Brazos Electric Power Cooperative Inc.
UPDATE 3: Updated Brazos DIP Budget Estimates $440M Liquidity at June 17
Wed 04/06/2022 13:48 PM
UPDATE 3: 1:48 p.m. ET 4/6/2022: Brazos Electric Power Cooperative Inc. today filed a further revised DIP budget for the 13-week period ending June 17, with liquidity projected at $440.4 million at the end of the forecast period. The new budget is shown below.
UPDATE 2: Brazos’ New 13-Week Budget Projects $377M in Liquidity as of Jan 21, 2022
UPDATE 2: 7:34 a.m. ET 11/5/2021: On Thursday evening, Nov. 4, debtor Brazos Electric Power Cooperative Inc. filed a further revised DIP budget over a 13-week period ending Jan. 21, 2022, with liquidity projected at $377 million at that time. The new budget is shown below.
UPDATE 1: Brazos Files Updated 13-Week Cash Flow Forecast
UPDATE 1: 11:52 a.m. ET 8/11/2021: This morning, debtor Brazos Electric Power Cooperative Inc. filed a revised DIP budget showing the debtor’s current 13-week cash flow forecast. The updated cash flow forecast is as follows:
The debtor’s initial DIP budget was attached as Exhibit 2 to the interim DIP order.
Original Story 1:50 p.m. UTC on June 11, 2021
Judge Jones Approves Brazos’ $350M DIP on Final Basis, Leaves Conflict of Interest Concerns for Another Day; Brazos Pushing Governor to Veto HB 4492 and SB 1580
Relevant Documents:
Agenda
Order
Judge David Jones approved the Brazos Electric debtor’s $350 million DIP facility on a final basis at an uncontested hearing this morning. Referring to responses filed by various parties flagging ongoing conflict of interest concerns surrounding the debtor’s cooperative structure, Judge Jones remarked, “I know this issue is out there,” adding that he hopes “we’re all looking for a solution” that keeps at the forefront the cooperative’s end-user customers’ need for affordable power. Judge Jones said that he would address the alleged conflicts of interest if and when a party files a pleading seeking specific relief.
The parties to raise conflict of interest issues in their DIP responses included the official committee of unsecured creditors, supplier Tenaska Marketing Ventures (joined by Tenaska Power Services) and NJR Energy Services, which says it has an approximately $26 million administrative expense claim against the debtor. Tenaska Marketing’s statement suggested that appointment of an examiner or a chapter 11 trustee may be the only way for Brazos to deal with the alleged conflicts. Judge Jones reassured the parties that he had read their papers and did not need for them to reiterate their conflicts-related concerns; as a result, none of the responding parties pressed their conflict narratives at today’s hearing.
The bulk of the hearing focused on the Brazos debtor’s concerns over Texas securitization bills HB 4492 and SB 1580 and their potentially “devastating” consequences for Brazos if they are signed into law. Brazos counsel Louis Strubeck of Norton Rose said the Brazos team has urged Gov. Greg Abbot to veto the bills, which have been passed by the Texas Legislature and now await the governor’s action. Strubeck said the bills each contain language that could have the effect of excluding Brazos from the ERCOT market if it is unable to pay Storm Uri-related charges, which he said would be unilaterally determined and assessed by ERCOT under the bills.
Strubeck began the hearing with an operational and legislative status update, in keeping with prior hearings in the Brazos case. Operationally, he said, Brazos is “in a very good place,” noting that interim DIP approval in May alleviated liquidity concerns of several “reluctant” potential counterparties, which “almost immediately engaged” with Brazos upon its receipt of interim DIP access.
Strubeck next turned to the status of HB 4492 and SB 1580, the two Texas securitization bills he said Brazos is most closely following. Strubeck said that the two bills now on the governor’s desk each contain “significant” changes to earlier iterations. According to Strubeck, those revisions would likely have “serious consequences” for Brazos if signed into law. Specifically, Strubeck said both bills contain language that would make ERCOT market participants such as Brazos susceptible to being “kicked out” as market participants if they are unable to “promptly pay” assessed charges. This would be a “devastating” consequence for Brazos and its customers, said Strubeck.
He also flagged the concern that, under the bills, charges to be assessed against market participants would be determined by ERCOT in accordance with its protocols and “nothing else.” Strubeck reminded the court that “the reason we’re here” is Brazos’ inability to pay ERCOT the $2 billion in Storm Uri-related charges assessed against Brazos - claims that he said will have to be adjudicated in the bankruptcy court - and that the debtor entered bankruptcy to avoid being “excluded as a market participant.”
Strubeck explained that after the bills passed the Legislature, Brazos and its advisors “immediately” sent a letter to the governor explaining the bills’ potential consequences and urging him to consider vetoing them. He said the Brazos team also held a meeting this week with the governor’s staff to discuss the concerns.
Strubeck concluded that if the bills are signed into law, it is “very possible that we will have no choice but to come back” to the bankruptcy court to attempt to address these issues.
UCC counsel Thomas Moers Mayer of Kramer Levin remarked that “there is no daylight between us and the debtor” with respect to Brazos’ legislative concerns and ERCOT’s claims. The UCC is “trying to be helpful and not get in the way,” said Mayer.
