Energy Future says power plant assets close to getting out of bankruptcy

Upon receipt of regulatory approvals and emergence, an entity at the moment called “Reorganized TCEH,” which includes power generator Luminant, TXU Energy and supporting business services, will operate as a stand-alone company poised to benefit from a strong balance sheet and enviable positioning in Texas’ competitive energy market, said Energy Future Holdings (EFH).

The company announced Aug. 26 that the U.S. Bankruptcy Court for the District of Delaware has confirmed Texas Competitive Energy Holdings’ amended plan of reorganization, which contemplates a tax-free spin off of the company’s competitive businesses, known as TCEH and including Luminant and TXU Energy, along with supporting business services.

In addition to court approval, the company has already received a majority of the key regulatory approvals required for emergence from bankruptcy, with a final approval from the Railroad Commission of Texas anticipated in September. Upon receipt of that approval, Luminant, TXU Energy and EFH Business Services, which will collectively be known as “Reorganized TCEH” in the short-term, can then emerge from Chapter 11.

EFH and Energy Future Intermediate Holdings, which owns an indirect 80% interest in transmission owner Oncor Electric Delivery Co. LLC, continues to be in the Chapter 11 restructuring process. The confirmation hearing related to emergence for these assets is slated to begin Dec. 1. NextEra Energy (NYSE: NEE) has a pending deal to acquire Oncor.

Under the plan, creditors of Texas Competitive Electric Holdings, the merchant energy subsidiary of EFH, will receive TCEH’s assets in a tax-free spinoff. TCEH will form a standalone reorganized entity post restructuring.

In April 2014, Energy Future Holdings Corp. and 70 affiliated companies filed petitions for relief under Chapter 11 of the United States Bankruptcy Code. Since then, contentious negotiations with varioys creditors have failed to reach a consensus reorganization plan.

Energy Future has three distinct business units:

  • its competitive electricity generation, coal 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 Oncor.

Luminant, which is under TCEH in the corporate structure, 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 capacity in the ERCOT market. 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.

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.