and, prior to the Vistra Spin-Off, TCEH.

EFIH

Refers to Energy Future Intermediate Holding Company LLC, a direct, wholly-owned subsidiary of EFH Corp. and the direct parent of Oncor Holdings. Renamed Sempra Texas Intermediate Holding Company LLC upon emergence from the EFH Bankruptcy Proceedings and closing of the Sempra Acquisition.

ERCOT

Electric Reliability Council of Texas, Inc., the independent system operator and the regional coordinator of various electricity systems within Texas

ERISA

Employee Retirement Income Security Act of 1974, as amended

FASB

Financial Accounting Standards Board

FERC

U.S. Federal Energy Regulatory Commission

Fitch

Fitch Ratings, Ltd. (a credit rating agency)

GAAP

generally accepted accounting principles of the U.S.

3


 

 

InfraREIT

InfraREIT, Inc., which was merged with and into a wholly-owned subsidiary of Oncor on May 16, 2019 in the InfraREIT Acquisition, with the surviving entity being a wholly-owned subsidiary of Oncor renamed Oncor NTU Holdings Company LLC.

InfraREIT Acquisition

Refers to Oncor’s acquisition of all of the equity interests of InfraREIT and InfraREIT Partners on May 16, 2019 pursuant to the transactions contemplated by the InfraREIT Merger Agreement and the SDTS-SU Asset Exchange.

InfraREIT Merger Agreement

Refers to the Agreement and Plan of Merger, dated as of October 18, 2018, among Oncor, 1912 Merger Sub LLC (a wholly-owned subsidiary of Oncor), Oncor T&D Partners, LP (a wholly-owned indirect subsidiary of Oncor), InfraREIT and InfraREIT Partners, which was completed on May 16, 2019.

InfraREIT Partners

InfraREIT Partners, LP, a subsidiary of InfraREIT which, as a result of the InfraREIT Acquisition, became an indirect wholly-owned subsidiary of Oncor and was renamed Oncor NTU Partnership LP.

kWh

kilowatt-hours

LIBOR

London Interbank Offered Rate, an interest rate at which banks can borrow funds, in marketable size, from other banks in the London interbank market

Moody’s

Moody’s Investors Service, Inc. (a credit rating agency)

NTU

Oncor Electric Delivery Company NTU LLC (formerly SDTS until the closing of the InfraREIT Acquisition), a wholly-owned indirect subsidiary of Oncor.

Oncor

Oncor Electric Delivery Company LLC, a direct, majority-owned subsidiary of Oncor Holdings

Oncor Holdings

Oncor Electric Delivery Holdings Company LLC, a direct, wholly-owned subsidiary of STIH and the direct majority owner (80.25% equity interest) of Oncor

Oncor OPEB Plans

Refers to plans sponsored by Oncor that offer certain postretirement health care and life insurance benefits to eligible current and former Oncor employees, certain eligible current and former EFH Corp. and Vistra employees, and their eligible dependents.

Oncor Retirement Plan

Refers to a defined benefit pension plan sponsored by Oncor.

Oncor Ring-Fenced Entities

Refers to Oncor Holdings and its direct and indirect subsidiaries, including Oncor and Oncor’s direct and indirect subsidiaries.

OPEB

other postretirement employee benefits

PUCT

Public Utility Commission of Texas

PURA

Texas Public Utility Regulatory Act

REP

retail electric provider

ROU

Right-of-use

S&P

S&P Global Ratings, a division of S&P Global Inc. (a credit rating agency)

4


 

 

SDTS

Sharyland Distribution & Transmission Services, L.L.C., an indirect subsidiary of InfraREIT, which was renamed Oncor Electric Delivery Company NTU LLC in connection with the InfraREIT Acquisition

SDTS-SU Asset Exchange

Refers to the transactions contemplated by the Agreement and Plan of Merger, dated as of October 18, 2018, by and among SU, SDTS and Oncor pursuant to which SU and SDTS exchanged certain assets as a condition to the closing of the transactions contemplated by the InfraREIT Merger Agreement.

SEC

U.S. Securities and Exchange Commission

Sempra

Sempra Energy

Sempra Acquisition

Refers to the transactions contemplated by the plan of reorganization confirmed in the EFH Bankruptcy Proceedings and that certain Agreement and Plan of Merger, dated as of August 21, 2017, by and between EFH Corp., EFIH, Sempra and one of Sempra’s wholly-owned subsidiaries, pursuant to which Sempra acquired the 80.03% of Oncor’s membership interests owned indirectly by EFH Corp. and EFIH. The transactions closed March 9, 2018.

Sempra-Sharyland Transaction

Refers to Sempra’s May 16, 2019 acquisition of a 50-percent interest in Sharyland Holdings.

Sharyland

Refers to Sharyland Utilities, L.L.C. (formerly SU), a subsidiary of Sharyland Holdings.

Sharyland Holdings

Refers to Sharyland Holdings, L.P., an entity in which Sempra acquired a 50-percent interest on May 16, 2019 in connection with the InfraREIT Acquisition. Sharyland Holdings is the parent of Sharyland.

Sponsor Group

Refers collectively to certain investment funds affiliated with Kohlberg Kravis Roberts & Co. L.P., TPG Global, LLC and GS Capital Partners, an affiliate of Goldman, Sachs & Co. that, prior to the Sempra Acquisition, held an ownership interest in Texas Holdings.

STH

Refers to Sempra Texas Holdings Corp., a Texas corporation (formerly EFH Corp. prior to the closing of the Sempra Acquisition), which is wholly owned by Sempra and the direct parent of STIH.

STIH

Refers to Sempra Texas Intermediate Holding Company LLC, a Delaware limited liability company (formerly EFIH prior to the closing of the Sempra Acquisition) and the sole member of Oncor Holdings following the Sempra Acquisition.

SU

Refers to Sharyland Utilities, L.P., which was converted into Sharyland on May 16, 2019

TCEH

Refers to Texas Competitive Electric Holdings Company LLC, a direct, wholly-owned subsidiary of EFCH and, prior to the Vistra Spin-Off, the parent company of EFH Corp.’s subsidiaries that were engaged in electricity generation and wholesale and retail energy market activities.  Subsequent to the Vistra Spin-Off, Vistra continued substantially the same operations as TCEH.

5


 

 

TCEH Debtors

Refers to certain subsidiaries of EFH Corp. that were debtors in the EFH Bankruptcy Proceedings, including TCEH’s subsidiaries that were engaged in electricity generation and wholesale and retail energy market activities.

TCJA

“Tax Cuts and Jobs Act,” enacted on December 22, 2017

TCOS

transmission cost of service

TCRF

transmission cost recovery factor

Texas Holdings

Refers to Texas Energy Future Holdings Limited Partnership, a limited partnership controlled by the Sponsor Group that owned substantially all of the common stock of EFH Corp. prior to the closing of the Sempra Acquisition.

Texas margin tax

A privilege tax imposed on taxable entities chartered/organized or doing business in the State of Texas that, for accounting purposes, is reported as an income tax. 

Texas RE

Refers to Texas Reliability Entity, Inc., an independent organization that develops reliability standards for the ERCOT region and monitors and enforces compliance with North American Electric Reliability Corporation standards and ERCOT protocols.

