Exelon taps restructuring advisor for power subsidiary – sources
U.S. utility holding company Exelon Corp has hired a debt restructuring adviser to help it evaluate options for its merchant power plant subsidiary ExGen Texas Power LLC, people familiar with the matter said on Tuesday.
The move comes as merchant power plants such as ExGen Texas Power, which burn fuels such as natural gas to generate electricity and then sell it onto the grid, struggle to cope with massive swings in energy prices.
Investment bank PJT Partners Inc will help Exelon address ExGen Texas Power’s cash liquidity concerns and its approximately $650 million in debt, the people said.
ExGen Texas Power’s lenders have also organized for a potential debt restructuring by tapping legal and financial counsel, the people added.
The sources asked not to be identified because they were not authorized to speak publicly on the matter. Exelon and PJT declined to comment.
Peers of Exelon have recently unveiled similar moves. NRG Energy Inc has announced that it is in talks with the bondholders of its GenOn Energy Inc subsidiary on a debt restructuring, while FirstEnergy Corp has said it plans to exit its merchant business by mid-2018.
Natural gas prices have been under pressure due to oversupply and warm weather in the northeastern United States, which have driven down electricity prices, in turn hurting power plants’ profits. Increased use of renewable energy has also negatively affected power plants that run on fossil fuels.
ExGen Texas Power operates five natural-gas-fired power plants in Texas. Its $675 million term loan that matures in 2021 is trading well below face value, an indication that investors do not expect full repayment.