A federal bankruptcy court has approved FirstEnergy Generation LLC's request to enter into a stalking horse agreement with Vermillion Power LLC tied to the sale of its 545-MW West Lorain gas-fired plant and related assets.
The FirstEnergy Solutions Corp. subsidiary in November agreed to sell the assets to Vermillion Power, an affiliate of Starwood Energy Group Global LLC, for $144 million in cash plus customary closing adjustments.
FirstEnergy Generation, along with FirstEnergy Solutions and affiliates, in late March filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court in the Northern District of Ohio.
As part of this reorganization process, FirstEnergy Generation asked the federal bankruptcy court for approval of auction and bid procedures that will allow other parties to submit bids for the West Lorain facility and related assets. If the auction does not yield better proposals, Starwood will acquire the facility, subject to customary conditions and approvals including that of the Federal Energy Regulatory Commission and under Hart-Scott-Rodino antitrust legislation.
The court approved the stalking horse agreement and bid procedures that include a bid deadline of Jan. 9, 2019, and auction date, if necessary, of Jan. 15, 2019. A sale hearing would be held Jan. 25, 2019.
"If the stalking horse purchaser's bid, as reflected in the stalking horse agreement, is determined by [FirstEnergy Generation], in its sole and absolute discretion ... to be the only qualified bid in respect of the West Lorain assets that is received by [FirstEnergy Generation] by the bid deadline, no auction will be conducted for the West Lorain assets and the stalking horse purchaser shall be deemed the successful bidder for the West Lorain assets," the court wrote in a Dec. 19 order.
The bid protections include a termination fee of 2.5% of the initial purchase price.