MORGANTOWN — Longview Power LLC announced Tuesday that it has filed for Chapter 11 bankruptcy protection under a prepackaged reorganization plan “as a result of substantially lessened demand for electricity due to long term power-pricing pressure caused by cheap natural gas, an unseasonably warm winter, and the COVID-19 pandemic and resulting economic impact, which collectively have severely depressed power prices.”
Longview said it will continue operations as it works to restructure its balance sheet.
Longview CEO Jeff Keffer said in the announcement that the company plans no staffing changes and expects to keep paying vendors in the ordinary course of business.
The company also does not anticipate any changes in its plans to develop new gas-fired and solar plants adjacent to the existing plant, he said, as those projects are not included in the Chapter 11 filing.
Longview said that more than 85% in interest of the company’s senior secured lenders support the prepackaged Chapter 11 reorganization plan, which will substantially lessen the cost and time required for the restructuring.
Asked by The Dominon Post about a likely timeline, Keffersaid, “Since this a prepackaged Chapter 11 reorganization with 90% approval of the lenders who must approve it, we expect that the bankruptcy process will be completed sometime between June and August.”
Longview expanded on its reasoning for the filing in its announcement: “The current unprecedented low energy prices in PJM [the regional power grid transmission organization] has prompted Longview to take this step to facilitate the efficient transition of ownership to its senior secured lenders through a restructuring and deleveraging of its balance sheet to eliminate its now unsustainable debt burden, and through the plan Longview will enter into a $40 million new money exit facility. Longview’s reorganization plan provides for the continued payment of all vendors in the ordinary course of business.”
Thompson Reuters Practical law explains exit financing this way: “The financing provided to Chapter 11 debtors to allow them to emerge from bankruptcy. … Reorganized debtors use exit financing to pay creditors’ claims under the plan and to fund their ongoing operations after bankruptcy.”
Keffer said this exit facility will be a $40 million term loan with a five year maturity.
Speaking on the bankruptcy, Keffer said, “This filing is unfortunate but necessary given the current depressed power prices, which have further dropped more recently due to the terrible COVID-19 pandemic sweeping the nation and dramatic effects of the pandemic on the economy. We are fortunate to have strong support from our senior secured lenders who under the plan will become our owners and provide needed financing.”
Longview and certain affiliates previously underwent Chapter 11 in 2013. At the time it said construction defects and failures prevented it from operating at its designed capacity.
The Dominion Post asked Keffer about the demand factors that influenced both the decision to file for Chapter 11 and to continue pursuing the two new projects (where increased demand fueled by retirements of coal-fired plants played a role).
He said, “There are a number of factors that are likely to affect load (demand) in PJM including retirements of older coal plants, which are expected to accelerate given the current market, and the decrease in natural gas drilling and production which is also accelerating due to the glut of natural gas in the market and the reduction in output from existing wells as well as the slowdown in oil production where natural gas is a byproduct.
“In addition,” he said, “it is important to note that two years ago when there was a polar vortex event in the PJM area demand was significantly higher and energy prices were more than three times the prices this past winter. All of these factors would support the kind of advanced technology, low cost facilities that Longview is developing.
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