By Michael Bologna
CHICAGO--The power generating company Edison Mission Energy (EME) Dec. 17 filed for Chapter 11 protection, citing depressed power pricing, a burdensome debt structure, and mounting expenses for environmental compliance (In re Edison Mission Energy, Bankr. N.D. Ill., No. 12-49219, 12/17/12).
Environmental groups said the announcement raises questions about the long-term viability of six coal-fired power plants in Illinois operated by Midwest Generation LLC, a subsidiary of Santa Ana, Calif.-based EME. EME controls 43 operating power projects across the country, with an aggregate capacity of 11,504 megawatts.
The EME reorganization could be a relatively quick proceeding under an agreement reached between the power company and parties holding its $3.7 billion in outstanding debt. EME's parent company, Edison International, said the agreement would permit it to deliver its equity interest in EME to the creditor group. Such a transition, however, would come after a period of restructuring and would require formal approval by the U.S. Bankruptcy Court for the Northern District of Illinois.
EME attributed the filing to depressed energy pricing, high fuel costs for its coal-fired facilities, a crushing debt burden, and the “need to retrofit its coal-fired facilities to comply with environmental regulations.” Company officials, however, noted that consumers would not see any interruption in services during this period of reorganization.
“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,” Pedro Pizarro, president of EME, said in a statement. “Throughout this process, business operations will continue in the normal course, and we will continue to support our customers, suppliers, and employees.”
In February, economic and environmental pressures caused Midwest Generation to announce the closure of its Fisk Station by the end of 2012 and Crawford Station by the end of 2014. And in early November, senior management at EME told financial analysts that the utility could be forced into bankruptcy before the end of the year (24 BBLR 1444, 11/8/12).
Low natural gas prices are putting pressure on coal-fired plants to retire, and the trend is accelerating due to a series of environmental regulations that will require coal-fired utilities to make substantial investments in pollution controls. Many of the oldest coal-fired plants that lack modern controls are shutting down, replaced by plants fired by cleaner, cheaper natural gas.
“The bankruptcy filing suggests these highly emitting, relatively inefficient coal plants are going to have a hard time surviving in a market where gas prices stay low,” said Brian Urbaszewski, director of environmental health programs at the Respiratory Health Association of Chicago. “It is unclear how they can continue if they can't compete in the marketplace. And, they need to make a lot of investments--hundreds of millions of dollars in investments--to bring these plants up to standards they have to meet.”
“Midwest Generation has failed to succeed in the competitive Illinois electricity power market. It has been outcompeted on price by Exelon's nuclear plants, new wind power farms, and natural gas plants,” Learner said. “While other coal plant owners such as Dynegy have modernized their plants, Midwest Generation lags behind.”
By Michael Bologna
Full text of the Chapter 11 petition is available at: /uploadedFiles/Content/News/Legal_and_Business/Bloomberg_Law/Legal_Reports/Edison-Mission-Petition(1).pdf
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