Texas Transmission

Refers to Texas Transmission Investment LLC, a limited liability company that owns a 19.75% equity interest in Oncor.  Texas Transmission is an entity indirectly owned by a private investment group led by OMERS Administration Corporation (acting through its infrastructure investment entity, OMERS Infrastructure Management Inc.) and Cheyne Walk Pte. Ltd.  Texas Transmission is not affiliated with Sempra, EFH Corp., any of their subsidiaries or any member of the Sponsor Group.

U.S.

United States of America

Vistra

Refers to Vistra Energy Corp. (formerly TCEH Corp.), and/or its subsidiaries, depending on context.  On October 3, 2016, the TCEH Debtors emerged from bankruptcy and became subsidiaries of TCEH Corp.  Subsequent to the Vistra Spin-Off, Vistra continued substantially the same operations as TCEH.

Vistra Retirement Plan

Refers to a defined benefit pension plan sponsored by an affiliate of Vistra, in which Oncor participates (formerly EFH Retirement Plan). 

Vistra Spin-Off

Refers to the completion of the TCEH Debtors’ reorganization under the Bankruptcy Code and emergence from the EFH Bankruptcy Proceedings effective October 3, 2016. Following the Vistra Spin-Off, the TCEH Debtors ceased to be affiliates of Oncor.



6


 

 

PART I.  FINANCIAL INFORMATION



ITEM 1.FINANCIAL STATEMENTS



ONCOR ELECTRIC DELIVERY COMPANY LLC

CONDENSED STATEMENTS OF CONSOLIDATED INCOME

(Unaudited)





 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended June 30,

 

Six Months Ended

June 30,



 

2019

 

2018

 

2019

 

2018



 

(millions of dollars)

Operating revenues (Note 3)

 

$

1,041 

 

$

1,021 

 

$

2,057 

 

$

2,011 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Wholesale transmission service

 

 

254 

 

 

238 

 

 

514 

 

 

483 

Operation and maintenance

 

 

204 

 

 

203 

 

 

425 

 

 

422 

Depreciation and amortization

 

 

178 

 

 

168 

 

 

350 

 

 

334 

Provision in lieu of income taxes (Note 9)

 

 

31 

 

 

47 

 

 

56 

 

 

80 

Taxes other than amounts related to income taxes

 

 

121 

 

 

121 

 

 

243 

 

 

246 

Total operating expenses

 

 

788 

 

 

777 

 

 

1,588 

 

 

1,565 

Operating income

 

 

253 

 

 

244 

 

 

469 

 

 

446 

Other deductions and (income) - net (Note 10)

 

 

25 

 

 

18 

 

 

42 

 

 

50 

Nonoperating benefit in lieu of income taxes

 

 

(4)

 

 

(4)

 

 

(7)

 

 

(11)

Interest expense and related charges (Note 10)

 

 

93 

 

 

87 

 

 

179 

 

 

175 

Net income

 

$

139 

 

$

143 

 

$

255 

 

$

232 



See Notes to Financial Statements.





CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

(Unaudited)





 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended June 30,

 

Six Months Ended

June 30,



 

2019

 

2018

 

2019

 

2018



 

(millions of dollars)

Net income

 

$

139 

 

$

143 

 

$

255 

 

$

232 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Net effects of cash flow hedges (net of tax) (Note 1)

 

 

 -

 

 

 -

 

 

(3)

 

 

 -

Defined benefit pension plans (net of tax)

 

 

 

 

 

 

 

 

Total other comprehensive income (loss)

 

 

 

 

 

 

 -

 

 

Comprehensive income

 

$

142 

 

$

144 

 

$

255 

 

$

234 



See Notes to Financial Statements.

7


 

 



ONCOR ELECTRIC DELIVERY COMPANY LLC

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS

(Unaudited)





 

 

 

 

 

 



 

Six Months Ended June 30,



 

2019

 

2018



 

(millions of dollars)

Cash flows — operating activities:

 

 

 

 

 

 

Net income

 

$

255 

 

$

232 

Adjustments to reconcile net income to cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization, including regulatory amortization

 

 

391 

 

 

393 

Provision in lieu of deferred income taxes

 

 

13 

 

 

26 

Other – net 

 

 

(3)

 

 

(1)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Regulatory accounts related to reconcilable tariffs (Note 2)

 

 

(108)

 

 

45 

Other operating assets and liabilities

 

 

(193)

 

 

(145)

Cash provided by operating activities

 

 

355 

 

 

550 

Cash flows — financing activities:

 

 

 

 

 

 

Issuances of long-term debt (Note 5)

 

 

1,300 

 

 

 -

Repayment of long-term debt (Note 5)

 

 

(738)

 

 

(144)

Proceeds of business acquisition bridge loan (Note 4)

 

 

600 

 

 

 -

Repayment of business acquisition bridge loan (Note 4)

 

 

(600)

 

 

 -

Payment of acquired entity credit facilities (Note 4)

 

 

(114)

 

 

 -

Change in short-term borrowings (Note 4)

 

 

260 

 

 

346 

Capital contributions from members (Note 7)

 

 

1,470 

 

 

144 

Distributions to members (Note 7)

 

 

(142)

 

 

 -

Debt discount, premium, financing and reacquisition costs – net

 

 

(29)

 

 

 -

Cash provided by financing activities

 

 

2,007 

 

 

346 

Cash flows — investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(1,047)

 

 

(926)

Business acquisition (Note 11)

 

 

(1,328)

 

 

 -

Other – net 

 

 

17 

 

 

10 

Cash used in investing activities

 

 

(2,358)

 

 

(916)

Net change in cash and cash equivalents

 

 

 

 

(20)

Cash and cash equivalents — beginning balance

 

 

 

 

21 

Cash and cash equivalents — ending balance

 

$

 

$





















See Notes to Financial Statements.

8


 

 

ONCOR ELECTRIC DELIVERY COMPANY LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)





 

 

 

 

 

 



 

At June 30,

 

At December 31,



 

2019

 

2018



 

(millions of dollars)

ASSETS

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

 

$

Trade accounts receivable – net (Note 10)

 

 

652 

 

 

559 

Amounts receivable from members related to income taxes (Note 9)

 

 

 

 

 -

Materials and supplies inventories — at average cost

 

 

136 

 

 

116 

Prepayments and other current assets

 

 

100 

 

 

94 

Total current assets

 

 

898 

 

 

772 

Investments and other property (Note 10)

 

 

122 

 

 

120 

Property, plant and equipment – net (Note 10)

 

 

18,631 

 

 

16,090 

Goodwill (Note 1)

 

 

4,751 

 

 

4,064 

Regulatory assets (Note 2)

 

 

1,775 

 

 

1,691 

Operating lease ROU and other assets (Note 6)

 

 

106 

 

 

15 

Total assets

 

$

26,283 

 

$

22,752 

LIABILITIES AND MEMBERSHIP INTERESTS

Current liabilities:

 

 

 

 

 

 

Short-term borrowings (Note 4)

 

$

1,073 

 

$

813 

Long-term debt due currently (Note 5)

 

 

361 

 

 

600 

Trade accounts payable

 

 

370 

 

 

300 

Amounts payable to members related to income taxes (Note 9)

 

 

13 

 

 

26 

Accrued taxes other than amounts related to income

 

 

131 

 

 

199 

Accrued interest

 

 

78 

 

 

68 

Operating lease and other current liabilities (Note 6)

 

 

225 

 

 

209 

Total current liabilities

 

 

2,251 

 

 

2,215 

Long-term debt, less amounts due currently (Note 5)

 

 

7,470 

 

 

5,835 

Liability in lieu of deferred income taxes (Note 9)

 

 

1,747 

 

 

1,602 

Regulatory liabilities (Note 2)

 

 

2,756 

 

 

2,697 

Employee benefit, operating lease and other obligations (Notes 6, 8 and 10)

 

 

2,013 

 

 

1,943 

Total liabilities

 

 

16,237 

 

 

14,292 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

Membership interests (Note 7):

 

 

 

 

 

 

Capital account ― number of units outstanding 2019 and 2018 – 635,000,000

 

 

10,210 

 

 

8,624 

Accumulated other comprehensive loss

 

 

(164)

 

 

(164)

Total membership interests

 

 

10,046 

 

 

8,460 

Total liabilities and membership interests

 

$

26,283 

 

$

22,752 



See Notes to Financial Statements.

