After lengthy negotiations with various creditors, Energy Future Holdings (EFH) on May 1 filed with its bankruptcy court its latest Chapter 11 reorganization plan.
Energy Future Holdings, in bankruptcy protection since April 2014, is the ultimate parent of companies like Texas Competitive Electric Holdings Co. LLC (TCEH). Its case is being handled at the U.S. Bankruptcy Court for the District of Delaware.
Energy Future has three distinct business units:
- its competitive electricity generation, mining, wholesale electricity sales, and commodity risk management and trading activities, conducted by debtors known collectively as “Luminant”;
- the competitive retail electricity sales and related operations, mainly conducted by debtors known as “TXU Energy”; and
- rate-regulated electricity transmission and distribution operations, conducted by the non-debtor Oncor Electric Delivery Co. LLC.
With the addition of two natural gas combined cycle gas turbine (CCGT) plants acquired in April 2016, Luminant currently owns and operates 15 power plants comprising 50 electricity generation units. Luminant’s total generation of 16,760 MW accounts for approximately 19% of the generation capacity in the ERCOT market. Luminant sells approximately 66% of its electricity generation output to TXU Energy, and sells the remainder through bilateral sales to third parties or through sales directly to ERCOT. Luminant also owns and operates 12 surface lignite coal mines in Texas that supply coal to Luminant’s lignite/coal-fueled units.
Oncor Electric operates the largest transmission and distribution system in Texas, delivering electricity to more than 3.3 million homes and businesses and operating more than 121,000 miles of transmission and distribution lines. Oncor Electric has the largest geographic service territory of any transmission and distribution utility within the ERCOT market, covering 91 counties and over 400 incorporated municipalities. Importantly, Oncor Electric is “ring-fenced” from the debtors: it has an independent board of directors, and it is operated, financed, and managed independently.
The plan provides for two potential restructurings for the power plant companies, including a spin-off to creditors in a tax-free deal. If the spin-off doesn’t happen, then the assets of the power plant debtors will be transferred to a reorganized TCEH in a transaction or transactions intended to qualify as a taxable sale or exchange.
As for what happens to Oncor, the plan says: “On the EFH Effective Date, EFH Corp. and [Energy Future Intermediate Holding Co. LLC] will implement and exercise their rights, if any, as direct or indirect equity holders of Oncor, and take other actions within their reasonable control, to cause Oncor to implement the IPO Conversion Plan, including the [real estate investment trust] Reorganization.”
The voting deadline for creditors on this revised plan is 4:00 p.m. (prevailing Eastern Time) on July 22. The court is due to hold a May 18 hearing on this plan.