Legislators inform Talen bankruptcy | news

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Talen Energy tried to put its bankruptcy in the best possible light at a meeting Thursday with Montana lawmakers about the importance of the company’s restructuring for the Colstrip power plant.

In a hearing that lasted about an hour, Debra L. Raggio, Talen’s senior vice president, asserted that the bankruptcy would be good for the state’s largest power plant and would not negatively impact environmental cleanup or employees’ pensions tied to Colstrip.

Raggio described the decision by several of Talen’s core creditors to swap $1.4 billion of unsecured debt for property as an investment in a company creditors believe in. There will be no change in the way Talen works, she said.

“Talen will have owners but the reason they are investing in this company is because they believe in the plan that we showed them and the business plan and the way we work. It won’t be a brand new approach,” Raggio told the Energy Telecommunication Interim Committee in a livestreamed hearing. “It’s not going to be a brand new approach there. To my knowledge, there is no desire to sell assets or change things significantly after showing up. We can’t predict what’s going to happen, but given that they want to participate, having heard the plans and our assets and how we’re structuring and how we’re running things, I’m at least confident that things won’t turn out that way will change a lot.

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Talen’s debts total approximately $4.5 billion. In its May 9 bankruptcy filing, the Texas-based company said its seven coal-fired power plants have become unprofitable in markets where electricity from gas-fired generators and renewable energy sources is cheaper. The company’s bankruptcy counsel informed the US Bankruptcy Court for the Texas Southern District that Talen plans to eliminate coal at its wholly-owned assets, which do not include Colstrip.

The Montana Department of Environmental Quality said Thursday that Talen’s clean-up bond would be in place to cover the company’s share of environmental costs should the state default on cleaning up the plant’s toxic coal ash ponds, which costs hundreds of millions of dollars.

But last year, DEQ also slashed the $122 million on the redevelopment bond for the Colstrip ash ponds that feed the now-closed Units 1 and 2 power plants. DEQ has approved the upfront payment requirements for the refurbishment of the nearly 50-year-old power plant complex on the assumption that more money could be raised later. Talen negotiated the bond over 11 months in 2021, eight of which occurred after it hired a bankruptcy counsel, according to court filings, said Anne Hedges of the Montana Environmental Information Center.

“They keep telling us, ‘Don’t worry, we have the option to add one year or five year increases to Talen’s bond issue if nothing else,'” Hedges told lawmakers. “Well, what happens when a company just doesn’t have the money? What if the company doesn’t exist? We’ve seen companies in this state that no longer exist that actually owe debts for cleaning facilities held under lock and key by DEQ.

“We don’t want that to happen. Because what would happen is that the rest of the owners would have to pick up Talen’s share. And do you know who the other owners are? A part of them, that’s us. They’re customers of NorthWestern Energy,” Hedges said.

NorthWestern, the largest monopoly utility in Montana, owns a 30% interest in Colstrip Unit 4, a double interest of Talen’s 30% interest in Unit 3 in the state. The other owners are PacifiCorp and Portland General Electric of Oregon and Puget Sound Energy and Avista Corp of Washington.

In a separate lawsuit against Talen’s Colstrip predecessor, PPL Corp, Talen alleges that PPL falsely took $733 million of the net proceeds from the sale of PPL’s ​​hydroelectric power plants in Montana before it spun off its coal-fired power plant properties to Talen Montana in 2015.

Talen alleges that PPL’s ​​actions have left the current operator and co-owner of the Colstrip power station “unable to fund its significant obligations both for environmental cleanup and obligations to other creditors such as the pension plan of its employees and former employees.”

Raggio told lawmakers that a report for the most recent quarter showed the pension was 94% funded.

On Wednesday, Talen Energy told the Lee Montana newspapers that Talen expects to have the pension fully funded by the end of 2025.

Earlier in the week, former and current Colstrip employees received letters from Talen CEO Alex Hernandez addressing how the bankruptcy of Talen Energy Supply and its subsidiaries would affect pensions. Hernandez informed employees that pension fund payments would continue during the bankruptcy.

Court filings show that Talen sought approval to provisionally spend up to $14.7 million to service its Colstrip co-ownership obligations, including pension and payroll obligations, during the bankruptcy. He noted that the US Pension Benefit Guaranty Corporation, a federal agency that bails out ailing personal pensions, is available as a replacement.