9


 

 

ONCOR ELECTRIC DELIVERY COMPANY LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



1.    BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES



Description of Business



References in this report to “we,” “our,” “us” and “the company” are to Oncor and/or its subsidiaries.  See “Glossary” for definition of terms and abbreviations.



We are a regulated electricity transmission and distribution company primarily engaged in providing delivery services to REPs that sell power in the north-central, eastern,  western and panhandle regions of Texas.  We are a direct, majority-owned subsidiary of Oncor Holdings, which is indirectly wholly owned by Sempra.  Oncor Holdings owns 80.25% of our membership interests and Texas Transmission owns 19.75% of our membership interests.  We are managed as an integrated business; consequently, there are no separate reportable business segments.



Our consolidated financial statements include the results of our wholly-owned indirect subsidiary NTU, which is a regulated utility that provides electricity transmission delivery service in the north-central,  western and  panhandle regions of Texas. We acquired NTU as part of the InfraREIT Acquisition that closed on May 16, 2019.



Various “ring-fencing” measures have been taken to enhance our credit quality and the separateness between the Oncor Ring-Fenced Entities, Sempra and its affiliates (other than the Oncor Ring-Fenced Entities), and any other entities with a direct or indirect ownership interest in Oncor or Oncor Holdings.  These measures serve to mitigate the Oncor Ring-Fenced Entities’ credit exposure to Sempra and its affiliates and any other direct or indirect owners of Oncor and Oncor Holdings, and to reduce the risk that the assets and liabilities of Oncor Ring-Fenced Entities would be substantively consolidated with the assets and liabilities of any Sempra entity or any other direct or indirect owners of Oncor and Oncor Holdings in connection with a bankruptcy of any such entities. Such measures include, among other things: the 19.75% equity interest held by Texas Transmission; maintenance of separate books and records for the Oncor Ring-Fenced Entities; and our board of directors being comprised of a majority of directors who meet certain independent/disinterested director standards.  As a result, none of the assets of the Oncor Ring-Fenced Entities are available to satisfy the debt or obligations of any Sempra entity or any other direct or indirect owner of Oncor or Oncor Holdings.  The assets and liabilities of the Oncor Ring-Fenced Entities are separate and distinct from those of any Sempra entities and any other direct or indirect owner of Oncor or Oncor Holdings.  We do not bear any liability for debt or contractual obligations of Sempra and its affiliates or any other direct or indirect owner of Oncor or Oncor Holdings, and vice versa.  Accordingly, our operations are conducted, and our cash flows are managed, independently from Sempra and its affiliates and any other direct or indirect owner of Oncor or Oncor Holdings.

 

Basis of Presentation



These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and related notes included in the 2018 Form 10-K.  In the opinion of Oncor management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the results of operations and financial position have been made.  We have evaluated all subsequent events through the date the financial statements were issued.  All appropriate intercompany items and transactions have been eliminated in consolidation.  The results of operations for an interim period may not give a true indication of results for a full year due to seasonality (see Note 13 to Financial Statements in our 2018 Form 10-K for additional information regarding quarterly results of operations).  Our consolidated financial statements have been prepared in accordance with GAAP governing rate-regulated operations.  All dollar amounts in the financial statements and tables in the notes are stated in millions of U.S. dollars unless otherwise indicated.



Use of Estimates



Preparation of our financial statements requires management to make estimates and assumptions about future

10


 

 

events that affect the reporting of assets and liabilities at the balance sheet dates and the reported amounts of revenue and expense, including fair value measurements.  In the event estimates and/or assumptions prove to be different from actual amounts, adjustments are made in subsequent periods to reflect more current information.  No material adjustments were made to previous estimates or assumptions during the current period.



Goodwill



We discuss goodwill in Note 1 to Financial Statements in our 2018 Form 10-K.  The increase in goodwill from $4,064 million at December 31, 2018 to $4,751 million at June 30, 2019 is due to the InfraREIT Acquisition. See Note 11 for more information on the InfraREIT Acquisition.



Changes in Accounting Standards  



Topic 842, “Leases”  In February 2016, the FASB issued ASU 2016-02 which created FASB Topic 842, Leases (Topic 842).  Topic 842 amends previous GAAP to require the balance sheet recognition of substantially all lease assets and liabilities, including operating leases.  Operating lease liabilities are not classified as debt for GAAP purposes under Topic 842 and are not treated as debt for our regulatory purposes.  All of Oncor’s existing leases meet the definition of an operating lease.  Under the new rules, the recognition of any finance leases (previously known as capital leases) on the balance sheet are classified as debt for both GAAP and regulatory capital structure purposes (see Note 7 for details) similar to the previous capital lease treatment. 



We adopted Topic 842 on January 1, 2019, using the optional transition method to apply the new guidance prospectively and not restate comparative periods.  We elected the package of practical expedients that permits us to not reassess (a) whether a contract is or contains a lease, (b) lease classification or (c) determination of initial direct costs, which allows us to carry forward accounting conclusions under previous GAAP on contracts that commenced prior to adoption of the lease standard.  We also elected the land easement practical expedient, which allows us to continue to account for pre-existing land easements under our accounting policy that existed before adoption of the lease standard.  We did not elect the practical expedient to use hindsight in making judgments when determining the lease term.



The adoption of Topic 842 affects our balance sheet, as our contracts for office space, service centers and fleet vehicles are operating leases.  The following table shows the increases on our balance sheet at January 1, 2019 from the initial adoption of Topic 842.



 

 

 



 

At January 1, 2019

Operating Leases:

 

 

 

ROU assets:

 

 

 

Operating lease ROU and other assets

 

$

82 



 

 

 

Lease liabilities:

 

 

 

Other current liabilities

 

$

26 

Employee benefit, operating lease and other obligations

 

 

56 

Total operating lease liabilities

 

$

82 



Topic 220, “Income Statement—Reporting Comprehensive Income” amended by ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”  In February 2018, the FASB issued ASU 2018-02, an amendment to Topic 220.  Under ASU 2018-02, an entity is required to provide certain disclosures regarding stranded tax effects, including its accounting policy related to releasing the income tax effects from accumulated other comprehensive income (AOCI).  We elected to reclassify stranded tax effects resulting from the TCJA from AOCI to capital accounts.  Our stranded tax effects in AOCI, which are related to previous interest rate cash flow hedges, were $4 million and increased our capital account upon reclassification.  We adopted the standard on a prospective basis January 1, 2019.

