Solar Trust of America Gets Funding, More Time to Entertain Bids

Solar Trust of America LLC, a U.S. company developing what would be the world’s largest solar power plant, was approved for new loans in its bankruptcy proceeding as it seeks more time to sell its assets.

The company, based in Oakland, California, and other U.S. units will receive financing arranged by Mason Capital Management LLC that includes $25 million in working capital loans and $18.3 million in letters of credit, according to an order filed today in bankruptcy court in Wilmington, Delaware.

The funding will replace $3.9 million in interim financing approved by the court April 3, the day after Solar Trust and other units filed Chapter 11 papers. NextEra Energy Resources LLC, the largest wind and solar power operator in the U.S., was to provide the interim funding, according to today’s court order.

The Mason Capital funding “is going to allow us to conduct a more well-paced sales process that will get more participation and maximize asset value,” Ned Kleinschmidt, co-founder of financial advisory firm RPA Advisors LLC and Solar Trust’s chief restructuring officer, said today by telephone. NextEra’s funding commitment would have allowed only about 30 days in which to complete a sale of assets, he said. “Now with the larger financing, we have a longer runway.”

The court hasn’t set a due date for bids from interested buyers, though the entire sale process may take about 90 days, Kleinschmidt said.

Solar-Thermal Plants

Solar Trust is developing solar-thermal power plants in several western U.S. states, including its 1,000-megawatt Blythe project, located in Riverside County, California, that would be the world’s largest. The company is a joint venture of Ferrostaal AG and Solar Millennium AG, which is undergoing its own insolvency proceedings in Germany.

While bids haven’t been received by the court yet, NextEra has said it is a potential buyer.

“NextEra may be interested in purchasing the debtors’ assets,” including the interconnection agreement for Blythe, it said April 3 in a court filing. That contract “is the single most valuable asset possessed by any of the debtors’ estates,” NextEra said.

The agreement, with the California Independent System Operator, will enable Blythe to interconnect with and transmit power over the grid. Similar contracts potentially can take years to complete, according to Bloomberg New Energy Finance analyst Anthony Kim.

There are 76 energy projects, representing 9,200 megawatts of potential generating capacity, in queue for interconnection in the service territory of Edison International’s Southern California Edison utility, according to a BNEF note published April 16.

’Partial Termination Rights’

The Blythe agreement has special conditions, or “partial termination rights,” that would enable Solar Trust, or “its successor-in-interest,” to maintain their place in the interconnection queue even if no more than a 250-megawatt project were built, according to NextEra’s filing.

Solar Trust’s power sales contract for Blythe, with Southern California Edison, will need to be renegotiated if the company, or a buyer, moves forward with a previously announced plan to switch technology for least half of the plant to less-expensive photovoltaic panels, according to Marc Ulrich, the utility’s vice president of alternative and renewable power.

“The contract we signed was for solar-thermal, and that was approved” by the California Public Utilities Commission, Ulrich said by telephone. “They did not have the right to just change the technology,” he said. “It absolutely would require them to renegotiate the terms with us.”

Steve Stengel, a NextEra spokesman, wouldn’t comment about the company’s potential to bid for Solar Trust’s assets.

The case is In re Solar Trust of America LLC, 12-11136, U.S. Bankruptcy Court, District of Delaware (Wilmington).

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