Energy Future Holdings Returned to Profit on Hedging

Energy Future Holdings Corp., the Texas power company seeking to restructure almost $44 billion of debt, reported its first quarterly profit in more than two years partly because of a gain on commodities hedging.

The third-quarter profit of $5 million compared with a loss of $407 million a year earlier, the Dallas-based company said in a filing with the U.S. Securities and Exchange Commission made public today.

Energy Future had a gain of $58 million in the most recent period from commodity hedging and other trading activity, compared with a loss of $3 million during the same period a year earlier, according to the filing. Revenue rose 8.5 percent to $1.89 billion.

Texas’ largest electricity provider is expected to make a $270 million interest payment due today after restructuring talks with creditors broke down, according to people familiar with the situation. The payment gives the company and its creditors several months to try to negotiate a fresh bankruptcy deal, the people said.

Energy Future, formerly known as TXU, has struggled to reduce debt since it was taken private by KKR & Co., TPG Capital and Goldman Sachs Capital Partners six years ago in the largest leveraged buyout in history. The deal was a bet that the company’s nuclear- and coal-fired plants would profit from an increase in natural gas prices. Instead, gas prices plunged about 74 percent from a July 2008 high.

Confidential Negotiations

Energy Future also said confidential negotiations with creditor groups to date had failed, and disclosed four rival restructuring proposals that had been discussed. The plan submitted by owners led by KKR and TPG would have seen them retain 4 percent equity, giving the remainder to senior creditors at Energy Future’s Texas Competitive unit.

The company said it had lined up $3.6 billion debt-in-possession financing to fund it through bankruptcy, as well as up to $750 million in a separate facility. Energy Future is “not currently engaged in ongoing negotiations with the principals of any of the creditors.”

The company’s units include Luminant, which owns more than 15,400 megawatts of power plant capacity in Texas; TXU Energy, a retail electricity seller; and Oncor Electric Delivery, a regulated power-line unit that supplies electricity to more than 3 million homes and businesses.

Before it's here, it's on the Bloomberg Terminal.