"The era of self-bonding by Luminant Mining appears to be over and rather than the taxpayers of Texas having to rely on a promise and a wink and a nod, there will actually be over $1 billion set aside in the Railroad Commission for restoration, so it's a good first step," said Al Armendariz, Sierra Club's Beyond Coal senior campaign representative.
Another crucial part of the restructuring is a $7 billion tax liability hanging over Energy Future's head. When the company took over TXU Corp. in 2007, the new stakeholders were spared having to pay that federal tax bill on the acquisition. However, the terms of the deal stipulated that if the company split up, the massive tax bill would come due.
Stakeholders hope they have reached a restructuring framework that will allow them to shed some of their assets without having to pay that tax, and have asked the IRS to rule on their request, said Allan Koenig, Energy Future's spokesman.
And because the company has been in constant dialogue with the IRS and others, Hempstead believes this is possible.
"If they think that they've got a deal and a structure then it's likely that they do," he said.
As part of the restructuring, Dallas-based Energy Future Holding said it will separate its Texas Competitive Electric Holdings Co. subsidiary, which includes TXU Energy, and give preferred lenders complete ownership in that reorganized business. It also will give lenders cash proceeds from new debt in exchange for eliminating about $23 billion of Texas Competitive Holdings' funded debt.
Energy Future will still own Energy Future Intermediate Holding Co. and keep its interest in Oncor Electric Delivery Co., a power transmission business, which is not part of the reorganization.
The holding company was formed in the 2007 acquisition of TXU Corp. by private-equity firms KKR & Co., TPG Capital and Goldman Sachs Capital Partners.
Schmall reported from Fort Worth, Texas.
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