A bankruptcy reorganization plan and accompanying disclosure statement from Edison Mission Energy describes the company’s power plants and how the company and its assets will be sold to NRG Energy (NYSE: NRG).
The plan and statement were filed Nov. 15 at the U.S. Bankruptcy Court for the Northern District of Illinois, where EME and most of its subsidiaries have been in Chapter 11 protection since December 2012. The plan provides for a sale to NRG of substantially all of EME’s assets.
The purchaser will provide EME’s bankruptcy estate with the sale proceeds of $2.635bn (comprised of $2.285bn payable in cash and $350m payable in common stock). NRG would assume certain liabilities of the debtors, including the leveraged leases at debtor Midwest Generation LLC’s Powerton and Joliet coal-fired facilities in Illinois.
The purchaser under the plan is NRG Energy Holdings, with is a subsidiary of NRG Energy, a Fortune 500 company and the largest competitive power generation company in the U.S. with about 47,000 MW of fossil, nuclear, solar, and wind generation capacity.
The bankruptcy court has scheduled the confirmation hearing for Feb. 26. Objections to confirmation of the plan must be filed and served on the debtors, and certain other parties, by no later than Feb. 7.
EME’s subsidiaries and affiliates own or lease interests in 42 operating projects with an aggregate net physical capacity of 9,358 MW, of which EME’s pro rata share was 7,935 MW.
Debtor Midwest Generation (MWG), an indirect wholly owned subsidiary of EME, was formed in 1999 for the purpose of owning or leasing, making improvements to, and operating and selling the capacity and energy of, the power generation assets purchased from Commonwealth Edison. EME’s coal-fired facilities are primarily owned or leased and operated by MWG. As of Dec. 31, 2012, MWG operated power plants capable of producing 4,619 MW in Illinois (the “MWG plants”):
- the Powerton, Joliet, Will County and Waukegan coal-fired plants consisting of 4,314 MW; and
- the Fisk and Waukegan on-site, oil-fired peaker plants consisting of 305 MW.
MWG leases the Powerton Station and Units 7 and 8 of the Joliet Station from third-party lessors under a sale-leaseback transaction completed in August 2000. Those revamped leases would be assumed by NRG.
The various EME plants include:
EME owns a 50% interest in Sunrise Power Co. LLC, which owns a 586 MW natural gas-fired combined cycle facility in Kern County, Calif. The power purchase agreement at Sunrise expired on June 30, 2012, and the project operates on a merchant basis selling into the California ISO market until a new power purchase agreement is executed. Dispatch will depend on market conditions, and Sunrise may run less than it has in the past. Historically, Sunrise has operated more during the summer due to higher demand driven by warmer weather, and during summer 2013, Sunrise had resource adequacy contracts for capacity with Pacific Gas and Electric (PG&E) and San Diego Gas and Electric (SDG&E).
Big Four Projects
EME owns partnership investments in Kern River Cogeneration Co., Midway-Sunset Cogeneration Co., Sycamore Cogeneration Co. and Watson Cogeneration Co., collectively called the “Big 4 Projects.”
- Kern River sells electricity to Southern California Edison (SCE) under a transition power purchase agreement and has entered into a long-term power purchase agreement with PG&E. Kern River sells steam to Chevron under a cogeneration partnership agreement. Chevron has objected to the debtors’ motion to assume the Kern River agreement and has filed a complaint against the debtors. This litigation remains pending.
- Midway-Sunset sells electricity to PG&E under a power purchase agreement that expires in 2016. Midway-Sunset also sells electricity and steam to Aera Energy LLC under agreements that expire concurrently with the PG&E power purchase agreement.
- Sycamore sells electricity to SCE under a transition power purchase agreement and has entered into a long-term power purchase agreement with SCE. Sycamore sells steam to Chevron under an agreement that expires in 2020. This plant is subject to the same legal action by Chevron as with Kern River.
- Watson sells electricity to SCE under a transition power purchase agreement. Watson currently sells power and steam to BP West Coast Products LLC under agreements that expire in 2014.
