With a deadline of Jan. 29 for creditors to vote on Edison Mission Energy’s reorganization plan, EME on Dec. 3 filed an updated version of that plan and the accompanying disclosure statement with its bankruptcy court.
The focus of that plan, pending at the U.S. Bankruptcy Court for the Northern District of Illinois, is a sale of Edison Mission Energy to NRG Energy (NYSE: NRG) in a deal announced in October. Edison Mission Energy and many of its subsidiaries, including coal-fired generator Midwest Generation (MWG), sought Chapter 11 protection in December 2012.
The reorganization plan provides for a sale of substantially all of EME’s assets, including its direct and indirect equity interests in the debtor subsidiaries and the non-debtor to NRG Energy Holdings, a subsidiary of NRG Energy. In exchange for this transfer, NRG 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) to be distributed to creditors by the debtors.
NRG would also assume certain liabilities of the debtors, including the leveraged leases at Midwest Generation’s coal-fired Powerton and Joliet power plants in Illinois.
The voting deadline on the plan is Jan. 29, 2014, at 5:00 p.m. (prevailing Central Time). The bankruptcy court has scheduled the confirmation hearing for Feb. 17, 2014.
Edison Mission Energy has nearly 8,000 MW of capacity
EME’s operating projects primarily consist of coal- and gas-fired facilities and wind energy facilities. 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.
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 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 at Joliet from third-party lessors under a sale-leaseback transaction completed in August 2000.
Under the Combined Pollutant Standard (CPS) put in place several years ago by the state of Illinois, MWG must permanently shut down or install flue gas desulfurization (FGD) at Joliet Units 6, 7, and 8, Will County Units 3 and 4, and Powerton Unit 5 by Dec. 31, 2018. An April 2013 CPS variance approved by the Illinois Pollution Control Board requires:
- permanent shut down or installation of FGD and electrostatic precipitator (ESP) upgrades on Powerton Unit 6 by Dec. 31, 2014;
- FGD and ESP upgrades or a fabric filter at Waukegan Unit 7 by Dec. 31, 2014; and
- FGD at Waukegan Unit 8 by May 31, 2015 (or a permanent shutdown of that unit).
Testing of dry sorbent injection using Trona on select MWG units has demonstrated significant reductions in SO2 emissions, the Dec. 3 disclosure statement noted. Dry sorbent injection technology used in in tandem with low sulfur coal is expected to require substantially less capital and time to construct than the use of spray dryer absorber technology, but would likely result in higher ongoing operating costs and may consequently impair the competitiveness of MWG’s plants, depending on competitors’ costs.
The Sierra Club, just before EME sought bankruptcy protection, filed a complaint with the Illinois Pollution Control Board alleging that MWG’s emissions of SO2 between 2010 and 2012 resulted in violations of air pollution control requirements of the Illinois Environmental Protection Act and the board’s regulations at Joliet, Powerton, Waukegan, and Will County. The Sierra Club seeks civil penalties, a cease and desist order, and limits and reductions of SO2 emissions. On Nov. 13, the Sierra Club obtained an order of the bankruptcy court granting relief from the automatic stay on all outside litigation against the company, allowing the Sierra Club to resume its action for declaratory and injunctive relief. But the court prohibited the board from enforcing, at this time, any monetary penalties that may be awarded by the board in that action.