11


 

 

2.    REGULATORY MATTERS



Regulatory Assets and Liabilities  



Recognition of regulatory assets and liabilities and the periods over which they are to be recovered or refunded through rate regulation reflect the decisions of the PUCT.   Components of our regulatory assets and liabilities and their remaining recovery periods as of June 30, 2019 are provided in the table below.  Amounts not currently earning a return through rate regulation are noted.



 

 

 

 

 

 

 

 



 

Remaining Rate Recovery/Amortization Period

 

 

 

 



 

At June 30, 2019

 

At June 30, 2019

 

At December 31, 2018

Regulatory assets:

 

 

 

 

 

 

 

 

Employee retirement liability (a)(b)(c)

 

To be determined

 

$

631 

 

$

648 

Employee retirement costs being amortized 

 

8 years

 

 

279 

 

 

297 

Employee retirement costs incurred since the last rate review period (b)

 

To be determined

 

 

76 

 

 

73 

Self-insurance reserve (primarily storm recovery costs) being amortized

 

8 years

 

 

330 

 

 

351 

Self-insurance reserve incurred since the last rate review period (primarily storm related) (b)

 

To be determined

 

 

152 

 

 

59 

Securities reacquisition costs

 

Lives of related debt

 

 

32 

 

 

10 

Deferred conventional meter and metering facilities depreciation

 

1 year

 

 

26 

 

 

36 

Under-recovered AMS costs

 

8 years

 

 

174 

 

 

185 

Energy efficiency performance bonus (a)

 

1 year or less

 

 

 

 

Under-recovered wholesale transmission service expense (a)

 

1 year or less

 

 

32 

 

 

 -

Other regulatory assets

 

Various

 

 

40 

 

 

25 

Total regulatory assets

 

 

 

 

1,775 

 

 

1,691 



 

 

 

 

 

 

 

 

Regulatory liabilities:

 

 

 

 

 

 

 

 

Estimated net removal costs

 

Lives of related assets

 

 

1,134 

 

 

1,023 

Excess deferred taxes

 

Primarily over lives of related assets

 

 

1,608 

 

 

1,571 

Over-recovered wholesale transmission service expense (a)

 

1 year or less

 

 

 -

 

 

89 

Other regulatory liabilities

 

Various

 

 

14 

 

 

14 

Total regulatory liabilities

 

 

 

 

2,756 

 

 

2,697 

Net regulatory assets (liabilities)

 

 

 

$

(981)

 

$

(1,006)

____________

(a)

Not earning a return in the regulatory rate-setting process.

(b)

Recovery is specifically authorized by statute or by the PUCT, subject to reasonableness review.

(c)

Represents unfunded liabilities recorded in accordance with pension and OPEB accounting standards.



12


 

 

InfraREIT Acquisition Approval (PUCT Docket No. 48929)



On May 9, 2019, the PUCT issued a final order in Docket No. 48929 approving the transactions contemplated by the InfraREIT Acquisition, including the SDTS-SU Asset Exchange, and the Sempra-Sharyland Transaction. For more information on these transactions, see Note 11.



Regulatory Status of the TCJA



The excess deferred tax related balances above are primarily the result of the TCJA corporate federal income tax rate reduction from 35% to 21%.  These regulatory liabilities reflect our obligation, as required by PUCT order in Docket No. 46957, to refund to utility customers any excess deferred tax related balances created by the reduction in the corporate federal income tax rate through reductions in our tariffs.



Docket No. 48325



In 2018, we made filings to incorporate the impacts of the TCJA into our tariffs, including the reduction in the corporate income tax rate from 35% to 21% and amortization of excess deferred federal income taxes. In the filings, we proposed a total net decrease in the revenue requirement used to set transmission and distribution rates of approximately $181 million annually as compared to the revenue requirement approved in Oncor’s most recent rate review, PUCT Docket No. 46957.  In September 2018, we reached an unopposed stipulation regarding an overall settlement of the TCJA impacts. The settlement included, on an annual basis, $144 million related to the reduction of income tax expense currently in rates and $75 million related to amortization of excess deferred federal income taxes.



The settlement rates were implemented on an interim basis during 2018 and were approved by the PUCT on April 4, 2019.  These rates include the refund of the unprotected portion of excess deferred federal income taxes over a ten-year period and the protected portion over the lives of the related assets.



Docket No. 49160 



During 2018, interim TCOS rates included refunds of excess deferred federal income taxes that were lower than the amount approved by the PUCT. We proposed refunding the related $9 million regulatory liability balance at March 31, 2019 over a one-month period as part of our Docket No. 49160 interim TCOS update filed in January 2019.  This TCOS filing was approved by the PUCT on April 26, 2019 and a total refund of $9 million was made in April and May of 2019.



DCRF (PUCT Docket No. 49427) 



On April 8, 2019, we filed with the PUCT, as well as with cities with original jurisdiction over our rates, an application for approval of an updated DCRF.  The DCRF allows us to recover, primarily through our tariff for retail delivery service, certain costs related to our distribution investments.  In our DCRF application, we requested a $29 million increase in annual distribution revenues related to 2018 distribution investments.  On May 30, 2019, a stipulated settlement agreement among the parties to the proceeding was reached that included a $25 million increase in annual distribution revenues, and, on June 10, 2019, interim rates based on the stipulated settlement agreement were authorized to begin on September 1, 2019.  The stipulated settlement agreement and interim rates are pending final PUCT approval.



AMS Final Reconciliation (PUCT Docket No. 49721)



On July 9, 2019, we filed a request with the PUCT for a final reconciliation of our AMS costs.  Effective with the implementation of rates pursuant to the Docket No. 46957 rate review, we ceased recovering AMS charges through a surcharge on November 26, 2017, and AMS costs are now being recovered through base rates.  We made the following requests in our AMS reconciliation filing:

·

a reconciliation of all costs incurred with the $87 million of revenues collected during the final period of the AMS surcharge from January 1, 2017 to November 26, 2017,

13


 

 

·

a final PUCT determination of the net operating cost savings of $16 million from the final period of our AMS deployment that were used to reduce the amount of costs that were ultimately recovered through our AMS surcharge,

·

authorization to add the under-recovery of the 2017 AMS costs from this reconciliation proceeding of $6 million to the existing AMS regulatory asset currently being recovered through base rates, and

·

authorization to establish a regulatory asset to capture the costs associated with this reconciliation proceeding (if approved, Oncor would seek recovery of that regulatory asset in a future Oncor rate case).



We cannot predict the outcome of the proceeding at this time.



3.   REVENUES



General



Our revenue is billed monthly under tariffs approved by the PUCT and the majority of revenues are related to providing electric delivery service to consumers.  Tariff rates are designed to recover the cost of providing electric delivery service to customers including a reasonable rate of return on invested capital.   As the volumes delivered can be directly measured, our revenues are recognized when the underlying service has been provided in an amount prescribed by the related tariff. We recognize revenue in the amount that we have the right to invoice.   Substantially all of our revenues are from contracts with customers except for alternative revenue program revenues discussed below.



Reconcilable Tariffs



The PUCT has designated certain tariffs (primarily TCRF and EECRF) as reconcilable, which means the differences between amounts billed under these tariffs and the related incurred costs are deferred as either regulatory assets or regulatory liabilities.  Accordingly, at prescribed intervals, future tariffs are adjusted to either repay regulatory liabilities or collect regulatory assets. 