EME owns 50% partnership interests in Coalinga Cogeneration Co., Mid-Set Cogeneration Co., Salinas River Cogeneration Co. and Sargent Canyon Cogeneration Co., each of which owns a 38 MW natural gas-fired cogen located in California. These projects sell electricity to PG&E under power purchase agreements that expire in 2016. The power purchase agreements became effective in December 2011.
Walnut Creek Project
Walnut Creek is a 479 MW natural gas-fired peaker plant in southern California. It achieved commercial operation during the second quarter of 2013 and started earning revenues under its 10-year power sales agreement with SCE in June 2013.
EME owns a 50% interest in American Bituminous Power Partners LP, which owns an 80-MW waste coal facility located in Grant Town, W.Va. (“Ambit”). Ambit sells electricity to Monongahela Power under a power purchase agreement that expires in 2036. On Oct., 1, 2013, Ambit made the required annual principal payments to certain bondholders by drawing on its line of credit and was unable to fully reimburse the drawdown, which is a potential event of default. However, Ambit and various counterparties, including the line of credit issuer, executed an amendment, effective Oct. 1, 2013, to waive any event of default.
EME, through certain other non-debtor affiliates, also owns or operates 29 wind facilities throughout the United States—in Illinois, Iowa, Minnesota, Nebraska, New Mexico, Oklahoma, Pennsylvania, Texas, Utah, West Virginia, and Wyoming. Those wind facilities accounted for 22% of EME’s total generating capacity on the bankruptcy petition date in December 2012. Generation from 428 MW of wind capacity is sold on a merchant basis, while the balance is sold under privately negotiated long-term power purchase agreements.
Until January 2013, EME indirectly owned a 38% limited partnership interest in Covanta Huntington LP, which owns a 25 MW waste-to-energy facility located near the Town of Huntington, N.Y. In October 2012, a non-debtor subsidiary of EME exercised an option to sell all of its interest in the project. In January 2013, EME received $7.5m in exchange for its indirect interest in the project.
The Midwest Generation plants are:
- Powerton is a 1,538 MW coal-fired station located in Pekin, Tazewell County, Ill. The operating units at Powerton are referred to as Units 5 and 6 and began operations in 1972 and 1975, respectively.
- The Joliet Station is located in Joliet, Will County, Ill., about 40 miles southwest of Chicago. The operating units are referred to as Units 6, 7, and 8. The operation of Units 6, 7, and 8 began in 1959, 1965, and 1966, respectively. Joliet Unit 6 is a 290-MW coal-fired unit located adjacent to, but across the Des Plaines River from, Joliet Units 7 and 8. Joliet Units 7 and 8 are coal-fired and have a combined capacity of 1,036 MW.
- The Waukegan Station is a 689-MW coal-fired plant located in Waukegan, Lake County, Ill., on Lake Michigan. The operating units comprising Waukegan are referred to as Units 7 and 8 and began operations in 1958 and 1962, respectively.
- The Will County Station is a 761-MW coal-fired plant located in Romeoville, Will County, Ill. The operating units are referred to as Units 3 and 4 and began operations between 1955 and 1963.
- The Fisk and Crawford coal plants, located in Chicago, began operations in 1903 and 1927, respectively. In September 2012, facing increased expenses from complying with environmental regulations, macroeconomic pressures, and opposition to the continued operation of the facilities, MWG permanently shut down the Fisk and Crawford coal facilities. The debtors may pursue a sale of the Fisk property (a 43-acre site), the Crawford property (a 72-acre site), and/or Sampson’s Canal (a canal near Fisk located at 2251 and 2401 South Loomis Street) outside of the plan, as permitted by the purchase agreement with NRG.
- The on-site peaking units consist of 305 MW at Fisk and Waukegan, which were commissioned in 1968. The Fisk and Waukegan peaking units burn fuel oil. Natural gas is used by the Fisk peaking unit for ignition. The on-site peaking units at Fisk would not be subject to the proposed Crawford and Fisk property sale effort.