UPDATE: Oct. 16, 2019: Judge Alan M. Koschik approved FirstEnergy Solutions' reorganization plan on Wednesday.
- Ohio-based FirstEnergy Solutions (FES) agreed on Tuesday to honor the contracts its parent company FirstEnergy Corp. negotiated with its power plant employees, paving the way for the generation company to emerge from federal bankruptcy.
- The company had previously insisted it could not afford the traditional pension plans in existing labor contracts, and was considering replacing them with 401(k) options, according to lawyers for the unions.
- Judge Alan M. Koschik said he would approve an FES restructuring order once the final documents are posted with the court, in light of the agreement. The stalemate over employee contracts was the last obstacle for the company's massive plan to restructure and shed more than $2 billion in debt.
FES has tried to avoid a decision on the contracts until after the court approved its restructuring plan. It has argued that the new company would not have enough money to fund the old contracts, though its top officers also said the company expected to exit bankruptcy protection with cash in excess of $1 billion.
FES is also in line to receive $150 million a year in new public funding that Ohio lawmakers approved in late July.
With Koschik's approval of the restructuring plan, the company’s goal is to resolve other, less difficult issues, and emerge from bankruptcy by the end of the year, Lisa Beckerman, an Akin Gump attorney representing FES told the court on Tuesday.
For months during what union and FES lawyers described as difficult negotiations, the company had refused either to reject or accept the FirstEnergy labor agreements. The union lawyers said that by law the company had to decide one way or the other before the court could approve the restructuring plan.
The company also agreed Tuesday to pay the unions’ attorney fees — $400,000 billed by the Cleveland-based law firm Goldstein Gragel for the 800 hours three of the firm’s lawyers worked on the negotiations since March 27.
The resolution of the issue will benefit both the company and the union employees, according to Joyce Goldstein, an attorney representing the Utility Workers Union of America and the International Brotherhood of Electrical Workers.
The agreement to keep the existing contracts will benefit all other FES union employees, she said.
Both Beckerman and Goldstein said lawyers representing the official committee of unsecured creditors were instrumental in helping the two sides reach an agreement.
Correction: An earlier version of this story mischaracterized the extent of the agreement regarding FES's labor contracts.It will apply to FES union employees only.