HOUSTON – Court documents filed this week show Energy Future Holdings CEO John Young, directors and other executives collected a combined $25.5 million in compensation and other payments in the year before the Dallas power generator filed for bankruptcy.
Energy Future Holdings, saddled with $42 billion in debt, filed in late April for one of the largest bankruptcies of a non-financial company since the 1980s, and is working to restructure its balance sheet as it pays the bills for its retail electricity and generator businesses.
The private equity firms that took Energy Future Holdings private in a massive leveraged buyout in 2007 also were paid millions of dollars in that 12-month period, according to court documents filed Monday.
TPG Capital Management and Kohlberg Kravis Roberts & Co. collected more than $7.1 million each, and Goldman Sachs & Co. received $5.3 million. All told, the executives, board members and private equity investors received $45.97 million from the company in that period, according to court documents.
TPG Capital, KKR and Goldman Saches all declined to comment.
Energy Future Holdings’ “pay-for-performance compensation philosophy seeks to incentivize operational excellence and instill a culture of ownership and accountability throughout the company – from executive management to all staff,” Allan Koenig, a spokesman for Energy Future Holdings, said in an emailed statement.
The Dallas-based company earlier said the bankruptcy proceedings won’t impact customers.
With $5 million in salary and other compensation between April 2013 and the bankruptcy filing in late April 2014, CEO John Young garnered the most in compensation and other payments out of the group of Energy Future executives and directors.
He was followed by Energy Future Holdings Chief Financial Officer Paul Keglevic, with $2.9 million; Executive Chairman Donald Evans, with $2.87 million; and TXU Energy President and CEO Jim Burke, with $2.5 million, according to court documents. TXU Energy is a subsidiary of Energy Future Holdings.
Young’s salary increased from $1.2 million in 2012 to $1.35 million last year, though his total compensation fell from $15.1 million in 2011 to $7.3 million in 2013, according to regulatory filings. Other executives saw similar drops in their total compensation packages over those two years.
Boards often ensure top executives are well compensated even as a company is in bankruptcy, Brent Longnecker, chairman and CEO of Houston executive compensation adviser Longnecker & Associates, said in an interview with FuelFix on Wednesday.
“When a company is in a turnaround situation, that’s when you want to be compensating the right people,” Longnecker said. Corporate boards might start ramping up retention packages as early as two years before a company files for bankruptcy, he added.
Longnecker said companies in dire financial straits are often in danger of losing key executives as headhunters call with leads on healthier companies — tempting offers when spouses and family members become nervous and gloom-and-doom headlines proliferate. Corporate boards, he said, are tasked with “keeping the team together.”
“You want to incentivize them to keep the company going,” which might involve a mix of complex transactions like selling off assets, he said. A board should “be trying to pay them a little bit more if they’re accomplishing objectives. In my opinion, it would be bad if you just had money that had nothing to do with the turnaround.”
Energy Future Holdings owns billions in coal-fired plants and other power assets. It went private in 2007 in the largest leveraged buyout in U.S. history, a deal valued at more than $45 billion. Seven years ago, the three private equity firms and other investors believed electricity prices would soar, but they soured after U.S. natural gas supplies became abundant amid a nationwide shale-gas boom.
Also on FuelFix: