Infrastructure
FirstEnergy Solutions Bankruptcy Could Take a Long Time
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When FirstEnergy Corp. (NYSE: FE) subsidiary FirstEnergy Solutions (FES) filed for bankruptcy on the last day of March, the engine started running on what could be a procedure that takes years to reach a conclusion.
FES, all its subsidiaries and FirstEnergy Nuclear Operating Company (FENOC) comprise FirstEnergy’s merchant power business, which the parent company has been trying to hive off for a while now. The company’s regulated power business and all its assorted subsidiaries are not affected by the bankruptcy filing.
The first deadline FES faces is May 4, the date by which the Public Utilities Commission of Ohio has set for the company to report whether it can continue to deliver electricity to its customers. The commission has expressed its doubts that FES customers will be able to avoid any negative effects from the bankruptcy filing, but the commission wants to hear from the company itself.
An FES spokesperson said the bankruptcy will have little impact on residential customers.
The more critical documents — at least from the bankruptcy reorganization point of view — are a statement by FES and the other filers listing assets, liabilities and other financial information and a reorganization plan that spells out how much FES plans to pay its creditors. FES has 18 months to file both documents.
But that’s not the end, according to Joseph Ferrise, a staff attorney for the Akron, Ohio, office of the Chapter 13 bankruptcy trustee and a law professor at the University of Akron. He told the Akron Beacon Journal earlier this month, “It can take, on the short end, five or six years [to resolve]. I would think it can take longer than that.”
For one thing, there is sure to be more than one argument over how much each creditor gets paid. All of those will take time to sort out.
Earlier this week, FES filed a motion with the bankruptcy court to allow FENOC to purchase uranium fuel (UF6) from supplier Macquarie Group for delivery in 2019 and 2020. Bankrupt Company News cited the FES filing:
Given the heavily regulated nature of UF6 and the limited number of suppliers, allowing the Macquarie Contract to terminate or alternatively, rejecting the Macquarie Contract, incurring damages that could be in excess of the cash collateral that Macquarie is currently holding, and then returning to the market to find an alternative supplier would be expensive and time-consuming.
The Akron Beacon Journal noted that the next hearing for FES in the bankruptcy court is scheduled for April 26.
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