- Energy Future Holdings (EFH) filed for Chapter 11 bankruptcy on Tuesday. EFH is looking to "swap" independent power producer Texas Competitive Electric Holdings for forgiveness on $25 billion worth of debt, according to the Wall Street Journal. Notably, Oncor did not file for bankruptcy.
- Wall Street private equity firms KKR & Co. and TPG engineered the $45 billion buyout of former TXU Corp. in 2007, which is said to be near a deal with creditors to accelerate bankruptcy proceedings.
- The abbreviated bankruptcy could depend at least in part on the sale of EFH-owned Oncor Electric Delivery Co. which, as the operator of the biggest electricity transmission and distribution system in Texas, brings in $15 billion in predictable annual earnings.
- KKR and TPG financed the EFH takeover in a $30-plus billion deal that protected their own exposure, according to SEC filings, with equity from Wall Street banks and their own clients, including Berkshire Hathaway which, Warren Buffett told investors, lost $873 million on his $2 billion EFH bonds bet.
Reports say the sale of Oncor, which holds enormous value as a regulated supplier of T&D services in the Texas deregulated electricity marketplace, could be the piece that pulls EFH through the bankruptcy process quickly.
Warren Buffett stands to potentially recoup losses if his MidAmerican Energy Holdings could buy Oncor at a fire sale price. "NV Energy will not be MidAmerican’s last major acquisition," Buffett recently said. Exelon, AEP, Centerpoint, and Xcel are also said to be eyeing Oncor, which Moody’s analysts see as a “premium asset.”
A Bloomberg analyst valued the EFH 80% ownership in Oncor at over $7 billion because Texas regulators allow it a 10% return and are likely to approve a $1 billion annual investment in new electricity infrastructure to meet the state’s increasing power demand.
Oncor’s net income increased 24% to $432 million in 2013 and it paid $310 million in dividends to EFH and other owners.