Ohio-based FirstEnergy Solutions (FES) is preparing to emerge from federal bankruptcy protection as early as today, just days before a scheduled refueling of one of its nuclear power plants. FES filed for bankruptcy on March 31, 2018.
FES and its parent FirstEnergy Corp. appeared in bankruptcy court Tuesday with a final comprehensive agreement that included a provision in which FirstEnergy will pay FES $125 million in cash to settle a disagreement about the value of tax liabilities. FirstEnergy last week refinanced $1.75 billion in existing debt with short-term notes, according to SEC filings.
The agreement, which creditors told the court they approved, will also allow the 4,600 employees of the new company, Energy Harbor, access to FirstEnergy’s IT systems during the refueling of its Davis-Besse nuclear plant beginning this weekend.
Lawyers for FES argued that without an immediate approval of the final agreement, the company would have to remain in bankruptcy protection for several more months because it could not refuel its reactors without access to FirstEnergy’s IT systems. The company also this spring must refuel one of its Pennsylvania reactors.
U.S. Bankruptcy Judge Alan Koschik questioned lawyers representing committees for the major creditors who said that while the refueling and IT issues provided a reason to settle rather than continue to negotiate, the agreement as written was fair and solved numerous other outstanding issues.
“It’s an agreement that defines the contours of the IT Services that FE Corporation will continue to provide the debtors,” explained Parker Milender, a lawyer with New York-based Milbank LLP, representing a creditors committee.
“It also settles certain outstanding commercial issues that have been lingering since the original settlement was approved in September 2018. For better or worse, these two entities are not yet able to separate from each other. And while that is difficult enough, it becomes even more difficult when there are multi-million commercial claims from one party against the other.”
The agreement enables FirstEnergy to profile the 4,600 FES employees as outside contractors, with carefully controlled access to its IT systems. The court questioned whether the arrangement could be made within days without exposing FirstEnergy to risk.
“Absolutely — we can get it done this week before the scheduled outages. We have been planning for this a long time, said FES attorney Scott Alberino of Washington-based Akin Gump. “I think FE has been working on implementing contractor profiles on 4,600 employees, for quite some time. FE has expended over 6,000-man hours working with us.”
The agreement approved by the court also includes a provision offered by Columbus, Ohio-based attorney David Beck representing the Ohio Consumers’ Counsel stating that the order will not prevent the OCC or any other consumer group from opposing an effort by FirstEnergy to pass on the $125 million to customers.
The Nuclear Regulatory Commission approved the transfer of the FirstEnergy nuclear operating licenses on Dec. 2 and is expected to issue final confirmation this week once FES files its final paperwork.