Bankruptcy reorganization confirmed for two Optim Energy companies

The U.S. Bankruptcy Court for the District of Delaware on July 30 confirmed the reorganization plans for the Optim Energy Altura Cogen LLC and Optim Energy Cedar Bayou 4 LLC affiliates of Optim Energy LLC.

Those two companies, called the “reorganizing debtors,” control gas-fired power plants in Texas. Optim Energy last year sold its coal-fired power plant in Texas, but then failed to get any acceptable offers for the two gas plants. So the decision was to reorganize the subsidiaries that control the gas plants, with the idea of them being viable entities going forward. Optim and related companies entered bankruptcy protection in February 2014.

While the July 30 approval by Judge Brendan L. Shannon covered both “reorganzing debtors,” each of these companies actually has its own particular reorganization plan with differing ways to deal with creditor claims.

The matter is not entirely over, though. The judge made his verbal ruling on confirmation at a July 24 hearing, with the written order then issued on July 30. On July 29, Walnut Creek Mining filed a notice of appeal of the July 24 verbal ruling.

“Walnut Creek Mining Company (‘Walnut Creek’) hereby appeals to the United States District Court for the District of Delaware pursuant to 28 U.S.C. § 158(a), Rule 8001(a) and 8002(a) of the Federal Rules of Bankruptcy Procedures and Rule 8003 of the Local Rules of the United States Bankruptcy Court for the District of Delaware from the ruling announced by the Honorable Brendan L. Shannon, United States Bankruptcy Judge, United States Bankruptcy Court for the District of Delaware on July 24, 2015 confirming the above captioned debtors’ Third Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code…,” said the notice.

Walnut Creek Mining had a contract to supply lignite to the coal-fired power plant that Optim sold last year, and it has a major claim against the bankrupty estate due to that now rejected contract. Walnut Creek Mining says that Optim’s decision to reorganize only the two companies with the gas-fired plants hurts its claim against the bankruptcy estate. Blackstone Group LP separately bought Walnut Creek Mining and Optim’s Twin Oaks coal plant.

Walnut Creek Mining attached to the July 29 notice a transcript from the July 24 hearing, where Judge Shannon says: “Walnut Creek faults the Debtor for engineering this process and, I believe, that is a term used by Walnut Creek, but it is always a question of degree and the facts of a particular case, as I said, matter. Here, the record reflects that Walnut Creek has a sufficiently attenuated relationship to these particular Debtors that its standing to proceed here at all has been fairly brought into question. I need not reach and will not reach the standing question because we have dealt with and fully developed the record in that respect. I don’t believe that I need to get into that. That is a complicated question and, frankly, I am prepared to deal with this matter on the merits. The record further reflects, though, that Walnut Creek would vastly prefer a different outcome and that it’s statutory compliance objection may afford it or could afford it a measure of leverage and opportunity in other transactions and perhaps with other Debtors within this corporate family. But that strategic hope does not render the Debtors’ plan fatally flawed. Here, I will not fault the Debtors for attempting to formulate a plan that complies with the Code and for taking steps to ensure that the statutory requirements will be or have been met.”

The judge added at the end of the hearing: “This has obviously been a bit of a brawl, but one of the things I enjoy about this job is managing and participating in well-presented litigation. There is a boat load of Case Law about these issues. The issues are informed by the facts. I think the case was, frankly, very, very well developed by all sides. While it is incumbent upon the Court to rule, I would simply observe that I think that the matter has been well presented and ably by all parties. It’s been a pleasure to deal with this matter. We will stand in recess. Have a good weekend.”

Apparently, considering the July 29 notice of appeal, Walnut Creek officials didn’t have a good weekend.

The Optim plants with approved reorganization plans 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.
  • 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. 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.
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.