AES Coal Power Plants in New York State File for Bankruptcy

AES Corp. (AES) units that either own or
lease six coal-fired power plants in New York state sought
bankruptcy court protection, citing the depressed economic
environment for the electric power industry.

AES Eastern Energy LP and 13 other AES affiliates listed as
much as $1 billion in debt in Chapter 11 filings yesterday in
U.S. Bankruptcy Court in Delaware. AES Eastern listed $100
million to $500 million in assets.

The units want to sell or transfer their only two plants in
active operation, in Cayuga and Somerset, as part of a
settlement with certificate holders, Peter Norgeot, president of
AES NY, said in a court filing.

“The debtors are out of options,” Norgeot said in the
filing. “After vigorously marketing their assets for almost a
year and soliciting 58 potential buyers/investors, it is
abundantly clear that, in the current economic environment and
with the debtors complicated leveraged lease structure, an out-
of-court restructuring sale is not possible.”

Moody’s Investors Service in July lowered its rating of AES
Eastern because competitors with gas-fired plants were
benefiting from low natural gas prices while AES’s operating
costs had risen as a consequence of higher coal prices. AES
Corp. had already written its interest in AES Eastern down to
zero and was looking for a buyer, Moody’s said at the time.

Fitch Downgraded Debt

Fitch Ratings on Dec. 20 downgraded $433.1 million in debt
serviced by cash flow from AES Eastern, saying that it was
likely to default on a lease payment due Jan. 3. Two of the
unit’s power plants, Somerset and Cayuga, have run at lower than
projected capacity this year because of “eroded energy
margins,” Fitch said.

The parent company had indicated it wouldn’t make loans or
provide equity to help AES Eastern to make payments, Fitch said
in the Dec. 20 report.

Rich Bulger, a spokesman for Arlington, Virginia-based AES,
didn’t immediately return a call to his office seeking comment
on the filings after regular business hours yesterday.

The case is In re AES Eastern Energy LP, 11-14138, U.S.
Bankruptcy Court
, District of Delaware.

To contact the reporter on this story:
Edvard Pettersson in Los Angeles at
epettersson@bloomberg.net

To contact the editor responsible for this story:
John Pickering at
jpickering@bloomberg.net

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