A U.S. bankruptcy court judge in Ohio approved a settlement between FirstEnergy and its bankrupt unregulated generation subsidiary FirstEnergy Solutions (FES), resolving disputes between FES and its parent company.
Judge Alan Koschik late Tuesday said he would approve a settlement under which FirstEnergy will make a payment of $225 million to FirstEnergy Solutions and issue $628 million in notes for the subsidiary.
- The settlement does not address concerns by other parties, such as the U.S. Environmental Protection Agency or the Ohio Consumers' Counsel regarding lingering liabilities from the coal and nuclear plants that FES plans to close.
Consumer and environmental advocates are concerned about who will be left to clean up the mess after FES emerges from bankruptcy, literally. In August, the bankrupt subsidiary of FirstEnergy announced its plans to close about 8,000 MW of coal and nuclear plants.
FES filed for Chapter 11 bankruptcy protection in March, but past cross-financing arrangements raised the possibility that the separation between parent and subsidiary might not be a clean break.
Judge Koschik's affirmation of a settlement between the parties "removes a lot of uncertainty," John Finnigan, lead attorney at the Environmental Defense Fund (EDF), told Utility Dive.
FirstEnergy is paying FES about $850 million to ensure a clean break. But it remains to be seen if the settlement will stand. "This is not the end of the story," Finnigan said. "The ruling will likely be appealed, and it could be reversed."
EDF want to make sure FirstEnergy's $850 million contribution to FES goes toward the cost of remediating the coal and nuclear plants the company plans to close.
"There is a very good chance we might appeal" the settlement, Finnigan said. "We haven't made our decision yet. We will evaluate it over the next few days."
The environmental remediation concerns are also shared by other entities such as the Ohio Office of Consumer Counsel. Those concerns could be compounded by the state of the company that emerges from bankruptcy. FES would likely emerge from bankruptcy with a fraction of its current debt load, but also as a much smaller company.
FES' website lists a total portfolio of 11,115 MW. Closing about 8,000 MW of coal and nuclear plants would leave about 2,000 MW of coal plants, 631 MW of gas and oil-fired plants and 476 MW of wind farms.