Walnut Creek Mining, which supplies minemouth lignite under contract to Optim Energy LLC’s Twin Oaks power plant in Texas, is seeking standing from Optim’s bankruptcy court to pursue certain claims against Optim’s owner.
On Feb. 12, Optim Energy, which controls two gas-fired power plants and one coal-fired power plant in Texas, filed for Chapter 11 protection at the U.S. Bankruptcy Court for the District of Delaware. It has indicated that a costly contract to buy lignite from Walnut Creek Mining is one of the major issues, along with collapsed power market prices in the region, that led it to file for bankruptcy.
In an April 14 motion, Walnut Creek Mining asked for standing to file claims against Cascade Investment LLC and Cascade subsidiary ECJV Holdings LLC. Cascade indirectly owns Optim. Walnut Creek Mining said that at the outset of this bankruptcy case, by entering into a debtor-in-possession (DIP) financing deal with Cascade, Optim Energy “fully compromised” its right to seek any claims against Cascade.
Walnut Creek Mining said the DIP agreement is an “inequitable scheme by the insider Defendants to transform themselves from mere equity holders to senior secured lenders.” Walnut Creek said it is the largest non-insider creditor of Optim Energy and that the DIP deal would reduce the amount of money that it and other non-insider creditors like it can get from the bankruptcy estate.
Any objections to the Walnut Creek motion need to be filed at the court by April 28, with a May 5 hearing currently on the schedule to hear this motion.
Walnut Creek Mining is an affiliate of construction and mining giant Kiewit Corp., which says about this operation on its website: “Walnut Creek Mining Company, a subsidiary of Kiewit Mining Group Inc., owns and is responsible for project operations and day-to-day management of this lignite mine located between Dallas and Houston, Texas. The operation includes an 80-cubic-yard dragline, a 20-cubic-yard mass excavator, an 18-cubic-yard hydraulic backhoe and a fleet of 150-ton end-dump trucks to move more than 20 million cubic yards of material annually. The captive lignite operation produces more than two million tons of lignite per year and incorporates a blending program that provides consistent quality lignite to fuel two 150-megawatt circulating-fluidized-bed power plants.”
The Twin Oaks plant is owned by debtor Optim Energy Twin Oaks LP, is located in Robertson County, Texas, and sells energy into the ERCOT market. Twin Oaks owns both the plant and underlying real property. Twin Oaks purchases the vast majority of its coal to operate the plant from Walnut Creek Mining under a long term fuel supply agreement executed in 1987. Under this agreement, Twin Oaks must purchase in excess of about 90% of its coal from Walnut Creek and is required to purchase minimum coal quantities regardless of the Twin Oaks plant’s actual coal needs. Twin Oaks is obligated to purchase coal from Walnut Creek to operate the Twin Oaks plant for at least another ten years.