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Energy Future Files New Chapter 11 Exit Plan

Court papers indicate NextEra Energy or others could bid for Energy Future’s Oncor business

The fate of Energy Future Holdings Corp.’s transmissions business, Oncor, is once again up in the air, under a new bankruptcy exit plan for the Dallas electricity giant.

Oncor, a business that carries electricity to some 10 million Texans, is back in play as a takeover target, under a bankruptcy emergence plan Energy Future filed Sunday, after a deal to buy it fell apart.

Court papers outlining Energy Future’s new chapter 11 exit plan indicate there is room for NextEra Energy Inc. or other strategic investors to make an offer for Oncor.

The new plan also has room for the deal that was stymied in regulatory action to work its way to completion, according to a statement from a spokeswoman for Hunt Consolidated Inc., the Texas company leading the deal. Hunt has asked state utility regulators to reconsider, and that effort continues, the statement said.

New court papers outline a chapter 11 plan designed to get Energy Future out of bankruptcy fast, with its coal mines and power plants in the hands of senior creditors and Oncor either sold or handed over to other creditors.

Two years ago, the former TXU Corp. sought protection from creditors to deal with an overload of debt from a leveraged buyout amid rough conditions in the energy market. The bankruptcy proceeding bogged down in inter-creditor strife and Oncor, a cash-producing essential piece of the Texas energy infrastructure that was shielded from its parent’s financial problems, offered a way out for Energy Future. Instead of selling Oncor for cash, which would likely spur more fights among creditors, the company chose a proposal that allowed creditors to invest in the business, if they dropped their quarrels.

Action before Texas utility regulators killed the buyout of Oncor, which was being led by Hunt Consolidated Inc. but involved money from an array of Energy Future creditors.

The Public Utility Commission of Texas approved the Hunt-led Oncor buyout, but put strictures on the deal that made it unacceptable to investors. They have decided to take the $550 million cash alternative Energy Future is offering, rather than risk funding a takeover that could ultimately not prove profitable.

Now Oncor will be handled through one of two options. Under an “investment scenario,” new money would come in to pay division creditors in cash, or creditors will split ownership of the division under a reorganization scenario, according to papers filed Sunday in bankruptcy court. Energy Future wants to start confirmation hearings on its new chapter 11 exit plan Aug. 1.

Florida’s NextEra has made no secret of its continued interest in buying Oncor. A NextEra spokesman declined to comment Friday on the new turn of events in Energy Future’s case, which could reignite a competition over Oncor. NextEra has been pursuing Energy Future’s transmission business since mid-2014, and participated in the challenge to the Hunt-led deal before the Texas PUC.

Read full article at The Wall Street Journal