Energy Future Holdings taps Hunt consortium to buy Oncor

Dive Brief:

Energy Future Holdings (EFH) has tapped Hunt Consolidated to acquire its assets out of bankruptcy, in a deal expected to value the regulated utility Oncor at upwards of $18 billion.
As part of the deal, EFH will be restructured into a Real Estate Investment Trust (REIT), which will be managed by Hunt and will continue to own Oncor's assets.
The arrangement will require approval from the bankruptcy court as well as regulators at the Public Utilities Commission of Texas (PUCT) and Internal Revenue Service.

Dive Insight:

Despite concerns that the plan is risky and could turn into a contentious regulatory proceeding, Energy Future Holdings has tapped the Hunt-led Consortium to lead it out of bankruptcy -- and ultimately into a Real Estate Investment Trust.

"Today's filing is a significant step forward in helping to ensure that Oncor has the resources and Texas-based management required to continue meeting the needs of its customers and its communities," Hunter Hunt, CEO of Hunt Consolidated Energy, said in a statement. "In coordination with existing Oncor management, we now begin the process of working closely with the PUCT and other stakeholders to have our proposal thoroughly reviewed, and to receive the necessary regulatory approvals."

Approval from the bankruptcy court could come this fall, Hunt said, and an application with Texas regulators will likely be filed in September.

Under the proposal, Hunt said the first lien creditors of Texas Competitive Electric Holdings Company (TCEH), the merchant energy subsidiary of EFH, will receive TCEH's assets in a tax free spinoff. That portion of the deal will satisfy approximately $25 billion in claims. Following that, the consortium would acquire EFH and its 80% ownership stake in Oncor.

The newly restructured REIT will be owned by the consortium and managed by Hunt, the company said, and will lease the transmission and distribution assets to Oncor, who will operate the system on the REIT's behalf. An operating company will be created and will keep the Oncor name, with its headquarters remaining in Dallas, Texas.

The consortium of investors includes: Hunt, Anchorage Capital Group, Arrowgrass Capital Partners, Avenue Capital Group, BlackRock, Centerbridge Partners, GSO, and the Teacher Retirement System of Texas.