Energy Future Holdings not making much progress with creditors

Texas utility holding company Energy Future Holdings Corp. (EFH Corp.) has been negotiating for relief from creditors, with a bankruptcy filing still a possibility, the company reported in its Nov. 1 Form 10-Q filing at the SEC.

Energy Future’s competitive business has been and is expected to continue to be adversely affected by the sustained decline in natural gas prices and its effect on wholesale and retail electricity prices in the Electric Reliability Council of Texas (ERCOT) region, the company reported. Further, the remaining natural gas hedges that Texas Competitive Electric Holdings Co. LLC (THEC) entered into when forward market prices of natural gas were significantly higher than current prices will mature in 2013 and 2014.

“These market conditions challenge the long-term profitability and operating cash flows of EFH Corp.’s competitive businesses and the ability to support their significant interest payments and debt maturities, and could adversely impact their ability to obtain additional liquidity and service, refinance and/or extend the maturities of their outstanding debt,” the Form 10-Q said.

EFH Corp. and its subsidiaries (other than operations called the “Oncor Ring-Fenced Entities”) continue to consider and evaluate possible transactions and initiatives to address their highly leveraged balance sheets and significant cash interest requirements and have entered into discussions with their lenders and bondholders with respect to such transactions and initiatives.

These transactions and initiatives may include, among others, debt for debt exchanges, recapitalizations, amendments to and extensions of debt obligations and exchanges or conversions of debt.

Talks lately with creditors have included the possibility of a consensual, prepackaged restructuring transaction. “Our objectives in these discussions were to promote a sustainable capital structure and maximize enterprise value of EFH Corp. and its subsidiaries by, among other things, encouraging agreement on a restructuring plan that would minimize time spent in a restructuring through a proactive and organized solution; minimizing any potential adverse tax impacts of a restructuring; maintaining the company in one consolidated group; maintaining focus on operating our businesses, and maintaining the company’s high-performing work force,” the Form 10-Q said.

Certain proposals contemplated that some combination of EFH Corp. and certain of its subsidiaries would implement a plan of reorganization by commencing one or more voluntary cases under Chapter 11 of the U.S. Bankruptcy Code.

“The confirmation of any plans of reorganization in such cases would be subject to applicable regulatory approvals,” the company said. “We and the Creditors have not reached agreement on the terms of any change in our capital structure. We are not currently engaged in ongoing negotiations with the principals of any of the Creditors. Although the Creditors are not currently engaged in ongoing negotiations with us, certain of the Creditors have directed their advisors to continue to work with us and our advisors to explore further whether the parties can reach an agreement on the terms of a consensual restructuring. We will continue to consider and evaluate a range of future changes to our capital structure, in addition to the proposed changes described above, which may include filing a voluntary case under Chapter 11 of the Code for some or all of EFH Corp. and its subsidiaries (excluding the Oncor Ring-Fenced Entities).”

The company is holding an earnings call for investors on Nov. 5.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.