Brazos seeks more time to control bankruptcy amid new storm laws
- Law firms
- Related documents
- Power Co-op requests four more months for plan filing period
- New Texas Laws ‘Add To The Complexities’ Of Bankruptcy
- Brazos fears being kicked out of the electricity market
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(Reuters) – Brazos Electric Power Cooperative is asking for four more months to keep control of its bankruptcy case, saying recently enacted laws aimed at mitigating the financial fallout from the February winter storm in Texas have complicated its restructuring efforts.
In court papers filed on Monday, the co-op asked U.S. bankruptcy judge David Jones in Houston to extend his exclusive period for filing a Chapter 11 plan until Oct. 27 and his corresponding period for soliciting creditors’ votes for the plan until Oct. 28 December. A hearing on the motion has not yet been scheduled.
Brazos filed for bankruptcy in March after the winter storm that cut power to millions of people in Texas left him with a $ 2.1 billion bill from the state’s grid operator, the Electric Reliability Council of Texas (ERCOT). Brazos challenged the bill.
Brazos, which is Texas’ largest and oldest electric co-op, says it must extend its period of exclusivity in part because two laws recently signed by Texas Gov. Greg Abbott have introduced new complications in the case. The laws allow co-ops like Brazos to use the securitization funding to recover some costs incurred as a result of the storm. But the co-op says the solution, where co-ops could be kicked out of the market if they don’t pay the full costs, could have devastating consequences for its members.
“Although the analysis of the Debtor and his advisers is ongoing, these laws appear to only add to the complexity of the Debtor’s case, raising potential obstacles to the Debtor’s ability to continue to participate in the market in the future. ERCOT’s power region and complicating Debtor’s restructuring strategy and ongoing plan negotiations, ”Brazos said in Monday’s filing.
The co-op indicated in the motion that it could pursue “the potential challenges of” the new laws.
Brazos also noted that its restructuring is already more complicated than a typical Chapter 11 business case in light of its structure as a member-owned cooperative.
ERCOT’s $ 2.1 billion bill for the seven days the storm lasted is nearly three times the co-op’s total cost of electricity as of 2020, which was $ 774 million, according to court documents. For several days during the storm, ERCOT had set electricity prices at $ 9,000 per megawatt hour.
Brazos owes approximately $ 2 billion in funded debt and $ 340 million in commercial debt. It finances operations during the bankruptcy with the help of a loan of $ 350 million from a group of lenders led by JP Morgan Chase Bank.
The co-op’s senior lawyer, Louis Strubeck, left Norton Rose Fulbright this week and joined O’Melveny & Myers.
The case is In re Brazos Electric Power Cooperative Inc, US Bankruptcy Court, Southern District of Texas, No. 21-30725.
For Brazos: Louis Strubeck and Gregory Wilkes of O’Melveny & Myers
For ERCOT: Kevin Lippman de Munsch Hardt Kopf & Harr
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