In October 2007, a group of private investors bought TXU Corp., which is now known as Energy Future Holdings Corp. (EFH). At the time of the buyout, EFH took on a large amount of debt to finance the transaction. It remains one of the largest leveraged buyouts in history.
EFH’s buyout of TXU Corp. was based on wholesale power prices at the time, which were generally tied to natural gas prices. EFH’s revenues proved insufficient to support the debt incurred to fund the buyout. As a result, EFH has filed for bankruptcy.
At the time of the buyout, Oncor and its new owners established various legal, financial, and contractual provisions to enhance the separateness between Oncor and its new owners and other unregulated affiliates and to protect Oncor’s credit quality. The primary objective was to minimize the risk that Oncor – and the 10 million Texans who rely on Oncor for electricity – would be negatively impacted in the event of a bankruptcy or other adverse financial condition occurring with the new owners and their other businesses. The provisions are commonly referred to as a “ring-fence.”