Judge to Reconsider NextEra Breakup Fee on Oncor Deal -- Update
September 19 2017 - 2:50PM
Dow Jones News
By Peg Brickley
A bankruptcy judge on Tuesday dealt a blow to NextEra Energy
Inc.'s efforts to collect a $275 million breakup fee for its failed
attempt to take over Energy Future Holdings Corp.'s Oncor
power-transmission business.
Judge Christopher Sontchi said he made an error last year when
he approved the breakup fee in a deal Energy Future hoped would
bail it out of bankruptcy. Reconsideration of the breakup fee order
is appropriate, the judge said.
The ruling, which came at a hearing in the U.S. Bankruptcy Court
in Wilmington, Del., is a win for creditors of Energy Future, who
are now counting on a new deal -- the sale of Oncor to Sempra
Energy, for $9.45 billion.
Assuming the Sempra buyout closes, it wouldn't bring enough
money to pay off all the debts remaining in Energy Future's
bankruptcy case, which began in 2014. That makes the NextEra
breakup fee fight a matter of high interest to creditors.
NextEra can still appeal the decision. A spokesman for NextEra
wasn't immediately available to say what the company will do.
The company's claim to the breakup fee, had it succeeded, would
have put a big dent in the pile of money Energy Future is expecting
from the Sempra deal, leaving some creditors with a depleted
recovery.
NextEra's takeover attempt was rejected by the Public Utility
Commission of Texas in a surprise ruling this year. Regulators said
NextEra's buyout of Oncor, a power-transmission business that is a
vital piece of the Texas power system, wasn't in the public
interest.
NextEra claimed it was entitled to collect the breakup fee to
cushion the blow of a takeover campaign that cost tens of millions
of dollars.
The company has said it was still trying to get the PUC Texas to
change its mind when Energy Future pulled the plug on the Oncor
sale and began talks with other contenders.
Judge Sontchi on Tuesday said he wouldn't have approved a
breakup fee provision that entitled NextEra to collect as long as
it refused to admit the Oncor deal was dead, so the provision was a
mistake.
The ruling is likely to spur settlement talks over the breakup
fee, lawyers said at Tuesday's court hearing.
The decision came in a fight led by Elliott Management Corp., a
hedge fund that picked up big stakes in Energy Future debt earlier
this year. Elliott has been leading creditors in an effort to spur
aggressive action by Energy Future to defeat the breakup fee.
Energy Future opposed Elliott's plea to the judge to reconsider
the breakup fee. Although Energy Future has filed a suit to
challenge the fee, it was reluctant to argue that the breakup fee
provision was approved in error.
In its lawsuit, Energy Future contends NextEra didn't use
commercially reasonable efforts to win over regulators who had the
final say on the Oncor sale. NextEra denies the allegations.
That litigation will continue, with Elliott and an official
committee of unsecured creditors participating.
That means NextEra is facing a two-front legal fight to collect
the $275 million. It must defeat Energy Future's lawsuit and mount
a successful appeal of Judge Sontchi's ruling on the mistake in the
breakup fee provision.
Write to Peg Brickley at peg.brickley@wsj.com
(END) Dow Jones Newswires
September 19, 2017 14:35 ET (18:35 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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