| News |

Like A Vampire, Wall Street Will Drain TXU Until There's Nothing Left

Keep Dallas Observer Free
I Support
  • Local
  • Community
  • Journalism
  • logo

Support the independent voice of Dallas and help keep the future of Dallas Observer free.

At least for now, Dallas-based electricity and transmission giant Energy Future Holdings, the former TXU, is paying off its debts. Technically, it's completely insolvent, but that hasn't stopped the Wall Street firms who purchased the company in the biggest leveraged buyout in history from extracting hundreds of millions of dollars in fees.

Bloomberg Businessweek paints a dire portrait of greed and impending collapse in a recent story. Energy Future's total liabilities, it reports, come to more than $52 billion. It's only worth $44 billion. With quarterly loss after quarterly loss, Moody's has characterized the company as "unsustainable," marching inexorably toward bankruptcy, Worry not, though. KKR & Co., TPG Capital and Goldman Sachs are still making money. They've paid themselves $528.3 million in fees, even as Energy Future toes the brink of insolvency. According to Bloomberg, the management fees these firms charge are 25 times greater than average.

When they bought the company with a lot of borrowed money, leveraged right up to the hilt in 2008, they saddled Energy Future with all that debt. It looked like it would work out for a little while. Its fleet of coal-fired plants were raking it in as the going price for electricity rose with the price of natural gas. Then the bottom dropped out. Natural gas glutted the market, and the recession cut demand off at the knees. Suddenly, all that debt became a lot less manageable when the profit margins evaporated. So, the company has had to borrow more and more, in order to make ridiculous interest payments, and to pay the Wall Street guys.

Says Tom Sanzillo, former deputy comptroller for New York, and the finance director for the Institute for Energy Economics and Financial Analysis (who was also a great help as we researched a feature story on the subject), making and selling electricity is only part of Energy Future's raison d'être now.

"This is a utility and its product is electricity that it sells to the public, but it really is a debt house," he told Bloomberg Businessweek. ""There are fees to be made in all that debt management."

Keep the Dallas Observer Free... Since we started the Dallas Observer, it has been defined as the free, independent voice of Dallas, and we would like to keep it that way. Offering our readers free access to incisive coverage of local news, food and culture. Producing stories on everything from political scandals to the hottest new bands, with gutsy reporting, stylish writing, and staffers who've won everything from the Society of Professional Journalists' Sigma Delta Chi feature-writing award to the Casey Medal for Meritorious Journalism. But with local journalism's existence under siege and advertising revenue setbacks having a larger impact, it is important now more than ever for us to rally support behind funding our local journalism. You can help by participating in our "I Support" membership program, allowing us to keep covering Dallas with no paywalls.

We use cookies to collect and analyze information on site performance and usage, and to enhance and customize content and advertisements. By clicking 'X' or continuing to use the site, you agree to allow cookies to be placed. To find out more, visit our cookies policy and our privacy policy.


Join the Observer community and help support independent local journalism in Dallas.


Join the Observer community and help support independent local journalism in Dallas.