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ACQUISTION AND DIVESTITURE ACTIVITY | 12 Months Ended
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Dec. 31, 2018
Business Combinations [Abstract] |
Acquistion and divestiture activity | ACQUISITION AND DIVESTITURE ACTIVITY We consolidate assets acquired and liabilities assumed as of the purchase date and include earnings from acquisitions in consolidated earnings after the purchase date. ACQUISITIONS SEMPRA TEXAS UTILITY After satisfying all conditions precedent, including final approval from the PUCT, on March 9, 2018, Sempra Energy completed the acquisition of an indirect, 100-percent interest in Oncor Holdings, which owned 80.03 percent of Oncor, and other EFH assets and liabilities unrelated to Oncor, pursuant to the Merger Agreement with EFH. Oncor is a regulated electric transmission and distribution business that operates the largest transmission and distribution system in Texas. This acquisition expanded our regulated earnings base, and may serve as a platform for future growth in the Texas energy market. Under the Merger Agreement, we paid Merger Consideration of $9.45 billion in cash and an additional $31 million representing an adjustment for dividends and payments pursuant to a tax sharing agreement with Oncor and Oncor Holdings. Also on March 9, 2018, in a separate transaction, Sempra Energy, through its interest in Oncor Holdings, acquired an additional 0.22 percent of the outstanding membership interests in Oncor from OMI for approximately $26 million in cash, bringing Sempra Energy’s indirect ownership in Oncor to 80.25 percent. TTI, an investment vehicle indirectly owned by third parties unaffiliated with Oncor Holdings or Sempra Energy, continues to own 19.75 percent of Oncor’s outstanding membership interests. Pursuant to the Merger Agreement, the reorganized EFH (renamed Sempra Texas Holdings Corp.) merged with an indirect subsidiary of Sempra Energy, with Sempra Texas Holdings Corp. continuing as the surviving company and an indirect, wholly owned subsidiary of Sempra Energy. Sempra Texas Holdings Corp. wholly owns EFIH (renamed Sempra Texas Intermediate Holding Company LLC), which holds our 100-percent interest in Oncor Holdings. Sempra Texas Intermediate Holding Company LLC is included in our newly formed Sempra Texas Utility reportable segment. Other assets and liabilities unrelated to Oncor that were acquired with Sempra Texas Holdings Corp. have been subsumed into our parent organization, Parent and other. Due to ring-fencing measures, existing governance mechanisms and commitments in effect following the Merger, we do not have the power to direct the significant activities of Oncor Holdings and Oncor. Consequently, we account for our 100-percent ownership interest in Oncor Holdings as an equity method investment. See Note 6 for additional information about our equity method investment in Oncor Holdings and related ring-fencing measures. The Sempra Texas Utility reportable segment comprises:
The foregoing is a simplified ownership structure that does not show all the subsidiaries of, or other equity interests owned by, these entities.
I n anticipation of the Merger, in January 2018, we completed registered public offerings of our common stock (including shares offered pursuant to forward sale agreements), series A preferred stock and long-term debt, as we discuss in Notes 7, 13 and 14. These offerings provided total initial net proceeds of approximately $7.0 billion for partial funding of the Merger Consideration, of which approximately $800 million was used to pay down commercial paper, pending the closing of the Merger. On March 8, 2018, to fund a portion of the Merger Consideration, we settled approximately $900 million (net of underwriting discounts of $16 million) of forward sales under the forward sale agreements entered into in connection with the public offering of common stock in January 2018 by delivery of 8,556,630 shares of newly issued Sempra Energy common stock, as we discuss in Note 14. We raised the remaining portion of the Merger Consideration through issuances of approximately $2.6 billion in commercial paper with a weighted-average maturity of 47 days and a weighted-average interest rate of 2.2 percent per annum. The total purchase price paid was comprised of the following:
• | $9,450 million of Merger Consideration;
• | $31 million adjustment for dividends and payments pursuant to a tax sharing agreement with Oncor and Oncor Holdings;
• | $26 million paid in a separate transaction to acquire an additional 0.22 percent of the outstanding membership interests in Oncor from OMI; and
• | $59 million of transaction costs included in the basis of our investment in Oncor Holdings.
We accounted for the Merger as an asset acquisition, as the equity method investment in Oncor Holdings represents substantially all of the fair value of the gross assets acquired. The following table sets forth the allocation of the total purchase price paid to the identifiable assets acquired and liabilities assumed.