In the same letter, non-union workers were told that lump sum payments during bankruptcy were not an option. Talen clarified to Lee that the lump sum suspension applied to employees other than Colstrip who had no option.

Raggio said Colstrip’s expenses would be among those covered by $1.7 billion in debt financing the company had secured to cover costs during the bankruptcy.

The mostly cordial hearing flared up shortly after Raggio was asked by Chairwoman Mary McNally, a Billings Democrat, to comment on the recent Colstrip Unit 3 outage.

“Unit 3 is not down. Block 3 is running. Unit 4 has a maintenance outage, but only routine maintenance, but Unit 3 is actively running,” Raggio said.

Sen. McNally replied, “OK, thanks. I just heard that in here.” Then Raggio interrupted her.

“I’ve heard a lot of things and I want to correct them, but you know,” Raggio said.

A few minutes later, Rep. Denise Hayman, a Bozeman Democrat, revisited the issue of Unit 3’s operations.

“Just to be perfectly clear, three were down and it went live today, is that correct?” said Haymann.

Raggio replied that it may have gone online a day early.

“I think we’re splitting hairs here,” Hayman said. “It’s run down. Right?”

Raggio replied, “It was down, Rep Hayman.”

The exciter servicing the generator at Unit 3 of the power plant needs repairs, which will most likely need to be done in North Carolina.

Two of the plant’s other owners, both with interests in Unit 3, had confirmed to Lee Montana last week that the repairs required for Unit 3 had impacted Colstrip’s performance for several weeks. Repair costs, including the exciter, are expected to be significant, which is no small feat considering the power plant’s six owners have been at odds over Colstrip’s maintenance costs for several years, with most owners looking to spend less than Talen, as the power plant operator , has requested.

A letter of evidence was produced on Thursday showing that Colstrip owners, who together own a 70% stake in the power plant, had learned of Talen’s financial problems through the news and wanted to know why Talen hadn’t told them.

“Talen’s failure to report material changes in its financial condition conflicts with its fiduciary duties as an operator and increases concerns about Talen’s ability to continue in that role,” the owner wrote. Portland General Electric plant co-owners Avista Corp., PacifiCorp and Puget Sound Energy issued the letter.

The four owners continued that Talen’s actions impacted their ability to make decisions about the safe and compliant operation of Colstrip and jeopardized the continued operation of the units. The letter was issued on April 12, almost a month before Talen filed for bankruptcy.

Relations between Talen and the majority owners of Colstrip have been strained for a number of years due to disagreements over maintenance spending. In 2021, Talen persuaded lawmakers to pass legislation authorizing the Montana Attorney General to dictate repairs and impose daily fines of $100,000 on any colstrip owner who fails to comply.

Most of Colstrip’s electricity is consumed in Washington and Oregon, where climate change laws dictate that utilities must begin removing coal from customer supplies by 2025. Colstrip owners in these states have objected to costly repairs that benefit the operation of the facility after their exit.

A lawmaker in 2021 likened the scenario to a divorce where “the Pacific Northwest owners trashed the house and locked the car on the way to the door.”

Another law sponsored by Talen requires all Colstrip arbitrations to take place in Montana, overriding the arbitration terms of Colstrip’s ownership and operating agreement. With both pieces of legislation, the state of Montana seeks to override the private business contract that has governed the power plant for nearly 40 years. The owners and the state are now locked in legal battles over the new laws.

The only owner who did not sign the letter requesting information about Talen’s financial woes was NorthWestern Energy, the largest monopoly utility in Montana and a 30 percent shareholder of Unit 4.

In an April 29 earnings call, NorthWestern President Brian Bird said the utility did not expect Talen’s financial woes to hurt Colstrip.

“I would say we have been in touch with Talen and are considering the implications. I think make sure it’s clear that Talen owns Unit 3. We are the owners of unit 4. However we have a mutual sharing agreement between the two units however how this insolvency could affect operations at the facility they are the operator. We are definitely keeping our eyes peeled at this time and do not believe this will impact the operations of the facility,” said Bird.

On Thursday, McNally said he had called the situation at Colstrip unsustainable and asked Talen for an assurance he would communicate with the other plant owners.

“I can promise that we will keep in touch with the co-owners as much as possible and I would like to ask them to do the same with us,” Raggio said.

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