Edison International’s unregulated power generating unit Edison Mission Energy (EME) on Monday filed for bankruptcy protection after reaching a reorganization agreement with its parent company and holders of its $3.7 billion in debt to become an entity that is independent of Edison International.
If approved in court, the agreement would transition Edison International’s equity interest in EME to creditors, retire existing public debt, and enhance its access to liquidity. EME said the financial restructuring agreement would ultimately result in a "substantial deleveraging of the company’s balance sheet."
To facilitate the restructuring process and ensure an effective transition to operating as an independent entity, EME and several of its subsidiaries—including Midwest Generation, which manages the company’s fleet of coal-fired plants in Illinois—filed voluntary petitions with the U.S. Bankruptcy Court for the Northern District of Illinois under Chapter 11 of the U.S. Bankruptcy Code. Certain other subsidiaries—including Edison Mission Marketing & Trading, Edison Mission Operation & Maintenance, and the company’s wind energy projects—were not included in the filings.
The restructuring was not expected to affect operations at EME’s 43 electric facilities across the country (generation assets with a total capacity of 11.5 GW) , EME said on its new website. "EME is operationally healthy, and plans to emerge from its restructuring as a recapitalized company separate from Edison International."
As of December 2011, EME’s assets included fossil-fuel power plants in California, Illinois, Pennsylvania, West Virginia, and Doga, Turkey; a biomass facility in New York; and one of the largest portfolios of wind energy projects in the U.S. Filings from December 2011 show that the company and its affiliates also had one wind project and one natural gas-fired peaker plant under construction, totaling 80 MW and 479 MW, respectively, and since that time construction has begun on an additional wind project totaling 40 MW. "EME is operationally healthy, and plans to emerge from its restructuring as a recapitalized company separate from Edison International," EME said.
The company admitted it has been challenged by "depressed" energy and capacity prices and high fuel costs affecting its coal-fired facilities. Pending debt maturities and the need to retrofit its coal-fired facilities to comply with environmental regulations have also affected its financial health, it said. "EME has taken numerous actions to address these external challenges, including retiring uneconomic power plants, implementing labor reductions, significantly reducing expenses without compromising safety and compliance, diversifying its portfolio of power generation assets, and developing a cost-effective environmental compliance program. The Company believes that these efforts, together with its financial restructuring, will position EME for profitability and long-term success."
“We are pleased to have reached this agreement, which we believe reflects the long-term value potential of our organization,” said Pedro Pizarro, president of EME. “This is an important first step in the process to reduce our debt, enhance our liquidity profile and position EME for continued operation and future success while preserving our ability to generate power safely and reliably at our electric facilities across the country. Throughout this process, business operations will continue in the normal course, and we will continue to support our customers, suppliers and employees.”
Sources: POWERnews, EME, Edison International