Sundevil Power Holdings LLC applied July 29 to the U.S. Bankruptcy Court for the District of Delaware for a change to a services contract for its gas-fired capacity in Arizona.
On Feb. 11, 2016, Sundevil and affiliate companies filed a voluntary petition for relief with this court under chapter 11 of the Bankruptcy Code. They are currently trying to sell their owned capacity.
The debtors are merchant power generators through Sundevil’s ownership of two of the four 550-MW natural gas-fired blocks (Power Blocks I and II) of the Gila River Power Station (GRPS), located in Gila Bend, Arizona. Sundevil and the other owners at the GPRS sell energy into the Southwest electric power market, specifically the sub-region of Arizona, New Mexico, and Southern Nevada known as the Desert Southwest (DSW). Most of Sundevil’s output is sold at the Palo Verde hub and to the California Independent System Operator (CAISO) market. Sundevil also sells capacity to CAISO and is capable of reaching other market hubs such as Mead (Southern Nevada) and Four Corners.
In order to ensure the safe, efficient, and effective operation of Power Blocks I and II, Sundevil entered into certain contracts, including a Power Project Services Agreement dated as of Sept. 9, 2014, with Freestate Management LLC, which is now known as Kelson Energy LLC. Pursuant to the Power Project Services Agreement, Freestate provides the febtors with certain energy management oversight and coordination, divestiture, O&M and procurement oversight management, financial administrative and advisory services. These services are critical to: the continuation of current operations and the value of these assets as a going concern; the maintenance of Power Blocks I and II in a “ready” state; and the preservation of the relationships among the co-owners of the GRPS.
Conversely, the debtors’ failure to obtain the appropriate level of services could materially impair the value of the debtors’ assets (i.e., Power Blocks I and II). As a result of personnel changes effective Aug. 1, 2016, the debtors have a business and operational need to shift a set of required services at their GPRS operations, historically done by another provider, to a new provider. After arms-length discussions with Freestate, carried out in the ordinary course of the debtors’ business operations, the debtors have negotiated with Freestate an amendment to the Power Project Services Agreement to shift such required services to Freestate, in the form of an Amended and Restated Power Project Services Agreement.
The July 29 application is due for an Aug. 23 hearing, with an Aug. 12 objection deadline.