A bankruptcy judge in Atlanta, GA, put the proceedings againstTitan Energy on hold last week after the gas marketer notified thecourt that AES Power Direct, a retail power provider, had made anbid to purchase its assets.
AES Power, a subsidiary of AES Corp. in Arlington, VA, confirmedlast week that it made a non-binding offer to buy the troubledTitan Energy, which filed for Chapter 11 bankruptcy on July 1, butit declined to disclose the terms of the transaction. Judge W.Homer Drake of the U.S. Bankruptcy Court for the Northern Districtof Georgia in Atlanta postponed proceedings until Tuesday so thatAES Power and Titan Energy could work out an agreement. The judgewants a final decision by then on whether AES Power will make itsoffer for Titan Energy binding, said AES Power President MeadBabcock. “That’s the timetable we’re working under.”
The bid to buy the Roswell, GA, gas marketer is subject to theoutcome of “due diligence,” a close analysis of the company’scontracts and records, Babcock noted. “I don’t feel at liberty togo into the details of the transaction” until this process iscompleted. Anyway, the terms “will probably change somewhat betweennow and the time the transaction settles,” he said.
AES Power, which started up a year ago, provides electricity toretail customers in New Jersey and eastern Pennsylvania. PurchasingTitan 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 asignificant amount of natural gas retail customers in two states[Ohio and Pennsylvania] that seem to be on the front-end of openingtheir markets to retail energy sales,” he told NGI. “We’d also bebuying some experience in the gas industry.” Titan Energy has91,000 retail gas customers in the two states. “They’ve got somecustomers in other states,” such as California, Maryland andVirginia, but its remaining “predominant” markets are Ohio andPennsylvania, Babcock noted. Titan Energy’s 50,000 customers inGeorgia were purchased earlier this month by Energy America, ajoint venture between Sempra Energy and Direct Energy Marketing ofCanada (See NGI, July 17).
Prior to the bankruptcy, Titan Energy claimed to have had atotal of 200,000 customers coast-to-coast. Founded in 1991, it alsopainted itself as something of a pioneer in catering to theresidential gas market during the initial phase of deregulation.
In the meantime, Judge Drake last week delayed action on themotions by two LDC subsidiaries of Columbia Energy Group to obtainsome relief. Titan Energy participated in the customer-choiceprograms of Columbia Gas of Ohio Co. and Columbia Gas ofPennsylvania Co., serving a total of 91,000 customers. But itceased 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 TitanEnergy’s customers in Ohio – whether they belong to Titan orwhether they have reverted back to Columbia Gas of Ohio in the wakeof the bankruptcy, said spokesman Steve Jablonski. This issue wouldat least be partly resolved if AES Power proceeds to acquire Titan.”We certainly would not be opposed to the transfer of the customersto another marketer.” But a lot hinges on the details of theagreement between AES Power and Titan Energy, Jablonski said.
The Ohio LDC notified Titan Energy that it was terminating themarketer from its customer-choice program on the very same day thatTitan filed for bankruptcy, which Jablonski said has “kind ofmuddied the waters.” In addition to the status of Titan’scustomers, the LDC has asked the court to rule on which takesprecedence – the bankruptcy filing or its termination notice.
If the court should find the customers are still Titan Energy’sand that the bankruptcy filing takes priority, then “under thebankruptcy code that basically freezes everything in place,” andColumbia Gas of Ohio would be hard-pressed to recover the costs ithas 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,Jablonski noted.
However, if the court rules the termination notice hasprecedence, then Titan Energy’s customers “would have reverted toour tariff,” and Columbia Gas of Ohio could recover the costs fromthe 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 forbankruptcy. “We cannot stop serving the customers. We are thesupplier of last resort,” he said.
Columbia Gas of Pennsylvania filed an emergency motion with thecourt seeking “adequate protection” for the money owed to it byTitan Energy. LDC spokesman Rob Boulware estimated that about$20,000 was owed by Titan as of July 1, and that the LDC has beenincurring costs of about $9,000 per day because it has had to servethe marketer’s customers.
In the event Titan fails to either resolve its debts or auctionoff its customers to another marketer, the Pennsylvania customerswould then revert back to Columbia Gas of Pennsylvania, Boulwaresaid. Efforts to reach Titan Energy for comment last week wereunsuccessful.
Titan Energy sought Chapter 11 bankruptcy protection after itswholesale natural gas supplier, DukeSolutions, filed a lawsuitagainst the gas marketer in federal court in Houston, accusing itof breach of contract. DukeSolutions, a subsidiary of Duke Energy,contends Titan Energy owes it more than $10 million. It also owesAtlanta Gas Light (AGL) about $1.6 million for back distributioncharges. Titan Energy paid part of its $2.8 million AGL bill with aletter of credit, but a balance still is outstanding.
Titan Energy became the second gas supplier serving thederegulated Georgia gas market to file for bankruptcy in less thana year. The first was Peachtree Natural Gas, which sold its 170,000customers to Shell Energy for $19.3 million. Shell Energy also wasa serious contender for Titan Energy’s Georgia customers, but itsoffer of $43/customer was eclipsed by Energy America by $1 more perhead.
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