- Your Town
Southern bankruptcy plan leaves BEC hanging
Beartooth Electric Co-op (BEC) Board member Arleen Boyd made it clear at the board meeting on Friday, Feb. 22, that the continued ownership of the Highwood Generation Station and membership in Southern (Southern Montana Electric Generation and Transmission Co-operative, Inc.) as required in the new plan submitted by the trustee for Southern in its bankruptcy action, “will damage our co-op and put us under an overwhelming financial burden with rate pressure we cannot sustain.”
One member called the plan “shoddy treatment” to BEC, the small rural co-op striving to avoid bankruptcy. “We’re operating in pretty good shape, outside of the bankruptcy consideration,” said BEC Manager Richard Peck.
Boyd noted the trustee’s plan lacked sufficient information and could easily result in additional liquidations and reorganizations among the affected parties.
The plan sets forth the number of payments due creditors without setting forth the amounts due in the payments. The payments would come from the rates of Southern’s co-op members to repay various large creditors. It contains no mention of their ability to pay or of any reduction of the debts. BEC may object to the plan and submit an alternative, which it made clear it intends to do.
Montana Public Service Commissioner Travis Kavulla said, “It is a fog of words. There are no money details. The Beartooth Board is right about that. There is zero in hard facts. It is absolutely frustrating-they are kicking the can down the road.”
“We are certain that we should not be forced to expose members to rates they cannot sustain in order to support the claims of a corporation that chose to in vest in an ill conceived plant based on the financial proposition that Southern’s member co-ops could and would raise rates to any extent necessary to pay the costs associated with HGS,” declared Boyd.
Two major points were made at the meeting: 1. The plan lacks essential figures with no crucial data to show it is feasible and 2. The plan may bring into question BEC’s right to vote against the plan by BEC by classifying its status as an unimpaired creditor.
“With critical information withheld, we cannot run the numbers to establish with certainty the impact on BEC of the plan before the court,” said Boyd. The plan gives no final figure on even the amount owed Southern’s biggest creditor, Prudential Insurance Company, leaving it blank in the exhibit regarding an amount that could reach $85 million.
It does not calculate into the plan the millions (up to $10 million estimated by BEC’s expert) required to get HGS up and running full time. Such omissions and others according to BEC, make the plan impossible to determine BEC’s rate obligation. BEC furthers states if such potential amounts were factored in it would make such a plan unfeasible.
One member commented that failure to factor in the numbers was what got Southern into trouble in the first place. He could not imagine that the court would now accept such an incomplete plan.
Kavulla appeared equally astonished. “It should say, ‘This is what we think members’ rates would look like the next 4-5 years,’” he responded. “People thought with the sunshine laws this bankruptcy would state more-but it may be more secretive than what Gregori (Tim Gregori, former Southern manager) was doing.” The trustee’s plan does not make clear that Gregori is out of management of Southern.
According to BEC, its next steps are to: 1. Proceed with its case to void the BEC 2008 contract with Southern. (There will be a pre-trial hearing on March 6); 2. Object to the disclosure statement (and the trustee’s plan); 3. Seek a negotiated settlement to exit Southern and 4. Prepare the financials to demonstrate the financial impact on BEC.
The Due Diligence committee recommended that BEC write off its own investments in Southern and SME, an amount totaling about $3.9 million. It urged BEC to aggressively inform and involve members.
Citing the fear that some members “were turned off” by the long and drawn out bankruptcy, Boyd urged members to rally, “This is the time to attend the bankruptcy hearing and show your support for BEC.”
The hearing on the trustee’s disclosure and plan will be held March 26, in U.S. District Bankruptcy Court in Billings.