FirstEnergy Corp. on Thursday said that it has reached an agreement with bankrupt NRG Energy Inc. related to a never-completed sale of four FirstEnergy power plants to NRG Energy. Under the agreement, FirstEnergy’s claim against NRG Energy would be allowed in the amount of $396 million, subject to U.S. Bankruptcy Court approval.

NRG Energy and certain of its subsidiaries filed voluntary bankruptcy petitions in U.S. Bankruptcy Court in the Southern District of New York in May 2003. Pursuant to NRG Energy’s proposed plan of reorganization, FirstEnergy, as an unsecured creditor, would receive a settlement value of approximately 50 cents on the dollar, or an estimated value of $198 million, with payment in the form of cash, notes and common stock.

The payment includes 12% in cash, or $23.8 million, 15.2% in notes, with an estimated value of $30.2 million, and 72.8% in new NRG Energy common stock, which is expected to be issued by the reorganized company. Based on the stock’s nominal value, as estimated in the plan of reorganization, the shares allocated to FirstEnergy would be worth approximately $144 million. The actual market value of the shares will be determined after trading begins in the public market.

The settlement is related to NRG Energy’s guarantee of obligations of its Able Acquisitions LLC affiliate’s 2002 agreement to buy FirstEnergy’s Ashtabula, Bay Shore, Eastlake, and Lakeshore plants for $1.5 billion.

The sale was cancelled in August 2002 due to an anticipatory breach of certain obligations in agreements by NRG Able Acquisitions (see Power Market Today, Aug. 9, 2002). Under terms of the agreements, announced on Nov. 29, 2001, NRG Energy would have purchased the four plants, which have a generating capacity of 2,535 MW. NRG Energy guaranteed the obligations of its Able Acquisitions affiliate under the agreements.

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