Exelon Subsidiary Files Bankruptcy; Lenders Would Take Over Four Plants
ExGen Texas Power (EGTP) Holdings LLC and ExGen Texas Power LLC, a subsidiary of Exelon Corp., on November 7 filed for Chapter 11 bankruptcy. The filing in U.S. Bankruptcy Court in Delaware is aimed at reducing the company's debt, and four of EGTP's five natural gas-fired power plants in Texas would be owned by lenders if the action is approved by the court.
Exelon in March of this year hired a debt restructuring adviser, PJT Partners, to help evaluate options for the ExGen units, saying low natural gas prices, and low prices for electricity, had a negative impact on its fossil fuel-powered generation. Reuters at the time reported that EGTP had about $650 million in debt.
EGTP operates five natural gas-fired power plants in Texas: two combined cycle plants, two gas-fired steam boilers, and a simple cycle plant.
Power plant operators across the country have struggled with low prices for electricity over the past several months, resulting in plant closures and other financial restructuring, with Texas particularly impacted. Vistra Energy in October said it would close two large coal-fired power plants in the state; Luminant just days earlier said it would retire its 1.9-GW Monticello Power Plant in Titus County, Texas.
The expansion of renewable energy has driven down electricity prices in many areas. A recent analysis by the Energy Institute at the University of Texas at Austin showed wind power generation capacity already may have surpassed coal-fired generation capacity in the state.
Exelon, which on November 7 filed a Form 8-K with the U.S. Securities and Exchange Commission (SEC) regarding the situation, said in a statement that "Historically low power prices within Texas have created challenging market conditions for all power generators, including the five natural gas-fired EGTP plants."
The statement continued: "EGTP's Board of Directors determined, after evaluating a range of opportunities, to move forward with a two-part plan. First, Exelon Generation has negotiated an agreement with EGTP's lenders that, pending a competitive bidding process and receipt of all necessary approvals, would allow Exelon Generation to continue to own and operate the Handley Generating Station in exchange for a $60 million payment to the lenders. Second, the lenders have agreed to exchange the debt they currently hold in EGTP's other four plants for equity in the plants, effectively taking ownership of these facilities."
The three-unit Handley plant is a 1,265-MW facility in Fort Worth (Figure 1). The plants being exchanged for equity are Wolf Hollow Generating Station, a 704-MW combined cycle plant in Granbury; Colorado Bend Generating Station, a 498-MW combined cycle facility in Wharton (Figure 2); ExTex LaPorte Generating Station, a small peaker plant in LaPorte; and Mountain Creek Generating Station, an 825-MW plant in Dallas.
Figure 1. The Handley Generating Station is a three-unit, 1,265-MW power plant in Fort Worth, Texas. The natural gas-fired plant will remain in the hands of Exelon subsidiary ExGen Texas Power (EGTP), in exchange for a $60 million payment to lenders under a bankruptcy plan filed by EGTP on November 7, 2017. Courtesy: Exelon Corp.
Exelon in the SEC filing said it estimates a pre-tax gain of $125 million to $200 million in the fourth quarter from the sale of assets of the power unit.
Reuters reported that EGTP has a $675 million term loan that comes due in 2021. Thomson Reuters LPC reported November 6 that the loan, which partly pays a dividend to Exelon, was trading at 71 cents on the dollar. Moody's Investors Service reported that EGTP has a $20 million revolving credit line due in 2019; $4 million of that loan was drawn in January.
Figure 2. The Colorado Bend Generating Station in Wharton, Texas, is among four natural gas-fired power plants that will have new ownership if a bankruptcy plan filed by Exelon Corp. subsidiary ExGen Texas Power is approved. Courtesy: Exelon Corp.
Moody's earlier this year said it did not believe the market value of EGTP's power plants would cover the company's debt in an asset sale.
The bankruptcy filing is the latest move by Exelon as the company struggles with low wholesale energy prices. The company earlier this year said it would retire its Three Mile Island nuclear plant in Pennsylvania in 2019, and Exelon has been a vocal proponent of government measures to prop up nuclear plants. The company generates 20.2 GW of power from 23 reactors at more than a dozen plants in five states.
-Darrell Proctor is a POWER associate editor (@DarrellProctor1, @POWERmagazine).
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