AES Corp. (AES) units that either own or lease six coal-fired power plants in New York state sought bankruptcy court protection, citing the depressed economic environment for the electric power industry.
AES Eastern Energy LP and 13 other AES affiliates listed as much as $1 billion in debt in Chapter 11 filings yesterday in U.S. Bankruptcy Court in Delaware. AES Eastern listed $100 million to $500 million in assets.
The units want to sell or transfer their only two plants in active operation, in Cayuga and Somerset, as part of a settlement with certificate holders, Peter Norgeot, president of AES NY, said in a court filing.
“The debtors are out of options,” Norgeot said in the filing. “After vigorously marketing their assets for almost a year and soliciting 58 potential buyers/investors, it is abundantly clear that, in the current economic environment and with the debtors complicated leveraged lease structure, an out- of-court restructuring sale is not possible.”
Moody’s Investors Service in July lowered its rating of AES Eastern because competitors with gas-fired plants were benefiting from low natural gas prices while AES’s operating costs had risen as a consequence of higher coal prices. AES Corp. had already written its interest in AES Eastern down to zero and was looking for a buyer, Moody’s said at the time.
Fitch Downgraded Debt
Fitch Ratings on Dec. 20 downgraded $433.1 million in debt serviced by cash flow from AES Eastern, saying that it was likely to default on a lease payment due Jan. 3. Two of the unit’s power plants, Somerset and Cayuga, have run at lower than projected capacity this year because of “eroded energy margins,” Fitch said.
The parent company had indicated it wouldn’t make loans or provide equity to help AES Eastern to make payments, Fitch said in the Dec. 20 report.
Rich Bulger, a spokesman for Arlington, Virginia-based AES, didn’t immediately return a call to his office seeking comment on the filings after regular business hours yesterday.
The case is In re AES Eastern Energy LP, 11-14138, U.S. Bankruptcy Court, District of Delaware.