Texas Energy Future Holdings, Limited Partnership (TEF) today made an initial filing with the Public Utility Commission of Texas (PUC) setting forth its commitments regarding TXU Electric Delivery (to be renamed Oncor). These commitments will be binding upon successful completion of the acquisition of TXU Corp. TEF is the holding company formed by Kohlberg Kravis Roberts & Co. (KKR), Texas Pacific Group (TPG) and other investors to acquire TXU Corp.
This voluntarily expedited initial filing means the PUC will have direct authority to hold the investors legally accountable to their commitments once the transaction closes.
TEF made its filing today with the PUC in anticipation of its voluntarily expedited 14.101 filing, which allows the PUC to review the buyout transaction. That filing will be made no later than April 25, 2007.
TEF is legally committing to hold a majority of its ownership stake, in the current regulatory system, for a minimum of five years, and committing that TXU Electric Delivery will not incur, guaranty or pledge assets in respect of any borrowing related to financing the merger transaction. TEF is also committing to establish a separate board for each of TXU’s three operating companies and to make substantial investments in new energy efficiency programs. More details on those commitments are listed below.
The PUC filing includes the following commitments by TEF:
– On or before closing of the transaction, the name of TXU Electric Delivery will be changed to Oncor Electric Delivery Company. Oncor’s logo will be separate and distinct from the logos of the parent, TXU Corp.; the retail electric provider, TXU Energy; and the power generation company, Luminant Energy.
– At closing and thereafter, Oncor will have a separate board of directors that will not include any members from the boards of directors of TXU Energy or Luminant.
– Within a reasonable transition period after closing of the merger transaction, not to exceed six months, Oncor’s headquarters will be located in a separate building from the headquarters and operations of TXU Energy and Luminant.
– Oncor will not incur, guaranty or pledge assets in respect of any borrowing related to financing the merger transaction. Oncor’s financial integrity will be protected from the separate operations of TXU Energy and Luminant.
– TEF will limit Oncor’s debt so that its debt-to-equity ratio is at or below the assumed debt-to-equity ratio established from time to time by the Commission for ratemaking purposes, which is currently set at 60:40. For ratemaking purposes, in its next rate case Oncor will support a cost of debt that does not exceed Oncor’s actual cost of debt immediately prior to the announcement of the proposed merger transaction.
– Following the closing of the proposed transaction, TEF intends for Oncor to continue to make capital expenditures at or above current levels. Total capital spending will depend in part on economic growth, permitting and siting. However, TEF commits that over the five years following the year in which closing of the proposed transaction occurs, Oncor will make capital expenditures in connection with its transmission and distribution business in an aggregate amount of more than $3.0 billion.
– Over the five years following the year in which closing occurs, subsidiaries of TXU Corp. will expend an aggregate of at least $200 million on demand-side management/energy efficiency programs over the amount included by the Commission in Oncor’s rates. This commitment will approximately double Electric Delivery’s current level of spending on DSM. Oncor will not seek to recover in rates any of the $200 million in incremental DSM expenditures.
– Oncor will support the inclusion of negotiated commitments with appropriate stakeholders regarding reliability, customer service and employee safety in any Final Order regarding the merger transaction issued pursuant to PURA Section 14.101.
– Oncor will file a general rate case at the Commission before July 1, 2008, consistent with the utility’s currently effective settlement agreement with certain municipalities.
– TEF will hold a majority of its ownership interest in Oncor, in the current regulatory system, for a period of more than five years after the closing date of its proposed merger transaction.
A copy of the PUC filing is available at http://www.texasenergyfuture.com/