- Oncor power distribution unit a focus of interest
- Unsolicited bid upended utility’s initial plan
- Company to spin off retail business to creditors
Edward Sassower, a Kirkland & Ellis lawyer who represents Energy Future, told a U.S. bankruptcy judge the company will seek a approval for the auction plan at a hearing on Oct. 17, suggesting the proposal could be filed soon, sister news service Reuters reported. “As you are aware, we’re in the midst of a bidding war,” said Sassower. “We’ve been working diligently to maintain that momentum by nurturing bids and attracting new bids. Market conditions are favorable and we want to lock in that value.”
In June, NextEra Energy Inc swooped in with an unsolicited bid for control of Oncor, but Energy Future rejected it. That proposal upended Energy Future’s initial plan to allow its unsecured creditors to own the company when it emerged from bankruptcy. Energy Future filed for bankruptcy in April after years of falling natural gas prices dragged power prices lower, cutting the company’s revenue and leaving it with unsustainable debt.
Energy Future’s main asset is its ownership stake in Oncor, a nonbankrupt business that owns the largest power transmission network in Texas. Thomson Reuters’ IFR has reported that Hunt Consolidated was considering a bid, and that Houston-based CenterPoint Energy Inc and Spanish Iberdrola also had shown interest.
Separately, Energy Future plans to spin off its power plants and retail electric utility business to that unit’s secured creditors, who are owed $24 billion. Bankruptcy auctions of a company’s assets are a customary way to raise money to repay a company’s debts, which in the case of Energy Future top $40 billion.
Sassower said the auction proposal would deviate from the usual practice of identifying a stalking horse or initial bidder before asking a judge to approve bidding procedures. Instead, Energy Future will ask Delaware U.S. Bankruptcy Judge Christopher Sontchi to approve a separate procedure for selecting a stalking horse, Sassower told the court.
Energy Future was created from a leveraged $45 billion buyout in 2007 of TXU Corp, in a deal led by Kohlberg Kravis Roberts & Co, TPG Capital and Goldman Sachs Group Inc’s private equity arm GS Capital Partners. The buyers are likely to lose their investment in the bankruptcy.
Tom Hals is a correspondent for Reuters in Wilmington, Delaware.