Energy Future Holdings Enters Into Definitive Merger Agreement With Hunt Consolidated Entities, Hunt Would Assume Oncor Ownership (TXU To Be Spun Off)

Hunt Consolidated, Inc. announced today that Energy Future Holdings (EFH) has selected the proposal of its consortium (which includes among others, Hunt, Anchorage Capital Group, Arrowgrass Capital Partners, Avenue Capital Group, BlackRock, Centerbridge Partners, GSO, and the Teacher Retirement System of Texas) as the plan to allow EFH and its subsidiaries to emerge from bankruptcy.

If ultimately approved by the bankruptcy court, the Public Utility Commission of Texas (PUCT), and other regulatory agencies, Hunt will assume operational control of EFH's regulated transmission and distribution company, Oncor Electric Delivery.

On Aug. 9, 2015, EFH and the acquisition vehicles formed by Hunt entered into a definitive merger agreement providing for the acquisition of EFH by Hunt and the members of its equity consortium, subject to certain conditions.

"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," said Hunter L. Hunt, chief executive officer of Hunt Consolidated Energy

TXU Energy and Luminant are to be spun off under the bankruptcy plan.

Specifically, pursuant to the Chapter 11 plan filed today by EFH, 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 in satisfaction of approximately $25 billion in claims, and the holders of all allowed claims (approximately $10 billion) against EFH and its subsidiary which is the indirect owner of an 80 percent interest in Oncor, will be paid in cash in full.

According to Hunt, the filing of the agreed plan is supported by, among others, the ad hoc group of TCEH unsecured noteholders, the steering committee of the ad hoc group of TCEH first lien loans and notes, the TCEH second lien indenture trustee, and the official committee of TCEH's unsecured creditors. Hunt claims that the filing, "ends over a year of litigation in EFH's Chapter 11 case."

After all necessary regulatory, bankruptcy court and Internal Revenue Service (IRS) approvals are obtained, and as part of the transaction, the Hunt consortium will then acquire EFH and the 80 percent ownership stake in Oncor. EFH will be restructured into a Real Estate Investment Trust (REIT), which will continue to own the transmission and distribution assets currently owned by Oncor. The newly restructured REIT will be owned by the consortium of investors and managed by Hunt. In addition, an operating company will be created and will keep the Oncor name, with its headquarters remaining in Oncor's existing office in Dallas, Texas. It will be responsible for the day-to-day operation, maintenance, and construction of Oncor's existing system. Oncor's existing management team, its employees, and its operating assets will transfer to this operating company, which will be owned and controlled by the Hunt family through the same entity that owns Sharyland Utilities (the Hunt family's other regulated electric utility in Texas). The newly restructured REIT will lease the transmission and distribution assets to Oncor, who will operate the system on the REIT's behalf.

The change in control of Oncor also requires regulatory approval from the PUCT and other regulatory authorities. The application for regulatory approval is expected to be filed with the PUCT in September.

As previously mused by RetailEnergyX.com, common ownership of Oncor and Sharyland Utilities begs the question whether, either as part of the change-in-control proceeding or in the future, Oncor and Sharyland delivery service would be merged into a single tariff applicable to all territories, which would allow REPs to develop uniform pricing plans for the combined service areas (click here for story)