AES Power Direct Makes Bid for Titan Energy Assets
A bankruptcy judge in Atlanta, GA, put the proceedings against
Titan Energy on hold last week after the gas marketer notified the
court that AES Power Direct, a retail power provider, had made an
bid to purchase its assets.
AES Power, a subsidiary of AES Corp. in Arlington, VA, confirmed
last week that it made a non-binding offer to buy the troubled
Titan Energy, which filed for Chapter 11 bankruptcy on July 1, but
it declined to disclose the terms of the transaction. Judge W.
Homer Drake of the U.S. Bankruptcy Court for the Northern District
of Georgia in Atlanta postponed proceedings until Tuesday so that
AES Power and Titan Energy could work out an agreement. The judge
wants a final decision by then on whether AES Power will make its
offer for Titan Energy binding, said AES Power President Mead
Babcock. "That's the timetable we're working under."
The bid to buy the Roswell, GA, gas marketer is subject to the
outcome of "due diligence," a close analysis of the company's
contracts and records, Babcock noted. "I don't feel at liberty to
go into the details of the transaction" until this process is
completed. Anyway, the terms "will probably change somewhat between
now and the time the transaction settles," he said.
AES Power, which started up a year ago, provides electricity to
retail customers in New Jersey and eastern Pennsylvania. Purchasing
Titan Energy would give it a foray into the retail gas business,
which it intended to get into eventually when it formed the McLean,
VA-based retail energy company, Babcock said.
"Our interest [in buying Titan Energy] is based on acquiring a
significant amount of natural gas retail customers in two states
[Ohio and Pennsylvania] that seem to be on the front-end of opening
their markets to retail energy sales," he told NGI. "We'd also be
buying some experience in the gas industry." Titan Energy has
91,000 retail gas customers in the two states. "They've got some
customers in other states," such as California, Maryland and
Virginia, but its remaining "predominant" markets are Ohio and
Pennsylvania, Babcock noted. Titan Energy's 50,000 customers in
Georgia were purchased earlier this month by Energy America, a
joint venture between Sempra Energy and Direct Energy Marketing of
Canada (See NGI, July 17).
Prior to the bankruptcy, Titan Energy claimed to have had a
total of 200,000 customers coast-to-coast. Founded in 1991, it also
painted itself as something of a pioneer in catering to the
residential gas market during the initial phase of deregulation.
In the meantime, Judge Drake last week delayed action on the
motions by two LDC subsidiaries of Columbia Energy Group to obtain
some relief. Titan Energy participated in the customer-choice
programs of Columbia Gas of Ohio Co. and Columbia Gas of
Pennsylvania Co., serving a total of 91,000 customers. But it
ceased service to its customers in the two markets on July 1,
forcing the LDCs to step in and provide the gas.
The Ohio LDC wants the court to determine the status of Titan
Energy's customers in Ohio - whether they belong to Titan or
whether they have reverted back to Columbia Gas of Ohio in the wake
of the bankruptcy, said spokesman Steve Jablonski. This issue would
at least be partly resolved if AES Power proceeds to acquire Titan.
"We certainly would not be opposed to the transfer of the customers
to another marketer." But a lot hinges on the details of the
agreement between AES Power and Titan Energy, Jablonski said.
The Ohio LDC notified Titan Energy that it was terminating the
marketer from its customer-choice program on the very same day that
Titan filed for bankruptcy, which Jablonski said has "kind of
muddied the waters." In addition to the status of Titan's
customers, the LDC has asked the court to rule on which takes
precedence - the bankruptcy filing or its termination notice.
If the court should find the customers are still Titan Energy's
and that the bankruptcy filing takes priority, then "under the
bankruptcy code that basically freezes everything in place," and
Columbia Gas of Ohio would be hard-pressed to recover the costs it
has incurred as a result of serving Titan's customers since July 1.
It would have to "stand in line" with the rest of the creditors,
However, if the court rules the termination notice has
precedence, then Titan Energy's customers "would have reverted to
our tariff," and Columbia Gas of Ohio could recover the costs from
the customers that it has been serving since July 1, he said.
Jablonski estimated Columbia Gas of Ohio has been paying about
$28,000 a day to supply Titan's customers since it filed for
bankruptcy. "We cannot stop serving the customers. We are the
supplier of last resort," he said.
Columbia Gas of Pennsylvania filed an emergency motion with the
court seeking "adequate protection" for the money owed to it by
Titan Energy. LDC spokesman Rob Boulware estimated that about
$20,000 was owed by Titan as of July 1, and that the LDC has been
incurring costs of about $9,000 per day because it has had to serve
the marketer's customers.
In the event Titan fails to either resolve its debts or auction
off its customers to another marketer, the Pennsylvania customers
would then revert back to Columbia Gas of Pennsylvania, Boulware
said. Efforts to reach Titan Energy for comment last week were
Titan Energy sought Chapter 11 bankruptcy protection after its
wholesale natural gas supplier, DukeSolutions, filed a lawsuit
against the gas marketer in federal court in Houston, accusing it
of breach of contract. DukeSolutions, a subsidiary of Duke Energy,
contends Titan Energy owes it more than $10 million. It also owes
Atlanta Gas Light (AGL) about $1.6 million for back distribution
charges. Titan Energy paid part of its $2.8 million AGL bill with a
letter of credit, but a balance still is outstanding.
Titan Energy became the second gas supplier serving the
deregulated Georgia gas market to file for bankruptcy in less than
a year. The first was Peachtree Natural Gas, which sold its 170,000
customers to Shell Energy for $19.3 million. Shell Energy also was
a serious contender for Titan Energy's Georgia customers, but its
offer of $43/customer was eclipsed by Energy America by $1 more per