Judge Jones said that he hopes issues of “preemption and discrimination and all of those topics” can be avoided but added that he is “perfectly prepared” to deal with them if needed. “It is my hope that rational folks will keep their eye on the appropriate endgame and take commercial, realistic action to find a solution,” added the judge.
UPDATE 2: Brazos’ New 13-Week Budget Projects $377M in Liquidity as of Jan 21, 2022
UPDATE 2: 7:34 a.m. ET 11/5/2021: On Thursday evening, Nov. 4, debtor Brazos Electric Power Cooperative Inc. filed a further revised DIP budget over a 13-week period ending Jan. 21, 2022, with liquidity projected at $377 million at that time. The new budget is shown below.
(Click HERE to enlarge.)
UPDATE 1: Brazos Files Updated 13-Week Cash Flow Forecast
UPDATE 1: 11:52 a.m. ET 8/11/2021: This morning, debtor Brazos Electric Power Cooperative Inc. filed a revised DIP budget showing the debtor’s current 13-week cash flow forecast. The updated cash flow forecast is as follows:
(Click HERE to enlarge.)
(Click HERE to enlarge.)
The debtor’s initial DIP budget was attached as Exhibit 2 to the interim DIP order.
Original Story 1:50 p.m. UTC on June 11, 2021
Judge Jones Approves Brazos’ $350M DIP on Final Basis, Leaves Conflict of Interest Concerns for Another Day; Brazos Pushing Governor to Veto HB 4492 and SB 1580
Relevant Documents:
Agenda
Order
Judge David Jones approved the Brazos Electric debtor’s $350 million DIP facility on a final basis at an uncontested hearing this morning. Referring to responses filed by various parties flagging ongoing conflict of interest concerns surrounding the debtor’s cooperative structure, Judge Jones remarked, “I know this issue is out there,” adding that he hopes “we’re all looking for a solution” that keeps at the forefront the cooperative’s end-user customers’ need for affordable power. Judge Jones said that he would address the alleged conflicts of interest if and when a party files a pleading seeking specific relief.
The parties to raise conflict of interest issues in their DIP responses included the official committee of unsecured creditors, supplier Tenaska Marketing Ventures (joined by Tenaska Power Services) and NJR Energy Services, which says it has an approximately $26 million administrative expense claim against the debtor. Tenaska Marketing’s statement suggested that appointment of an examiner or a chapter 11 trustee may be the only way for Brazos to deal with the alleged conflicts. Judge Jones reassured the parties that he had read their papers and did not need for them to reiterate their conflicts-related concerns; as a result, none of the responding parties pressed their conflict narratives at today’s hearing.
The bulk of the hearing focused on the Brazos debtor’s concerns over Texas securitization bills HB 4492 and SB 1580 and their potentially “devastating” consequences for Brazos if they are signed into law. Brazos counsel Louis Strubeck of Norton Rose said the Brazos team has urged Gov. Greg Abbot to veto the bills, which have been passed by the Texas Legislature and now await the governor’s action. Strubeck said the bills each contain language that could have the effect of excluding Brazos from the ERCOT market if it is unable to pay Storm Uri-related charges, which he said would be unilaterally determined and assessed by ERCOT under the bills.
Strubeck began the hearing with an operational and legislative status update, in keeping with prior hearings in the Brazos case. Operationally, he said, Brazos is “in a very good place,” noting that interim DIP approval in May alleviated liquidity concerns of several “reluctant” potential counterparties, which “almost immediately engaged” with Brazos upon its receipt of interim DIP access.
Strubeck next turned to the status of HB 4492 and SB 1580, the two Texas securitization bills he said Brazos is most closely following. Strubeck said that the two bills now on the governor’s desk each contain “significant” changes to earlier iterations. According to Strubeck, those revisions would likely have “serious consequences” for Brazos if signed into law. Specifically, Strubeck said both bills contain language that would make ERCOT market participants such as Brazos susceptible to being “kicked out” as market participants if they are unable to “promptly pay” assessed charges. This would be a “devastating” consequence for Brazos and its customers, said Strubeck.
He also flagged the concern that, under the bills, charges to be assessed against market participants would be determined by ERCOT in accordance with its protocols and “nothing else.” Strubeck reminded the court that “the reason we’re here” is Brazos’ inability to pay ERCOT the $2 billion in Storm Uri-related charges assessed against Brazos - claims that he said will have to be adjudicated in the bankruptcy court - and that the debtor entered bankruptcy to avoid being “excluded as a market participant.”
Strubeck explained that after the bills passed the Legislature, Brazos and its advisors “immediately” sent a letter to the governor explaining the bills’ potential consequences and urging him to consider vetoing them. He said the Brazos team also held a meeting this week with the governor’s staff to discuss the concerns.
Strubeck concluded that if the bills are signed into law, it is “very possible that we will have no choice but to come back” to the bankruptcy court to attempt to address these issues.
UCC counsel Thomas Moers Mayer of Kramer Levin remarked that “there is no daylight between us and the debtor” with respect to Brazos’ legislative concerns and ERCOT’s claims. The UCC is “trying to be helpful and not get in the way,” said Mayer.
Judge Jones said that he hopes issues of “preemption and discrimination and all of those topics” can be avoided but added that he is “perfectly prepared” to deal with them if needed. “It is my hope that rational folks will keep their eye on the appropriate endgame and take commercial, realistic action to find a solution,” added the judge.
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