Judge allows bankrupt FirstEnergy Solutions to exit power plant co-op
- A judge in the U.S. Bankruptcy Court of the Northern District of Ohio, Eastern Division, has granted a preliminary injunction allowing FirstEnergy Solutions to withdraw from the Ohio Valley Electric Corporation (OVEC), a cooperative of companies that operates two coal-fired power plants.
- The decision allows FirstEnergy Solutions to avoid being on the hook for $58 million annually to support the plants' operations. Other OVEC members, however, say the decision could ultimately raise prices for consumers.
- FirstEnergy Solutions, the competitive generation subsidiary of FirstEnergy Corp., filed for Chapter 11 bankruptcy protection in March, part of the parent company's strategy of transforming itself into a fully-regulated utility company.
FirstEnergy Corp. last month reported financial results for the first time since separating from its competitive generation business, and posted significantly higher earnings. The company also raised its forecast for 2018 earnings, seeing a brighter future having cut loose its FirstEnergy Solutions (FES) subsidiary.
But FES' bankruptcy will have impacts on other companies, and potentially on customers, warn some stakeholders. OVEC also includes Dayton Power & Light, American Electric Power and Duke Energy, and they turned to regulators in an attempt to block FES from exiting the corporation, citing increased costs in managing two power plants.
The FES bankruptcy filing had been widely anticipated, and followed the company's plea for the U.S. Department of Energy to issue an emergency order to provide cost recovery for coal and nuclear plants in the PJM Interconnection market.
Unsecured creditors are owed billions by FES and six affiliated debtors, with the Bank of New York (BNY) Mellon Trust likely the largest unsecured creditor. The list of 50-largest unsecured debts includes more than $2 billion owed to BNY Mellon Trust, along with two unsecured claims in litigation with BNSF Railway and Norfolk Southern, two transportation companies that move coal supplies.
FirstEnergy indicated two years ago that it wanted to explore strategic alternatives for its commodity-exposed generation business, with a goal of exiting the business by mid-2018. The company's regulated generation fleet totals about 3.8 GW and includes four plants in West Virginia, Virginia and New Jersey.
Three weeks ago, FirstEnergy Corp. announced it had reached an agreement in principle with two groups of key creditors in the FES bankruptcy proceeding.
The company called it a "significant step" toward FES and related entities ultimately emerging from bankruptcy.
"The settlement is intended to fully release FirstEnergy and related parties from all claims," the company said. It provides FES with "assistance from FirstEnergy on key business matters during the restructuring process."
FirstEnergy also said the creditor groups have agreed to "use their best efforts" to have the Official Committee of the Unsecured Creditors, as well as any remaining key creditors, join the settlement by June 15.
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