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(Reuters) - Brazos Electric Power Cooperative is seeking an additional four months to maintain control of its bankruptcy case, saying that recently enacted laws aimed at mitigating the financial fallout of February’s winter storm in Texas have complicated its restructuring efforts.
In court papers filed on Monday, the co-op asked U.S. Bankruptcy Judge David Jones in Houston to extend its exclusive period to file a Chapter 11 plan through Oct. 27 and its corresponding period to solicit creditor votes for the plan through Dec. 28. A hearing on the motion has not yet been scheduled.
Brazos filed for bankruptcy in March after the winter storm that knocked out power for millions in Texas left it with a $2.1 billion bill from the state’s grid operator, the Electric Reliability Council of Texas (ERCOT). Brazos has disputed the bill.
Brazos, which is Texas’s largest and oldest electric co-op, says it needs to extend its exclusivity period in part because two laws recently signed by Texas Governor Greg Abbott have introduced new complications in the case. The laws enable co-ops like Brazos to use securitization financing to recover certain costs incurred as a result of the storm. But the co-op says that solution, under which co-ops could be kicked out of the market if they don’t pay the costs in full, could have devastating consequences for its members.
“Although the Debtor’s and its advisers’ analysis is ongoing, these laws appear to only compound the complexities of the Debtor’s case, raising potential hurdles to the Debtor’s ability to continue as a market participant in the ERCOT power region and complicating the Debtor’s restructuring strategy and ongoing plan negotiations,” Brazos said in Monday’s filing.
The co-op indicated in the motion that it may pursue “potential challenges related to” the new laws.
Brazos also noted that its restructuring is already more complicated than a typical commercial Chapter 11 case in light of its structure as a member-owned co-op.
The $2.1 billion bill from ERCOT for the seven days the storm lasted is nearly three times the co-op's total power cost from 2020, which was $774 million, according to court papers. For several days during the storm, ERCOT had set electricity prices at $9,000 per megawatt hour.
Brazos owes about $2 billion in funded debt and $340 million in trade debt. It is funding operations during the bankruptcy with the help of a $350 million loan provided by a J.P Morgan Chase Bank-led group of lenders.
The co-op's lead lawyer, Louis Strubeck, this week left Norton Rose Fulbright and joined O'Melveny & Myers.
The case is In re Brazos Electric Power Cooperative Inc, U.S. Bankruptcy Court, Southern District of Texas, No. 21-30725.
For Brazos: Louis Strubeck and Gregory Wilkes of O'Melveny & Myers
For ERCOT: Kevin Lippman of Munsch Hardt Kopf & Harr
Read more:
Brazos seeks approval of $350 million bankruptcy loan
Brazos Electric nets cash access but may seek outside financing for bankruptcy
Texas power cooperative files for bankruptcy, citing $1.8 billion grid debt
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