Bankrupt power giant Energy Future Holdings terminated its restructuring agreement and announced plans to auction its stake in the profitable power transmission business Oncor Electric Delivery Co., according to a filing Thursday with the U.S. Securities and Exchange Commission.
The company and its creditors "believe that the (restructuring agreement) has provided significant benefit," including obtaining billions of dollars in new financing, the filing said.
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In a letter to employees Thursday, Energy Future said it would maintain its approach to reorganizing the company, which centers on a tax-free spinoff of the unprofitable side, including Luminant, the state's largest power generator, and TXU Energy, the state's largest electricity retailer.
With cash flows for electricity distribution and production shielded from creditors, the bankruptcy has not yet impacted consumers.
The proposed auction of Oncor, which the company said would take place in the coming weeks, has already generated interest from potential bidders, including Florida-based NextEra Energy and Hunt Consolidated in Dallas.
Hunt hired former Energy Future executive David Campbell as chief executive of its power utility investment arm on Monday, with Hunt spokeswoman Jeanne Phillips saying in a statement that the company is "intent" on acquiring control of Oncor.
Moody's Investor Services analyst Jairo Chung says Oncor's prospects for growth are better than the industry average because of its coverage area in Northwest Texas, which is projected to see significant population growth.
The auction proceeds would be allocated among Energy Future's creditors, Chung said.
Energy Future filed for Chapter 11 bankruptcy reorganization in April in an attempt to halve a $40 billion debt load stemming from a bet that natural gas prices would rise. A glut of U.S. shale production instead brought natural gas prices to record lows, making it difficult for the company to service the debt it took on to buy TXU Corp. in 2007.
A crucial part of the restructuring is a $7 billion tax liability. When Energy Future took over TXU Corp., the new stakeholders were spared having to pay the federal tax bill on the acquisition. However, the terms of the deal stipulated that if the company split up, the bill would come due.
According to the Energy Future filing, stakeholders still hope to reach a restructuring framework that will allow them to shed some of their assets without having to pay that tax.