Power company files for bankruptcy

NEW YORK: 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 US$550mil 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 US have been pummelled 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 US 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 US$2.5bil 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 US$3.6bil of debt, about 60% of which is in municipal issues, according to data compiled by Bloomberg.

The bankruptcy could be a setback for Robert Murray, an outspoken US 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 US$5.46bil loss from the unit in 2016 and a US$2.39bil 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. — Bloomberg

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