Alternative Revenue Program 



The PUCT has implemented an incentive program allowing us to earn performance bonuses by exceeding PUCT energy efficiency program targets. This incentive program and the related performance bonus revenues are considered an “alternative revenue program” under GAAP.  Annual performance bonuses are recognized as revenue when approved by the PUCT, typically in the third or fourth quarter each year. 



14


 

 

Disaggregation of Revenues 



The following table reflects electric delivery revenues disaggregated by tariff for the three and six months ended June 30, 2019 and 2018:



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended June 30,

 

Six Months Ended June 30,



 

2019

 

2018

 

2019

 

2018

Operating revenues

 

 

 

 

 

 

 

 

 

 

 

 

Revenues contributing to earnings:

 

 

 

 

 

 

 

 

 

 

 

 

Distribution base revenues

 

$

497 

 

$

529 

 

$

996 

 

$

1,036 

Transmission base revenues (TCOS revenues):

 

 

 

 

 

 

 

 

 

 

 

 

Billed to third-party wholesale customers

 

 

168 

 

 

141 

 

 

312 

 

 

266 

Billed to REPs serving Oncor distribution customers, through TCRF

 

 

93 

 

 

79 

 

 

177 

 

 

157 

Total transmission base revenues

 

 

261 

 

 

220 

 

 

489 

 

 

423 

Other miscellaneous revenues

 

 

19 

 

 

16 

 

 

35 

 

 

31 

Total revenues contributing to earnings

 

 

777 

 

 

765 

 

 

1,520 

 

 

1,490 



 

 

 

 

 

 

 

 

 

 

 

 

Revenues collected for pass-through expenses:

 

 

 

 

 

 

 

 

 

 

 

 

TCRF - third-party wholesale transmission service

 

 

254 

 

 

238 

 

 

514 

 

 

483 

EECRF and other regulatory charges

 

 

10 

 

 

18 

 

 

23 

 

 

38 

Revenues collected for pass-through expenses

 

 

264 

 

 

256 

 

 

537 

 

 

521 



 

 

 

 

 

 

 

 

 

 

 

 

Total operating revenues

 

$

1,041 

 

$

1,021 

 

$

2,057 

 

$

2,011 



Customers



Our distribution customers consist of approximately 90 REPs and certain electric cooperatives in our certificated service area.  The consumers of the electricity we deliver are free to choose their electricity supplier from REPs who compete for their business.  Our transmission base revenues are collected from load serving entities benefiting from our transmission system.  Our transmission customers consist of municipalities, electric cooperatives and other distribution companies.  REP subsidiaries of our two largest counterparties represented 18% and 15% of our total operating revenues for the three months ended June 30, 2019, and 21% and 15% of our total operating revenues for the six months ended June 30, 2019.  No other customer represented more than 10% of our total operating revenues.



Variability



Our revenues and cash flows are subject to seasonality, timing of customer billings, weather conditions and other electricity usage drivers, with revenues being highest in the summer. Payment is due 35 days after invoicing. Under a PUCT rule relating to the Certification of Retail Electric Providers, write-offs of uncollectible amounts owed by nonaffiliated REPs are recoverable as a regulatory asset. 



Pass-through Expenses



Expenses which are allowed to be passed-through to customers (primarily, third party wholesale transmission service and energy efficiency program costs) are generally recognized as revenue at the time the costs are incurred.  Franchise taxes are assessed by local governmental bodies, based on kWh delivered and are not a “pass-through” item.  The rates we charge customers are intended to recover the franchise taxes, but we are not acting as an agent to collect the taxes from customers; therefore, franchise taxes are reported as a principal component of “taxes other than amounts related to income taxes” instead of a reduction to “revenues” in the income statement. 

 

 

15


 

 

4.    SHORT-TERM BORROWINGS



At June 30, 2019 and December 31, 2018, outstanding short-term borrowings under our CP Program and Credit Facility consisted of the following:



 

 

 

 

 

 



 

At June 30,

 

At December 31,



 

2019

 

2018

Total borrowing capacity

 

$

2,000 

 

$

2,000 

Commercial paper outstanding (a)

 

 

(1,073)

 

 

(813)

Credit facility outstanding (b)

 

 

 -

 

 

 -

Letters of credit outstanding (c)

 

 

(10)

 

 

(9)

Available unused credit

 

$

917 

 

$

1,178 

____________

a)

The weighted average interest rates for commercial paper at June 30, 2019 and December 31, 2018 were 2.70% and 2.74%, respectively.

b)

At June 30, 2019, the applicable interest rate for any outstanding borrowings would have been LIBOR plus 1.00%

c)

The interest rate on outstanding letters of credit at both June 30, 2019 and December 31, 2018 was 1.20% based on our credit ratings.

 

CP Program



In March 2018, we established the CP Program, under which we may issue unsecured commercial paper notes (CP Notes) on a private placement basis up to a maximum aggregate face or principal amount outstanding at any time of $2.0 billion.  The proceeds of CP Notes issued under the CP Program are used for working capital and general corporate purposes. The CP Program obtains liquidity support from our Credit Facility, which is discussed below.  If at any time funds are not available on favorable terms under the CP Program, we may utilize the Credit Facility for funding. 



Credit Facility     



At June 30, 2019, we had a $2.0 billion unsecured revolving Credit Facility to be used for working capital and general corporate purposes, issuances of letters of credit and support for commercial paper issuances.  We may request increases in our borrowing capacity in increments of not less than $100 million, not to exceed $400 million in the aggregate provided certain conditions are met, including lender approvals. The Credit Facility’s five-year term expires in November 2022 and gives us the option of requesting up to two one-year extensions, with such extensions subject to certain conditions and lender approvals.  Borrowings are classified as short-term on the balance sheet.



May 2019 Term Loan Credit Agreement



On May 9, 2019, we entered into a short-term unsecured term loan credit agreement (Bridge Loan) in an aggregate principal amount of up to $600 million in connection with the InfraREIT Acquisition.  The Bridge Loan had a six-month term.  Borrowings under the Bridge Loan could only be used to finance the repayment of indebtedness of InfraREIT or its affiliates and to pay expenses and fees related to the InfraREIT Acquisition. A fee was payable to the lenders under the Bridge Loan in an amount equal to 0.075% per annum on the average daily undrawn amount of the commitments.



The Bridge Loan contained customary covenants for facilities of this type, restricting, subject to certain exceptions, us and our subsidiaries from, among other things, incurring additional liens, entering into mergers and consolidations, and sales of substantial assets.  The Bridge Loan also contained a senior debt-to-capitalization ratio covenant that effectively limited our ability to incur indebtedness in the future.  



On May 15, 2019, we borrowed $600 million under the Bridge Loan to pay, at closing of the InfraREIT Acquisition, all amounts outstanding under SDTS’s term loan, all amounts outstanding under the revolving credit facilities of SDTS and InfraREIT Partners, and amounts owed to discharge certain outstanding notes of SDTS. The borrowing under the Bridge Loan bore interest at a per annum rate equal to LIBOR plus 0.65%. The Bridge Loan was repaid in full in May 2019 with the proceeds from our May 23, 2019 senior secured notes issuance (discussed in Note 5 below) and as a result the agreement is no longer in effect.

