Energy Future TCEH debtors’ amended plan of reorganization confirmed

By Caroline Salls

Pittsburgh, Aug. 26 – Energy Future Holdings Corp. said the U.S. Bankruptcy Court for the District of Delaware confirmed debtor Texas Competitive Energy Holding’s (TCEH) amended plan of reorganization.

As previously reported, the plan contemplates a tax-free spinoff of the TCEH debtors, including Luminant and TXU Energy, along with supporting business services.

According to a company news release, the TCEH debtors have already received a majority of the key regulatory approvals required for emergence, with a final approval from the Railroad Commission of Texas expected to come in September.

Upon receipt of that approval, Energy Future said Luminant, TXU Energy and EFH Business Services, which will collectively be known as Reorganized TCEH in the short-term, can then emerge.

Plan terms

The terms of the amended plan include the following:

• If a spinoff condition is satisfied, the stock of reorganized TCEH, new reorganized TCEH debt if applicable, the net cash proceeds of a spinoff preferred stock sale, any spinoff rights and specified settlement claim proceeds will be distributed to holders of TCEH first-lien claims in a transaction intended to qualify as a tax-free reorganization.

Additionally, if the spinoff condition is satisfied, some of the TCEH debtors’ assets will be transferred to a preferred stock entity under a spinoff preferred stock sale in a transaction intended to qualify as a taxable sale exchange.

• Under the spinoff, TCEH will spin off from the debtors to form a stand-alone reorganized entity, and some tax attributes of the Energy Future group will be substantially used to provide reorganized TCEH with a partial step-up in tax basis in some of its assets, valued at roughly $1 billion;

• Holders of TCEH unsecured debt claims and general unsecured claims against the TCEH debtors other than EFCH will receive a share of a TCEH cash payment;

• TCEH will receive an unsecured settlement claim against Energy Future Holdings (EFH Corp.) in the amount of $700 million;

• On the TCEH effective date, except for liabilities assumed by reorganized TCEH under the plan, all other claims against the TCEH debtors will be canceled.

Immediately following the cancelation, under a separation agreement, TCEH and the EFH debtors will make a contribution to reorganized TCEH, in exchange for which TCEH will receive 100% of the reorganized TCEH membership interests and the net cash proceeds of the new reorganized TCEH debt, or, at the election of the TCEH supporting first-lien creditors, all or a portion of the new reorganized TCEH debt;

• Interests in TCEH debtors other than TCEH and Energy Future Competitive Holdings Co. LLC (EFCH) will be reinstated or canceled and released without distribution; and

• Interests in TCEH and EFCH will be canceled and released without distribution.

Energy Future debtors

Energy Future Holdings and Energy Future Intermediate Holdings, which owns an indirect 80% interest in Oncor Electric Delivery Co., will continue their Chapter 11 restructuring process.

The plan confirmation hearing for those debtors is slated to begin Dec. 1.

Energy Future, a Dallas-based power generation company and utility operator, filed for bankruptcy April 29, 2014. The Chapter 11 case number is 14-10979.

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