As expected as a result of its dwindling revenue, Homer City Generation, a large coal-fired power plant in Indiana County, ran out of cash and skipped its last debt payment on Oct. 3.
Homer City had signed an agreement with the majority of its debt holders to delay their seeking to collect any of its $606 million in debt while the company tries to arrange a sale or otherwise restructure its finances.
The agreement was set to expire Tuesday but was extended until Oct. 24.
GE Capital Corp., which rescued Homer City from bankruptcy four years ago and invested $750 million into pollution controls, had put the plant up for sale earlier this year after writing down the value of the asset. It received several offers valued between $230 million and $535 million, but debt holders rejected all of them last month.
On Oct. 6, Moody’s Investors Service Inc. downgraded the power plant for the second time this year citing “a high probability that Homer City will eventually file for bankruptcy” and that, in such an event, debt holders are likely to lose most of what they’re owed.
The forces undermining the plant’s viability, Moody’s analysts said, are low electricity prices driven by coal’s competition with low-cost natural gas, and the need for more capital investment for maintenance and environmental compliance.
About 270 employees work at the facility, which has a capacity of 1,884 megawatts — enough to power about 2 million homes.
In a statement announcing the extension of its deal with debt holders this week, the company said it will use the time to continue discussions with them “regarding a comprehensive financial restructuring with the intent to significantly deleverage its balance sheet and provide for an orderly transition of its ownership.”
“Homer City expects to continue to operate its facilities and meet its obligations in the ordinary course,” the statement said.
Anya Litvak: email@example.com or 412-263-1455.