16


 

 



InfraREIT Short-Term Debt Repayments in Connection with InfraREIT Acquisition

In connection with the closing of the InfraREIT Acquisition, on May 16, 2019, the credit facilities of InfraREIT and its subsidiaries were terminated and borrowings totaling $114 million were repaid in full by Oncor.  For more information on the extinguishment of InfraREIT debt in connection with the InfraREIT Acquisition, see Notes 5 and 11.

17


 

 

5.    LONG-TERM DEBT



Our senior notes are secured by a first priority lien on certain transmission and distribution assets equally and ratably with all of Oncor’s other secured indebtedness.  See “Deed of Trust” below for additional information.  At June 30, 2019 and December 31, 2018, our long-term debt consisted of the following:



 

 

 

 

 

 



 

June 30,

 

December 31,



 

2019

 

2018

Fixed Rate Secured:

 

 

 

 

 

 

2.15%  Senior Notes due June 1, 2019 

 

$

 -

 

$

250 

5.75%  Senior Notes due September 30, 2020 

 

 

126 

 

 

126 

8.50%  Senior Notes, Series C, due December 30, 2020 

 

 

14 

 

 

 -

4.10%  Senior Notes, due June 1, 2022 

 

 

400 

 

 

400 

7.00%  Debentures due September 1, 2022 

 

 

482 

 

 

482 

2.75%  Senior Notes due June 1, 2024 

 

 

500 

 

 

 -

2.95%  Senior Notes due April 1, 2025 

 

 

350 

 

 

350 

3.86%  Senior Notes, Series A, due December 3, 2025 

 

 

174 

 

 

 -

3.86%  Senior Notes, Series B, due January 14, 2026 

 

 

38 

 

 

 -

3.70%  Senior Notes due November 15, 2028 

 

 

650 

 

 

350 

5.75%  Senior Notes due March 15, 2029 

 

 

318 

 

 

318 

7.25%  Senior Notes, Series B, due December 30, 2029 

 

 

38 

 

 

 -

6.47%  Senior Notes, Series A, due September 30, 2030 

 

 

87 

 

 

 -

7.00%  Senior Notes due May 1, 2032 

 

 

500 

 

 

500 

7.25%  Senior Notes due January 15, 2033 

 

 

350 

 

 

350 

7.50%  Senior Notes due September 1, 2038 

 

 

300 

 

 

300 

5.25%  Senior Notes due September 30, 2040 

 

 

475 

 

 

475 

4.55%  Senior Notes due December 1, 2041 

 

 

400 

 

 

400 

5.30%  Senior Notes due June 1, 2042 

 

 

500 

 

 

500 

3.75%  Senior Notes due April 1, 2045 

 

 

550 

 

 

550 

3.80%  Senior Notes due September 30, 2047 

 

 

325 

 

 

325 

4.10%  Senior Notes due November 15, 2048 

 

 

450 

 

 

450 

3.80%  Senior Notes, due June 1, 2049 

 

 

500 

 

 

 -

Secured long-term debt

 

 

7,527 

 

 

6,126 

Unsecured:

 

 

 

 

 

 

Term loan credit agreement maturing December 9, 2019

 

 

350 

 

 

350 

Total long-term debt

 

 

7,877 

 

 

6,476 

Unamortized discount and debt issuance costs

 

 

(46)

 

 

(41)

Less amount due currently

 

 

(361)

 

 

(600)

       Long-term debt, less amounts due currently

 

$

7,470 

 

$

5,835 



Long-Term Debt-Related Activity in 2019



Debt Repayments



Repayments of long-term debt in the six months ended June 30, 2019 included $250 million aggregate principal amount of our 2.15% senior secured notes due June 1, 2019 and $488 million aggregate principal amount of long-term debt of InfraREIT’s subsidiaries that we paid on May 16, 2019 in connection with and immediately following the InfraREIT Acquisition. 



18


 

 

Long-Term Debt Activity in Connection with InfraREIT Acquisition



[In connection with the closing of the InfraREIT Acquisition, on May 16, 2019, we extinguished all of the $839 million of outstanding long-term debt of InfraREIT and its subsidiaries. As part of that extinguishment, we repaid $288 million principal amount of outstanding InfraREIT subsidiary senior notes (plus $5 million in accrued interest and $19 million in make-whole fees relating to those notes) and an outstanding $200 million principal amount InfraREIT subsidiary term loan. Additionally, we issued $351 million of new Oncor secured senior notes in exchange for a like principal amount of outstanding InfraREIT subsidiary senior notes.]



We received no proceeds from the issuance of the new Oncor notes and the exchanges were accounted for as debt modifications. Following are details of the exchanges:



(i)

$87 million aggregate principal amount of newly issued Oncor 6.47% Senior Notes, Series A, due September 30, 2030 (2030 Notes), issued in exchange for a like principal amount of SDTS’s 6.47% Senior Notes due September 30, 2030,

(ii)

$38 million aggregate principal amount of newly issued Oncor 7.25% Senior Notes, Series B, due December 30, 2029 (2029 Notes), issued in exchange for a like principal amount of SDTS’s 7.25% Senior Notes due December 30, 2029, 

(iii)

$14 million aggregate principal amount of newly issued Oncor 8.50% Senior Notes, Series C, due December 30, 2020 (2020 Notes), issued in exchange for a like principal amount of Transmission and Distributions Company, L.L.C.’s 8.5% Senior Notes due December 30, 2020,

(iv)

$174 million aggregate principal amount of newly issued Oncor 3.86% Senior Notes, Series A, due December 3, 2025 (2025 Notes), issued in exchange for a like principal amount of SDTS’s 3.86% Senior Notes due December 3, 2025, and

(v)

$38 million aggregate principal amount of newly issued Oncor 3.86% Senior Notes, Series B, due January 14, 2026 (2026 Notes), issued in exchange for a like principal amount of SDTS’s 3.86% Senior Notes due January 14, 2026.



The 2030 Notes, 2029 Notes and 2020 Notes were issued pursuant to a note purchase agreement (ABC Note Purchase Agreement) that we entered into on May 3, 2019. The 2025 Notes and 2026 Notes were issued pursuant to a note purchase agreement (AB Note Purchase Agreement, and together with the ABC Note Purchase Agreement, Note Purchase Agreements) that we entered into on May 6, 2019. Closing of the Note Purchase Agreements and issuance of the 2030 Notes, 2029 Notes, 2020 Notes, 2025 Notes and 2026 Notes (collectively, NPA Notes) occurred on May 16, 2019, immediately following consummation of the InfraREIT Acquisition.



Interest and the applicable principal prepayment for the 2029 Notes and 2030 Notes are payable on the 30th day of March, June, September and December of each year, and interest and the applicable principal prepayment for the 2020 Notes are payable on the 15th day of January, April, July and October of each year. Interest on the 2025 Notes is payable on June 3 and December 3 of each year, and interest on the 2026 Notes is payable on January 14 and July 14 of each year. At closing of the Note Purchase Agreements, we paid accrued and unpaid interest and certain fees with respect to the exchanged notes totaling an aggregate of $6 million.



The Note Purchase Agreements contain customary covenant restrictions and events of default. The NPA Notes are secured equally and ratably with our other secured indebtedness pursuant to the Deed of Trust. For more information on the Deed of Trust, see “Deed of Trust” below. We received no proceeds from the issuance of the NPA Notes.



