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Great Expectations

February 21, 2013

Energy Future Holdings Corp. (EFH) is based in Dallas, Texas, privately owned and has a portfolio of competitive and regulated companies. It does business in the Texas electricity market which is one of the world’s largest. The company’s competitive businesses are TXU Energy and Luminant. The regulated operation involves Oncor.

TXU Energy is a leading competitive retail electricity provider, providing electricity to more Texans than any other retailer. Luminant is the largest power generator in Texas. Its other activities include mining, wholesale marketing and trading, and development. Oncor operates the largest electricity distribution and transmission system in Texas with more than three million delivery points, 102,000 miles of distribution conductors and 15,000 miles of transmission lines.

On October 10, 2007, a group of investors led by Kohlberg Kravis Roberts & Co., TPG and Goldman Sachs Capital completed the acquisition of TXU (now EFH and the other companies). This became the biggest leveraged buyout in U.S. history involving more than $40 billion in debt.

With its potential there were great expectations. Unfortunately not all expectations become reality. The private investor group was banking on gas prices to rise which would also raise electricity prices. This didn’t happen with natural gas prices dropping from $8 per million BTU in 2007 to below $2 in more recent times.

Now EFH and its private investors are hiring restructuring advisers as they try to control the crushing debt load according to sources.  Some things just don’t work out as planned no matter how good the planners are.

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