Citing historically low electricity prices and an overall harsh business environment for power generators, Chicago-based Exelon Corp. filed Chapter 11 bankruptcy protections for Exelon Generation Texas Power LLC — a merchant generation unit Exelon owns in Texas.
The board of Exelon Generation Texas voted to pursue a two-part plan, according to a release from Exelon. The unit will continue to own and operate the 1,265 MW Handley Generating Station in Fort Worth, Texas, in exchange for a $60 million payment to the lenders.
Also, the lenders have agreed to exchange the debt they currently hold in Exelon Generation Texas other four plants for equity in the power plants, effectively taking ownership of these facilities, according to Exelon.
“Exelon Generation remains committed to working with all stakeholders to ensure the best outcome for our employees, customers, communities and shareholders,” according to Exelon.
A combination of forces, including flat demand, cheap natural gas and low renewable energy prices, are putting pressure on merchant generators, making it hard for them to recoup their costs.
According to a study by the Wilkinson Barker Knauer LLP law firm and the Power Research Group, merchant generation funded by private risk capital was once thought of as the future of power generation. Instead, the industry is facing the prospects of more bankruptcies and mergers to strengthen weaker companies.