The Hunts Get Oncor

The deal still awaits government approval.

The deal still needs government and bankruptcy court approval, but Energy Future Holdings (the former TXU Corp.) has agreed to sell Oncor — its subsidiary that handles power lines — to Ray L. Hunt and his partners. Energy Future filed for bankruptcy last year, the result of what’s proven to be a disastrous leveraged buyout. As the DMN reports:

The deal is expected to leave the private equity firms that led the deal, KKR & Co. and TPG, with none of the $8 billion they invested when they bought TXU in 2007. More critical is the question of how other creditors will react to the plan – one group had been working with the investment firm Fidelity on their own bid for Oncor.

The Hunt consortium plans on placing Oncor into a real estate investment trust, a corporate structure that would shift income tax away from the company to its shareholders. A REIT has never been applied to a power utility of Oncor’s size – it serves more than 3 million customers across North and West Texas.

Among attorneys working on the deal, a looming question remains how the Texas Public Utility Commission, which must sign off on the sale of all utilities, will consider the REIT structure in determining what rates Oncor will be allowed to charge electrical customers.