Comanche Peak parent company files for Chapter 11 bankruptcy; Luminant to be split off

Comanche Peak Nuclear Power Plant/Photo by Kathryn Jones/GR Current

The Comanche Peak Nuclear Power Plant is expected to continue operating as usual during the bankruptcy process. Photo by Kathryn Jones/GR Current

By Kathryn Jones

Editor

As expected, Dallas-based Energy Future Holdings today filed for Chapter 11 bankruptcy protection to reduce a staggering $40 billion in debt that jeopardized its future.

The state’s largest power company is the parent of Luminant Generation, which operates the Comanche Peak Nuclear Power Plant in Somervell County and other power generating plants in Texas.

Under the restructuring plan, units Luminant and TXU Energy would be split off from the parent company and transferred to first-lien lenders. Oncor, the regulated electric delivery business, is not part of the Chapter 11 filing.

The energy holding company said it has secured commitments for new capital totaling up to $11.77 billion. If the bankruptcy court approves the reorganization plan, the capital would be used to help support normal business operations during the bankruptcy process.

“We are pleased to have the support of our key financial stakeholders for a consensual restructuring,” John Young, Energy Future Holdings’ president and chief executive officer, said in a prepared statement. “With this restructuring plan, we now have a path to a sustainable capital structure that would EFH and its family of companies in an even stronger position over the long term to deliver for all of our stakeholders, including our customers, our employees and our business partners.”

Energy Future Holdings said it expected normal day-to-day operations to continue during the restructuring.

“This restructuring is focused on our balance sheet, not our operations,” Young said.

Luminant “will continue to provide safe, reliable energy and TXU Energy will continue to provide best-in-class customer service and innovative energy solutions. We will maintain our commitment to operational excellence in a competitive energy market,” he added.

The Electric Reliability Council of Texas, or ERCOT, which maintains the state’s power grid, issued a statement saying it saw no “immediate concerns related to system reliability or market efficiency” with the bankruptcy filing.

“As the bankruptcy proceeding moves forward, ERCOT continues to focus on maintaining system reliability and managing the efficiency of the market,” the statement read. “It is our understanding that EFH and its affected subsidiaries expect to continue operating generation assets and serving retail customers in Texas.”

ERCOT said it will participate as needed in the proceeding “to help ensure a smooth transition and implement any reorganizational plans for EFH assets to ensure continued system reliability and market efficiency.”

Read Energy Future Holdings’ news release here:

http://www.energyfutureholdings.com/restructuring/pdf/press_release_4-29-14.pdf

The Comanche Peak Nuclear Power Plant is the largest employer in Somervell County. Wages and benefits for employees, retirement plan payments, medical benefits for retirees, customer service, compliance with regulatory requirements and payments to vendors and suppliers will continue, the company said.

See facts about Luminant here: http://www.luminant.com/pdf/fact/LuminantQuickFacts.pdf

Energy Future Holdings added it intended to file its reorganization plan in the “near term” and expected the restructuring to be confirmed by the bankruptcy court within nine months. If that timetable holds up, the restructuring could be completed within about 11 months.

“We expect that, with the support of our financial stakeholders, our restructuring can proceed expeditiously as we seek to strengthen our balance sheet and position the company for the future,” Young said.

The holding company has considered filing for bankruptcy protection for more than a year under the crush of annual $4 billion interest payments on its pile of debt.

Energy Future Holdings was created seven years ago in what became the largest leveraged buyout in U.S. history. Private equity firms KKR & Co., Texas Pacific Group — formed with principals that once worked for the billionaire Bass brothers in Fort Worth — and Goldman Sachs Capital Partners paid $45 billion to buy out shareholders of the former TXU Corp. But natural gas prices didn’t rise as they expected but instead fell during the Barnett Shale boom. Luminant put on hold its plans to build two new reactors at Comanche Peak, which is now 30 years old.

The drop in property valuation at Comanche Peak has hammered Somervell County’s budget, forcing county officials to look elsewhere for economic development opportunities.

The Current will update this story as more information becomes available.

 

 

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