PURCHASE PRICE ALLOCATION |  |
(Dollars in millions)
| At March 9, 2018(1)
Assets acquired: |
Accounts receivable – other, net |  | $ | 1 |
Due from unconsolidated affiliates |  | 46 |
Investment in Oncor Holdings |  | 9,227 |
Deferred income tax assets |  | 287 |
Other noncurrent assets |  | 109 |
Total assets acquired |  | 9,670 |
Liabilities assumed: |  |
Other current liabilities |  | 23 |
Pension and other postretirement benefit plan obligations |  | 21 |
Deferred credits and other |  | 58 |
Total liabilities assumed |  | 102 |
Net assets acquired |  | $ | 9,568 |
Total purchase price paid |  | $ | 9,568 |
(1) | In the fourth quarter of 2018, we received additional information regarding deferred income taxes related to
the resolution of claims in EFH’s emergence from bankruptcy as of the acquisition date. As a result, we recorded an adjustment to increase our investment in Oncor Holdings by $64 million, decrease deferred income tax assets by $66 million and decrease deferred credits and other liabilities by $2 million. Also in the fourth quarter of 2018, we recorded $2 million of additional purchase price paid related to additional transaction costs. The fair value of the equity method investment in Oncor Holdings is primarily attributable to Oncor’s business. Therefore, we considered the underlying assets and liabilities of Oncor when determining the fair value of our equity method investment. As a regulated entity, Oncor’s rates are set and approved by the PUCT, and are designed to recover the cost of providing service and the opportunity to earn a reasonable return on its investments. Accordingly, Oncor applies the guidance under the provisions of U.S. GAAP governing rate-regulated operations. Under U.S. GAAP, regulation is viewed as being a characteristic (restriction) of a regulated entity’s assets and liabilities, and the impact of regulation is considered a fundamental input to measuring the fair value of Oncor’s assets and liabilities. Under this premise, we concluded that the carrying values of all assets and liabilities recoverable through rates are representative of their fair values. SEMPRA SOUTH AMERICAN UTILITIES Compañía Transmisora del Norte Grande S.A. Background and Financing. On December 18, 2018, Chilquinta Energía acquired a 100-percent interest in CTNG through a sales and purchase agreement with AES Gener S.A. and its subsidiary Sociedad Eléctrica Angamos S.A. CTNG owns regulated transmission assets in the Valparaiso, Metropolitana and Antofagasta regions of Chile. The fully operating transmission assets include a 114-mile, 110-kV single-circuit transmission line, an 82-mile, 220-kV double-circuit transmission line, substations and other transmission assets. CTNG’s regulated revenues are based on tariffs that are set by the CNE and are reviewed by the CNE every four years. This business acquisition aligns with Chilquinta Energía’s business model of owning and operating regulated transmission and distribution assets. We completed the acquisition for a purchase price of $226 million. We paid the purchase price of $208 million (net of $18 million cash acquired) with available cash on hand at Sempra South American Utilities. Purchase Price Allocation. We accounted for this business combination using the acquisition method of accounting whereby the total fair value of the business acquired is allocated to identifiable assets acquired and liabilities assumed based on their respective fair values, with any excess recognized as goodwill at the Sempra South American Utilities reportable segment. None of the goodwill is expected to be deductible in Chile or in the U.S. for income tax purposes. The following table summarizes the fair value of the CTNG business combination and the preliminary purchase price allocation of the assets acquired and liabilities assumed at the date of acquisition:
PRELIMINARY PURCHASE PRICE ALLOCATION |  |
(Dollars in millions)
| At December 18, 2018
Assets acquired: |
Cash and cash equivalents |  | $ | 18 |
Other assets |  | 5 |
Other intangible assets |  | 46 |
Property, plant and equipment |  | 162 |
Total assets acquired |  | 231 |
Liabilities assumed: |  |
Other current liabilities |  | 1 |
Deferred income taxes |  | 42 |
Total liabilities assumed |  | 43 |
Total identifiable net assets acquired |  | 188 |
Goodwill |  | 38 |
Total purchase price paid |  | $ | 226 |
At December 31, 2018, the purchase price allocation was preliminary and subject to completion. Adjustments to the current fair value estimates in the above table may occur as the process conducted for various valuations and assessments is finalized, primarily related to deferred income taxes. During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with a corresponding offset to goodwill. Valuation of CTNG’s Assets and Liabilities. The fair values of the tangible and intangible assets acquired and liabilities assumed were recognized based on their preliminary values at the acquisition date. Significant inputs used to measure the fair values of the acquired PP&E and intangible assets are as follows:
▪ | PP&E - We applied an income approach using market-based discounted cash flows. We used discounted free cash flows on revenues established by the most recent regulatory rate case, which was determined to reflect the fair value of PP&E.
▪ | Intangible assets - CTNG holds concession permits that allow it to operate transmission lines and substations into perpetuity. We applied an income approach using market-based discounted cash flows. To estimate the fair value of the concession permits, we estimated the fair value of each transmission line and substation business enterprise assuming that they will operate into perpetuity. We then subtracted the corresponding fair value of the PP&E from each transmission line and substation business enterprise value to estimate the value attributable to the concession permits.
