Exelon affiliate Exelon Generation Texas Power, which owns and operates nearly 3,500 MW of gas-fired power plants in Texas, filed for Chapter 11 bankruptcy protection on Nov. 7 for ExGen Texas Power Holdings and ExGen Texas Power.
The voluntary filing in the U.S. Bankruptcy Court for the District of Delaware for ExGen Texas Power Holdings and ExGen Texas Power calls for all but one of five power plants to be transferred to debt holders.
Exelon, in a statement, attributed the unit’s bankruptcy to “historically low power prices” in Texas that have created “challenging market conditions for all power generators, including the five natural gas‑fired [Exelon Generation Texas Power] plants.”
The five plants are Colorado Bend I (498 MW), ExTex LaPorte (150 MW), Handley (1,265), Mountain Creek (825 MW), and Wolf Hollow I (704 MW).
Two newly built Exelon gas-fired, 1,100 MW combined-cycle plants in Texas are not included in the filing. They are Wolf Hollow II and Colorado Bend II.
The ExGen plants have been struggling economically for some time. In May, Exelon told investors it was looking for a buyer for the plants.
In March, Moody’s Investors Service lowered ExGen Texas Power’s $659 million senior secured term loan B to a Caa3 rating with a negative outlook, reflecting “a high default probability within the next 12 months.”
At the time, Moody’s cited “a weakly competitive portfolio given new entrants; limited sponsor support; high leverage and high refinancing risk owing to the volatile and unpredictable merchant energy market in [the Electric Reliability Council of Texas].”
ExGen Texas Power’s filing lays out a two part plan negotiated with lenders. In the first part, ExGen Texas Power would continue to own and operate the Handley plant in exchange for a $60 million payment to the lender and pending a competitive bidding process and receipt of necessary approvals. In the second part of the plan, the lenders agreed to exchange the debt they hold in the other four ExGen Texas Power plants for equity in the plants, effectively giving them ownership.
Exelon said the filings would “reduce the amount of debt the plants would otherwise take forward, thereby maximizing their opportunities for long‑term success.”
Low wholesale power prices in ERCOT are causing problems for other generators in Texas.
In October, newly formed generator Vistra Energy announced plans to close three coal-fired stations totaling 4,200 MW.
“Luminant decided to retire these units given they are projected to be uneconomic based on current market conditions and given the significant environmental costs associated with operating such units,” Vistra, Luminant’s parent company, said in a Securities and Exchange Commission filing.
Sustained low wholesale power prices, an oversupplied renewable generation market and low natural gas prices, along with other factors, have contributed to this decision, the company said in a press release.
Talen Energy plans to close its 330-MW, gas-fired Barney Davis steam plant, and the City of Garland is seeking ERCOT approval to mothball two gas-fired steam units totaling 188 MW.