Energy Future Holdings filed for Chapter 11 bankruptcy reorganization Tuesday after agreeing with key financial stakeholders to keep its power-producing businesses operating in Texas while it reduces roughly $40 billion in debt.
The company owns TXU Energy, a retail electricity provider, and Luminant, the state's largest power generator. State agencies, including the manager of Texas' electricity grid, have been closely watching the company in the run-up to its filing to ensure that power production is not impacted. In the short term, it appears power distribution and production will continue normally.
Energy Future recently skipped a deadline to pay $109 million in interest.
The Dallas company said Tuesday it will separate its Texas Competitive Electric Holdings Co. subsidiary, which includes TXU Energy, and give preferred lenders complete ownership in that reorganized business. It also will give lenders cash proceeds from new debt in exchange for eliminating about $23 billion of Texas Competitive Holdings' funded debt.
Energy Future will still own Energy Future Intermediate Holding Co. and keep its interest in Oncor Electric Delivery Co., which is not part of the reorganization.
The Electric Reliability Council of Texas, or ERCOT, which manages the state's grid and the flow of power to 23 million customers in Texas, said Tuesday it has been monitoring Energy Future's situation and is focused on maintaining system reliability.
"It is our understanding that EFH and its affected subsidiaries expect to continue operating generation assets and serving retail customers in Texas," ERCOT said in its statement, noting that the company's transmission business, Oncor, is not included in the bankruptcy filing. "Therefore, ERCOT sees no immediate concerns related to system reliability or market efficiency associated with this filing."
Saddled with some $40 billion in debt, Energy Future Holdings — formerly known as TXU Corp. before a massive leveraged buyout in 2007 — represents one of the largest bankruptcy filings in U.S. history. The company said it reached an agreement with key investors to separate its electric generation and retail assets.
EFH, which had bet big on natural gas prices that plummeted, owns the retail electric provider TXU Energy and Luminant, the state’s largest generator. It filed the bankruptcy petition in a Delaware court.
The reorganization, long in the works, is not expected to impact the companies' daily operations or threaten Texas' electric grid.
"This restructuring is focused on our balance sheet, not our operations," John Young, the company’s president and CEO, said in a prepared statement.