Bloomberg News

Energy Future Holdings Reports $710 Million 3rd-Quarter Loss

October 28, 2011

(Adds sales decline, higher interest expense in second paragraph.)

Oct. 28 (Bloomberg) -- Energy Future Holdings Corp., the Texas power company that was taken private in 2007 in the largest buyout in history, reported its third consecutive quarterly loss as interest costs rose and sales fell.

The loss before adjustments narrowed to $710 million from $2.9 billion a year earlier, the closely held company said in a filing with the U.S. Securities and Exchange Commission made public today. Sales fell 11 percent to $2.32 billion as it lost customers. Interest expense and related costs rose 50 percent to $505 million.

The loss was $76 million compared with profit of $17 million a year earlier, after writedowns and quarterly adjustments to the value of contracts used to lock in interest rates and fuel costs, Energy Future, based in Dallas, said in a statement.

The year-earlier loss included a $4.1 billion writedown on the value of the company’s generation unit amid a drop in power prices.

Long-term debt was little-changed at $40.18 billion from the period ended June 30 for Energy Future and its wholly owned power-delivery unit, Oncor Holdings, according to the filing.

Last month, Energy Future filed a lawsuit challenging U.S. Environmental Protection Agency rules aimed at reducing cross- state air pollution, saying it would cost $1.5 billion through 2020 and at least 500 jobs. The company said it will close 1,200 megawatts of coal-fired generation and three mines to meet the regulation.

Customer Base Shrinks

The third-quarter loss included $723 million in costs that included writing down pollution allowances and lignite mines because of the EPA rules and losses on interest-rate swaps. The company reported one-time gains of $89 million largely from natural-gas hedging positions.

The number of retail electricity customers during the first nine months of 2011 fell 8.9 percent to 1.87 million.

Energy Future, facing a decline in gas and power prices, has sought to reduce its risk of default by extending debt maturities and asking bondholders to swap their holdings at discounted prices for new securities. In April, lenders agreed to extend the maturity on about $17.8 billion of the company’s debt.

Bonds Fall

The company’s $1.87 billion of 10.25 percent bonds due November 2015 have fallen 22 cents, or 36 percent, since July 1, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority.

Energy Future, formerly known as TXU Corp., was sold to a group led by KKR & Co. LP and TPG Capital in 2007, in a $43.2 billion transaction.

Energy Future’s units include Oncor, a regulated power-line business; TXU Energy, a retail electricity seller with more than 2 million customers; and Luminant, which owns more than 15,400 megawatts of generation capacity in Texas.

(Energy Future will hold an earnings conference call for investors and analysts starting at 11 a.m. New York time, accessible at EVTS <GO>.)

--With assistance from Kristen Haunss and Jim Polson in New York. Editors: Jessica Resnick-Ault, Susan Warren

To contact the reporter on this story: Mark Chediak in San Francisco at mchediak@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net


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