Energy Future Holdings applied for bankruptcy protection on Tuesday. The development comes seven years after a huge buyout put it to debt before a surge in US natural gas cut electricity prices.
The biggest power firm in Texas carries debts amounting to $49.7 billion, owed to hedge funds and investment companies. The more than $36.4 billion assets of the former TXU Corp makes it almost tied for the 10th largest bankruptcy filing ever, according to Reuters.
The Texas grid operator, ERCOT and the Texas Public Utility Commission moved to assure consumers that the latest filing would not hamper power supply.
However, the Chapter 11 filing adds pressure on authorities to revamp the energy market. The Texas energy sector is currently marred with disputes over how to pay for increased generation capacity, leaving the grid with little reserve power and threatening to impede growth of the soaring Texas economy.
Energy Future said it filed for bankruptcy armed with creditor agreements that would overhaul about $40 billion in amount owed. The application was long-awaited to bring to an end a huge buyout that involved some of the most prominent financiers such as a unit of Goldman Sachs.
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Topnotch investors such as Warren Buffet incurred losses after investing in Energy Future bonds.
As New York Post reports, the firm agreed to part with its deregulated Texas Competitive Holdings subsidiary and give it to creditors. In return, the firm will have debts amounting to $23 billion cut.
The Dallas energy firm has set aside $11 billion in financing, which it will use to fund operations while restructuring. It estimates that its reorganization will take 11 months.
In 2007, Capital Partners, a Goldman Sachs subsidiary and TPG Capital injected $8.3 billion to acquire stake in the power utility with a 2 million customer-base in a deal that let the Energy Future borrow elsewhere to fund the remainder of its $44 billion buyout.
To contact the assembler of the stories: Yashu Gola at yashu@forexminute.com
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