Additional Long-Term Debt Issuances 



On May 23, 2019, we completed a sale of $500 million aggregate principal amount of 2.75% Senior Secured Notes due 2024 (2024 Notes), $300 million aggregate principal amount of 3.70% Senior Secured Notes due 2028 (2028 Notes) and $500 million aggregate principal amount of 3.80% Senior Secured Notes due 2049 (2049 Notes and, together with the 2024 Notes and the 2028 Notes, the New Indenture Notes). The 2028 Notes constitute an additional issuance of our 3.70% Senior Secured Notes due 2028, $350 million of which we previously issued on August 10, 2018 and are currently outstanding (Outstanding Notes). The 2028 Notes were issued as part of the same series as the Outstanding Notes. Additionally, the 2028 Notes exchanged or sold in connection with the transactions

19


 

 

contemplated by a registration rights agreement are expected to become fungible with the Outstanding Notes. We used the proceeds (net of the initial purchasers’ discount, fees, expenses and accrued interest) of $1,297 million from the sale of the New Indenture Notes for general corporate purposes, including to repay all amounts outstanding under the Bridge Loan, to repay our $250 million aggregate principal amount of 2.15% Senior Secured Notes due June 1, 2019 and to repay CP Notes, when due, under our CP Program. For more information on the Bridge Loan, see Note 4.



The New Indenture Notes were issued in a private placement and were not registered under the Securities Act of 1933.  We have agreed, subject to certain exceptions, to register with the SEC notes having substantially identical terms as the New Indenture Notes (except for provisions relating to the transfer restriction and payment of additional interest) as part of an offer to exchange freely tradable exchange notes for the New Indenture Notes.  We have agreed to use commercially reasonable efforts to cause the exchange offer to be completed within 315 days after the issue date of the New Indenture Notes.  If a registration statement for the exchange offer is not declared effective by the SEC within 270 days after the issue date of the New Indenture Notes or the exchange offer is not completed within 315 days after the issue date of the New Indenture Notes (an exchange default), then the annual interest rate on the New Indenture Notes will increase 50 basis points per annum until the earlier of the expiration of the exchange default or the second anniversary of the issue date of the New Indenture Notes.



Deed of Trust



Our secured indebtedness is secured equally and ratably by a first priority lien on property we acquired or constructed for the transmission and distribution of electricity.  The property is mortgaged under the Deed of Trust.  The Deed of Trust permits us to secure indebtedness (excluding borrowings under the CP Program, the Credit Facility and the term loan credit agreement) with the lien of the Deed of Trust up to the aggregate of (i) the amount of available bond credits, and (ii) 85% of the lower of the fair value or cost of certain property additions that could be certified to the Deed of Trust collateral agent.  At June 30, 2019, the amount of available bond credits was $3,232 million and the amount of future debt we could secure with property additions, subject to those property additions being certified to the Deed of Trust collateral agent, was $1,790 million.



Borrowings under the CP Program, the Credit Facility,  the term loan credit agreement and, while it was outstanding, the Bridge Loan, are not secured.



Maturities



Long-term maturities (including current maturities) at June 30, 2019, are as follows:





 

 

 

Year

 

Amount

2019

 

$

361 

2020

 

 

148 

2021

 

 

2022

 

 

891 

2023

 

 

10 

Thereafter

 

 

6,458 

Unamortized discount and debt issuance costs

 

 

(46)

Total

 

$

7,831 



Fair Value of Long-Term Debt



At June 30, 2019 and December 31, 2018, the estimated fair value of our long-term debt (including current maturities) totaled $9,085 million and $7,086 million, respectively, and the carrying amount totaled $7,831 million and $6,435 million, respectively.  The fair value is estimated using observable market data, representing Level 2 valuations under accounting standards related to the determination of fair value.



20


 

 

6.    COMMITMENTS AND CONTINGENCIES



Legal/Regulatory Proceedings



We are involved in various legal and administrative proceedings in the normal course of business, the ultimate resolution of which, in the opinion of management, should not have a material effect upon our financial position, results of operations or cash flows.  See Notes 2 and 11 and Note 8 to Financial Statements in our 2018 Form 10-K for additional information regarding our regulatory and legal proceedings, respectively. 



Leases



General



A lease exists when a contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.  As lessee, our leased assets primarily consist of our vehicle fleet and real estate leased for company offices and service centers.  Our leases are accounted for as operating leases for both GAAP and rate-making purposes. We generally recognize operating lease costs on a straight-line basis over the lease term in operating expenses.  We are not a lessor to any material lease contracts.



As of the lease commencement date, we recognize a lease liability for our obligation to make lease payments, which we initially measure at present value using our incremental borrowing rate at the date of lease commencement, unless the rate implicit in the lease is readily determinable. We determine our incremental borrowing rate based on the rate of interest that we would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. We also record a ROU asset for our right to use the underlying asset, which is initially equal to the lease liability and adjusted for any lease payments made at or before lease commencement, lease incentives and any initial direct costs.



Some of our lease agreements contain nonlease components, which represent items or activities that transfer a good or service.  We separate lease components from nonlease components, if any, for our fleet vehicle and real estate leases for purposes of calculating the related lease liability and ROU asset.



Certain of our leases include options to extend the lease terms for up to 20 years, while others include options to terminate early. Our lease liabilities and ROU assets are based on lease terms that may include such options to extend or terminate the lease when it is reasonably certain that we will exercise that option.



Short-term Leases



Some of our contracts are short-term leases, which have a lease term of 12 months or less at lease commencement.  As allowed by GAAP, we do not recognize a lease liability or ROU asset arising from short-term leases for all existing classes of underlying assets. We recognize short-term lease costs on a straight-line basis over the lease term.



21


 

 

Lease Obligations, Lease Costs and Other Supplemental Data



The following tables summarize lease information as of and for the six months ended June 30, 2019.    





 

 

 



 

At June 30,



 

2019

Operating Leases:

 

 

 

ROU assets:

 

 

 

Operating lease ROU assets and other

 

$

89 



 

 

 

Lease liabilities:

 

 

 

Operating lease and other current liabilities

 

$

26 

Employee benefit, operating lease and other obligations

 

 

63 

Total operating lease liabilities

 

$

89 



 

 

 

Weighted-average remaining lease term (in years)

 

 

Weighted-average discount rate

 

 

3.4% 



The components of lease costs and cash paid for amounts included in the measurement of lease liabilities for the three and six months ended June 30, 2019 were as follows:



 

 

 

 

 

 



 

Three Months Ended

 

Six Months Ended



 

June 30, 2019

 

June 30, 2019

Operating lease cost:

 

 

 

 

 

 

Operating lease costs (including amounts allocated to property, plant and equipment)

 

$

 

$

19 

Short-term lease costs

 

 

11 

 

 

22 

Total operating lease costs

 

$

20 

 

$

41 



 

 

 

 

 

 

Operating lease payments:

 

 

 

 

 

 

Cash paid for amounts included in the measurement of lease liabilities

 

$

 

$

15 



 

 

 

 

 

 

The table below presents the maturity analysis of our lease liabilities and reconciliation to the present value of lease liabilities:





 

 

 

Year

 

Amount

2019 (remaining six months)

 

$

16 

2020

 

 

25 

2021

 

 

22 

2022

 

 

16 

2023

 

 

10 

Thereafter

 

 

Total undiscounted lease payments

 

 

96 

Less imputed interest

 

 

(7)

Total future minimum lease payments

 

$

89 



22


 

 

Lease Disclosures Under Previous GAAP



The table below presents the future minimum lease payments under previous GAAP:





 

 

 

Year

 

Amount

2019

 

$

29 

2020

 

 

22 

2021

 

 

20 

2022

 

 

15 

2023

 

 

Thereafter

 

 

Total future minimum lease payments

 

$

99 





7.    MEMBERSHIP INTERESTS



Cash Distributions





The PUCT order issued in the Sempra Acquisition and our limited liability company agreement set forth various restrictions on distributions to our members. Among those restrictions is the commitment that we will make no distributions that would cause us to be out of compliance with the PUCT’s approved debt-to-equity ratio which is currently 57.5% debt to 42.5% equity. The distribution restrictions also include the ability of our board, a majority of the disinterested directors, or any Texas Transmission director to limit distributions to the extent each determines it is necessary to meet expected future requirements of Oncor (including continuing compliance with the PUCT debt-to-equity ratio commitment). 



