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Judge approves Murray Energy contract settlement with FirstEnergy Solutions, FirstEnergy Generation

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Judge approves Murray Energy contract settlement with FirstEnergy Solutions, FirstEnergy Generation

Louisville, Kentucky — A federal bankruptcy judge this week approved, "in its entirety," an agreement between Ohio-based Murray Energy and bankrupt FirstEnergy Solutions/FirstEnergy Generation to settle the privately owned coal company's $3.1 billion damage claim against the FirstEnergy subsidiaries.

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The Wednesday ruling by Judge Alan Koschik of the US Bankruptcy Court for the Northern District of Ohio formalizes the deal entered into about a month ago by the companies.

After filing for Chapter 11 bankruptcy reorganization on March 31, FES/FG asked the court to reject a longstanding coal contract under which Murray was to deliver 6.5 million st/year of Northern Appalachian coal to them through 2028. The coal was committed to the 2,490-MW Bruce Mansfield power plant near Shippingport, Pennsylvania, and the 1,490-MW Sammis generating station in southern Ohio.

Koschik denied the FES/FG request in October, even though the companies argued they needed far less coal to supply the power plants going forward. In late August, FES notified regional grid operator PJM Interconnection that it intends to deactivate Mansfield by June 1, 2021, and the Sammis coal units by June 1, 2022.

The denial set the stage for a negotiated settlement between Murray and FES/FG.

The judge said the agreement "shall be fully binding on and effective as to each and all of the parties thereto. If there is any direct conflict between the terms of the settlement agreement and the terms of this order, the terms of this order shall control solely to the extent of such conflict."

Koschik added he intends to retain jurisdiction over "all matters arising from or related to the implementation of this order" until a Chapter 11 plan is confirmed for FES/FG, likely in 2019.

Under the settlement, Murray will continue to supply an undisclosed amount of coal to FES/FG through 2019. Murray also will continue to dispose of coal combustion waste created by the burning of coal at Mansfield essentially at cost.

Murray spokesman Jason Witt declined comment on the final court ruling Thursday.

-- Bob Matyi, newsdesk@spglobal.com