Energy Future Holdings reports $3.36 billion loss

Posted Tuesday, Feb. 19, 2013  comments  Print Reprints

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Dallas-based Energy Future Holdings reported its fourth annual loss in the five years since it was formed with the buyout of TXU Corp. in 2007, as the company continued to struggle with huge debt and shrinking revenue.

The power company said it lost $3.36 billion last year, including a $1.2 billion noncash impairment charge in the fourth quarter. That compared with a $1.9 billion net loss in 2011.

Without the impairment and other unusual charges, EFH said, it would have lost $1.03 billion. That compared with an adjusted loss of $1.08 million in 2011.

The company owns Luminant Generation, the state's largest electricity producer, and TXU Energy, the state's largest electricity retailer. It also owns 80 percent of Oncor Electric Delivery, a regulated utility that operates most of the power lines and stations serving North Texas and whose operations are reported separately.

EFH faces stiff interest payments on its debt, and the revenue that it generates to pay those charges is declining.

Last year, its unregulated operations, Luminant and TXU Energy, reported total revenue of $5.6 billion, down 20 percent from the previous year and 42 percent from 2008, its first full year after the buyout led by TPG Capital and KKR.

Those operations hold $40.3 billion in debt, according to a company presentation to financial analysts that accompanied Tuesday's earnings report.

Oncor reported $3.3 billion in revenue last year, up from $3.1 billion in 2011. While it has $6.3 billion in debt of its own, its regulated return was more than enough to pay the interest and still report $340 million in net profit for the year.

Luminant and TXU Energy have faced a tough environment in Texas' unregulated electricity markets, where power prices have been driven down by cheap natural gas.

CEO John Young told analysts during a conference call Tuesday that the average wholesale price of power in the state's biggest grid, the Electric Reliability Council of Texas, was $25.17 per megawatt last year. In 2011, he said, it was $42.44. A megawatt is 1 million watts.

"If low natural gas prices continue, they pose significant challenges" to profitability, Young said.

The mounting losses have led to speculation that EFH intends to restructure its debt.

This month, The Wall Street Journal reported that EFH hired the Kirkland & Ellis law firm to help with that, and Moody's Investors Service, a big debt-rating firm, has said it expects a restructuring within a year.

On Tuesday, company executives told analysts that they would not comment on debt restructuring.

According to its disclosure, EFH has $1.9 billion in cash and cash equivalents. The filing says that based on expected prices in ERCOT and other forecasts, the company expects to have enough money to pay its bills in the coming year.

Despite its big net losses, EFH still generates considerable cash. The company said its earnings before interest, taxes, depreciation and amortization (EBITDA) were nearly $5.3 billion in 2012. Chief Financial Officer Paul Keglevic said that was the highest ever for EFH.

But its interest costs are also high. Last year, EFH had $3.5 billion in interest and related expenses, down from $4.3 billion in 2011.

Tuesday's reported loss was higher than the preliminary results it released in January, when it estimated a $2.2 billion loss. At the time, it said it might take further write-downs, and the company wrote off $1.2 billion of goodwill in the fourth quarter.

Goodwill is an accounting entry representing what EFH paid in 2007 for TXU in excess of its book value. At least once a year, corporations must compare the asset values on their books with values under current market conditions, lowering the book value if necessary.

Jim Fuquay, 817-390-7552

Twitter: @jimfuquay

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