Energy Future Holdings Corp. (TXU:US), the Texas power plant owner taken private in the biggest leveraged buyout in history, reported a $1.95 billion fourth-quarter loss as lower prices forced a writedown in the value of an electricity unit.
The quarterly loss widened more than 10-fold from $136 million a year earlier, the largest power plant owner in Texas said in a regulatory filing (TXU:US) made public today. Last year’s results for the Dallas-based company included a $1.2 billion write-off as lower natural gas prices reduced wholesale power rates.
The eighth straight quarterly loss (TXU:US) adds urgency after the Texas power company hired law firm Kirkland & Ellis LLP (1132L:US) to restructure its debt, people familiar with the situation said earlier this month. Debt rose to $43.2 billion at the end of 2012, from $42.9 billion as of Sept. 30. Energy Future (TXU:US) has struggled with a collapse in electricity prices tied to gas, which has fallen 77 percent since 2008.
“Everything is on the table right now,” Peter Thornton, an analyst at Montpelier, Vermont-based KDP Investment Advisors Inc., said today in an e-mail. “A restructuring or prepackaged Chapter 11 filing is more likely to occur toward the end of 2013 or in early 2014.”
The company plans to pay the interest due lenders in May, Chief Financial Officer Paul Keglevic said today on a conference call with investors.
It expects to negotiate with creditors to lower interest costs by offering to exchange old debt for new, debt for equity, and to extend debt maturities, according to today’s annual report.
“Aspects of our current financial condition may also be challenging to our efforts to obtain additional financing,” according to the filing. The value of generating plants may decline further if current forward natural gas prices continue to fall, according to the filing.
The company, formerly known as TXU, was taken private in 2007 in the largest buyout in history. KKR & Co. (KKR:US), which helped take it private, separately retained Blackstone Group LP (BX:US) as an adviser to help restructure Energy Future’s debt, people familiar with the situation said earlier this month.
Sales fell 6.6 percent to $1.28 billion from $1.37 billion a year earlier, according to the filing with the U.S. Securities and Exchange Commission.
The fourth-quarter loss was $483 million excluding one-time items such as the plant writedown, pension costs, adjustments to management benefits and gains and losses from contracts used to lock in fuel and interest costs, Energy Future said today in a statement.
The company’s $1.23 billion of 15 percent bonds due April 2021 increased to 28.25 cents on the dollar at 11:53 a.m. in New York, from 27 cents on Feb. 14, according to Trace, the bond- price reporting system of the Financial Industry Regulatory Authority.
The Texas Competitive $15.4 billion term loan due in October 2017 rose to 68.2 cents on the dollar today from 66.75 cents on Friday, the highest since Oct. 23, according to prices compiled by Bloomberg. Its $3.8 billion portion that matures in October 2014 rose to 73.4 cents today from 71.8 cents, the prices show.
Energy Future was sold to a group led by KKR (KKR:US) and TPG Capital in 2007, in a $43.2 billion cash transaction. Moody’s Investors Service has predicted a “material” reorganization this year.
Energy Future has sought to protect its regulated independent utility Oncor Electric Delivery Co. from a potential restructuring of other parts of the company by paying off intercompany loans while changing the terms of outstanding bonds to isolate the distribution unit.
Energy Future’s units include Oncor, the regulated power- line business that delivers electricity to more than 3 million homes and businesses; TXU Energy, a retail electricity seller; and Luminant, which owns more than 15,400 megawatts of generation capacity in Texas.
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