Additionally, we recognized deferred income taxes on CTNG’s existing NOLs and for the difference between fair values and tax bases of the net assets acquired using the Chilean statutory tax rate. For substantially all other assets and liabilities, we determined that historical carrying value approximates fair value due to their short-term nature. Impact on Operating Results. We incurred negligible acquisition costs in the year ended December 31, 2018, which are included in O&M on the Sempra Energy Consolidated Statement of Operations. For the year ended December 31, 2018, the Sempra Energy Consolidated Statement of Operations includes $1 million of revenues and negligible earnings from CTNG since the December 18, 2018 date of acquisition. Unaudited Pro Forma Information The following table represents unaudited pro forma information for the years ended December 31, 2018 and 2017, combining the historical results of operations of Sempra Energy and CTNG as though the acquisition occurred on January 1, 2017. The pro forma information is not necessarily indicative of results that would have been achieved had the business been combined during the periods presented or the results that we would expect going forward.
UNAUDITED PRO FORMA INFORMATION – SEMPRA ENERGY CONSOLIDATED
(Dollars in millions)
|  |  | Years ended December 31,
|  |  |  |  | 2018 |  | 2017
Total revenues |  |  |  |  | $ | 11,703 |  |  | $ | 11,224 |
Net income |  |  |  |  | 1,130 |  |  | 356 |
Earnings attributable to common shares |  |  |  |  | 928 |  |  | 261 |
The unaudited pro forma information above assumes the loss of interest income on cash on hand used to fund the acquisition in all periods presented. Also, as a result of discrete historical financial information not being available for 2017, CTNG’s income statement for 2017 was estimated using the 2018 income statement, primarily adjusted for expected changes in inflation and regulatory rates. SEMPRA MEXICO 2018 Acquisitions Trafigura Mexico, S.A. de C.V. On September 26, 2018, Sempra Mexico acquired a 51-percent interest (with an option to increase its ownership interest to 82.5 percent) in a subsidiary of Trafigura Mexico, S.A. de C.V. that owns certain permits and land where the Manzanillo Terminal will be built. We consolidate this subsidiary and report NCI for the 49-percent ownership interest held by Trafigura Mexico, S.A. de C.V. IEnova intends to invest $102 million to $165 million (depending on ownership interest) to develop, construct and operate the Manzanillo Terminal, a marine terminal for the receipt, storage and delivery of refined products located in Colima, Mexico. IEnova and Trafigura Mexico, S.A. de C.V. also entered into a long-term, U.S. dollar-denominated terminal services agreement for 50 percent of the terminal’s initial storage capacity of 1.48 million barrels. We expect operations to commence in the fourth quarter of 2020. Don Diego Solar Netherlands B.V. (formerly known as Fisterra Energy Netherlands II, B.V.) On February 28, 2018, Sempra Mexico completed the asset acquisition of Don Diego Solar Netherlands B.V., for a purchase price of $5 million. Substantially all of the fair value of the gross assets acquired is attributable to a self-supply permit that allows generators to compete directly with the CFE’s retail tariffs and, thus, have access to PPAs with a competitive pricing position. IEnova intends to invest $130 million to develop, construct and operate the Don Diego Solar Complex, a 125-MW solar facility in Sonora, Mexico. IEnova entered into a 15-year, U.S. dollar-denominated PPA with various subsidiaries of El Puerto de Liverpool, S.A.B. de C.V., for a portion of the capacity. We expect operations to commence in the second half of 2019. 2017 Acquisition Ductos y Energéticos del Norte, S. de R.L. de C.V. On November 15, 2017, IEnova completed the asset acquisition of PEMEX’s 50-percent interest in DEN, a JV that holds a 50-percent interest in the Los Ramones Norte pipeline through TAG, for a purchase price of $165 million (exclusive of $18 million of cash and cash equivalents acquired), plus the assumption of $96 million of short-term debt. This acquisition increased IEnova’s ownership interest in DEN through IEnova Pipelines from 50 percent to 100 percent, and increased IEnova’s indirect ownership interest in TAG from 25 percent to 50 percent. IEnova Pipelines previously accounted for its 50-percent interest in DEN as an equity method investment. At closing, DEN became a wholly owned, consolidated subsidiary of IEnova Pipelines. DEN will continue to account for its interest in TAG as an equity method investment. This acquisition also included a $66 million intangible asset that represents a favorable O&M agreement, which has an amortization period of 23 years. 2016 Acquisitions The following table summarizes the total fair value of the 2016 business combinations at Sempra Mexico, described below, and the final purchase price allocations of the assets acquired and liabilities assumed at the dates of acquisition:
PURCHASE PRICE ALLOCATIONS |  |
(Dollars in millions) |  |
|  | IEnova Pipelines |  | Ventika
