Bankruptcy judge approves sale of Oncor utility to NextEra

Dallas-based Energy Future Holdings is one step closer to ending one of the biggest U.S. energy bankruptcies after a judge approved a plan to sell its Oncor power transmission unit to NextEra Energy.

U.S. Bankruptcy Judge Christopher Sontchi confirmed Energy Future’s reorganization plan Friday after a court hearing in Delaware. Florida-based NextEra still must obtain permission from Texas regulators to buy Oncor, the largest owner of high-voltage power lines in the state.

“NextEra has been interested in making the best deal possible for Oncor from the beginning of the case,” Howard Seife, an attorney for NextEra, said after Sontchi ruled. This is NextEra’s second attempt to buy the distribution unit out of bankruptcy.

Energy Future filed for bankruptcy protection in April 2014 with almost $50 billion in debt, much of it from a record leveraged buyout of the former TXU Corp. seven years earlier by KKR, TPG Capital and Goldman Sachs Capital Partners. Since then, Energy Future has seen two previous bankruptcy plans blow up because of creditor squabbles or regulator opposition.

The last major hurdle in bankruptcy court was cleared this week when Energy Future reached a settlement with holdout creditor groups that were fighting for about $800 million in payments known as make-whole premiums, in addition to full principal and interest.

NextEra agreed to purchase Energy Future’s 80 percent stake in Oncor in a transaction that has been valued at more than $18 billion, including debt. It demanded that Energy Future win court approval of the reorganization plan before Texas regulators sit down later this month to consider the Oncor sale.

Oncor, a regulated utility, operates independently of its parent. NextEra said that, once it takes over, it will try to preserve that independence to reduce Oncor’s debt and maintain its high credit-rating.

The first time NextEra tried to buy Oncor, in 2015, it lost out to a group of Energy Future creditors and Dallas-based Hunt Consolidated, which planned to turn the company into a real estate investment trust to save on taxes. That arrangement fell apart last year when Texas regulators imposed conditions that Hunt and its allies could not meet.

NextEra returned with an offer that avoided the complications that entangled Hunt’s REIT proposal. Still, the Texas regulators’ blessing is still needed for the plan to go through.

“We’re not done yet,” Andy Wright, Energy Future’s general counsel, said after the judge ruled. “We’re hopeful this is the last time we’ll be back in Delaware.”

This story was originally published February 17, 2017 at 4:54 PM with the headline "Bankruptcy judge approves sale of Oncor utility to NextEra."