Energy Future Holdings Corp. will likely abandon the $18 billion sale of itsOncor power transmission company to an investor group led by Dallas billionaire Ray Hunt, the bankrupt power goliath told a bankruptcy judge Thursday.
The deal was supposed to be Energy Future Holdings’ ticket out of bankruptcy court, where the case has lingered for two years at a cost to EFH estimated at $1 million a day in legal fees....
Energy Future had hoped that the sale of Oncor would provide the cash to appease creditors and hasten the end of bankruptcy proceedings.
REITs are also an important source of funding for the nation’s infrastructure, similar to Master Limited Partnerships, which have used public equity effectively to support the pipeline industry’s growth, Hunter Hunt points out.
In a typical REIT structure, the entity qualifying as a REIT owns the real property assets and leases them to one or more tenants. In the case of a shopping center, for example, the REIT would own the physical building. The tenants of the shopping center would operate their business in the building and pay rent payments to the REIT. Proceeds from those payments would be distributed to the various REIT investors through dividends, which are generally taxed at the individual tax rates for each investor....
Geoffrey Gay, general counsel for Steering Committee of Cities Served byOncor, said the structure is unnecessarily complex and could be expensive and a bad deal for ratepayers.
“The REIT structure would divide Oncor into two separate corporations — one that owns assets and one that manages the company,” Gay said. “We think that’s a very complicated structure. It potentially increases the necessary rates of return. You have two different corporations that need a profit as opposed to one.”
The Texas Public Utility Commission approved the Hunt group’s plan in March but imposed conditions that the Hunts say effectively would kill the deal. The Hunt group asked the PUC for a rehearing to reconsider some of those conditions. There’s a PUC meeting Wednesday where that request is supposed to be considered.
But the original purchase plan upon which months of filings and several PUC hearings depended on is as dead as the Monty Python parrot. The Hunt group missed a deadline Saturday to have the regulatory approvals in hand. It could have paid $50 million for another month to pursue those approvals but chose not to.
And so a group of EFH creditors used a contract option to pull out of the deal, killing the original reorganization plan. EFH filed a new proposed plan on Sunday in Delaware. That plan would still allow for the Hunts’ plan to buy Oncor to roll forward — but would also set up an alternative plan if the Hunts can’t succeed quickly.
From June 23, 2016- Hunt-Led Group Sues Texas Regulator Over Failed Oncor Buyout
Hunt Consolidated Inc. and a group of creditors that sought to buy Energy Future Holdings Corp.’s Oncor Electric Delivery Co. utility are suing Texas regulators who attached conditions to their merger that caused the deal to unravel.
In a lawsuit dated June 17, the Hunt-led group said the Public Utility Commission of Texas erred in setting conditions that may have required the buyers to share potential tax savings with the utility’s ratepayers. The would-be buyers are seeking to reverse the agency’s March 24 order, according to the suit, which was filed in Travis County, Texas, and served on the commission on Thursday.
The sale of Oncor, the regulated utility unit of Energy Future, has been seen as key to Energy Future’s emergence from bankruptcy after two years of restructuring almost $50 billion in debt. Hunt’s complex transaction had called for investors to raise more than $12 billion and the cancellation of billions in debt, according to bankruptcy court documents.
Warren Buffett, Edison International and others are interested in buying Texas’ largest power transmission company, according to Bloomberg and Reuters reports.
Buffett’s Berkshire Hathaway, California-based Edison and Fidelity Investments have joined Florida-based NextEra Energy in pursuing bids to purchase Oncor, which is owned by the bankrupt parent company, Dallas-based Energy Future Holdings.
Other large shareholders of Energy Future Holdings have expressed interest in buying all of EFH, which also owns the state’s largest power producer, Luminant, and retail electricity company, TXU Energy. Potential EFH buyers include Borealis Infrastructure Management and Singapore’s GIC Special Investments, according to the reports.
Oncor is back on the auction block after an $18 billion deal fell through that would have sold the company to a consortium led by Dallas billionaire Ray Hunt. EFH is trying to emerge from bankruptcy through the sale.
In May, the Hunt group sale fell apart because of stipulations imposed regulators on the consortium’s plan to Oncor into a tax-friendly real estate investment trust. The group is suing the state’s Public Utility Commission for placing restrictions on the deal that allegedly killed it.
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