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June 23, 2022 – Further to the Court's May 6th bidding procedure order [Docket No. 136] and an auction held on June 22, 2022, the Debtor notified the Court that stalking horse Rockland Capital, LLC (“Rockland”) had been selected as the successful bidder ($144.75mn purchase price), with LS Power Equity Advisors, LLC (“LS Power”) chosen as the back-up bidder ($144.5mn bid) for their assets [Docket No. 249]. A revised Rockland asset purchase agreement (“APA”) is yet to be filed, although their earlier stalking horse APA is attached as Exhibit C to the Debtor's bidding procedure motion [Docket No.7]. The sale hearing is set for June 27th.
Highlighting what was a considerable advancement on Rockland's $91.25mn stalking horse bid, the Debtor's notice provides: "At the conclusion of the Auction, and after consultation with the Consultation Parties, the Debtor selected Rockland as the successful bidder (the “Successful Bidder”). The terms of the Successful Bidder’s bid, pursuant to which it has agreed to purchase the Acquired Assets for, among other consideration, a purchase price of $144,750,000 ($141,556,000 after application of a $3,194,000 Break-Up Fee credit) plus up to an additional $2,700,000 in potential Incentive Consideration, are set forth on the record at the Auction and in the Asset Purchase Agreement to be executed between the Debtor and the Successful Bidder (the 'Rockland APA')…the Debtor selected LS Power as the backup bidder (the “Backup Bidder”) for a purchase price of $144,500,000 plus up to $2,700,000 of Incentive Consideration, as set forth on the record at the Auction."
On April 11, 2022, Ector County Energy Center LLC (“ECEC” or the “Debtor”) filed for Chapter 11 protection noting estimated assets between $50.0mn and $100.0mn; and estimated liabilities between $100.0mn and $500.0mn. At filing, the Odessa, Texas owner/operator of a "peaker*" power plant, cited lawsuits stemming from winter storm Uri (see "Events" below) as forcing it to seek bankruptcy shelter. The Debtor's ultimate parent is Invenergy which with its "affiliated companies have successfully developed more than 30,000 megawatts of projects that are in operation, construction or contracted, including wind, solar, and natural gas power generation and advanced energy storage projects." Invenergy launched the Debtor's facility in November 2015.
*Peaker plants are power plants designed to balance the fluctuating power requirement in the electricity network and operate during periods of high level demand for electricity or shortfalls of electricity supply, such as during periods of extreme heat when air conditioning causes electricity usage to reach its highest levels.
On May 6th, the Court hearing the Ector County Energy Center case issued an order (i) authorizing the Debtor to enter into a stalking horse asset purchase agreement with Ector County Generation LLC, an acquisition entity affiliated with Rockland Capital, LLC ($91.25mn opening bid), (ii) approving the bidding procedures for the sale of the Debtor’s 330 MW natural gas-fired generating facility (the “Sale”), including bidder protections for the Stalking Horse Bidder (iii) approving a 3% Break-Up Fee and 1% Reduced Break-Up Fee (detailed below) and (iv) approving an auction/sale timetable culminating in a June 22, 2022 auction and June 27, 2022 sale hearing [Docket No. 136].
We recently saw Rockland Capital, LLC serve as a stalking horse for another holder of peaker assets (Agilon Energy, still in bankruptcy), with Rockland Capital failing to win that auction contest, but walking away with a $2.6mn break-up fee for its efforts.
In October 2021, Rockland announced that one of its funds has acquired 100% of the interests in two other Texas peaking plants via an affiliate named Texas Peaker Power, from an affiliate of JDH Capital Company. The 100 MW nameplate natural gas-fired simple cycle power plants, Chamon and Port Comfort, are located in Houston and Point Comfort, Texas, respectively. Commenting at the time, Rockland's Scott Harlan, stated: "The assets also complement Rockland’s existing ERCOT portfolio, allowing us to realize operating efficiencies across our growing ERCOT peaker fleet.”