|  | At September 26, 2016(1) |  | At December 14, 2016(2)
Fair value of business combination: |  |  |  |
Cash consideration (fair value of total consideration) |  | $ | 1,144 |  |  | $ | 310 |
Fair value of equity interest in IEnova Pipelines immediately prior to acquisition |  | 1,144 |  |  | — |
Total fair value of business combination |  | $ | 2,288 |  |  | $ | 310 |
Assets acquired: |  |  |  |
Cash and cash equivalents |  | $ | 66 |  |  | $ | — |
Restricted cash |  | — |  |  | 68 |
Accounts receivable |  | 39 |  |  | 14 |
Other current assets |  | 6 |  |  | 1 |
Other intangible assets |  | — |  |  | 154 |
Deferred income taxes |  | — |  |  | 36 |
Regulatory assets |  | 33 |  |  | — |
Property, plant and equipment |  | 1,248 |  |  | 673 |
Other noncurrent assets |  | 1 |  |  | 3 |
Total assets acquired |  | 1,393 |  |  | 949 |
Liabilities assumed: |  |  |  |
Short-term debt |  | — |  |  | 125 |
Accounts payable |  | 11 |  |  | 1 |
Due to unconsolidated affiliates |  | 3 |  |  | — |
Current portion of long-term debt |  | 49 |  |  | 7 |
Fixed-price contracts and other derivatives, current |  | 6 |  |  | 4 |
Other current liabilities |  | 20 |  |  | 8 |
Long-term debt |  | 315 |  |  | 478 |
Asset retirement obligations |  | 5 |  |  | 2 |
Deferred income taxes |  | 127 |  |  | 120 |
Fixed-price contracts and other derivatives, noncurrent |  | 19 |  |  | 10 |
Other noncurrent liabilities |  | 11 |  |  | — |
Total liabilities assumed |  | 566 |  |  | 755 |
Total identifiable net assets acquired |  | 827 |  |  | 194 |
Goodwill |  | 1,461 |  |  | 116 |
Total fair value of business combination |  | $ | 2,288 |  |  | $ | 310 |
(1) | During the fourth quarter of 2016, we received additional information regarding IEnova Pipelines’ deferred income taxes as of the acquisition date, primarily related to basis differences in IEnova Pipelines’ PP&E. As a result, we recorded measurement period adjustments that resulted in a net increase to goodwill of $86 million, an increase in deferred income tax liabilities of $119 million and $33 million of regulatory assets related to deferred income taxes on AFUDC.
(2) | During the fourth quarter of 2017, we received additional information regarding Ventika’s deferred income taxes as of the acquisition date, primarily related to net operating loss carryforwards. As a result, we recorded a measurement period adjustment that resulted in a decrease to goodwill and an increase in deferred income tax assets of $13 million.
IEnova Pipelines, S. de R.L. de C.V. (formerly known as Gasoductos de Chihuahua, S. de R.L. de C.V., or GdC) Background and Financing. On September 26, 2016, IEnova completed the acquisition of PEMEX’s 50-percent interest in IEnova Pipelines, which develops and operates energy infrastructure in Mexico, for a purchase price of $1.144 billion (exclusive of $66 million of cash and cash equivalents acquired), plus the assumption of $364 million of long-term debt, increasing IEnova’s ownership interest in IEnova Pipelines to 100 percent. IEnova Pipelines became a consolidated subsidiary of IEnova on this date. Prior to the acquisition date, IEnova owned 50 percent of IEnova Pipelines and accounted for its interest as an equity method investment. The assets involved in the acquisition included three natural gas pipelines, an ethane pipeline, and a liquid petroleum gas pipeline and associated storage terminal. The transaction excluded the Los Ramones Norte pipeline, in which IEnova continued to hold an indirect 25-percent ownership interest through IEnova Pipelines’ interest in DEN until November 2017, as we discuss above. IEnova paid $1.078 billion in cash ($1.144 billion purchase price less $66 million of cash and cash equivalents acquired), which was funded using interim financing provided by Sempra Global through a $1.15 billion bridge loan to IEnova. Sempra Global funded the majority of the transaction using commercial paper borrowings. As we discuss in Note 1, in October 2016, IEnova completed a private follow-on offering of its common stock in the U.S. and outside of Mexico and a concurrent public common stock offering in Mexico. IEnova used a portion of the net proceeds from the offerings to fully repay the Sempra Global bridge loan. Purchase Price Allocation. We accounted for this business combination using the acquisition method of accounting whereby the total fair value of the business acquired is allocated to identifiable assets acquired and liabilities assumed based on their respective fair values, with any excess recognized as goodwill at the Sempra Mexico reportable segment. None of the goodwill is expected to be deductible in Mexico or the U.S. for income tax purposes. Gain on Remeasurement of Equity Method Investment. In the year ended December 31, 2016, we recorded a pretax gain of $617 million ($432 million after-tax) for the excess of the acquisition-date fair value of Sempra Mexico’s previously held equity interest in IEnova Pipelines over the carrying value of that interest, included as Remeasurement of Equity Method Investment on the Sempra Energy Consolidated Statement of Operations. We used a market approach to measure the acquisition-date