Massachusetts Natural Gas Plant files for Ch. 11 after arbitration loss

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Signage is seen at the United States Bankruptcy Court for the Southern District of New York in Manhattan, New York City, USA REUTERS/Andrew Kelly

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  • Footprint Power ordered to pay 236 million dollars to a Spanish company
  • Lender buyout or bankruptcy sale on the table

(Reuters) – Natural gas-fired power plant operator Footprint Power Salem Harbor Development LP filed for Ch. 11 bankruptcy protection on Wednesday after being ordered to pay $236 million in a dispute over long time on the construction of its main facility.

The Salem, Mass.-based company declared $337 million in secured debt in addition to the arbitration award in favor of Spanish company Iberdrola Energy Projects Inc. in court documents filed with the U.S. District Bankruptcy Court of Delaware.

Footprint Power, which is owned by funds managed by Oaktree Capital Management, has drawn up a preliminary restructuring proposal under which it will transfer its equity to its lenders or find an outside buyer. The process of marketing the company’s assets and finding interested bidders is underway, according to court documents.

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Iberdrola and Footprint Power signed a deal in 2014 to build the Salem power plant for around $702 million. Footprint Power says that over the course of the project, it began to see increased costs, delays, and problems with subcontractors and project management. The company blamed “mismanagement of the project” by Iberdrola for the problems, according to a written statement from its chief restructuring officer, John Castellano.

Footprint Power terminated the contract in April 2018. IEP then initiated arbitration proceedings, arguing allegations of wrongful termination and seeking $575 million in damages.

An arbitration panel awarded the $236 million award in favor of Iberdrola in October 2021. A New York court upheld the award in December.

A representative for Iberdrola and an attorney for Footprint Power did not immediately respond to requests for comment.

The dispute with Iberdrola resulted in several defaults under Footprint Power’s main credit agreement. Shortly after the arbitration award was issued, the loan officer transferred approximately $90 million from the company’s accounts and used it to repay the principal of the loan, leaving the company with approximately $27.5 million. dollars of available cash.

Iberdrola and Footprint Power signed a new agreement in January under which Iberdrola said it would suspend its efforts to obtain the judgment. But he told Footprint Power last week that he planned to terminate that agreement on March 23, Castellano said, prompting Footprint Power to seek Chapter 11 protection.

A hearing on a range of administrative and operational issues is scheduled for Friday before US Bankruptcy Judge Mary Walrath.

Footprint Power finally completed construction of the facility, which has been operational since May 2018. The company reported 2021 revenue of approximately $195 million.

The case is In re Footprint Power Salem Harbor Development LP, US Bankruptcy Court, District of Delaware, No. 22-10239.

For Footprint Power: Brian Hermann, John Weber and Alice Nofzinger of Paul Weiss Rifkind Wharton & Garrison and Pauline Morgan and Andrew Magaziner of Young Conaway Stargatt & Taylor

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