SRE 3Q2017: New Strategy Takes Shape with Oncor; New Projects Increase NIV

We look for SRE to … and …. Other than … seems prohibited, especially if it has …
Guiding towards … 20XX …
20XX AEPS guidance of $XXX-$XXX seems – only some XX% CAGR from …. SRE is … grow …
20XX … expected …
We look for … regards to …
Within next … we look for … and begin …
NIV/share … $XXX/share from $XXX/share on … and additions of …

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SRE: Details on financing given; Oncor deal looks to remain on track for 1H18 close

Expected 20XXE … of $XXX-$XXX/share, which is .. with …
SRE intends to own … after …, which we expect to occur within …
… issue of some XXX%-XXX% of SRE’s …, which is about $XXB (XX% of $XXB)

Balance of the … is going to come from a …, likely more … in our opinion, given the plethora of …
Still searching for … of … investment: Looking for long-term … with about a … horizon
Based on $XXXB … program at Oncor, SRE expects CAGR in net income to be … 20XX
SRE states 100% valuation for Oncor based on $XXXB EV
Deal expected to close in …

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SRE: Oncor acquisition is strategically astute and appears financially sound

Conference call reveals … multiple paid and that SRE would issue some equity to fund the transaction: It was revealed by management that it estimates having valued Oncor at some XXx 2018E AEBITDA and some XXx 20XXE adjusted net income. This includes SRE’s estimate of the impact of …. The financial data is expected to be updated just before or after closing the transaction in ….

· Oncor’s 2018E AEBITDA and Net Income based on offering price for EFHC: Based on the multiple that SRE believes it would pay, if successful, Oncor’s implied … about $XXXMM and $XXXMM, respectively

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SRE: We like strategic direction of Oncor acquisition; not sure of financing

Strategically, we believe this is a good deal for SRE’s investors: The five year $XXXB investment program at Oncor should be accretive to SRE’s earnings and help raise the value of SRE. More than anything else, we believe that SRE paid …, but not be strapped with the … “Winner’s Curse,” in our opinion. However, SRE’s choice to finance part of the deal with …, in our opinion, based on some basic math.

Deal terms: Although details were scant, it seems SRE would buy 100% of Oncor’s ultimate parent, Energy Future Holdings Corp. (EFHC), for $XXXB in cash, resulting in an EV for Oncor of about $XXXB.

Third-party investor(s) for risk mitigation:

Based on some simple calculations, we believe that SRE paid just … for the deal:
SRE’s ultimate ownership: Sale to a … would leave … with total equity interest in … and, therefore, a … (… an XX% equity interest in Oncor).
Depending on the tax rate at EFHC, … to ROE:
Oncor’s CAGR in net income from … for SRE’s 2018 …:

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