fair value of IEnova’s equity interest in IEnova Pipelines immediately prior to the business acquisition. We discuss non-recurring fair value measures and the associated accounting impact of the IEnova Pipelines acquisition in Note 12. Valuation of IEnova Pipelines’ Assets and Liabilities. Based on the nature of the Mexico regulatory environment and the oversight surrounding the establishment and maintenance of rates that IEnova Pipelines charges for services on its assets, IEnova Pipelines applies the guidance under the provisions of U.S. GAAP governing rate-regulated operations. Therefore, when determining the fair value of the acquired assets and liabilities assumed, we considered the effect of regulation on a market participant’s view of the highest and best use of the assets, in particular for the fair value of IEnova Pipelines’ PP&E. Under U.S. GAAP, regulation is viewed as being a characteristic (restriction) of a regulated entity’s PP&E, and the impact of regulation is considered a fundamental input to measuring the fair value of PP&E in a business combination involving a regulated business. Under this premise, the fair value of the PP&E of a regulated business is generally assumed to be equivalent to carrying value for financial reporting purposes. Management concluded that the carrying value of IEnova Pipelines’ PP&E is representative of fair value. We applied an income approach, specifically the discounted cash flow method, to measure the fair value of debt and derivatives. We valued debt by discounting future debt payments by a market yield, and we valued derivatives by discounting the future interest payments under the fixed and floating rates using current market data. For substantially all other assets and liabilities, we determined that historical carrying value approximates fair value due to their short-term nature. Impact on Operating Results. We incurred acquisition costs of $4 million for the year ended December 31, 2016, which are included in O&M on the Sempra Energy Consolidated Statement of Operations. For the year ended December 31, 2016, the Sempra Energy Consolidated Statement of Operations includes $82 million of revenues and $33 million of earnings (after NCI) from IEnova Pipelines since the September 26, 2016 date of acquisition. Ventika, S.A.P.I. de C.V. and Ventika II, S.A.P.I. de C.V. Background and Financing. On December 14, 2016, IEnova acquired 100 percent of the equity interests in the Ventika wind power generation facilities for cash consideration of $310 million and the assumption of $610 million of existing debt. Ventika is a 252-MW wind farm located in Nuevo Leon, Mexico, that began commercial operations in April 2016. All of Ventika’s generation capacity is contracted under 20-year, U.S. dollar-denominated PPAs with five private off-takers. The acquisition was funded using $50 million of net proceeds from the IEnova equity offerings that we discuss in Note 1, $250 million of borrowings against Sempra Mexico’s revolving credit facility, and $10 million of available cash at IEnova. The acquisition also included $68 million of restricted cash that represents funds set aside for servicing debt, operations and other costs pursuant to the long-term debt agreements. Purchase Price Allocation. We accounted for this business combination using the acquisition method of accounting whereby the total fair value of the business acquired is allocated to identifiable assets acquired and liabilities assumed based on their respective fair values, with any excess recognized as goodwill at the Sempra Mexico reportable segment. None of the goodwill is expected to be deductible in Mexico or in the U.S. for income tax purposes. Valuation of Ventika’s Assets and Liabilities. The fair values of the tangible and intangible assets acquired and liabilities assumed were recognized based on their preliminary values at the acquisition date. Significant inputs used to measure the fair values of the acquired PP&E, intangible asset, debt and derivatives are as follows:
▪ | PP&E – We applied an income approach using market-based discounted cash flows. We used the pricing included in the existing PPAs, which was determined to reflect current market rates in the Mexican renewable energy market.
▪ | Intangible asset – Ventika is the holder of a renewable energy transmission and consumption permit that allows it to transmit its generated power to various locations within Mexico at beneficial rates and reduces the administrative burden to manage transmitting power to off-takers. With recent renewable energy market reforms in Mexico, these transmission and consumption permits are no longer available, resulting in higher tariffs for generators. We applied an income approach based on a cash flow differential approach that measures the fair value of the transmission rights by comparing the operating expenses under the transmission and consumption permit as compared to under the new, higher tariffs. This acquired intangible asset has an amortization period of 19 years, reflecting the remaining life of the transmission and consumption transmission permit at the time of acquisition.
