Dynegy Inc., as promised, files for Chapter 11 bankruptcy

Independent power producer Dynegy Inc. (NYSE:DYN), following through on recent indications, said July 6 that it has filed a voluntary petition to reorganize under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York.

The Chapter 11 case of Dynegy’s wholly-owned subsidiary, Dynegy Holdings LLC, has been pending in the same court since November 2011. The filing was made to facilitate the implementation of the transactions contemplated under an amended and restated settlement agreement entered into, by and among Dynegy, Dynegy Holdings, and certain Dynegy Holdings debtors and the primary creditor constituencies in the Dynegy Holdings Chapter 11 case.

Among other things, the settlement, which has already been approved by the court, provides for Dynegy and Dynegy Holdings to merge and for the administrative claim granted to Dynegy in the Dynegy Holdings Chapter 11 case to be transferred out of Dynegy for the benefit of its shareholders, Dynegy noted. Both of these matters are the subject of a pending motion in Dynegy Holdings’ case.

Subject to obtaining additional relief from the court in Dynegy’s case, the filing will also permit the solicitation of votes on the companies’ joint Chapter 11 plan to commence. It is contemplated that upon completion of the merger, Dynegy Inc. will be the surviving entity. All assets will then be held under a single holding company, thus eliminating a layer from the corporate structure.

Dynegy’s other coal- and gas-fired plants not affected

Dynegy subsidiaries that own and operate the company’s coal fleet (in Illinois) and gas-fired businesses were separately financed during 2011 and are therefore not included in the Chapter 11 filing, Dynegy stated. They will continue to operate as normal.

Dynegy said it has sought customary first-day relief designed to ensure a smooth transition into Chapter 11 administration. Among other things, this relief, if granted by the bankruptcy court, will ensure that the company has enough cash and liquidity to fund continuing operations and all administrative obligations incurred during the Chapter 11 process.

On Nov. 7, 2011, Dynegy Holdings and four affiliated companies that control the Danskammer and Roseton power plants in New York state filed petitions seeking relief under Chapter 11. Their cases have been assigned to Judge Cecelia Morris.

Dynegy’s subsidiaries produce and sell electric energy, capacity and ancillary services in key U.S. markets. The Dynegy Power LLC power generation portfolio consists of approximately 6,771 MW of primarily natural gas-fired intermediate and peaking facilities. The Dynegy Midwest Generation LLC portfolio consists of approximately 3,132 MW of primarily coal-fired baseload plants. The DNE portfolio, which is the one in bankruptcy, consists of about 1,693 MW from two power plants which are primarily natural gas-fired peaking (Roseton) and baseload coal generation (Danskammer) facilities.

Dynegy Holdings recently told the court that while the court has approved the termination of its leases on the Roseton and Danskammer plants with affiliates of Public Service Enterprise Group (NYSE: PEG), it has retained operational control of the plants while other regulatory approvals are obtained. Dynegy indicated that it and PSEG will work together to sell both of these plants and that Danskammer faces heavy emissions control needs and a possible coal-to-gas conversion.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.