EFH bankruptcy delayed

Impact on Comanche Peak, Somervell County remains unclear

Wednesday, November 6, 2013

The Glenrose Reporter

Nov. 1 came and went, and Energy Future Holdings (EFH) did not file bankruptcy. The parent company of Luminant Energy, which operates Comanche Peak Nuclear Power Plant, carries about $40 billion in debt.

As the Nov. 1 deadline to make a $270 million interest approached, experts across the nation began speculating about the company’s future. Locally, Somervell County Commissioners Court held a special meeting, informing employees EHT could expedite the looming Chapter 11 bankruptcy and file the debt restructuring plan rather than make the payment.

Media outlets across the nation, including Bloomberg News, Reuters and The Wall Street Journal reported hours before the deadline the Dallas-based electricity giant would make the scheduled payment.

"As I understand it, discussions with secured creditors have failed," County Judge Mike Ford explained, adding the failure reset debt negotiations. "They are not declaring bankruptcy at this point."

The next payment is due by late February or early March 2014.

While county officials and stock market analysts agree bankruptcy is inevitable, those at home in Somervell are saying while the filing could have a local impact, there is no fear the county’s No. 1 source of tax revenue will go off the grid.

"Closure of Comanche Peak is not what we are talking about," County Auditor Brian Watts said.

Ford agreed.

"The public needs to understand, no matter what happens, the power plant will not shut down," he said. "It is a part of the power grid."
But Watts said there could be an impact to the county.

"There are real fears about when the property tax payment will be made," he said.

And there are a lot of zeros attached to those fears. This year, Luminant’s tax payment is scheduled to bring about $8.8 million to county coffers. The current county budget adds up to more than $12 million, and there is $6 million in reserves.

During negotiations over Comanche Peak’s pending tax payment, the facility was devalued by more than $300 million this year. And officials say there is a real possibility the value will continue to decrease, causing the county to tighten its belt even more. It has also been said if the power plant is sold, the value would likely be less than what is currently on the books.

But Watts said as the county waits to see if the current year’s tax payment will be made, officials realize the ongoing negotiation process is not unprecedented.
"EFH is following what was started by General Motors," he said, referring to pre-negotiated bankruptcy filing.

Watts said the process will allow EHT to "shed bad assets and go forward with good decisions."

"Then they will be able to emerge out of bankruptcy and proceed," Watts said. "It may take awhile, but the secured creditors will get what’s due to them."
EHT was formed from one of the largest leverage buyouts in history – the $45 billion buyout of TXU Corp. in 2007. Watts said investors gambled on the fact that electricity rates – driven by natural gas prices – would remain high.

"They assumed gas prices would remain stable and possibly increase," Watts said, adding when fracking unveiled a wealth of natural gas across the nation, prices plummeted. While it was initially assumed to be a good deal in 2007, it became a bad business move, impacting big power players like Warren Buffet and Berkshire Hawthaway.
But at the end of the day, county officials have only one concern.

"I don’t care about Buffett and Wall Street," Watts said. "I care about Somevell County."

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