Texas' Energy Future files Ch. 11 reorganization
DALLAS - Energy Future Holdings filed for Chapter 11 bankruptcy reorganization Tuesday after agreeing with key financial stakeholders to keep its power-producing businesses operating in Texas while it reduces roughly $40 billion in debt.
The company owns TXU Energy, a retail electricity provider, and Luminant, the state's largest power generator. State agencies, including the manager of Texas' electricity grid, have been closely watching the company in the run-up to its filing to ensure that power production is not impacted. In the short term, it appears power distribution and production will continue normally.
Energy Future's main stakeholders had discussed a restructuring, and the company recently skipped a deadline to pay $109 million in interest.
The Dallas company said Tuesday it will separate its Texas Competitive Electric Holdings Co. subsidiary, which includes TXU Energy, and give preferred lenders complete ownership in that reorganized business. It also will give lenders cash proceeds from new debt in exchange for eliminating about $23 billion of Texas Competitive Holdings' funded debt.
Energy Future will still own Energy Future Intermediate Holding Co. and keep its interest in Oncor Electric Delivery Co., a power transmission business, which is not part of the reorganization.
The company found itself with an untenable debt load after it bet that natural gas prices would rise, giving its coal-fired plants a competitive edge. Instead, natural gas prices have plummeted amid a glut of production from U.S. shale deposits.
It said Tuesday that it expects day-to-day operations to continue during the reorganization. That includes provision of power to customers, the payment of wages and benefits, and payments to vendors.
The Electric Reliability Council of Texas, or ERCOT, which manages the state's grid and the flow of power to 23 million customers in Texas, said in a statement Tuesday it has been monitoring Energy Future's situation and is focused on maintaining system reliability and market efficiency as the restructuring moves forward.
"It is our understanding that EFH and its affected subsidiaries expect to continue operating generation assets and serving retail customers in Texas," ERCOT said in its statement, noting that the company's transmission business, Oncor, is not included in the bankruptcy filing. "Therefore, ERCOT sees no immediate concerns related to system reliability or market efficiency associated with this filing."
Energy Future expects to leave its restructuring in about 11 months.
The holding company was acquired in 2007 by private-equity firms KKR & Co., TPG Capital and Goldman Sachs Capital Partners.