AES Eastern Energy, a subsidiary of AES Corporation, announced last week it was filing for bankruptcy. Many were wondering if the bankruptcy filing would hurt the expected earnings for the parent corporation. Today, AES Corp. announced that the bankruptcy filing of the coal plants in New York wouldn’t have any effect on the corporation’s earnings. In a statement they said that it didn’t expect the bankruptcy filing to impact its predicted 2011 in earnings and it would not update its guidance for 2012.
As many big energy companies continue to file for bankruptcy, many are wondering how many more will fall in 2012. Recently, energy companies have been blaming financial problems on falling power prices and their growing debt to stay afloat. This bankruptcy filing of two major coal plants hit home showing the difficulties that other US coal plants share. With new regulations, high coal prices, low wholesale natural gas and electricity prices, the coal burning power plant industry will have trouble staying in existence.
AES warned back in September that the ailing New York coal plants would have to be closed if the company could not offload them to other investors. Back in 1998, AES bought six coal plants from New York State electric and gas Corporation in 1998 for $950 million. The company financed the purchase through a $550 million sale-leaseback transaction. In 2002, two of the plants purchased were shut down, leaving four left only to have two more shut down in March 2011. This left the Cayuga plant in Lansing, New York and the Somerset plant in Barker, New York which are now in the process of filing for bankruptcy.
It will be interesting to see how many other coal plants will end up having to file for bankruptcy as power prices continue to fall and costs continue to rise.