(Bloomberg) — Lincoln Power LLC, the owner of two Illinois power plants, filed for bankruptcy after its financial strain was exacerbated by nearly $39 million in penalties levied by the biggest US electric-grid operator.
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The Chapter 11 filing allows Lincoln, a unit of Carlyle Group-backed Cogentrix Energy Power Management LLC, to keep operating while working on a plan to repay creditors.
PJM Interconnection LLC, which runs the grid that stretches from Washington to Chicago, fined Lincoln after its plants in Elgin and East Dundee, Illinois, failed to generate enough power during a severe winter storm in December. The grid operator in February demanded that those plants provide millions of dollars in collateral to prove Lincoln’s continued creditworthiness, according to bankruptcy court filings.
Ensuing negotiations resulted in PJM withholding a combined $350,000 from the plants each week.
Lincoln isn’t the only company facing the penalties PJM put in place to hold plants accountable for failing to show up in emergencies. The grid operator estimates that these fines may reach $2 billion after widespread power-plant failures during the December storm. PJM has also asked federal regulators to give companies that are at risk of bankruptcy more time to pay these fines.
Read More: Biggest US Grid Saw 23% of Power Plants Fail in Recent Storm
Both Lincoln plants also filed for Chapter 11 protections, but are expected to still remain operational through the bankruptcy, said Jeff Ingraham, chief operating officer of Cogentrix.
The storm penalties and the cash withheld weighed on the company’s already-strained finances, Justin Pugh, Lincoln’s chief restructuring officer, said in a sworn court statement.
“As a result of these factors, the debtors’ debt load is simply no longer workable,” he said.
The company owes lenders more than $150 million across a term loan and revolving credit facility, court papers show. It also has about $8 million in letters of credit outstanding.
“PJM has been working with our members over the last several months to minimize member defaults,” the grid operator said in a statement.
The case is Lincoln Power LLC, 23-10382, US Bankruptcy Court for the District of Delaware.
–With assistance from Steven Church.
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Source: finance.yahoo.com