Energy Future Wrangles With Vistra Over Tax Breaks -- Update
Energy Future Holdings Corp. is battling some of its former businesses in a tax dispute with Vistra Energy Corp., and hedge fund Elliott Management Corp. is chiming in.
Vistra is made up of Energy Future's former power-producing and retailing businesses, which exited from bankruptcy last year as a new company. Still stuck in chapter 11, Energy Future on Tuesday sued Vistra, accusing it of violating an agreement on how to divide the energy giant's tax breaks.
Elliott, Energy Future's largest creditor, filed papers seeking to weigh in on the fight, which focuses on an agreement struck in August 2016, as the former TXU retailing and power-generating businesses, TXU Energy and Luminant, were preparing to exit bankruptcy.
A spokesman for Vistra couldn't immediately be reached for comment. Most court papers were filed under seal, so the value of the disputed tax breaks isn't known. Lawyers for Energy Future say the information, including "numerical descriptions," needs to stay secret, because it "may impact future transactions in which the parties may participate."
Taxes were a driving force in shaping Energy Future's restructuring, which saw the company split in two. Done incorrectly, the breakup of Energy Future could have left behind a multibillion-dollar unpaid tax bill, which would have been a major embarrassment for private-equity owners KKR & Co., TPG Capital and an arm of Goldman Sachs Group Inc.
To prevent the tax-liability overhang, Energy Future engaged in extensive talks with the Internal Revenue Service and devised a complex deal structure meant to produce the desired effect, accompanied by a pact to cooperate in filing tax returns.
New court papers say Energy Future doesn't believe Vistra is abiding by the tax agreement, and will further violate it Oct. 16, when it files its tax returns. Vistra plans to use certain tax breaks in a way that would limit their availability to Energy Future, lawyers for the bankrupt company say.
Energy Future, the former TXU Corp., filed for chapter 11 bankruptcy protection in April 2014, loaded down with more than $42 billion in debt. Last year's exit of the Vistra businesses from bankruptcy cleared away more than $30 billion in debt, leaving the parent holding company to resolve the rest.
Energy Future is hoping to sell its 80% stake in Oncor, a Texas power transmission company, to California's Sempra Energy Inc., in a $9.45 billion deal. Texas regulators must approve the transaction first, a process that could take as long as eight months. Assuming Sempra gets the nod from the Public Utility Commission of Texas, Energy Future will seek confirmation of its chapter 11 exit plan.
Elliott Management, which is run by billionaire Paul Singer, bought up Energy Future debt this year, then dueled with Warren Buffett's Berkshire Hathaway Energy Co. for the right to acquire Oncor. In August, Sempra Energy swooped in and agreed to buy Oncor in a deal that has Elliott's backing.
Write to Peg Brickley at peg.brickley@wsj.com
Energy Future Holdings Corp. is battling some of its former businesses in a tax dispute with Vistra Energy Corp., and hedge fund Elliott Management Corp. is chiming in.
Vistra is made up of Energy Future's former power-producing and retailing businesses, which exited from bankruptcy last year as a new company. Still stuck in chapter 11, Energy Future on Tuesday sued Vistra, accusing it of violating an agreement on how to divide the energy giant's tax breaks.
Elliott, Energy Future's largest creditor, filed papers seeking to weigh in on the fight, which focuses on an agreement struck in August 2016, as the former TXU retailing and power-generating businesses, TXU Energy and Luminant, were preparing to exit bankruptcy.
Vistra declined to comment on the case, which is set for a status conference Thursday in the U.S. Bankruptcy Court in Wilmington, Del. Most court papers were filed under seal, so the value of the disputed tax breaks isn't known. Lawyers for Energy Future say the information, including "numerical descriptions," needs to stay secret, because it "may impact future transactions in which the parties may participate."
Taxes were a driving force in shaping Energy Future's restructuring, which saw the company split in two. Done incorrectly, the breakup of Energy Future could have left behind a multibillion-dollar unpaid tax bill, which would have been a major embarrassment for private-equity owners KKR & Co., TPG Capital and an arm of Goldman Sachs Group Inc.
To prevent the tax-liability overhang, Energy Future engaged in extensive talks with the Internal Revenue Service and devised a complex deal structure meant to produce the desired effect, accompanied by a pact to cooperate in filing tax returns.
New court papers say Energy Future doesn't believe Vistra is abiding by the tax agreement, and will further violate it Oct. 16, when it files its tax returns. Vistra plans to use certain tax breaks in a way that would limit their availability to Energy Future, lawyers for the bankrupt company say.
Energy Future, the former TXU Corp., filed for chapter 11 bankruptcy protection in April 2014, loaded down with more than $42 billion in debt. Last year's exit of the Vistra businesses from bankruptcy cleared away more than $30 billion in debt, leaving the parent holding company to resolve the rest.
Energy Future is hoping to sell its 80% stake in Oncor, a Texas power transmission company, to California's Sempra Energy Inc., in a $9.45 billion deal. Texas regulators must approve the transaction first, a process that could take as long as eight months. Assuming Sempra gets the nod from the Public Utility Commission of Texas, Energy Future will seek confirmation of its chapter 11 exit plan.
Elliott Management, which is run by billionaire Paul Singer, bought up Energy Future debt this year, then dueled with Warren Buffett's Berkshire Hathaway Energy Co. for the right to acquire Oncor. In August, Sempra Energy swooped in and agreed to buy Oncor in a deal that has Elliott's backing.
Write to Peg Brickley at peg.brickley@wsj.com
(END) Dow Jones Newswires
October 11, 2017 16:09 ET (20:09 GMT)