Energy Future files for bankruptcy

  • Deal was the Largest buyout in history
  • Glut of natural gas from new technology
  • Negotiations could take years to resolve

The former TXU Corp owes more than $40 billion to hedge funds and investment firms and the Chapter 11 filing, one of the largest ever, could mark the start of years of expensive court-supervised negotiations. The company also said it had reached an agreement to borrow $4.47 billion to finance its Chapter 11 bankruptcy.

Energy Future was created in 2007 by the $45 billion leveraged buyout of TXU Corp, a deal led by Kohlberg Kravis Roberts & Co, Goldman Sachs Group Inc’s private equity arm GS Capital Partners and TPG Capital Management.

Energy Future joins a list of operators of coal-fired power plants that have struggled in recent years as new drilling technology created a glut of natural gas. Low gas prices drag electricity prices down and make coal-fired plants uncompetitive.

Ultimately, Energy Future’s businesses are likely to be broken up and transferred to the hands of its creditors, people close to the matter have told Reuters.

The company’s generation business, Luminant, and regulated distribution unit, Oncor, both rank among the largest in the United States. Oncor has not filed for bankruptcy petition, Energy Future said. Consumers are not expected to be impacted by the bankruptcy, which was filed in the U.S. Bankruptcy Court in Wilmington, Delaware.

Energy Future listed assets and liabilities in excess of $1 billion.

Tanya Agrawal is a correspondent for Reuters in Bangalore, Nick Brown and Billy Cheung, in New York.