+1 212 318 2000
Europe, Middle East, & Africa
+44 20 7330 7500
+65 6212 1000
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
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).