▪ | Debt – Using an income approach, we valued debt by discounting future debt payments by a market yield commensurate with the remaining term of the loans.
▪ | Derivatives – Using an income approach, we valued derivatives by discounting the future interest payments under the fixed and floating rates using current market data.
Additionally, we recognized deferred income taxes on Ventika’s existing NOLs and the difference between the fair values and tax bases of the net assets acquired using the Mexican statutory rate. For substantially all other assets and liabilities, we determined that historical carrying value approximates fair value due to their short-term nature. Impact on Operating Results. We incurred acquisition costs of $1 million in the year ended December 31, 2016, which are included in O&M on the Sempra Energy Consolidated Statement of Operations. For the year ended December 31, 2016, the Sempra Energy Consolidated Statement of Operations includes $4 million of revenues and $3 million of earnings (after NCI) from Ventika since the December 14, 2016 date of acquisition. SEMPRA RENEWABLES On July 10, 2017, Sempra Renewables paid $124 million in cash for an asset acquisition of a portfolio of four solar projects located in Fresno County, California, that were under construction. Completed in 2018, the facilities were sold to a subsidiary of Con Ed in December 2018, as we discuss below. In July 2016, Sempra Renewables acquired a 100-percent interest in a 100-MW wind farm in Huron County, Michigan, with a 15-year PPA, for a total purchase price of $22 million. Sempra Renewables paid $18 million in cash on the acquisition date and paid the remaining $4 million in cash on achievement of certain construction milestones in the fourth quarter of 2016. We placed this wind farm into service in November 2017. This facility is currently included in a plan of sale that we discuss below. PENDING ACQUISITION SEMPRA ENERGY Sempra Texas Utility On October 18, 2018, Oncor entered into the InfraREIT Merger Agreement, whereby Oncor has agreed to acquire 100 percent of the issued and outstanding shares of InfraREIT and 100 percent of the limited partnership units of its subsidiary, InfraREIT Partners, for approximately $1,275 million, or $21 per share and unit, plus approximately $40 million for a management agreement termination fee, as well as other customary transaction costs incurred by InfraREIT that would be borne by Oncor as part of the acquisition. In addition, the transaction includes InfraREIT’s outstanding debt, which as of September 30, 2018 was approximately $945 million. Consummation of the InfraREIT Merger Agreement is subject to the satisfaction of certain closing conditions, including the substantially concurrent consummation of the transactions contemplated by the Asset Exchange Agreement and Securities Purchase Agreement, discussed below. On October 18, 2018, Oncor entered into the Asset Exchange Agreement, whereby SDTS has agreed to accept and assume certain assets and liabilities of SU in exchange for certain SDTS assets. As currently contemplated, SDTS would receive certain real property and other assets used in the electric transmission and distribution business in Central, North and West Texas, as well as the equity interests in GS Project Entity, LLC (a wholly owned subsidiary of SU) and SU would receive certain real property and other assets that are near the Texas-Mexico border. Immediately prior to completing the exchange, SDTS would become a wholly owned, indirect subsidiary of InfraREIT Partners. Consummation of the Asset Exchange Agreement is subject to the satisfaction of certain closing conditions, including the substantially concurrent consummation of the transactions contemplated by the Securities Purchase Agreement, discussed below. On October 18, 2018, Sempra Energy entered into the Securities Purchase Agreement, whereby Sempra Texas Utilities Holdings I, LLC (a wholly owned subsidiary of Sempra Energy in our Sempra Texas Utility reportable segment) has agreed to acquire a 50-percent economic interest in Sharyland Holdings, LP for approximately $98 million, subject to customary closing adjustments. In connection with and prior to the consummation of the Securities Purchase Agreement, Sharyland Holdings, LP would own 100- percent of the membership interests in SU and SU would convert into a limited liability company, which is expected to be named Sharyland Utilities, LLC. Upon consummation of the Securities Purchase Agreement, Sempra Texas Utilities Holdings I, LLC would indirectly own and account for its 50-percent membership interest in Sharyland Utilities, LLC as an equity method investment. Consummation of the Securities Purchase Agreement is subject to the satisfaction of certain closing conditions, including the substantially concurrent consummation of the transactions contemplated by the InfraREIT Merger Agreement and the Asset Exchange Agreement. For Oncor to fund its acquisition of interests in InfraREIT, Sempra Energy and certain indirect equity holders of TTI have committed to make capital contributions proportionate to Sempra Energy’s and TTI’s respective ownership interests in Oncor, with the amount estimated to be contributed by Sempra Energy equal to approximately $1,025 million, excluding Sempra Energy’s share of the approximately $40 million for a management agreement termination fee, as well as other customary transaction costs incurred by InfraREIT that would be borne by Oncor as part of the acquisition. We expect to fund our capital contribution to Oncor and to purchase the 50-percent limited-partner interest in Sharyland Holdings, LP by utilizing a portion of the $1.6 billion in proceeds received from the sale of certain of our non-utility U.S. renewables business to a subsidiary of Con Ed, which we