Hunt requests rehearing for Oncor deal

Dive Brief:

Texas' decision last month to approve Hunt Consolidated's plan to purchase Oncor out of bankruptcy included stipulations that investors are rejecting, with the companies now saying the deal "will not close" as currently structured, the Texas Tribune reports.
Hunt Consolidated filed a request for rehearing on Monday, weeks after the Public Utilities Commission of Texas gave broad and conditional approval of an arrangement to operate Oncor as a Real Estate Investment Trust.
As reported at the time of approval, Texas' order left some details to be determined and it was unclear if restrictions on the deal would be acceptable to investors.
As part of the plan to pull Energy Futures Holding out of bankruptcy, a group of creditors want to split the company into two halves. Oncor, operated as a REIT, could see a $250 million tax boon, an issue which complicated the proceeding.

Dive Insight:

Texas regulators rushed to issue a decision on Hunt's plan for Oncor in an effort to meet a March 27 deadline for the transaction. In doing so, they placed stipulations on the company's projected tax windfall and set some details aside for later determination. But investors this week told regulators that "the transaction as currently configured will not close based on the order as written."

And almost as a warning, Hunt's investor group told the PUCT that should the deal not close, "the matter will be returned to the bankruptcy court for an indefinite period of time, with all of the uncertainties inherent in a lengthy and contentious proceeding and no assurance that a new plan will be superior to the one before the commission in this proceeding."

The Texas Tribune reports in a separate proceeding examining the possible rate impact on Oncor customers, PUCT staff said the investors proposed "a transaction that is materially different than the transaction approved” in March.

Hunt proposed that first lien creditors of Texas Competitive Electric Holdings Company (TCEH), the merchant energy subsidiary of Energy Future Holdings, 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 would be owned by the consortium and managed by Hunt.

Regulators have suggested that the tax windfall resulting from the new structure might be shared with customers in the form of bill credits to lower energy costs.

The commissioners are set to consider Hunt's request on May 4.