Sundevil sells power plant assets, files wind-down plan at bankruptcy court

With its 1,100 MW of generating capacity sold, Sundevil Power Holdings LLC on Dec. 21 filed with the U.S. Bankruptcy Court for the District of Delaware a reorganization plan that essentially lays out what creditors will be paid what money from what is left in the bankruptcy estate.

Raphael T. Wallander, a Principal at Wayzata Investment Partners LLC, which controlled the company, filed testimony in support of the plan.

On Feb. 11, 2016, Sundevil Power Holdings and SPH Holdco LLC each filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. As of that petition date, these debtors were merchant power generators through Sundevil’s ownership of two of the four 550-MW natural gas-fired power blocks (“Power Blocks I and II”) of the Gila River Power Station (GRPS) located in Gila Bend, Arizona. Sundevil and the other power block owners sold energy into the Southwest electric power market, specifically the sub-region of Arizona, New Mexico, and Southern Nevada known as the Desert Southwest.

Most of Sundevil’s output was sold at the Palo Verde hub and to California Independent System Operator market, Wallander noted. Power Blocks I and II began commercial operations in 2003.

Wrote Wallander about the reasons for bankruptcy: “The combination of lower-than-anticipated power demand growth, declining natural gas prices, increased distributed generation (rooftop solar), slower-than-expected retirement of older, inflexible coal-fired generation, and a substantial buildout of utility scale renewable energy sources contributed to the Debtors’ inability to generate sufficient revenue and liquidity to continue to maintain their capital structure on a long-term basis. While the buildout of substantial, utility-scale renewable resources actually increases the need for flexible generation resources such as those owned by the Debtors, regulated utilities have continued to rely on older, inflexible, carbon-intensive, coal-fired generation to meet electric demand needs despite the ability of Sundevil’s assets to serve those needs more economically while achieving comparatively significant reductions in air emissions (i.e., carbon dioxide reductions of up to 65%, nitrous oxide reductions of roughly 95% and sulfur dioxide emissions reductions of nearly 99%). While these older coal-generation assets are more expensive to operate and pollute more, regulated utilities have been allowed to continue to pass such costs on to their customers.”

Some of the secured lenders lodged a winning bid for the two power units and that court-approved sale deal closed on Nov. 7, Wallander wrote. “Following the November 7, 2016 closing of the Sale under the [Asset Purchase Agreement], the Debtors negotiated with the Secured Lenders, as well as other creditors, to arrive at the principal definitive terms of the currently proposed chapter 11 plan with the Lenders. These negotiations were in all instances conducted in good faith, in the interest of pursuing a responsible, cost-effective exit from the Debtors’ cases that would be in the best interest of the Debtors’ estates and their stakeholders.”

On Oct. 27, the Federal Energy Regulatory Commission had approved an Aug. 11 application from CXA Sundevil Power I Inc., CXA Sundevil Power II Inc. and Sundevil Power Holdings for authorization for a transaction whereby Sundevil Power Holdings would transfer to the CXA companies Power Blocks 1 and 2. The two CXA buyers are indirect, wholly owned subsidiaries of Beal Financial Corp.

Power Block 3 is owned by Tucson Electric Power and UNS Electric Inc. together as tenants in common. Gila River Power LLC, part of Entegra Power, owns 100% of Power Block 4.

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.