Texas power plant seeks Ch. 11 after 2021 storm leads to lawsuits

An electrical substation is seen after winter weather caused electricity blackouts in Houston, Texas, U.S. February 20, 2021. REUTERS/Go Nakamura

• Ector County Energy looks to sell its assets for $91 mln
• Direct Energy sought $400 mln after historic storm

(Reuters) - Another Texas power company has filed for bankruptcy protection in the wake of last year's historic winter storm that knocked out power for millions and caused energy prices to skyrocket.

Ector County Energy Center LLC, which filed for Chapter 11 in U.S. Bankruptcy Court in Delaware on Monday, was one of many power generators in the state unable to produce power during the storm. Facing extensive litigation, including a $400 million lawsuit brought by one of its customers, Direct Energy Business Marketing LLC, the company is looking sell its assets through bankruptcy.

The company, which reported revenues of about $23 million in 2021, operates a 330 megawatt natural gas-fired plant located outside of Odessa, Texas. It has lined up a lead bid of $91.25 million from an affiliate of Rockland Capital.

At the time of the storm, Ector had an agreement under which Direct Energy paid a monthly premium in exchange for the right to call on Ector to provide energy and various ancillary services, according to court papers.

Ector was unable to deliver power or services during the storm, prompting Direct Energy to sue in New York state court in June 2021 for $400 million in damages. It has also been hit with more than 100 other lawsuits stemming from the storm.

The company, which is an indirect unit of Invenergy Clean Power LLC, also saw its cash flow decline after the storm as it shifted from pre-set pricing models to operating largely in real-time energy markets, according to court papers.

In addition to its legal troubles, Ector owes $337.3 million on a first lien loan. It had about $5.4 million in cash on hand as of April 1, 2022.

Others power companies have also filed for bankruptcy as a result of the storm, including the largest power cooperative in Texas, Brazos Electric Power Cooperative, which is in mediation with the Electric Reliability Council of Texas over the $2 billion bill it was charged after the storm.

The case is In re Ector County Energy Center LLC, U.S. Bankruptcy Court, District of Delaware, No. 22-10320.

For ECEC: John Monaghan, Lynne Xerras, Kathleen St. John, David Wirt and Phillip Nelson of Holland & Knight; and Christopher Ward and Michael DiPietro of Polsinelli

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