The $45B LBO of TXU was the largest in history — it bankrupted the company in 7 years

Energy Future Holdings traces its roots to 1912, when Texas Power and Light was founded to electrify the state. The company grew through mergers and was known as TXU Corporation by the 2000s — the dominant electric utility in Texas, with generation, transmission, and retail operations serving millions of customers. Its most valuable assets were its coal-fired power plants, which produced cheap electricity when natural gas prices were high.

In October 2007, a consortium led by KKR, TPG Capital, and Goldman Sachs Capital Partners acquired TXU in a $45 billion leveraged buyout — the largest LBO in history. The deal was a massive bet on natural gas prices: the buyers paid a premium assuming that gas would remain expensive enough to keep TXU's coal plants competitive. To fund the buyout, the consortium loaded the company with over $40 billion in debt. TXU was renamed Energy Future Holdings.

The bet failed spectacularly. The shale gas revolution of the late 2000s drove natural gas prices to historic lows — from roughly $7 per MMBtu in 2008 to below $3 by 2012. Gas-fired power plants could now generate electricity far more cheaply than coal plants, and TXU's coal-heavy fleet became a liability. By February 2013, Moody's described the company as 'a financially distressed company with an untenable capital structure.' Energy Future Holdings could not service its enormous debt load on collapsing power revenues.

On 29 April 2014, Energy Future Holdings filed for Chapter 11. It was the biggest bankruptcy of a private-equity-backed company since Chrysler in 2009 and the third-largest energy bankruptcy after Enron and Calpine. The company's Oncor transmission business was sold to Sempra Energy for $9.45B in 2017. The remaining generation and retail businesses were absorbed into Vistra Energy. The LBO that was supposed to be the largest private equity deal ever became the largest failed LBO in history.