discuss below. The capital contributions are contingent on the satisfaction of customary conditions, including the substantially simultaneous closing of the transactions contemplated by the InfraREIT Merger Agreement, but are not a condition to the transactions contemplated therein. The transactions contemplated by the agreements discussed above require approval by the PUCT and the FERC, as well as the satisfaction of other regulatory requirements, approval by the Committee on Foreign Investment in the United States, certain lender consents and other customary closing conditions. Early termination of the applicable 30-day waiting period required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, was granted on December 14, 2018. In addition, the acquisition of InfraREIT was approved by the InfraREIT stockholders on February 7, 2019. We expect that the transactions will close in mid-2019. ASSETS HELD FOR SALE We classify assets as held for sale when management approves and commits to a formal plan to actively market an asset for sale and we expect the sale to close within the next 12 months. Upon classifying an asset as held for sale, we record the asset at the lower of its carrying value or its estimated fair value reduced for selling costs. SEMPRA SOUTH AMERICAN UTILITIES On January 25, 2019, our board of directors approved a plan to sell our South American businesses and we classified these businesses as held for sale. We expect to complete the sales process by the end of 2019. SEMPRA MEXICO Termoeléctrica de Mexicali In February 2016, management approved a plan to market and sell Sempra Mexico’s TdM, a 625-MW natural gas-fired power plant located in Mexicali, Baja California, Mexico. As a result, we stopped depreciating the plant and classified it as held for sale. In connection with the sales process, in late September 2016 and early July 2017, Sempra Mexico received market information indicating that the fair value of TdM was less than its carrying value. After performing analysis of the information, Sempra Mexico reduced the carrying value of TdM by recognizing noncash impairment charges of $131 million ($111 million after-tax) in the third quarter of 2016 and $71 million in the second quarter of 2017, recorded in Impairment Losses on Sempra Energy’s Consolidated Statements of Operations. We discuss non-recurring fair value measures and the associated accounting impact on TdM in Note 12. In connection with TdM’s classification as held for sale, we recognized an $8 million income tax benefit in 2017 and an $8 million income tax expense in 2016 for a deferred Mexican income tax liability related to the excess of carrying value over the tax basis. On June 1, 2018, management terminated its sales process for TdM due to evolving strategic considerations for projects under development at IEnova. As a result, the assets and liabilities previously classified as held for sale were reclassified as held and used, and depreciation resumed. We reclassified the property, plant and equipment at its carrying value (which approximated fair value) at the date of the subsequent decision not to sell. PLANNED SALE OF U.S. RENEWABLES AND NATURAL GAS STORAGE ASSETS On June 25, 2018, our board of directors approved a plan to divest certain non-utility natural gas storage assets in the southeast U.S., and all our U.S. wind and U.S. solar assets (collectively, the Assets). The plan to sell the Assets resulted from the most recent comprehensive strategic portfolio review by the board of directors and management. As a result of our plan to sell the Assets, we recorded impairment charges totaling $1.5 billion ($900 million after tax and NCI) in June 2018. These charges included $1.3 billion ($755 million after tax and NCI) at Sempra LNG & Midstream, which are included in Impairment Losses on Sempra Energy’s Consolidated Statement of Operations, and $200 million ($145 million after tax) at Sempra Renewables, which is included in Equity Earnings on Sempra Energy’s Consolidated Statement of Operations. In December 2018, we reduced the impairment of $1.3 billion recorded at Sempra LNG & Midstream in June 2018 by $183 million ($126 million after tax and NCI) as a result of the sales agreement for certain storage assets described below, resulting in a total impairment charge of $1.1 billion ($629 million after tax and NCI) for the year ended December 31, 2018. These impairment charges primarily represent an adjustment of the related assets’ carrying values to estimated fair values, less costs to sell when applicable, which we discuss further in Notes 6 and 12. Sempra Renewables In December 2018, Sempra Renewables completed the sale of all its operating solar assets, its solar and battery storage development projects and one wind generation facility, as we describe below in “Divestitures.” In February 2019, Sempra Renewables entered into an agreement with American Electric Power to sell its remaining wind assets and investments for $551 million, subject to working capital adjustments and customary closing conditions. We expect to complete the sale in the second quarter of 2019. Sempra LNG & Midstream On February 7, 2019, Sempra LNG & Midstream completed the sale of its non-utility natural gas storage assets in the southeast U.S. (comprised of Mississippi Hub and Bay Gas) to an affiliate of ArcLight Capital Partners. Sempra LNG & Midstream received cash proceeds of $328 million (subject to working capital adjustments and Sempra LNG & Midstream’s purchase for $20 million of the 9.1-percent minority interest in Bay Gas immediately prior to and included as part of the sale). The carrying amounts of the major classes of assets and related liabilities classified as held for sale associated with Sempra Renewables and Sempra LNG & Midstream are summarized in the following table.
