Energy Future granted approval of settlement tied to merger disputes

By Caroline Salls

Pittsburgh, Feb. 14 – Energy Future Holdings Corp. received court approval of a settlement that resolves disputes surrounding the planned merger with Sempra Energy and the related plan support and Oncor Electric Delivery Co. LLC tax-sharing agreements, according to an order filed Wednesday with the U.S. Bankruptcy Court for the District of Delaware.

Energy Future said the disputes involve the relevant parties’ rights and obligations in connection with a dividend declared by Oncor on Oct. 25, any dividend that may be declared, including dividends related to amounts earned by Oncor from Oct. 1 through Dec. 31, Oncor’s disposition of those dividends and claims Energy Future may have against Oncor or its immediate parent under the tax-sharing agreement for tax years 2016, 2017 and 2018.

Under the settlement, Sempra will pay $27.5 million to Energy Future Intermediate Holding Co. LLC (EFIH) and $3.75 million to Energy Future Holdings at the closing of the merger agreement.

If Oncor has paid the third quarter 2017 dividend or declares and/or pays a fourth-quarter 2017 dividend or any other dividend before the merger closing and/or payments are made on specified tax-sharing agreement claims, then Sempra, as the indirect owner of the reorganized Energy Future entities, will retain the benefits of those dividends or payments.

As an alternative, Sempra may distribute those dividends or payments to EFIH or Energy Future Holdings to be distributed to creditors and to satisfy its settlement payment obligations, in which case the settlement payment would be reduced on a dollar-for-dollar basis.

In addition, Energy Future Holdings will pay Oncor $19 million on account of tax year 2016 but will not be obligated to make any payments in connection with tax years 2017 and 2018, meaning reorganized Energy Future “bears the benefits and burdens for tax years 2017 and 2018,” the motion said.

Energy Future is a Dallas-based power generation company and utility operator. The company filed for bankruptcy on April 29, 2014. The Chapter 11 case number is 14-10979.

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