More than a year after it said prolific Appalachian natural gas supplies eroded profits from power sales and were partly to blame for its decision to file for Chapter 11 bankruptcy, a court has approved the FirstEnergy Solutions Corp. (FES) restructuring plan.
Judge Alan M. Koschik of the U.S. Bankruptcy Court for the Northern District of Ohio on Wednesday signed off on the plan, clearing a path for the company to exit proceedings by year’s end. FES would separate from parent FirstEnergy Corp. and emerge from bankruptcy as an independent company owned by its creditors.
The company was able to resolve a major sticking point by agreeing to uphold the contracts of union employees at its power plants that were negotiated by FirstEnergy. FES is expected to wipe out $2 billion of debt and emerge from bankruptcy with more than $1 billion in cash under the court-approved plan.
The company owns coal, dual-fuel and wind power facilities mostly in Ohio and Pennsylvania along with three nuclear power plants. Two facilities, the Davis-Besse and Perry nuclear plants, would enjoy the support of $150 million in subsidies that were passed in Ohio earlier this year. The subsidies outraged those in the natural gas industry who fought against the legislation and were cited in decisions to cancel two gas-fired power projects in the state.
Operators like FES have claimed that abundant, low-cost Appalachian gas supplies have made it difficult for nuclear and coal facilities to compete. Booming production has attracted an influx of developers that have invested $11 billion to build more than 11,000 MW of gas-fired capacity in Ohio alone, according the Ohio Independent Power Producers.
The battle over subsidies has continued since they were signed into law over the summer; opponents are trying to get a referendum on the statewide ballot to overturn them. FES, meanwhile, has filed a lawsuit in the Ohio Supreme Court to stop the ballot initiative, arguing that the monthly surcharges that customers will pay to fund the subsidies are a tax not subject to referendum.
On the same week the court approved FES’ restructuring plan, the company warned that it would close the nuclear plants if the initiative to overturn state subsidies does make it on the ballot.
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