Thursday, August 2, 2012

Bankruptcy Could Shutter 13.5% of Illinois’ Power Generating Capacity

Three months ago executives at Midwest Generation, operator of six coal fired electric power generating plants in Illinois, announced they were closing two of the plants in Chicago, as part of an environmental deal to avoid expensive stack gas cleaning installations at the creaky old facilities at the Fisk and Crawford plants. Earlier this week the same executives said they may not be able to keep their other four Illinois coal fired plants open, as low natural gas prices and resulting low rates for electricity threaten the company with bankruptcy.

Closing of the Fisk and Crawford plants as the company has agreed to do will put about 180 employees out of work. The six Midwest Generation plants provide electricity to power 5 million homes in the state, but the grid operator is obligated to keep supplying electricity to those customers even if all six plants are shuttered. Nevertheless, closing all six plants would throw 1,000 people out of work, and shut down 13.55 of the total power generation capacity in Illinois.

Midwest Generation’s parent Edison International says it will not provide financial support for Midwest. If Midwest filed for bankruptcy, as it is threatening to do, its bondholders would have to decide whether to keep the remaining plants in Romeoville, Joliet, Waukegan and Pekin open for business, by funding environmental upgrades Midwest does not have the cash to pay for, sell them, if a buyer could be found, or shut them down and abandon them. In any event, Midwest predicts it will default on a half billion dollar debt repayment due next June.

Company officials are in negotiations to restructure $3.7 billion in unsecured debt in order to avoid bankruptcy. Analysts predict Midwest’s cash flows will remain negative until at least 2016 without a sharp upturn in utility rates. Parent Edison International’s profits are down 46% from a year ago.

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