By Tom Kleckner and Rich Heidorn Jr.

Energy Future Holdings reached a major milestone in its Chapter 11 reorganization Monday, completing its tax-free spinoff of Luminant and TXU Energy into a new standalone company, TCEH Corp.

TCEH issued 427.5 million shares of common stock and other assets to the “pre-emergence” first-lien creditors of Texas Competitive Electric Holdings Co. It will trade on the OTCQX market under the ticker symbol THHH.

Luminant is Texas’ largest electric power generator with almost 17,000 MW of generation, including 2,300 MW of nuclear power, 8,000 MW of coal and 6,000 MW of natural gas. TXU Energy, a competitive retail electricity provider, has 1.7 million business and residential customers in Texas.

TCEH appointed as its CEO Curt Morgan, a consultant for the first-lien creditors and a former operating partner at private equity firm Energy Capital Partners. Also appointed to the board of directors were Gavin Baiera, Jennifer Box, Jeff Hunter, Michael Liebelson, Cyrus Madon and Geoffrey Strong.

In a statement Tuesday, Morgan said the company emerged from bankruptcy “with a strong balance sheet and the potential for stable earnings and significant cash generation,” having eliminated more than $33 billion of debt and other obligations and reduced its leverage to a low 2.3 times of gross secured debt to cash flow.

EFH said it was continuing its efforts to complete its reorganization with its sale of its 80% interest in Oncor, Texas’ largest transmission and distribution utility.

NextEra, EFH Seek to Reassure Texas PUC on Merger

Last week, EFH and NextEra Energy sought to assure Texas regulators they won’t be constrained in their review of NextEra’s agreement to purchase Oncor, which includes a $275 million termination fee.

During an update hearing Sept. 26 on EFH’s emergence from Chapter 11 bankruptcy (14-10979-CSS), Judge Christopher S. Sontchi said he had filed a joint letter from EFH and NextEra addressing the Public Utility Commission of Texas’ concerns.

PUC Commissioner Ken Anderson said during a Sept. 22 open meeting that the termination fee “appears to be an effort to really tie the commission’s hands in the proceeding,” as it would allow NextEra to cancel the deal if the commission imposed “overly burdensome” conditions. Anderson also called the fee an “improper attempt to constrain the commission.” (See Texas PUC Expresses Doubts over NextEra-Oncor Deal.)

NextEra has proposed buying Oncor for $18.7 billion.

According to the letter, “NextEra is not entitled to a termination fee under the merger agreement if NextEra Energy terminates the merger agreement because the commission either approves the merger agreement transaction with ‘burdensome conditions’ … or does not approve the merger agreement transaction.”

NextEra and EFH said the termination fee would be triggered only if EFH or Energy Future Intermediate Holding Co., Oncor’s direct parent, terminate the merger agreement. The companies wrote they “would like to make clear that, in any event, NextEra will not seek to collect any portion of the termination fee contemplated by the merger agreement in the event it terminates the agreement.”

Sontchi opened Monday’s hearing by quoting from the transcript of the PUC meeting.

“I believe [the] letter addresses the concerns raised by Commissioner Anderson,” Sontchi said. He said any possible triggering of the termination fee is “an issue for the bankruptcy court, and not for the PUCT and ratepayers.”

The PUC’s approval is just one of several favorable regulatory rulings NextEra and EFH must secure before closing the deal.