By Jim Polson 1
April 2018, 12:50 GMT+8
A power generator that pleaded for
the Trump administration’s help in bailing out struggling coal and nuclear
plants has filed for bankruptcy.
FirstEnergy Solutions Corp., its
subsidiaries and FirstEnergy Nuclear Operating Co. listed $550 million in cash
to continue operations and meet obligations to employees in a Chapter 11
filing in Federal Court in Akron, Ohio, according to a March 31 statement
distributed by PR Newswire. Parent FirstEnergy Corp. is not part of the filing,
the company said in a separate statement.
The move comes after the FirstEnergy
unit on March 29 called on Energy Secretary Rick Perry to declare a grid
emergency and guarantee profit for ailing coal and nuclear generators,
including its own. Perry had drafted an earlier plan to compensate reactors and
coal units more for their power, but federal regulators shot that down in
January.
“The Chapter 11 filing represents
our best path forward as we continue to pursue opportunities for restructuring,
asset sales and legislative and regulatory relief,” Donald R. Schneider,
president of FirstEnergy Solutions, said in the bankruptcy statement. “We
believe that this decision will best serve our customers, employees and
business partners."
Electricity generators across the
U.S. have been pummeled by low power prices as stagnant demand, cheap natural
gas and surging development of wind and solar have squeezed profits. Few have embodied
the struggle as much as FirstEnergy Solutions, which owns a fleet of coal and
nuclear plants in Ohio and Pennsylvania.
Warning of a “power crisis,”
Akron-based FirstEnergy Solutions had asked Perry for an order that would force
PJM Interconnection LLC, the largest U.S. power grid operator, to pay nuclear
and coal plants a guaranteed profit if they’re capable of storing 25 days worth
of fuel on-site.
The company had already announced
plans to shut three nuclear plants in the PJM region and has closed several
coal-fired generators since 2012.
FirstEnergy Corp., which owns
utilities from New Jersey to Ohio, had warned investors as far back as
2016 that it was considering bankruptcy for the unit. In January, a group
including Elliott Management Corp. announced a $2.5 billion investment in the
parent company that included an agreement to explore how to exit the
unregulated power business as soon as possible. The company said it planned to
sever ties with the unit by March 31.
FirstEnergy Solutions has around
$3.6 billion of debt, about 60 percent of which is in municipal issues,
according to data compiled by Bloomberg.
The bankruptcy could be a setback
for Robert Murray, an outspoken U.S. coal mogul whose mines supply FirstEnergy
Solutions plants. His company, Murray Energy Corp., urged the Trump
administration last year to take emergency steps to keep the plants open.
FirstEnergy Solutions reported a
$5.46 billion loss from the unit in 2016 and a $2.39 billion loss last year.
Akin Gump Strauss Hauer & Feld
LLP is serving as legal counsel to FirstEnergy Solutions in the bankruptcy
filing. Lazard Freres & Co. is serving as investment banker, Alvarez &
Marsal North America LLC is serving as restructuring advisor and Charles Moore
has been appointed as chief restructuring officer.
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