In a declaration in support of the motion [Docket No. 8], the Debtor’s Investment Banker, Alexander Svoyskiy states, “Starting on December 1, 2021, PWP initiated a broad marketing outreach to a large group of potential buyers, comprised of strategic investors already operating in the power production industry, participants in related industries potentially interested in vertical integration, hedge funds, private equity funds, energy traders and other potential buyers. The list of these potential buyers was developed by PWP, based upon its significant experience in the energy industry and expertise in the sale of power assets similar to those in this case, as well as PWP’s knowledge of potential buyers who may have an interest in the Debtor’s business. In aggregate, PWP contacted over one hundred and three (103) potentially interested parties. In response to the PWP marketing and outreach efforts, thirty five (35) prospective bidders executed a non-disclosure agreement and gained access to a data room containing diligence information on the Debtor’s business. On February 4, 2022, PWP received several binding bids to acquire the Debtor’s business, while several additional parties indicated their interest in participating in a post-petition overbid process.
PWP presented the bids to ECEC’s management and the Special Committee of the Board of Managers (the ‘Special Committee’) of Invenergy AMPCI Thermal Power LLC, which has been designated with the corporate authority to make all decisions affecting the business and operations of, and take all actions deemed necessary, appropriate or advisable on behalf of, the Debtor. ECEC, in consultation with its advisors, analyzed all of the binding bids received and selected the bid submitted by Ector County Generation LLC, an acquisition entity affiliated with Rockland Capital, LLC (the ‘Stalking Horse Bidder’) as the most favorable for the Debtor and its creditors to be the stalking horse bid. In evaluating the bids received, the Debtor analyzed, among other things: (i) the form and amount of consideration offered; (ii) each bidder’s ability to close; (iii) the structure of the proposed transaction; (iv) the proposed timeline; and (v) any execution or other risks. The Debtor also consulted with certain key stakeholders before and after the stalking horse bids were submitted.
Ultimately, through extensive and good faith negotiations, the parties reached an agreement that is set forth in the Asset Purchase Agreement (the ‘Stalking Horse APA’) currently before this Court, pursuant to which the Stalking Horse Bidder would acquire substantially all of the Debtor’s assets for a purchase price of $91,250,000 (the ‘Stalking Horse Bid Amount’), subject to various potential adjustments set forth in the Stalking Horse APA, including a working capital adjustment and an additional $2.7 million in ‘Incentive Consideration’ that are collectively projected to increase the sale price to as much as approximately $95 million.
….PWP has generated significant interest among potential purchasers. PWP will continue to aggressively pursue these efforts through the Bid Deadline, and through the date of the Auction to the extent that one or more Qualified Bids is received.”
About the Debtor
According to the Baumgartner Declaration: “The Debtor is in the business of owning and operating a 330 MW natural gas-fired electricity-generating facility (‘Power Plant’) located on 32.5 acres of Debtor-owned land in Ector County, Texas, just outside of Odessa, that is part of the Permian Basin. The Debtor dispatches energy generated by its two natural gas fueled simple-cycle combustion turbines and related balance of plant equipment, all designed to enable the Power Plant to generate energy and respond quickly at times when demand is ‘peaking’ and the market requires additional power supply.
ECEC is licensed as a ‘power generating company’ by the Public Utilities Commission of Texas or ‘PUCT,’ and is a participant in the competitive wholesale electricity market operated by the Electric Reliability Council of Texas (‘ERCOT’) as a ‘Qualified Scheduling Entity’ ('QSE'). The Power Plant was placed in service on or about September 28, 2015 and has maintained ordinary course peakerFN operations since then, with one notable exception, during the extraordinary and prolonged cold weather event that occurred in February 2021 referred to as ‘Winter Storm Uri’.”
FN Peaker plants are power plants designed to balance the fluctuating power requirement in the electricity network and operate during periods of high level demand for electricity or shortfalls of electricity supply, such as during periods of extreme heat when air conditioning causes electricity usage to reach its highest levels.
About Rockland Capital
Rockland Capital (www.rocklandcapital.com) is a private equity company that was formed in early 2003 in order to acquire and develop selected investment opportunities in power and energy infrastructure markets. Rockland is currently investing Rockland Power Partners III, LP, a $454 million private equity fund with investors that include U.S. endowments and foundations, funds of funds, pension plans and family offices. The firm also manages Rockland PJM Partners, LP, a $200 million private equity fund, Rockland Power Partners II, LP, a $425 million fund, and Rockland Power Partners, LP, a $333 million fund. Investments have been located throughout the United States and the United Kingdom, ranging from 1,875 MW to 5 MW, fueled by natural gas, coal, biomass, oil, energy storage, wind and solar power.
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