Billion dollar restructuring

As part of a series of moves estimated at reducing its debt, TXU Corporation announced today that it is to sell TXU Australia to Singapore Power for $3.72 billion.

The move will result in a reduction of $1.7 billion in consolidated TXU debt and proceeds to TXU of approximately $1.85 billion after taxes and transaction costs. The sale, to be cleared by the Australian Competition and Consumer Commission, is expected to close in the third quarter.

In addition, the company has agreed to sell the assets of TXU Fuel Company, its gas transportation subsidiary that has approximately 1,900 miles of intrastate pipeline and a total system capacity of 1.3 Bcf/day. It will be sold to Energy Transfer Partners for $502 million.

As part of the transaction, TXU Energy will have an eight year transportation agreement with the new owner to transport gas to TXU Energy’s generating assets. The pre-tax gain related to the sale is expected to be approximately $390 million, which will be recognised over eight years.

TXU also intends to sell its TXU Gas Company subsidiary valued at $1.8 billion, resulting in proceeds of approximately $1.17 billion after taxes. TXU Gas is comprised of a regulated natural gas transmission and distribution business in Texas.

With the anticipated $3.36 billion in net proceeds from the divestments of the companies, TXU intends to repurchase various forms of securities. Toward this goal, TXU has repurchased all $750 million outstanding principal amount of TXU Energy’s Exchangeable Preferred Membership Interests (EPMI) at a price of $1.842 billion.

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