Optim Energy working up a sale plan for its two gas-fired plants in Texas

Optim Energy LLC, which last year sold its coal-fired power plant in Texas but retained its two gas-fired plants in the state, on Jan. 14 asked its bankruptcy court for extra time to file a chapter 11 reorganization plan that would likely call for the sale of the two plants.

Optim and its affiliated companies want the U.S. Bankruptcy Court for the District of Delaware to extend the periods by approximately 120 days during which they have the exclusive rights to: file chapter 11 plans through and including June 9, 2015; and to solicit acceptances of that plan through and including August 10, 2015.

“The Debtors respectfully submit sufficient cause exists for the further extension of the Exclusive Periods by approximately 120 days,” said the Jan. 14 request, which is due for a court hearing on Feb. 4. “Since entry of the Second Exclusivity Order ,the Debtors have devoted significant resources and efforts to, among other things, formulating potential restructuring strategies for the Debtors’ remaining principal assets, their interests in the Cedar Bayou Plant and the Altura Cogen Plant (together, the ‘Gas Plant Portfolio’), including the potential sale of the Gas Plant Portfolio under a chapter 11 plan of reorganization.

“The Debtors commenced a full marketing process for the Gas Plant Portfolio in November 2014, from which several interested parties submitted proposals to purchase the Debtors’ assets. The Debtors are in the midst of evaluating these proposals and engaging in further diligence discussions with certain parties, which will take additional time before coming to full conclusion, and will determine the final terms of any plan(s) the Debtors will file.

“In addition, extension of the Exclusive Periods is a condition to obtaining anextension of the [debtor-in-possession financing] Facility, which otherwise matures on February 12, 2015. The Debtors are currently in discussions with the DIP Lender regarding the initial three-month extension (to May 12, 2015) contemplated by the DIP Facility. To the extent that the requested exclusivity extension is granted, the DIP Lender has agreed to consent to the three-month extension of the maturity date (as contemplated in the DIP Credit Agreement).

“Given the need to extend the DIP Facility and the amount of work in front of the Debtors over the next several months to bring their reorganization initiatives to conclusion, the Debtors respectfully submit that cause exists pursuant to section 1121(d) of the Bankruptcy Code to extend the Exclusive Periods through and including June 9, 2015 and August 10, 2015, respectively.”

The Optim companies entered chapter 11 protection in February 2014, and subsequently sold their money-losing Twin Oaks coal plant in Texas.

Optim says it has made a lot of progress in recent months

The Jan 14 filing argued: “Since the Petition Date, the Debtors have devoted significant resources and efforts negotiating with their creditors. This has resulted in, among other things, the Debtors: (a) reaching a settlement agreement with Robertson County regarding the appraised value of the Twin Oaks Plant for purposes of assessing taxes for the 2013 and 2014 tax years;(b) completing the successful marketing and sale of the Twin Oaks Plant, which closed on October 14, 2014; (c) reviewing executory contracts and leases, resulting in this Court’s entry of an order authorizing the Debtors, effective as of the closing of the sale of the Twin Oaks Plant, toreject (i) the O&M Services Agreement between NAES Corporation and Debtor Optim Energy Twin Oaks, LP and (ii) the Fuel Supply Agreement between Walnut Creek Mining Company and Debtor Optim Energy Twin Oaks, LP; (d) reaching agreements with their landlords to extend the time for assumption or rejection of (i) the Premise Lease between NRG Texas Power, LLC, NRG Cedar Bayou Development Company and Debtor Optim Energy Cedar Bayou 4, LLC and (ii) the Amended and Restated Lease and Easement Agreement between Lyondell Chemical Company and Debtor Optim Energy Altura Cogen, LLC, and the Debtors are currently in discussions with such landlords regarding an additional extension of time; (e) the Court’s approval of an agreement between the Debtors and the City of Baytown, Texas, regarding certain tax issues; and (f) defending against a standing motion and appeal from Walnut Creek Mining Company.”

The two gas plants being marketed, as described in a prior bankruptcy filing, are:

  • Altura Cogen Plant: This is a natural-gas powered plant capable of producing 600 MW located in Harris County, Texas, and sells the majority of its energy in the ERCOT market. The plant has been commercially operating since 1985 and is located within a complex of petrochemical facilities owned by Lyondell Chemical. Altura Cogen purchases the natural gas to fuel the plant from EDF Trading North America LLC under fuel purchase agreements which typically expire every few years. Lyondell purchases a portion of the power generated, as well as the steam produced from power production operations.
  • Cedar Bayou Plant: Cedar Bayou is a gas-fired plant capable of producing 550 MW located in Chambers County, Texas, which operates in ERCOT’s Houston Zone. Debtor Optim Energy Cedar Bayou 4 owns a 50% undivided interest and NRG Cedar Bayou Development owns the remaining 50% undivided interest. The Cedar Bayou Plant began operating in 2009. It is located within a complex of electric generation facilities owned by NRG Texas Power. The Cedar Bayou Plant is operated by NRG Cedar Bayou in accordance with a Joint Ownership Agreement. The energy generated by the Cedar Bayou Plant is sold on behalf of Cedar Bayou and NRG Texas as joint owners on a short-term basis into the Texas power market through a scheduling and dispatch agreement with NRG Texas.
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.