Longview Power LLC filed for Chapter 11 bankruptcy on Friday and blamed a unit of Germany's Siemens AG for glitches at Longview's $2 billion West Virginia power plant that left it unable to pay its debts.
The coal-fired plant in Maidsville has a capacity to generate about 700 megawatts of electrical power and was among the largest construction projects in West Virginia's history. However, it has been plagued by construction delays and legal problems since it was proposed more than a decade ago.
Continue Reading Below
Longview said there will be no interruption to its business and employees will not be affected by the Chapter 11 filing.
The plant was funded by a $1 billion equity investment by First Reserve Corp, a private equity firm focused on energy, and about $1 billion in debt. About $557 million in debt matures in February, according to documents filed in the U.S. Bankruptcy Court in Delaware.
The bankruptcy filing was aimed at preventing a default on an interest payment due Friday, which in turn would have caused a default on a $59 million letter of credit.
"The company has been in consensual negotiations with our senior lenders toward a Chapter 11 plan to maximize value. We remain confident that the company and our lenders will reach an agreement on the terms of a Chapter 11 plan in the near term," Chief Executive Jeffery Keffer said in a statement.
The company blamed its bankruptcy primarily on what it called the failures by the contractors which built the plant, delaying its opening by nine months and limiting the plant's capacity. Siemens Energy led a team that also included units of Foster Wheeler AG and Kvaerner ASA of Norway.
Siemens and Foster Wheeler did not immediately respond to a request for comment. Kvaerner could not be reached for comment, but said in its annual report that construction delays were caused by changes to the project and the supply of services and materials.
The legal disputes are currently before an arbitration panel, but Keffer said in court documents the company plans to seek an expedited hearing on the disputes in the bankruptcy court.
The company also blamed the sharp decline in wholesale electricity prices that have caused other power producers such as Dynegy to seek bankruptcy.
In addition to Longview Power, 12 affiliates also filed for bankruptcy protection, including the company's Mepco coal business which owns or operates four mines in West Virginia and Pennsylvania. The mines produce about 4 million tons of coal annually, according to court records.
Coal prices have been falling due to a boom in natural gas drilling.
GenPower Holdings is Longview's ultimate parent.
The company has engaged Lazard Ltd as its investment banker and Alvarez & Marsal North America LLC as its restructuring advisor.
Longview is represented by Kirkland & Ellis LLP, as primary restructuring counsel, and Dentons US LLP for all issues related to company's pending arbitration proceedings.
The case is in re Longview Power LLC, Case No. 13-12211, U.S. Bankruptcy Court, District of Delaware.
(Reporting by Sakthi Prasad in Bangalore; Editing by David Cowell and Andrew Hay)