Homer City Power Plan Files Chapter 11 Bankruptcy

by San Antonio Attorney

Homer City Generation LP, a large electric-power generating company in Western Pennsylvania, filed for Chapter 11 bankruptcy with a plan to wipe out about $607 million in debt while maintaining the normal operation of the power plant. The filing is its second bankruptcy.

The power company has been preparing for this for the past months. It considered selling the facility one year ago. However, its debt holders turned down a number of offers and decided to restructure instead. The reorganization includes paying debt holders with equity.

Since October 2016, when Homer City defaulted, it has been avoiding debt holders as the next move is being discussed.

In the period in-between, Homer City’s top coal seller, Consol Energy Inc., filed a lawsuit against the firm and its parent company, GE Capital, due to allegedly dishonoring contract with them. Consol seeks to stop Homer City from selling the facility or otherwise reorganize until the complaint is resolved.

But Consol and Homer City have resolved the issue clearing the way for the power plan to move forward. As part of the settlement, Consol got a new coal supply contract with a two-year term.

The power plant was constructed between 196’s and 1970’s. It has 245 employees and has the capacity to provide electricity to 2 million houses. It was saved from bankruptcy in 2012 when three of its units were upgraded through funds provided by GE capital.

In 2016, however, GE announced a break up with Homer City, which has been affected by low power prices, competition with cheap natural gas, new government requirements, and market trend.

 

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