Bankrupt electric co-op files reorganization plan
BILLINGS, Mont. (AP) — The trustee for the bankrupt Southern Montana Electric Generation and Transmission Cooperative has filed a reorganization plan that calls for keeping the electricity wholesaler together by restructuring its debt and holding on to a 40-megawatt power plant near Great Falls.
Southern, composed of five rural cooperatives and the city of Great Falls, filed for bankruptcy in 2011 after contracting with PPL Montana for more power than it needed at high rates and trying to borrow $215 million to expand the gas-fired Highwood Generating Station to 250 megawatts.
The bankruptcy has prompted one of Southern's members, Yellowstone Valley Electric Cooperative, to file legal action seeking to break away and prompted two other members to file legal claims.
Southern's trustee, attorney Lee Freeman, of Livingston, filed the reorganization plan Friday in U.S. Bankruptcy Court, just hours before a midnight deadline. The co-op's members expressed initial skepticism but said they were still digesting the plan.
Freeman described the plan in court records as allowing Southern to continue operating by providing reasonable rates to its members for at least 10 years, while making significant payments to secured creditors and a distribution to unsecured creditors that is "equal to if not greater than" what they would receive if Southern was sold off.
Under the plan, Southern would enter a 10-year power supply agreement with Morgan Stanley Capital Group Inc. at market prices that are now at historic lows.
The new contract would replace the one it previously held with PPL, saving about $100 million. The savings would be used to charge its members lower rates and pay off the debts of the Highwood plant that Southern built for $85 million.
Southern also would continue owning the Highwood plant and have the option to sell it. The highest offer the trustee has received for the plant was $30 million.
Freeman recommended in a summary of the plan the parties accept it and he does not believe there is a better alternative.
"I think it is a pretty good plan," Freeman told the Billings Gazette Monday. "It doesn't give everybody everything they want, but it certainly represents a way to resolve these competing claims."
One of the co-op's members called the plan an incomplete document, while an attorney representing another said liquidating Southern might be the best approach.
"There is absolutely not enough information there to gauge or make any kind of serious assessment of this plan," Arleen Boyd of Fishtail, a board member of Beartooth Electric Cooperative, told the Great Falls Tribune. "It's missing so many pieces of key information."
Among the missing information: how much the Highwood plant is worth; whether Great Falls owes Southern Montana a penalty for losing customers after the city hiked its power rates; and how the wholesale co-op can continue operating with more than $400 million in claims against it.
The parties in the bankruptcy case will be able to ask questions about the reorganization plan at a March 26 hearing in Billings.
Digesting the trustee's plan will take a while, said David Dover, the Fergus Electric co-op's representative on the Southern Montana board.
"It's long and a lot of legal jargon," Dover told the Great Falls newspaper.
Doug James, a Billings attorney who represents the city of Great Falls, said he also was still studying Freeman's filings but added that members would have to evaluate whether liquidating Southern would be the best course.