Edison Mission Energy, the unregulated generating unit of Edison International (EIX:US), filed for bankruptcy and said it reached agreement on a reorganization plan with its parent and holders of its $3.7 billion in debt.
Under the agreement, Edison International will transfer its stake in Edison Mission Energy to unsecured creditors, the unit said in a statement today. The Santa Ana, California-based company listed $5.13 billion in assets and $5.09 billion in liabilities in Chapter 11 papers filed today in U.S. Bankruptcy Court in Chicago.
Edison Mission Energy President Pedro Pizarro said the agreement is a first step in enhancing the unit’s liquidity. The company has been challenged by high fuel costs and depressed energy and capacity prices, according to the statement. Subsidiaries including Midwest Generation also filed for Chapter 11 bankruptcy protection.
The companies “have been hit by a sea change in the power market’s competitive landscape, dramatically higher environmental capital expenditure requirements, and debt payment maturities that have severely limited the debtors’ ability to compete effectively,” Maria Rigatti, Edison Mission’s chief financial officer, said in court papers.
Edison Mission sells the electricity it generates in competitive wholesale power markets where the prices aren’t set by regulators.
Edison Mission Energy’s largest unsecured creditors listed in court papers hold $1.24 billion in 7 percent senior notes due in 2017 and $834 million in 7.2 percent senior notes due in 2019, under trustee Wells Fargo Bank NA.
Edison International will record a $1.5 billion charge during the fourth quarter as a result of its unregulated unit’s bankruptcy, the company said today in a filing with the U.S. Securities and Exchange Commission.
The bankruptcy isn’t expected to have a “material adverse effect” on Edison International since the unit hasn’t been making dividend payments to the parent company because of its operating losses and excessive debt, Hugh Wynne, a utility analyst for Sanford C. Bernstein & Co., wrote in a research note today.
Southern California Edison, another Edison International unit, is California’s second-largest utility, providing power to 14 million people, according to the company’s website. PG&E Corp. (PCG:US), based in San Francisco, owns California’s largest electric utility.
The case is In re Edison Mission Energy, 12-49219, U.S. Bankruptcy Court, Northern District of Illinois (Chicago).
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