By Michael Brooks
Exelon will relinquish four Texas natural gas plants to its lenders and pay $60 million to keep a fifth plant in the latest response to what the company called “historically low power prices” in the state.
The plans were detailed in a Chapter 11 bankruptcy filing Nov. 7 by ExGen Texas Power, Exelon’s merchant generation business in Texas, and in an 8-K filing by Exelon. It follows Vistra Energy’s announcements last month that it would retire 4,100 MW of coal-fired generation in the state.
Exelon said it made the bankruptcy filing to offload most of a $675 million loan due in September 2021. “Pending a competitive bidding process,” the company said in a statement, it will pay $60 million to lenders to keep its 1,265-MW Handley Generating Plant in Fort Worth.
“Lenders have agreed to exchange the debt they currently hold in EGTP’s other four plants for equity in the plants, effectively taking ownership of these facilities,” Exelon said.
The company told the Securities and Exchange Commission that it expects a pre-tax gain of $125 million to $200 million in the fourth quarter off the sale. It had recorded pre-tax impairment charges of $418 million in the second quarter of 2017 and $40 million in the third quarter for the plants.
The other four plants are the 738-MW Wolf Hollow combined cycle facility in Granbury; the 510-MW Colorado Bend combined cycle in Wharton; the 808-MW Mountain Creek steam boiler in Dallas; and the 156-MW simple cycle facility in La Porte.
The company has been seeking to sell its Texas fleet since at least March, when Reuters reported that it had hired a debt restructuring adviser to help it evaluate its options. This followed a January decision by Moody’s Investors Services to downgrade EGTP’s debt from B2 to Caa1.
Exelon’s stock closed at $41.27/share Tuesday, up 1.45% from Monday’s close.
Independent Market Monitor Beth Garza told ERCOT’s Board of Directors last month that the Vistra retirements will result in higher prices and lower capacity margins, citing two years of “clearly unsustainably low prices with high reserve margins.” (See ERCOT IMM: ‘Fat and Happy’ Times Ending with Coal Closures.)
