Fundraising

TXU sells $1.25bn stake in electricity distributor

TPG, Kohlberg Kravis Roberts and Goldman Sachs have sold a minority stake in the electricity distribution arm of portfolio company Energy Future Holdings, formerly TXU. The sale is the first since the record $45bn buyout closed in October 2007.

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Energy Future Holdings, a portfolio company of TPG, Kohlberg Kravis Roberts and Goldman Sachs Capital Partners, has achieved its first liquidity event since the record-setting $45 billion buyout of the company formerly known as TXU.

The company has agreed to sell a 20 percent stake in Oncor, a regulated electric distribution and transmission business which is a business unit of Energy Future Holdings, to a private equity consortium led by Borealis Infrastructure Management and GIC Special Investments for $1.25 billion (€840 million).

TPG, KKR and Goldman Sachs had intended to sell a 20 percent stake in Oncor since acquiring TXU in October 2007.

On news of the agreement, US ratings agency Standard & Poor's announced that it upgraded Oncor's credit ratings two notches from BBB- to BBB+.

“The sale of a minority interest to these investors fulfills an important transaction-related commitment and will enhance Oncor’s financial separation from other Energy Future Holdings businesses,” said Energy Future Holdings chief executive John Young in a statement.

Borealis Infrastructure is the infrastructure investment arm of the $52 billion Canadian pension plan, the Ontario Municipal Employees Retirement System. GIC is the private equity and infrastructure unit of the Government of Singapore Investment Corporation, the largest sovereign wealth fund in Asia with assets totaling around $330 billion.

At the time of the acquisition, TXU was the largest-ever leveraged buyout. The deal’s size will soon be exceeded by the $50 billion buyout of Bell Canada by a private equity consortium including Ontario Teachers’ Pension Plan, Providence Equity Partners, Madison Dearborn Partners and Merrill Lynch Global Private Equity.

The buyout of TXU took eight months to close following the initial bid due to protests by environmental advocacy groups, Texas legislators and labor unions.

Energy Future Holdings initially functioned as one entity before being restructured to divide the company into three separate businesses: TXU Energy, an electricity retailer; Luminant, a power generation business whose operations include mining, wholesale marketing and trading and construction; and Oncor.