Dive Brief:
- Exelon Corp. announced this morning that its Texas merchant power subsidiary ExGen Texas Power (EGTP) Holdings LLC and ExGen Texas Power LLC filed for Chapter 11 bankruptcy, with an eye towards reducing debt at the companies.
- News stories earlier this year cited anonymous sources saying Exelon had brought an adviser on board to help it deal with mounting debt at the power subsidiary. The company reportedly selected PJT Partners Inc. to help address $650 million in debt.
- EGTP's Board of Directors will go forward with a two-part plan for the company, including a negotiated agreement with lenders that would allow Exelon Generation to continue to own and operate the Handley Generating Station in exchange for a $60 million payment to the lenders.
Dive Insight:
Prior to the announcement, ExGen Texas Power owned five generating facilities in the Lone Star state, but the bankruptcy agreement will change that. In the second part of the company's plan, lenders agreed to exchange the debt they currently hold in EGTP’s other four plants for equity in the plants, effectively taking ownership of all but Handley.
In a statement, the company said Exelon Generation "remains committed to working with all stakeholders to ensure the best outcome for our employees, customers, communities and shareholders.” The bankruptcy filings "help to facilitate the planned transactions and provide additional tools to reduce the amount of debt the plants would otherwise take forward, thereby maximizing their opportunities for long-term success."
Exelon blamed the financial woes on "historically low power prices within Texas" that created "challenging market conditions for all power generators, including the five natural gas-fired EGTP plants."
The Exelon development comes as Vistra Energy announced plans last month to close three coal-fired power plants in Texas — part of the 5,625 MW of fossil fuel capacity that is slated to be retired or mothballed in the state in the coming year.
EGTP owns two combined-cycle gas plants, two gas-fired steam boilers and a small simple-cycle plant. Cheap gas has been pushing coal off the grid in some markets, and Texas' wind power is now having some of the same effect on gas. The Handley plant is a 3-unit, 1,265 MW facility located in Fort Worth, providing electricity to customers in the Electric Reliability Council of Texas.
