Oncor Lower Earnings Forecast Cuts Valuation, CreditSights Says

Energy Future Holdings Corp.’s lower earnings forecast for its regulated power-line utility reduces the unit’s estimated value, according to debt researcher CreditSights Inc.

Oncor Electric Delivery Co. projects earnings before interest, taxes, depreciation and amortization to be $1.93 billion in 2017, according to a regulatory filing yesterday. That figure is less than the $2.02 billion that the company predicted in an April disclosure. Net income for 2017 is now expected to be $465 million, compared with a previous estimate of $524 million.

In the most recent filing, “both earnings and Ebitda estimates are lower than previous disclosures,” CreditSights analysts Scott Greenstein and Dot Matthews wrote in the report yesterday. The New York-based researcher now estimates that the 80 percent of Oncor owned by Energy Future is worth $5.5 billion to $5.9 billion.

Oncor’s $800 million of 7 percent, first-lien bonds due September 2022 fell 1.2 cents on the dollar to 121.4 cents yesterday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. That’s the lowest level since May 2012.

Energy Future released financial projections for its Oncor unit as part of a disclosure of its efforts to reach a pre-negotiated bankruptcy plan with its creditors. The proposals sought to pare the parent company’s $43.6 billion of debt through Chapter 11 while keeping all the subsidiaries together. Oncor was not included in the bankruptcy plans.

Texas’ largest electricity provider has struggled to reduce its obligations since it was taken private in a $48 billion deal in 2007 led by KKR & Co., TPG Capital and Goldman Sachs Capital Partners. The biggest leveraged buyout in history left Energy Future with more than $40 billion in debt in an unsuccessful bet natural gas prices would rise.

To contact the reporter on this story: Mark Chediak in San Francisco at mchediak@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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