The PUCT has the authority to determine what types of debt and equity are included in a utility’s debt-to-equity ratio.  For purposes of this ratio, debt is calculated as long-term debt including finance leases plus unamortized gains on reacquired debt less unamortized issuance expenses, premiums and losses on reacquired debt.  Equity is calculated as membership interests determined in accordance with GAAP, excluding the effects of acquisition accounting from a 2007 transaction.



At June 30, 2019, we had $612 million available to distribute to our members as our regulatory capitalization ratio was 55.0% debt to 45.0% equity. 



On July 30, 2019, our board of directors declared a cash distribution of $71 million, which was paid to our members on July 31, 2019.  On May 1, 2019, our board of directors declared a cash distribution of $71 million, which was paid to our members on May 2, 2019.



Cash Contributions





On July 29, 2019 our members made capital contributions of 70 million. On May 15, 2019, Sempra and certain indirect owners of Texas Transmission made capital contributions of $1,330 million to fund the cash consideration and certain expenses payable in connection with the InfraREIT Acquisition. For more information on the InfraREIT Acquisition, see Note 11. In addition, on April 30, 2019, our members made capital contributions of $70 million. 

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Membership Interests



The following table presents the changes to membership interests during the three months and six months ended June 30, 2019 and 2018, net of tax: 



 

 

 

 

 

 

 

 



Capital Accounts

 

Accumulated Other Comprehensive Income (Loss)

 

Total Membership Interests

Balance at December 31, 2018

$

8,624 

 

$

(164)

 

$

8,460 

Net income

 

116 

 

 

 -

 

 

116 

Distributions

 

(71)

 

 

 -

 

 

(71)

Capital contributions

 

70 

 

 

 -

 

 

70 

Net effects of cash flow hedges (Note 1)

 

 

 

(4)

 

 

 -

Defined benefit pension plans

 

 -

 

 

 

 

Balance at March 31, 2019

 

8,743 

 

 

(167)

 

 

8,576 

Net income

 

139 

 

 

 -

 

 

139 

Distributions

 

(71)

 

 

 -

 

 

(71)

Capital contributions

 

1,400 

 

 

 -

 

 

1,400 

Net effects of cash flow hedges (Note 1)

 

(1)

 

 

 

 

 -

Defined benefit pension plans

 

 -

 

 

 

 

Balance at June 30, 2019

$

10,210 

 

$

(164)

 

$

10,046 



 

 

 

 

 

 

 

 

Balance at December 31, 2017

$

8,004 

 

$

(101)

 

$

7,903 

Net income

 

89 

 

 

 -

 

 

89 

Defined benefit pension plans

 

 -

 

 

 

 

Balance at March 31, 2018

 

8,093 

 

 

(100)

 

 

7,993 

Net income

 

143 

 

 

 -

 

 

143 

Capital contributions

 

144 

 

 

 -

 

 

144 

Defined benefit pension plans

 

 -

 

 

 

 

Balance at June 30, 2018

$

8,380 

 

$

(99)

 

$

8,281 













24


 

 

Accumulated Other Comprehensive Income (Loss)



The following table presents the changes to accumulated other comprehensive income (loss) for the six months ended June 30, 2019 and 2018, net of tax:



 

 

 

 

 

 

 

 



Cash Flow Hedges – Interest Rate Swap

 

Defined Benefit Pension and OPEB Plans

 

Accumulated Other Comprehensive Income (Loss)

Balance at December 31, 2018

$

(16)

 

$

(148)

 

$

(164)

Defined benefit pension plans

 

 -

 

 

 

 

Amounts reclassified from accumulated other comprehensive income (loss) and reported in interest expense and related charges

 

 

 

 -

 

 

Amounts reclassified from accumulated other comprehensive income (loss) to capital account (Note 1)

 

(4)

 

 

 -

 

 

(4)

Balance at June 30, 2019

$

(19)

 

$

(145)

 

$

(164)



 

 

 

 

 

 

 

 

Balance at December 31, 2017

$

(18)

 

$

(83)

 

$

(101)

Defined benefit pension plans

 

 -

 

 

 

 

Balance at June 30, 2018

$

(18)

 

$

(81)

 

$

(99)







8.    PENSION AND OPEB PLANS



Pension Plans



We sponsor the Oncor Retirement Plan and also have liabilities under the Vistra Retirement Plan, both of which are qualified pension plans under Section 401(a) of the Internal Revenue Code of 1986, as amended, and are subject to the provisions of ERISA.  Employees do not contribute to either plan.  We also have a supplemental pension plan for certain employees whose retirement benefits cannot be fully earned under the qualified retirement plans.  See Note 10 to Financial Statements in our 2018 Form 10-K for additional information regarding pension plans.



OPEB Plans



We currently sponsor two OPEB plans. One plan covers our eligible current and future retirees whose services are 100% attributed to the regulated business.  Effective January 1, 2018, we established a second plan to cover EFH Corp./Vistra retirees and eligible current and future retirees whose employment services were assigned to both Oncor (or a predecessor regulated utility business) and the non-regulated business of EFH Corp./Vistra.  Vistra is solely responsible for its portion of the liability for retiree benefits related to those retirees.  See Note 10 to Financial Statements in our 2018 Form 10-K for additional information.



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Pension and OPEB Costs



Our net costs related to pension plans and the Oncor OPEB Plans for the three and six months ended June 30, 2019 and 2018 were comprised of the following:



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended 

June 30,

 

Six Months Ended 

June 30,



 

2019

 

2018

 

2019

 

2018



 

 

 

 

 

 

 

 

 

 

 

 

Components of net allocated pension costs:

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

 

$

 

$

13 

 

$

14 

Interest cost

 

 

32 

 

 

30 

 

 

64 

 

 

60 

Expected return on assets

 

 

(30)

 

 

(30)

 

 

(60)

 

 

(60)

Amortization of net loss

 

 

 

 

12 

 

 

15 

 

 

24 

Net pension costs

 

 

16 

 

 

19 

 

 

32 

 

 

38 

Components of net OPEB costs:

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

 

 

 

 

 

 

 

Interest cost

 

 

11 

 

 

11 

 

 

22 

 

 

22 

Expected return on assets

 

 

(2)

 

 

(2)

 

 

(4)

 

 

(4)

Amortization of prior service cost

 

 

(5)

 

 

(7)

 

 

(10)

 

 

(14)

Amortization of net loss

 

 

 

 

14 

 

 

 

 

28 

Net OPEB costs

 

 

10