Optim Energy LLC is getting ready to market its two gas-fired power plants in Texas now that it has closed the sale, as of Oct. 14, of its coal-fired Twin Oaks plant in Texas.
Optim and related companies have been in Chapter 11 protection lately at the U.S. Bankruptcy Court for the District of Delaware, according to GenerationHub. On Oct. 22, they asked the court to let them assume an underlying lease, called the “CB4 Lease,” for the gas-fired Cedar Bayou Plant with NRG Texas Power LLC.
In that Oct. 22 filing, the companies said: “The debtors have also filed a pending motion that requests the court to extend the time during which the debtors have the exclusive right to file chapter 11 plans through and including February 9, 2015. During this time, the debtors will continue formulating restructuring strategies for the debtors' remaining principal assets, which are their interests in the Cedar Bayou Plant and the Altura Cogen Plant (the gas plant portfolio). The debtors recently closed on the sale of the Twin Oaks Plant on October 14, 2014, which took up a significant portion of the debtors' time since the petition date.
“The debtors have begun to formulate potential restructuring strategies for their gas plant portfolio, including the potential sale of the gas plant portfolio to a plan sponsor under a chapter 11 plan of reorganization. The ultimate strategy adopted for the debtors' gas plant portfolio will significantly influence the terms of a chapter 11 plan or plans to be filed in these cases. Moreover, a full marketing process for the gas plant portfolio could take several months. Given the amount of work in front of the debtors over the next several months, the debtors respectfully submit that it is in the best interests of the estates and their creditors to consider the CB4 Lease in the context of plan confirmation with the myriad of additional executory contracts in these cases. However, only NRG Texas can provide the consent that will allow such an orderly and comprehensive analysis to occur.”
The Optim companies are power plant owners principally engaged in the production of energy in Texas' deregulated energy market through two natural gas-fired power plants with an aggregate output of about 875 MW.
“The depressed and changing economic environment of the electric power industry — particularly with respect to coal-fired plants — and the Debtors' continuous liquidity constraints have culminated in aggregated and continuing losses requiring the debtors to file voluntary petitions under the Bankruptcy Code,” the Oct. 22 filing noted.
Debtor Optim Energy Cedar Bayou 4 LLC (CB4) and NRG Cedar Bayou Development Co. LLC each own 50 percent undivided interests in the Cedar Bayou Plant. CB4 and NRG Cedar Bayou lease the property on which the plant is situated from NRG Texas pursuant to a 2007 premises lease, which is the aforementioned "CB4 Lease.”
The Cedar Bayou Plant is operated by NRG Texas. CB4 purchases its share of the natural gas to fuel the plant pursuant to short term (typically periods of three months) fuel purchase agreements with NRG Power Marketing LLC.
The energy generated by the Cedar Bayou Plant is sold on a short-term basis into the Texas power market. NRG Texas provides certain services to and supplies certain products for the Cedar Bayou Plant, including maintenance, site security, and storm water discharge.
The two gas plants to be marketed, as described in a prior bankruptcy filing, are:
Altura Cogen Plant: This is a natural-gas powered plant capable of producing 600 MW located in Harris County, Texas, and sells the majority of its energy in the ERCOT market. The plant is owned by Debtor Optim Energy Altura Cogen LLC. The plant has been commercially operating since 1985 and is located within a complex of petrochemical facilities owned by Lyondell Chemical Co.
Altura Cogen leases the property at which the power plant is situated from Lyondell. Altura Cogen purchases the natural gas to fuel the plant from EDF Trading North America LLC under fuel purchase agreements that typically expire every few years. The energy generated by Altura Cogen is sold on a short-term basis into the ERCOT market pursuant to an energy management agreement between Optim Marketing and EDF, dated as of November 2011.
EDF provides power management services for the two plants, including scheduling, bidding, and dispatching. EDF also provides fuel management services, including procuring fuel for Altura Cogen. Lyondell purchases a portion of the power generated, as well as the steam produced from power production operations.
Cedar Bayou Plant: Cedar Bayou is a gas-fired plant capable of producing 550 MW located in Chambers County, Texas, which operates in ERCOT's Houston Zone. Debtor Optim Energy Cedar Bayou 4 LLC owns a 50 percent undivided interest and NRG Cedar Bayou Development owns the remaining 50 percent undivided interest.
The Cedar Bayou Plant began operating in 2009. It is located within a complex of electric generation facilities owned by NRG Texas Power. The Cedar Bayou Plant is operated by NRG Cedar Bayou in accordance with a Joint Ownership Agreement. The energy generated by the Cedar Bayou Plant is sold on behalf of Cedar Bayou and NRG Texas as joint owners on a short-term basis into the Texas power market through a scheduling and dispatch agreement with NRG Texas.