EME trust objects to $21.3m claim by General Electric over coal car lease

The EME Reorganization Trust, which is handling the last remnants of the assets of and bankruptcy claims against Edison Mission Energy, has asked for a Feb. 25 court hearing on its objection to a $21.3m claim lodged by General Electric Railcar Services Corp. over a rejected lease rider for coal-hauling rail cars.

Edison Mission Energy’s primary assets were sold to NRG Energy some time ago out of this case, pending at the U.S. Bankruptcy Court for the Northern District of Illinois. Under the law, when a bankrupt company rejects a contract or lease, the counter-party to that agreement can lodge a claim against the bankruptcy estate. The GE claim is based around Edison Mission Energy affiliate Midwest Generation LLC (MWG), which controlled several coal-fired power plants in Illinois.

“GE Rail has asserted a claim in the amount of $21,330,384 on account of damages allegedly resulting from the Debtors’ rejection of certain riders related to a railcar lease arrangement between MWG and GE Rail,” said the Jan. 23 objection from the trust. “GE Rail has failed, however, to provide any basis for concluding that it actually incurred the damages alleged in its Claim, and in fact, a review of the Claim and the available information demonstrates that the Claim is significantly overstated as a result of several flaws underlying GE Rail’s calculation of the amount of its alleged damages. Specifically, GE Rail has failed to: (1) accurately calculate its alleged damages; (2) account for the early termination rights associated with the rejected lease riders; (3) factor in revenue reductions resulting from the loss of derailed rail cars; (4) credit amounts paid by MWG to GE Rail after the rejection of the lease riders; and (5) recognize its duty to mitigate alleged damages. As a result, the Reorganization Trust respectfully requests that the Court enter an order disallowing and expunging GE Rail’s Claim in its entirety and granting such other and further relief as the Court deems appropriate.”

MWG had leased a fleet of railcars from GE Rail through an Assignment Agreement dated December 1999, pursuant to which MWG accepted an assignment of the interest of Commonwealth Edison, the former owner of the Illinois plants, in a 1998 lease agreement. In August 2013, the court agreed to reject the lease riders. GE Rail and MWG then entered into a new rider for 1,007 railcars previously leased to MWG under the rejected riders. That new rider permits MWG to lease railcars that were previously leased under the Prepetition Riders for a period not to exceed 24 months beginning on June 1, 2013. The new Rental Rate for the cars is $150 per car per month. Further, under the new rider, MWG reserved the right to terminate the new rider early with respect to some or all of the railcars, without penalty. MWG exercised this right as of September 2013 with respect to 78 railcars. 

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.