Energy Future now officially open to offers for its assets

Texas power and transmission company Energy Future Holdings Corp., which entered Chapter 11 bankruptcy protection in April to reorganize around a pre-packaged plan, said in a July 24 SEC filing that it now intends to put assets formally up for sale.

On April 29, Energy Future Holdings and the substantial majority of its direct and indirect subsidiaries, including Energy Future Intermediate Holding Co. LLC (EFIH), Energy Future Competitive Holdings Co. LLC (EFCH) and Texas Competitive Electric Holdings Co. LLC (TCEH), but excluding Oncor Electric Delivery Holdings Co. LLC and its direct and indirect subsidiaries, filed voluntary petitions for relief under Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware.

In anticipation of the bankruptcy filing, the so-called “Reorganizing Entities” entered into a Restructuring Support and Lock-Up Agreement (RSA) with various stakeholders in order to effect an agreed upon restructuring through a pre-arranged Chapter 11 plan of reorganization.

On July 24, each of EFH Corp., EFIH, EFCH, TCEH, EFIH Finance Inc. and TCEH Finance Inc. provided a notice of termination of the RSA in accordance with its terms. The RSA termination will be effective five business days following delivery of the notice, on July 31.

The filing said the RSA was useful in providing a framework for the restructuring transactions involving EFH Corp. and EFIH described in the RSA, which prompted competing proposals, including, among others, an alternative proposal from NextEra Energy (NYSE: NEE).

“In cooperation with their various stakeholders, the Reorganizing Entities have focused (and will continue to focus) on formulating and implementing an effective and efficient plan of reorganization for each of the Reorganizing Entities under Chapter 11 of the Bankruptcy Code that maximizes enterprise value,” the filing said. “Each of the Reorganizing Entities remains committed to the tax-free spin of TCEH and its subsidiaries (the ‘TCEH Debtors’) described in the RSA. Moreover, the TCEH first lien creditors who were party to the RSA have advised the Reorganizing Entities that, notwithstanding the RSA Termination, they intend to continue to work cooperatively with the Reorganizing Entities and other parties in interest to pursue transactions that can be achieved expeditiously, including a possible tax-free spin of the TCEH Debtors, which will maximize the value of the TCEH Debtors’ estates and resolve the Chapter 11 Cases.

“The Reorganizing Entities are encouraged by the interest in EFIH and it subsidiaries, including Oncor Electric Delivery Company LLC. The Reorganizing Entities intend to conduct a court supervised bid process with respect to the restructuring of EFH and EFIH to maximize their respective enterprise values for all stakeholders. In addition, EFH and EFIH intend to continue to negotiate with each party that has submitted bids to date with respect to the reorganization of EFH and EFIH.”

Oncor, considered the company’s most valuable asset, is a regulated electric transmission and distribution service provider that serves 10 million customers across Texas. EFH’s power plants, including several coal-fired plants, are reportedly attracting lesser interest from outside parties.

Energy Future looks at spinning off generating arm

Michael Carter, Senior Vice President of Corporate Planning and an Assistant Treasurer of EFH Corporate Services Co., a direct subsidiary of Energy Future Holdings, wrote about the case so far in July 23 testimony in support of a request to extend the deadline for the bankrupt companies to file a final reorganization plan.

“Despite the fact that the Debtors have been doing everything they should be doing to facilitate an expeditious exit from chapter 11, there remains much work to do,” Carter said. “There are a number of open issues the Debtors are actively addressing with their stakeholders. For example, the Debtors have discussed a potential tax-free spin of TCEH and its subsidiaries with several of their regulators, including, among others, the [Public Utility Commission of Texas], the [Nuclear Regulatory Commission], and the IRS but have not obtained any assurances regarding their assessments of such a transaction. With respect to the IRS, the Debtors have asked the IRS to opine on the tax attributes of a tax-efficient restructuring and, to date, are engaged in active discussions with the IRS.”

Energy Future is asking the court to extend the periods during which the debtors have the exclusive right to file a chapter 11 plan by 180 days, through and including Feb. 23, 2015, then an April 25, 2015, extended deadline to solicit creditor support for that plan. An Aug. 13 hearing is scheduled on the extension request.

Said EFH in the main body of the July 23 extension motion: “Since the current proposal was filed with the Court, trading values of EFH and EFIH debt instruments have increased and third-party strategic buyers, including NextEra Energy, Inc. (‘NextEra’), have shown interest in purchasing the equity in reorganized EFH based on higher valuations of EFIH’s indirect ownership interest in Oncor Electric Delivery Company LLC. As a result, the Debtors are also engaging their stakeholders in discussions regarding the process for evaluating alternative restructuring proposals that will facilitate confirmation of a consensual, value-maximizing plan of reorganization.”

EFIH is a holding company for its subsidiaries, including Oncor Electric Delivery Holdings and its subsidiary, Oncor Electric Delivery Co. LLC, which are principally engaged in providing delivery services to retail electric providers.

The power plants are under the bankrupt Luminant affiliates, which are under TCEH and form a competitive power generation business with plant, coal mine, wholesale marketing and trading, and development operations in Texas. They have more than 15,400 MW of generation, including 2,300 MW of nuclear and 8,000 MW fueled by coal.

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.