NRG Energy said in its Nov. 4 quarterly Form 10-Q financial report that it is looking at options, including bankruptcy, for its GenOn Energy affiliate, which operates mostly capacity in the mid-Atlantic region.
NRG said that $703 million of GenOn's Senior Notes outstanding are current within the GenOn consolidated balance sheet and are due on June 15, 2017. "GenOn's future profitability continues to be adversely affected by (i) a sustained decline in natural gas prices and its resulting effect on wholesale power prices and capacity prices, and (ii) the inability of GenOn Mid-Atlantic and REMA to make distributions of cash and certain other restricted payments to GenOn," said NRG. "Based on current projections, GenOn is not expected to have sufficient liquidity to repay the senior notes due in June 2017. As a result of these factors, there is no assurance GenOn will continue as a going concern."
NRG added: "GenOn is currently considering all options available to it, including negotiations with creditors and lessors, refinancing the senior notes, potential sales of certain generating assets as well as the possibility for a need to file for protection under Chapter 11 of the U.S. Bankruptcy Code. During the second quarter of 2016, GenOn appointed two independent directors as part of this process. Any resolution may have a material impact on the Company's statement of operations, cash flows and financial position."
NRG noted that on Oct. 7, GenOn's corporate credit rating was lowered by Moody's from Caa2 to Caa3 and its probability of default rating was lowered from Caa2-PD to Caa3-PD. In addition, Moody's also lowered the ratings of NRG REMA and GenOn Mid-Atlantic's pass through certificates to Caa1 from B2.
NRG said that it has no obligation to provide any financial support to GenOn other than under the secured intercompany revolving credit agreement between it and GenOn and NRG Americas. The Form 10-Q added: "The Company cannot assure you that GenOn’s inability to continue as a going concern will not have a material impact on the Company's statement of operations, cash flows and financial position including, among other things, if GenOn were to file for bankruptcy protection."
GenOn Mid-Atlantic covers coal generation units at two power plants—Dickerson and Morgantown in Maryland - under operating leases. NRG REMA leases a 100 percent interest in the Shawville generating facility and 16.7 percent and 16.5 percent interests in the coal-fired Keystone and Conemaugh generating facilities, respectively.
Notable is that the 597 MW Shawville Units 1-4 are undergoing a coal-to-gas conversion, with a commercial operation start on gas due in the fourth quarter of this year.