Judge rejects FirstEnergy’s plan to shed liabilities
Firm’s bankruptcy proposal collapses
FirstEnergy Corp. and its bankrupt subsidiary FirstEnergy Solutions hit a major snag in their plan to trade future environmental liabilities for several billion dollars to recapitalize the bankrupt power generation firm.
A federal bankruptcy judge called FirstEnergy Solutions’ restructuring plan “patently unconfirmable” because it includes broad releases from liability for Akron-based FirstEnergy Corp. The parent company is seeking a clean break from the underperforming coal and nuclear plants that plunged its subsidiary into Chapter 11 a year ago. It has also said that the settlement with FirstEnergy Solutions’ creditors depends on getting these releases.
A slew of government agencies objected to the deal, including the Pennsylvania Department of Environmental Protection, federal nuclear and environmental regulators, the Securities & Exchange Commission, the National Labor Relations Board and the U.S. Trustee assigned to the case.
“This scheme is an abuse of the bankruptcy system that would impermissibly allow the [FirstEnergy Corp.] to receive a major benefit of the bankruptcy process without having to be subject to any of its burdens and safeguards,” the DEP, EPA, NRC, and the state of Ohio wrote in a brief last week.
In its appeal to the court, the FirstEnergy Corp. said the releases are in line with what has been allowed in other bankruptcies and that some details should be ironed out at a later state in the process.
Judge Alan Koschik disagreed, ruling from the bench on Thursday that the releases included in the disclosure statement make the plan unconfirmable.
“This is a huge victory for consumers,” said Howard Learner, executive director of the Environmental Law and Policy Center and one of the attorneys representing environmental groups in the bankruptcy.
“The ball is in FirstEnergy’s and FirstEnergy Solutions’ court to provide a different approach that is legal, fair to consumers and doesn’t lead to environmental” burdens being left behind, he said.
FirstEnergy Solutions said on Thursday evening that it will revise its disclosure statement and refile it with the court.
“The company remains focused on a plan that will significantly strengthen its financial position and allow it to exit Chapter 11 in 2019,” CEO and president John Judge said in a statement.
The release did not give a timeline for the filing. It stressed that operations at the company’s power plants would not be impacted by the judge’s ruling.
The environmental legacy of coal assets such as the Bruce Mansfield coal power plant, the Hatfield’s Ferry coal waste landfill and the Little Blue Run coal ash impoundment hang in the balance, as does the nuclear decommissioning of the Beaver Valley power station.