Edison Mission units' partners claim bankruptcy constituted default

By Caroline Salls

Pittsburgh, Dec. 27 - Partners of Edison Mission Energy subsidiaries Southern Sierra Energy Co. and Western Sierra Energy Co. filed a lawsuit on Dec. 26, seeking a ruling that the defendants' bankruptcy filing constituted defaults under their partnership agreements, according to a filing with the U.S. Bankruptcy Court for the Northern District of Illinois.

Plaintiffs Chevron Kern River Co. and Chevron Sycamore Cogeneration Co. said the defendants "filed their bankruptcy petitions expressly to take advantage of the automatic stay to prevent plaintiffs from exercising their partnership rights upon the bankruptcy filing of defendants' corporate parent, Edison Mission Energy."

The plaintiffs said the debtors intend to reorganize in a way that will result in a total change in control of Edison Mission Energy and its subsidiaries.

"The prospect of an involuntary partnership, much less with uncertain or unqualified partners, is contrary to the law and abhorrent to plaintiffs alike," the lawsuit said.

The plaintiffs said California law allows them to exercise their partnership rights despite the defendants' "legal maneuvering," and, if they were stayed from exercising their partnership rights until confirmation of a plan of reorganization, the value of the defendants' interests in the partnerships will prove substantially lower than the value plaintiffs have already offered to the defendants.

As of Sept. 30, the net book values of the defendants totaled about $85 million, according to the lawsuit, meaning Southern Sierra's and Western Sierra's share of the net book value in these two entities together is $42.5 million.

In addition to the default ruling, the lawsuit seeks a judgment that the defendants are defaulting partners and the plaintiffs are non-defaulting partners.

The plaintiffs are also seeking relief from the automatic stay imposed by the defendants' bankruptcy filing to allow them to enforce their rights under the partnership agreements and the California Corporations Code.

Edison Mission, an Irvine, Calif.-based developer of wind energy projects, filed for bankruptcy on Dec. 17. The Chapter 11 case number is 12-49219.

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