The severely in debt electric power producing company, AES Eastern Energy LP announced it was filing for bankruptcy under Chapter 11 and planning to sell two coal fired power plants that reside in upstate New York. The company is based in Ithaca, New York and is a division of AES Corporation. What’s interesting is, more than a dozen AES affiliates turned into a bankruptcy filing under Chapter 11 at the U.S. Bankruptcy Court Wilmington Delaware while cutting a deal with bondholders that were intending to take over the two coal-fired power plants.
According to the company president, Peter Norgeot, “the debtors are out of options, and out of time.”It was reported that AES Eastern Energy was filing for bankruptcy because it couldn’t afford to make a $33 million interest only lease payment.
In the bankruptcy filing, the company blamed its financial trouble on new regulations and falling power prices. Because of higher operating costs and lower energy rates the ailing company is questioning its viability on how they currently operate.
According to the Chapter 11 bankruptcy court, the bondholders will be the lead bidders for the Cuyahoga and Somerset coal fired power plants for a price of $300 million which could go higher at the auction. The two remaining power plants will continue to operate during the bankruptcy filing. The bankruptcy attorney for AES operates out of Richards Layton and Finger and is handling the Chapter 11 bankruptcy while Barclays Capital is serving as their financial advisor.
AES originally bought these plants from New York State electric and gas Corporation in 1998 for $950 million and financed the majority through a $550 million sale lease transaction.
The next couple years will be trying for the electric power industry, especially for the companies using coal-fired electric power plants. As new government regulations come onboard, it will be harder for these companies to show a profit without being able to raise power rates substantially.