GenOn Energy Files for Chapter 11 Bankruptcy
GenOn Energy Inc, an energy company with thousands of megawatts of generation capacity in the U.S., has filed for Chapter 11 bankruptcy protection, amid piling debt. The Texas-based energy company is a subsidiary of energy conglomerate NRG Energy Inc, and was acquired by the latter in 2012.
The company has filed for bankruptcy to restructure a $1.8 billion debt load and to split from NRG Energy. The bankruptcy petition has been filed in a U.S. Bankruptcy Court in Houston, Texas.
NRG Energy came under fire when GenOn creditors blamed the former of siphoning funds from GenOn’s bank accounts. NRG Energy has been accused of drawing at least $520.0 million from GenOn.
GenOn management has now struck an arrangement with NRG Energy under which the former will release all claims against NRG Energy in exchange for $261.3 million cash payment. In addition, 100% control of GenOn will be handed over to GenOn creditors.
According to the bankruptcy filing, GenOn currently lists $2.44 billion worth of assets on its balance sheet against a debt load of $2.1 billion.
Moreover, GenOn will also take back nearly 15.4 Gigawatts of production capacity from NRG Energy, which holds a portfolio of 46 gigawatts of assets.
Once the restructuring process is complete in a few months, the company expects to have $1.75 billion on its balance sheet. GenOn will reorganize its capital structure and issue new debt instruments.
Credit analysis firm DebtWire Analytics has analyzed GenOn and predicts that the company’s future profitability remains in question, despite the restructuring effort that will remove as much as $2.0 billion in debt from its balance sheet. According to the research firm, low commodity prices and a glut of shale gas will continue to hurt GenOn’s profitability numbers.
At the same time, the rise of renewable energy alternatives like solar, wind, and hydro power—as well as stringent environmental regulations—are expected to be problematic for GenOn, which relies on coal for nearly 51% of its energy production.
Nonetheless, GenOn aims to operate separately from NRG Energy once the bankruptcy proceedings are complete.
“GenOn Energy Files for Chapter 11 Bankruptcy Protection,” The Wall Street Journal, June 14, 2017.
“Bankrupt GenOn to Officially Split from NRG Energy,” Power, June 14, 2017.