The U.S. Bankruptcy Court for Optim Energy on May 19 approved the latest reorganization plan and disclosure statement for two of Optim’s subsidiary companies, with the plan allowing those two companies to retain their two gas-fired power plants in Texas as part of a plan of reorganization.
The last day for parties to object to confirmation of this plan is June 17, with a June 24 confirmation hearing scheduled.
Said a May 19 version of the disclosure statement about a failed effort to sell the two power plants, which went through two rounds of bidding: “The Reorganizing Debtors, in consultation with their advisors, independent directors and the Consultation Parties, reviewed the bids received from Round Two Participants. The Reorganizing Debtors initially determined that the best path forward for a potential sale of the Gas Plant Portfolio would be through a plan of reorganization and proposed bidding procedures at a value to the Reorganizing Debtors in Cash of at least $355 million (net of all deductions and/or adjustments and with no right of set off). However, after running an extensive marketing campaign the Reorganizing Debtors did not receive any bids for the Gas Plant Portfolio on terms satisfactory to the Reorganizing Debtors and the Consultation Parties.
“The Reorganizing Debtors have now determined, in consultation with their advisors, independent directors and the Consultation Parties, that the best path forward is to terminate the sale process and instead seek Confirmation of the Plan. The Plan, if confirmed, will provide the Pre-Petition Secured Parties with a Second Lien Note, ownership of the Gas Plant Portfolio (via the Newco Equity Interests), certain residual Cash and certain unclaimed Undeliverable Distributions in exchange for the Allowed Pre-Petition Secured Parties Secured Claims against the Reorganizing Debtors.
“The Pre-Petition Secured Parties will receive substantially less than a full recovery on account of their Claims under the Plan. Nonetheless, the Pre-Petition Secured Parties are consenting to the Reorganizing Debtors’ Estates funding the distributions to holders of Allowed Claims under each Subplan. Holders of Allowed General Unsecured Claims will receive distributions so long as the Class of such Claims at each Reorganizing Debtor also votes in favor of the applicable Subplan(s). If the Class of General Unsecured Claims in each of the Reorganizing Debtors votes to accept the applicable Subplan, a holder of Allowed General Unsecured Claims in such Subplan will receive additional consideration if such holder does not opt out of the releases contained in Section 10.03 of the Plan. It is therefore very important that you read this Disclosure Statement, the attached Plan and all of the referenced supporting documentation in their entirety and, if you support the Plan, that you submit a Ballot voting in favor of the Subplan and the recoveries it will provide, and consent to the release provisions contained therein.”
The “Reorganizing Debtors” are Optim Energy Altura Cogen LLC and Optim Energy Cedar Bayou 4 LLC, which directly own the gas-fired power plants that didn’t get sold. The Optim plants that were up for sale are:
- The Altura Cogen Plant is a natural gas-fired plant capable of producing 600 MW, located in Harris County, Texas. It sells the majority of its energy in the ERCOT market. The plant is owned by Optim Energy Altura Cogen. The Altura Cogen Plant has been commercially operating since 1985 and is located within a complex of petrochemical facilities owned by Lyondell Chemical Co. Limited objections by Lyondell to the sale plan have been resolved.
- The Cedar Bayou Plant is a gas-fired plant capable of producing 550 MW, located in Chambers County, Texas. It operates in ERCOT’s Houston Zone. Debtor Optim Energy Cedar Bayou 4 owns a 50% undivided interest in the Cedar Bayou Plant and NRG Cedar Bayou Development Co. LLC owns the remaining 50% undivided interest. The Cedar Bayou Plant began operating in 2009. It is located within a complex of generation facilities owned by NRG Texas Power LLC, which owns the real property upon which the Cedar Bayou Plant is situated.