Longview Files Chapter 11 Proceeding
The State Journal
30 August 2013
By Jim Ross - email
Longview Power, which operates the Longview power plant near
Morgantown, and some of its affiliates filed for Chapter 11
bankruptcy protection on Aug. 30 as Longview found itself unable
to make a payment on its financing package.
Last November, Electric Light and Power magazine found the
advanced supercritical pulverized coal plant to be the most
efficient coal-fired plant in the U.S. fleet in 2011. But the
company says a combination of poor construction and market
conditions have kept the plant from reaching its full operating
and financial potential.
The companies listed on the filing in U.S. Bankruptcy Court in
Delaware were Longview Power, Alternate Energy, Border Energy,
Coresco, Dana Mining Co. of Pennsylvania, Dana Mining Co.,
Longview Intermediate Holdings, Mepco Conveyor, Mepco Holdings,
Mepco Intermediate Holdings A, Mepco Intermediate Holdings, Mepco
and Shannopin Materials.
The company said it filed for bankruptcy protection because the
Longview plant "has been plagued by design, construction, and
equipment defects and failures … since Longview Power took
possession of the Power Facility in December 2011."
The plant has been able to run at only 68 percent capacity because
of numerous forced outages, extended planned outages and
generation derating, that is, when a plant operates at less than
its rated maximum capacity. The plant has had three forced outages
to address boiler tube leaks in the past four months alone, the
filing says.
Longview names Siemens Energy Inc., Foster Wheeler North America
Corp. and Kvaerner North American Construction as the contractors
who built the plant. Longview and the contractors are in
arbitration over the dispute, the filing says.
Longview Power also faces a debt of about $557 million that will
mature in February 2014, the filing says. Because of operational
issues, the company does not expect to satisfy its obligations
under the credit agreement.
The filing also says the company faced an interest payment due
Aug. 30. Also, a $59 million line of credit could be lost based on
a request made to the arbitration panel by the contractors.
Longview Power was formed in 2003 for the purpose of constructing
and operating the Longview power plant. Construction began in
2007. According to the bankruptcy filing, the plant used advanced
power generation technology to meet the highest environmental
standards and a supercritical pulverized coal-fired boiler to
generate electric power. When operational, the Longview plant is
one of the lowest cost coal-fired producers of power in the
regional power grid. Electricity produced by the plant is sold to
the grid in the day-ahead and real-time markets.
"The Contractors' Failures are the primary driver for the Debtors'
operational and balance sheet challenges," the filing says.
Siemens was to lead a team of engineering, procurement and
construction contractors and deliver the power plant by a
guaranteed completion date. The main piece of equipment was to be
the supercritical boiler designed by Foster Wheeler and a turbine
island, automated computerized controls and an air pollution
control system designed and supplies by Siemens. Kvaerner was to
build the power plant.
"The Debtors believe this project was fundamentally mismanaged,"
the filing says. Longview Power was not able to take over the
plant until December 2011 — approximately nine months after the
guaranteed completion date — and it had the operational problems.
"These issued have prevented Debtors from operating the Power
Facility at full capacity and from selling electricity on anything
other than a day-ahead basis, limiting the Debtors' sales and
ability to sell higher-margin electricity energy services, and
reducing the revenue stream from the Power Facility operations
while increasing volatility around their cash flows," the filing
says.
The filing also says wholesale electricity prices have fallen
significantly since construction began in 2007, in part because of
a recession that reduced electricity demand and in part because of
low-priced natural gas that came on the market when hydraulic
fracturing expanded.
In a news release issued Friday morning, Longview officials said
the businesses seeking protection "intend to operate their
businesses as they continue to negotiate a chapter 11 plan with
their lenders to de-risk their balance sheet."
"After careful consideration of available alternatives, the
Company determined that filing for Chapter 11 was a necessary and
prudent step that allows us to strengthen and operate our
businesses without interruption while continuing to restructure
the Company's balance sheet," Jeffery Keffer, CEO of Longview
Power, said in the statement. "The Company has been in consensual
negotiations with our senior lenders toward a Chapter 11 plan to
maximize value; those negotiations remain ongoing. We remain
confident that the Company and our lenders will reach an agreement
on the terms of a Chapter 11 plan in the near term."