Energy Future Holdings Plans $4B Charge

Privately held utility Energy Future Holdings Corp. expects to take a non-cash $4 billion goodwill impairment charge in the third quarter to reflect the effect of lower wholesale power prices, the company said in a regulatory filing, according to Reuters, publisher of Buyouts.

“The goodwill impairment charge reflects the estimated effect of lower wholesale power prices … driven by the sustained decline in forward natural gas prices,” the company said in its filing.

The Dallas-based energy company, formerly known as TXU Corp, was bought out in 2007 for $44.3 billion by Kohlberg Kravis Roberts & Co., Texas Pacific Group and GS Capital Partners.

Moody’s Investors Service downgraded the Corporate Family Rating for Energy Future Holdings to Caa2 from Caa1, reflecting a worsening in the company’s already very high credit risk.

“Its capital structure appears to be untenable, calling into question the sustainability of the business model,” Moody’s said in discussing the rating rationale. “The company’s cash flow generation is highly exposed to natural gas and power commodity prices, which are expected to remain low over the next several years.”

Standard & Poor’s in July cut its rating on Energy Future Holdings by four notches, saying it views a debt exchange by the energy company as distressed and equivalent to a default. Energy Future Holdings announced the debt exchange as it was seeking to reduce the heavy debt taken on in its 2007 leveraged buyout.

Nick Zieminski is a correspondent for Reuters in New York.