Energy Future files revised bid plan for Oncor electric distribution company

Energy Future Holdings, which controls both power generation and distribution assets in Texas, on Jan. 13 filed with its bankruptcy court a revised bidding plan for its Oncor Electric Delivery Co. LLC operation.

In September 2014, Energy Future and related companies in chapter 11 protection at the U.S. Bankruptcy Court for the District of Delaware filed a motion for approval of bidding procedures for Oncor. The judge on Nov. 3, 2014, approved the procedures, contingent on some changes in them being made. The altered bid procedures were what was filed on Jan. 13.

Following the Nov. 3 ruling, the debtor companies and their advisors, including advisors to each debtor for matters on which there is an actual conflict of interest between the debtors, developed and negotiated the revised proposed form of order attached to the Jan. 13 filing. Judge Christopher Sontchi on Jan. 14 approved the revised bidding procedures, including the planned bidding schedule.

The revised bid plan is based on the “stalking horse” concept, which is routine in bankruptcy cases and involves lining up an initial bidder, with that bidder then paid a break fee if it is later beaten at a live auction. This procedure is used to give bidders an incentive to get involved in the sale process early, instead of hanging back until the auction itself, which many do anyway.

Said the revised bid procedures: “Under the two-stage Stalking Horse Bidding Process, in the initial stage (‘Round 1’), Acceptable Bidders may submit preliminary Bid materials to the Debtors (a ‘Round 1 Bid’), and the Debtors, in consultation with the [creditors] Committee Representatives, will select certain Acceptable Bidders, based on the Bid Criteria, to advance to the second stage (‘Round 2’). During Round 2, Round 2 Bidders (as defined below) will prepare and submit definitive documentation, and the Debtors and certain selected Round 2 Bidders will continue to negotiate the terms of such definitive documentation. The Debtors and their advisors and representatives will reasonably promptly consult with the Committee Representatives with respect to the negotiations. At the conclusion of this process, the Debtors will select, in consultation with the Committee Representatives, the highest or otherwise best Bid to serve as the Stalking Horse Bid (as defined below).”

There is a planned March 2 deadline to submit Round 1 bids, with a March 16 deadline for picked bidders in Round 1 to submit final documentation. There is an April 13 deadline for Round 2 bidders to submit final documentation. Then there is a non-specific timeline from there for the rest of the bidding and open auction process.

Oncor is a regulated electricity business that operates the largest distribution and transmission system in Texas, delivering power to more than 3 million homes and businesses and operating about 119,000 miles of transmission and distribution lines in Texas. This sale process does not involve any power generating assets. Oncor is considered the crown jewel of Energy Future’s operations, with the power generation business facing more challenges in terms of valuation.

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.