The bankruptcy judge for power plant operator Entegra Power Group LLC and some of its related companies on Sept. 19 approved a bankruptcy reorganization plan, clearing the way for a quick emergence from Chapter 11 protection.
The plan approved by Judge Peter Walsh restructures and reduces the debt of those companies, allowing them to emerge intact. The companies on Aug. 4 had filed a prepackaged plan of reorganization under Chapter 11 at the U.S. Bankruptcy Court for the District of Delaware, according to GenerationHub.
Other affiliates seeking bankruptcy protection included Entegra TC, Basso TP-2, EPG, Union Power, Union Power Partners, UPP Finance Co., Trans-Union Pipeline, Trans-Union Interstate Pipeline, Entegra Power Services, Union Power Employee Co. and Gila River Energy HoldCo.
“The Debtors operate an independent power company that owns two of the largest gas-fueled power plants in the United States, located in El Dorado, Arkansas (the ‘Union Facility’) and Gila Bend, Arizona (the ‘Gila Facility’),” said an Entegra bankruptcy filing. “The Debtors market electric power from the Union Facility and Gila Facility to wholesale customers in the southeastern and southwestern United States. The Entities that directly own and operate the Gila Facility are not anticipated to commence Chapter 11 Cases, and the Gila Facility will not become property of the Debtors’ chapter 11 estate.”
The debtors’ corporate headquarters and full service asset management group is based in Tampa, Florida. For the fiscal year ended Dec. 31, 2013, the debtors reported on a consolidated basis $220.6 million in revenue. As of Dec. 31, 2013, the debtors reported on a consolidated balance-sheet basis total debt of about $1.5 billion, which is what was slashed nearly in half in this bankruptcy process.
The Union Facility is a natural gas-fired, combined-cycle plant consisting of four identical combined power blocks (each, a “Union Power Block”), located in El Dorado, Arkansas. It began full commercial operation in June 2003. Each of the Union Power Blocks has an average annual capacity of 527.5 MW, with a total facility capacity of about 2,100 MW. The Union Facility is owned and operated by debtor affiliate Union Power Partners LP (UPP), an exempt wholesale generator (EWG), which has been authorized by the Federal Energy Regulatory Commission to make sales of electric energy, capacity, and ancillary services at market-based rates.
Non-debtor Gila River Power LLC (f/k/a Gila River Power LP) owns and operates two of four combined power blocks (each a “Gila Block”) that make up the Gila Facility located in Gila Bend, Arizona. Each of the Gila Power Blocks has an approximate installed capacity of 583 MW, with a total facility capacity of around 2,334 MW.
The Gila Facility is located in its own generator-only balancing authority area, which has no load other than station power loads when the Gila Facility is operating, and is interconnected to the transmission system of Arizona Public Service (APS). Gila River is an EWG and has been authorized by the FERC to sell wholesale electric energy, capacity, and ancillary services at market-based rates.
Gila River makes such sales primarily into APS and Salt River Project balancing authority areas, within the Western Electricity Coordinating Council region (WECC). Gila River also makes some sales into the markets operated by the California Independent System Operator (CAISO), also in the WECC region.
Gila River previously owned all of the Gila Blocks, but sold Gila Block 2 to Sundevil Power Holdings LLC, a wholly owned subsidiary of Wayzata Investment Partners in 2010, and Gila Block 1 to Sundevil in July 2011. Gila River continues to own and operate Gila Block 3 and Gila Block 4 but has committed all of the output from Gila Block 4 to APS under a long-term sales agreement ending in 2017.
In December 2013, Gila River entered into a purchase agreement with Tucson Electric Power (TEP) for the sale of Gila Block 3 for $219 million, which is expected to close in the future, subject to regulatory approval.
Michael Schuyler, the President and CEO of Entegra, said in initial testimony about the reasons to seek bankruptcy reorganization: “Wholesale electricity prices have fallen significantly in recent history as a result of reduced electricity demand and substantial reductions in natural gas prices. Lower natural gas prices have been caused, in part, by the rapid expansion of natural gas production, and natural gas inventories arising from the development of new extraction techniques and the discovery of new shale deposits. Generally, the presence of low-priced natural gas reduces the variable costs of natural-gas fired power facilities and reduces the wholesale market price for all generators. Furthermore, the power generation industry is highly competitive on both a regional and national level. This competitive environment has added an additional layer of complexity to the Debtors’ existing challenges.”