By: Longview News-Journal |
Energy Future Holdings Corp. has sued to force the owner of 19.75 percent of its Oncor electricity-transmissions business to go along with a $12.2 billion deal designed to bail Energy Future out of bankruptcy.
Oncor, a cash-generating business that carries power to more than 3.2 million homes and businesses in Texas, is central to Energy Future’s chapter 11 exit proposal. It is set to be sold to an investment group led by Hunt Consolidated Inc., but minority stakeholder Texas Transmission Investment LLC is balking at the proposed sale.
Energy Future on Monday asked a bankruptcy judge to enforce so-called drag-along rights in an agreement struck in 2008 after private-equity firms had taken over the Dallas energy giant, which was then called TXU Corp., in a debt-fueled deal.
Energy Future, anxious to maintain an investment-grade rating for Oncor’s debt, agreed to “ring-fencing” provisions that included ownership of part of the transmission business by independent outsiders.
Texas Transmission, an investment group led by Canadian pension giant OMERS, bought 19.75 percent of Oncor for $1.25 billion. Energy Future contends the sale included an agreement that the minority stakeholder could be forced to sell its piece of Oncor if majority owner Energy Future decided to unload the business.
A lawyer for Texas Transmission and spokespeople for OMERS weren’t immediately available Tuesday to respond to the lawsuit, which was filed in the U.S. Bankruptcy Court in Wilmington, Delaware.
In September, Texas Transmission’s lawyers filed papers saying they have a right to hold out for a good price. The so-called drag-along deal rights were agreed on the basis that Energy Future and Texas Transmission would both want top dollar for Oncor.
That is no longer the case, Texas Transmission’s lawyers said. The minority owner still wants the most money it can get for Oncor, but Energy Future has other objectives, Texas Transmission contends.
Overloaded with $42 billion debt in a depressed energy market, Energy Future filed for chapter 11 bankruptcy protection in April 2014.
It is polling creditors on a bankruptcy plan built around the sale of Oncor, a transaction that is fraught with complications, in addition to the spat over price with the minority stakeholder.
The Public Utility Commission of Texas must approve the Oncor transaction, which is premised on converting the utility into a tax-advantaged real-estate investment trust. Commissioner Kenneth W. Anderson Jr. has fired warning shots over the Oncor deal and said the commission will take a hard look at the transaction to make sure it doesn’t jeopardize the Texas power-delivery system.
The lawsuit involving Texas Transmission alleges Oncor’s minority owner breached its agreement to sell. Texas Transmission contends it has no obligation to sell, and the provisions allowing Energy Future to force it to go along with the deal haven’t been triggered.
If the Oncor deal falls through, Energy Future’s chapter 11 plan has fail-safe provisions that allow the company to move ahead to get out of bankruptcy. Deal or no deal for Oncor, Energy Future plans to spin off its electricity generating and retailing businesses, which are part of the Texas Competitive division, as a separate company, to be owned by senior lenders to the division.