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By Mark Peters
Of DOW JONES NEWSWIRES
Alcoa Inc. (AA) is seeking $500 million in damages from Energy Future Holdings Corp. in a lawsuit over power supply for a Texas aluminum plant.
The aluminum giant disclosed the amount in a filing Thursday as part of a year-old suit against the privately held power company, formerly known as TXU Corp. Energy Future Holdings was created two years ago in a record-setting leveraged buyout led by private-equity companies Kohlberg Kravis Roberts & Co., TPG Inc. and Goldman Sachs Group Inc. (GS).
Alcoa is seeking the $500 million in damages and return of a coal mine for what it says is wrongful conduct by Energy Future Holdings. The aluminium maker's case revolves around a decades-old agreement to supply power to Alcoa's smelter in Rockdale, Texas, from a coal-fired power plant known as Sandow Unit 4 now owned by Energy Future Holdings' subsidiary Luminant.
Alcoa said Luminant manipulated power prices and mismanaged a coal mine for the Sandow plant, among other claims, driving up what Alcoa paid for electricity by as much as 100 times the average price. Alcoa partially curtailed production at the Rockdale plant in June 2008 and has since curtailed the smelter's remaining output.
Energy Future Holdings "intentionally and deliberately manipulated electricity prices in an attempt to relieve them of a relationship they didn't want," Alcoa spokesman Kevin Lowery wrote in an e-mail Friday.
A spokesman for Energy Future Holdings said the company continues to dispute the allegations by Alcoa and will vigorously defend itself.
The massive buyout of TXU has been challenged by a large debt load and a weakened power market. Energy Future Holdings faces increasing questions on how it will handle the massive debt it took to complete the buyout. The company recently moved to reduce its overall debt by $2 billion to $42 billion through a debt exchange. The proposal hasn't yet won approval from investors.
TXU bonds were a touch higher in fairly active trading Friday, according to MarketAxess, which pegs the 10.875% bonds due 2017 and the 10.25% bonds due 2015 up 0.75 points each at 71.25 cents and 72.5 cents respectively.
- By Mark Peters, Dow Jones Newswires; 212-416-2457; mark.peters@dowjones.com
(Kate Haywood in New York contributed to this article.)
(END) Dow Jones Newswires
10-23-09 1631ET
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