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Electricity provider owners collect $528.3 million in payments despite company nearing bankruptcy

KKR & Co., TPG Capital and Goldman Sachs Capital Partners, which took the former TXU Corp. private five years ago in one of the largest leveraged buyouts in history, have paid themselves $528.3 million in fees, even as the electricity provider teeters toward a near-term bankruptcy or restructuring.

KKR & Co., TPG Capital and Goldman Sachs Capital Partners, which took the former TXU Corp. private five years ago in one of the largest leveraged buyouts in history, have paid themselves $528.3 million in fees, even as the electricity provider teeters toward a near-term bankruptcy or restructuring.

The payments consist of a $300 million charge for advising on the buyout, annual management fees totaling $171 million, and as much as $57.3 million for consulting on debt deals, the Dallas-based company now called Energy Future Holdings Corp. said in regulatory filings. The private-equity firms' fees are as much as 25 times greater than average, based on data from Philadelphia law firm Dechert L.L.P. and researcher Preqin Ltd.

Energy Future's long-term debt has soared to $42 billion since the buyout, and the company is poised for its seventh straight quarterly loss as it struggles with natural gas prices 74 percent below their 2008 peak. Moody's Investors Service says the company may need to restructure next year, and derivatives traders are pricing in a 95 percent chance of default within five years for its deregulated unit.

"This is a utility and its product is electricity that it sells to the public, but it really is a debt house," said Tom Sanzillo, finance director for the Institute for Energy Economics & Financial Analysis, a research group, and former deputy comptroller of New York who oversaw the state's $156 billion pension fund. "There are fees to be made in all that debt management."

Spokesmen for KKR, TPG and Goldman Sachs declined to comment.

The company, which traces its roots in North Texas to 1882, expects to post a third-quarter net loss of $407 million on operating revenue of $1.8 billion, according to an Oct. 18 filing. Energy Future plans to release its full earnings report on Oct. 30. Total liabilities were $52.2 billion as of June 30, compared with total assets of $44.1 billion, according to data compiled by Bloomberg, indicating it is technically insolvent.

"We continue to pay our debts as they become due and have always been and remain in compliance with all of our debt covenants," Energy Future spokesman Allan Koenig wrote in an e-mail.