EME Homer City Generation LP said in an Oct. 3 SEC filing that it is making progress with the financing related to a planned turnover of its leased, coal-fired Homer City power plant in Pennsylvania to an affiliate of General Electric (NYSE: GE), the longtime owner of the plant.
EME Homer City, as assignor, and Homer City Generation LP, an affiliate of General Electric Capital Corp. (GECC), had previously entered into a Master Transaction Agreement (MTA) on Sept 21. Under the MTA, Homer City has agreed to transfer substantially all of its rights in and assets related to the Homer City plant and specified liabilities to the GECC affiliate.
On Oct. 3, GECC, EFS-N Inc., Homer City Generation LP and the Metropolitan Life Insurance Co. entered into a Plan Support Agreement (PSA) with certain holders of the bonds holding approximately 76% of the outstanding principal amount of the bonds issued under the indenture, dated as of December 2001, between Homer City Funding LLC (Fundco), and The Bank of New York, as successor trustee. Fundco is in the process of entering into the PSA. Under the PSA, the parties to it commit to support and implement a reorganization and restructuring of Fundco and its obligations through a solicitation of votes on a prepackaged plan of reorganization under chapter 11 of the bankruptcy code.
Among other things, the PSA requires Fundco to undertake a solicitation and commence a chapter 11 case, with the consenting bond holders to vote all claims represented by the existing bonds in favor of the plan, and the parties would use commercially reasonable efforts in furtherance of obtaining confirmation of the plan and consummating the transactions contemplated related to it. In addition, the PSA requires the applicable parties to forbear from exercising remedies under the existing operative documents during the term of the PSA. The PSA contains certain milestone events that must be achieved by specified dates, which events include the commencement of Fundco’s chapter 11 case, the confirmation of the plan, and the effective date of the plan.
There is also in this deal a complex series of financial arrangements related to a need to finance new emissions controls for Units 1-2 at the three-unit Homer City plant. That includes an existing engineering, procurement, and construction agreement between a wholly owned subsidiary of GECC and Kiewit Power Constructors Co. related to the construction of those controls.
Homer City is a three-unit, 1,884-MW plant located in Indiana County, Pa. EME Homer City, an affiliate of Edison International (NYSE: EIX), acquired the plant in March 1999 and completed a sale-leaseback of its facilities to third parties in December 2001.
Homer City Units 1 and 2 were placed into commercial operation in 1969, said EME Homer City’s March 28 Form 10-K report. Unit 1 has an installed capacity of 620 MW, and Unit 2 has an installed capacity of 614 MW. Unit 3 commenced commercial operation in 1977 and has an installed capacity of 650 MW.
In a disclosure statement attached to the Oct. 3 SEC filing, there was a discussion of the emissions projects needed to comply with the Mercury and Air Toxics Standards, the Clean Air Interstate Rule and the Cross-State Air Pollution Rule: “Compliance with MATS and, potentially, any more stringent rule that replaces CAIR, requires significant capital improvements to the Facility through the installation of flue-gas desulfurization retrofit scrubber systems (‘FGDs’) to Units 1 and 2 of the Facility. Construction of the FGDs commenced during the second quarter of 2012 to meet the anticipated regulatory deadlines under CSAPR prior to its vacatur. The cost of construction and installation of the FGDs is currently estimated to be approximately $700-$750 million. EME Homer City does not have sufficient capital and does not expect to generate sufficient funds from operations to fund installation of the FGDs. Moreover, the agreements entered into pursuant to the 2001 Transaction limit EME Homer City’s ability to incur debt. As a result, installation of the FGDs, and in turn the future viability of the Facility, is dependent on funding from other parties.”