TXU’s buyout structure creates a potential model for utility M&A and refinancing deals
Terry A. Pratt is a director, utilities and infrastructure, with Standard & Poor’s Rating Services in New York. Email him at firstname.lastname@example.org.
Few electric utilities have experienced more change in one year than TXU Corp. did in 2007.
In February, TXU was a publicly held company, whose shareholders were well rewarded by the stock price movement over the previous year. The company was engaged in a $11 billion program to build 11 new coal-fired power plants totaling 8,600 MW to solidify its competitive position in the unregulated Texas electricity markets — a goal that made it a prime target of environmental groups at that time. TXU had $12 billion in debt and a BBB- rating.
By November, TXU was privately held by a Kohlberg Kravis Roberts & Co. (KKR) and TPG Capital (TPG)-led consortium. It had cancelled eight of the 11 coal plants — or about 6,400 MW — and thereby gained the alliance of several environmental groups to endorse the KKR- and TPG-led buyout. The new company, Energy Future Holdings Corp. (EFH), had about $39 billion in debt and a B- rating.
What a difference ten months can make.