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AES Power Buys Bankrupt Titan for $6 Million
AES Power Direct LLC, a retail electric provider, completed its purchase of the entire stock of bankrupt marketer Titan Energy Inc. of Toronto for an estimated $6 million in cash last Thursday after a bankruptcy judge in Georgia authorized the sale earlier in the week.
In a 16-page order issued last Tuesday, Judge W. Homer Drake of the U.S. Bankruptcy Court for the Northern District of Georgia directed AES Power Direct, a subsidiary of AES Corp. in Arlington, VA, to close its transaction with Titan Energy by no later than Thursday afternoon so it could begin to "promptly cure any defaults" of the natural gas marketer, which sought Chapter 11 protection on July 1.
The order requires AES Power to immediately pay off Titan Energy's principal creditors, establish an escrow to take care of other creditors, surrender Titan's Georgia marketing certificate to the Georgia Public Service Commission, and to notify Titan Energy's gas customers in Ohio that the company has been restructured.
Some of Titan Energy's biggest energy-related creditors were: Duke Energy's DukeSolutions (to be paid $6 million), Columbia Gas Transmission ($1.7 million), Columbia Gas of Ohio ($28,000 per day since July 1), Columbia Gas of Pennsylvania (amount not specified), Peoples Natural Gas (amount not specified), Cincinnati Gas & Electric ($56,246), Pacific Gas and Electric (amount not specified), California Polar Power Brokers ($146,843), Washington Gas & Light ($2,283 per day since July 1), Coenergy Trading Co. ($1.675 million plus $400,000 for gas storage), Utiliread Inc. (about $341,000), Atlanta Gas Light ($468,000), and Alliance Gas Services ($456,207). Nearly all of the major creditors signed off on AES Power's acquisition of Titan Energy, as well as the Ohio Consumers Counsel, the Pennsylvania Consumer Advocate Office and the Ohio Public Utilities Commission.
In addition, the order called for AES Power Direct to allot "sufficient funds" for Titan Energy to quickly resume supplying gas to its remaining 91,000 gas customers in the Ohio and Pennsylvania markets. Titan Energy of Georgia, a subsidiary of Titan Energy, had 50,000 customers in Georgia, but they were purchased in early July by Energy America, a joint venture between Sempra Energy and Direct Energy Marketing of Canada. Titan also has a small cadre of gas customers in Virginia, Maryland and California.
Titan Energy cut off service to its customers in Ohio and Pennsylvania on July 1, forcing Columbia Gas of Ohio, Columbia Gas of Pennsylvania and Cincinnati Gas and Electric to step in and supply gas to customers being served under the choice programs.
Titan Energy sought Chapter 11 bankruptcy protection after its wholesale gas supplier, DukeSolutions, filed a lawsuit against the gas marketer in federal court in Houston, accusing it of breach of contract. DukeSolutions estimated Titan Energy owed it $10 million.
Judge Drake's order contemplates that Titan Energy under the ownership of AES Power will emerge from bankruptcy shortly, said a lawyer who attended last Tuesday's hearing.
AES Power President Mead Babcock said the company bought Titan Energy because it would give AES Power, whose experience has been limited to the retail electric market, access to retail gas customers in two prime markets - Ohio and Pennsylvania. The McLean, VA-based retail energy company, which started up a year ago, currently provides electricity to retail customers in New Jersey and eastern Pennsylvania.
He said the gas marketer, which will be a subsidiary of AES Power, will continue to operate under the name of Titan Energy, at least for the short term. "In the long term, it's yet to be determined." Babcock was unable to predict what changes, if any, would be made to the company. "It's been a very fast-moving transaction. We'll get into a transition period very shortly, and decide where we go from here." He doesn't anticipate any changes to Titan Energy's management. "Part of the acquisition is that we're getting the talents, the abilities and the experience of the people there."
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