Sempra Energy (NYSE: SRE) announced that it is commencing concurrent offerings (the equity offerings) of $2.5 billion of shares of its common stock in connection with the forward sale agreements described below and $1.5 billion of shares of its Mandatory Convertible Preferred Stock, Series A, each in a separate registered public offering, subject to market and other conditions.

These offerings are being made by means of separate prospectus supplements and are not contingent on each other or upon the consummation of Sempra Energy’s pending acquisition (the merger) of Energy Future Holdings Corp. (EFH), including EFH’s indirect, approximately 80-percent ownership of Oncor Electric Delivery Company LLC (Oncor).

Sempra Energy expects to use the net proceeds from these offerings and the related sale of shares of its common stock pursuant to the forward sale agreements referred to below, together with the net proceeds from planned future debt financings, which may include the issuance of its debt securities, commercial paper supported by its revolving credit facilities and borrowings under its revolving credit facilities, to finance the merger and related costs and expenses or, in the case of any proceeds received from settlements under the forward sale agreements that occur after the closing of the proposed merger, to repay indebtedness incurred to finance a portion of the cost of the merger and related costs and expenses. If for any reason the merger is not completed on or prior to Dec. 1, 2018, or the related merger agreement is terminated on or prior to that date, then Sempra Energy expects to use the net proceeds from the equity offerings for general corporate purposes, which may include, in Sempra Energy’s sole discretion, the voluntary redemption of the Mandatory Convertible Preferred Stock, debt repayment, including repayment of commercial paper, capital expenditures, investments and possibly repurchases of its common stock at the discretion of its board of directors.

Sempra Energy intends to grant the underwriters in the respective equity offerings the option to purchase directly from Sempra Energy up to an additional $375 million of shares of its common stock and up to an additional $225 million of shares of its Mandatory Convertible Preferred Stock.

Morgan Stanley, RBC Capital Markets and Barclays are acting as joint bookrunners of the equity offerings and representatives of the underwriters.

In connection with the common stock offering, Sempra Energy expects to enter into forward sale agreements with each of Morgan Stanley & Co. LLC, an affiliate of RBC Capital Markets, LLC and an affiliate of Barclays Capital Inc. (in such capacity, the forward purchasers) with respect to $2.5 billion of shares of its common stock. In connection with the forward sale agreements, the forward purchasers or their affiliates (in such capacity, the forward sellers) are expected to borrow from third parties and sell to the underwriters of the common stock offering for resale by such underwriters in such offering, an aggregate of $2.5 billion of shares of the common stock. If, however, the forward purchasers determine in good faith, after using commercially reasonable efforts, that the forward sellers are unable to borrow and deliver to the underwriters any such shares of common stock, or the forward sellers are unable to borrow and deliver to the underwriters any such shares at a stock loan rate not greater than a specified rate, Sempra Energy will issue and sell to the underwriters a number of shares of common stock equal to the number of shares that the forward sellers did not deliver.

Sempra Energy will not initially receive any proceeds from the sale of common stock sold by the forward sellers to the underwriters. Instead, subject to its right to elect cash settlement or net share settlement subject to certain conditions, Sempra Energy intends to deliver, upon physical settlement of such forward sale agreements on one or more dates specified by Sempra Energy occurring no later than Dec. 15, 2019, an aggregate of $2.5 billion of shares of its common stock to the forward purchasers in exchange for cash proceeds per share equal to the applicable forward sale price per share, which will initially be equal to the public offering price per share in the common stock offering, less underwriting discounts and commissions, as subsequently adjusted as provided in the forward sale agreements.

Each share of Mandatory Convertible Preferred Stock is expected to have a liquidation preference of $100 per share. 

Unless earlier converted or redeemed, each share of Mandatory Convertible Preferred Stock will automatically convert into a variable number of shares of Sempra Energy’s common stock on the mandatory conversion date, which is expected to be Jan. 15, 2021. The number of shares of Sempra Energy’s common stock issuable on mandatory conversion will be determined based on the average volume-weighted average price of Sempra Energy’s common stock over the 20-trading day period commencing on and including the 21st scheduled trading day prior to Jan. 15, 2021. The dividend rate and the conversion terms of the Mandatory Convertible Preferred Stock will be determined by negotiations among Sempra Energy and the underwriters.

The offerings are being made pursuant to an effective shelf registration statement filed with the U.S. Securities and Exchange Commission (SEC). Each offering will be made only by means of a prospectus supplement relating to such offering and the accompanying base prospectus, copies of which may be obtained by contacting the representatives of the underwriters using the information provided below under “Underwriter Contact Information.” An electronic copy of each preliminary prospectus supplement, 

This press release shall not constitute an offer to sell or a solicitation of an offer to buy the securities described herein, nor shall there be any sale of these securities in any state or other jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.