ASSETS HELD FOR SALE AT DECEMBER 31, 2018
(Dollars in millions)
| Sempra Renewables |  | Sempra LNG & Midstream
Cash and cash equivalents | $ | 7 |  |  | $ | — |
Accounts receivable – trade, net | 2 |  |  | 5 |
Accounts receivable – other, net | 1 |  |  | — |
Other current assets | 1 |  |  | 6 |
Property, plant and equipment, net | 366 |  |  | 324 |
Other noncurrent assets | — |  |  | 1 |
Total assets held for sale | $ | 377 |  |  | $ | 336 |
Accounts payable – trade | $ | 2 |  |  | $ | 2 |
Other current liabilities | 4 |  |  | 3 |
Asset retirement obligations | 6 |  |  | 8 |
Total liabilities held for sale | $ | 12 |  |  | $ | 13 |
Sempra Renewables’ wind equity method investments totaling $291 million at December 31, 2018, which are included in the plan of sale, continue to be classified as Other Investments on Sempra Energy’s Consolidated Balance Sheets. See Note 6 for further discussion. DIVESTITURES The following table summarizes the deconsolidation of certain subsidiaries that have been sold in 2018 and 2016, as we discuss below:
DECONSOLIDATION OF SUBSIDIARIES
(Dollars in millions)
| Certain subsidiaries of Sempra Renewables | EnergySouth
| At December 13, 2018 | At September 12, 2016
Proceeds from sale, net of transaction costs | $ | 1,585 |  | $ | 304 |
Cash | (7 | ) | (2 | )
Restricted cash | (7 | ) | — |
Other current assets | (14 | ) | (17 | )
Property, plant and equipment, net | (1,303 | ) | (199 | )
Other investments | (329 | ) | — |
Goodwill | — |  | (72 | )
Other noncurrent assets | (24 | ) | (65 | )
Current liabilities | 8 |  | 25 |
Long-term debt | 70 |  | 67 |
Asset retirement obligations | 52 |  | — |
Other noncurrent liabilities | 5 |  | 89 |
Noncontrolling interests | 486 |  | — |
Accumulated other comprehensive income | (9 | ) | — |
Gain on sale | $ | 513 |  | $ | 130 |
SEMPRA RENEWABLES On December 13, 2018, Sempra Renewables completed the sale of the following assets to a subsidiary of Con Ed for cash proceeds of $1.6 billion:
▪ | all of its operating solar assets, including assets that we owned through JVs or through tax equity arrangements (other than those interests held by tax equity investors);
▪ | its solar and battery storage development projects; and
▪ | its 50-percent interest in the Broken Bow 2 wind generation facility.
In 2018, we recognized a pretax gain of $513 million ($367 million after tax) in Gain on Sale of Assets on Sempra Energy’s Consolidated Statement of Operations. SEMPRA LNG & MIDSTREAM EnergySouth Inc. On September 12, 2016, Sempra LNG & Midstream completed the sale of EnergySouth, the parent company of Mobile Gas and Willmut Gas, to Spire Inc. for cash proceeds of $318 million, net of $2 million cash sold, with the buyer assuming debt of $67 million. In 2016, we recognized a pretax gain of $130 million ($78 million after tax) in Gain on Sale of Assets on Sempra Energy’s Consolidated Statement of Operations. Investment in Rockies Express In March 2016, Sempra LNG & Midstream entered into an agreement to sell its 25-percent interest in Rockies Express to a subsidiary of Tallgrass Development, LP for cash consideration of $440 million, subject to adjustment at closing. The transaction closed in May 2016 for total cash proceeds of $443 million. At the date of the agreement, the carrying value of Sempra LNG & Midstream’s investment in Rockies Express was $484 million. Following the execution of the agreement, Sempra LNG & Midstream measured the fair value of its equity method investment at $440 million, and recognized a $44 million ($27 million after tax) impairment in Equity Earnings on the Sempra Energy Consolidated Statement of Operations. We discuss non-recurring fair value measures and the associated accounting impact on our investment in Rockies Express in Note 12. We discuss Sempra LNG & Midstream’s 2016 permanent release of pipeline capacity that it held with Rockies Express and others in Note 16.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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