EME Homer City to sell interest in plant; bondholder consent required

By Caroline Salls

Pittsburgh, Sept. 24 - EME Homer City Generation LP and General Electric Capital Corp. affiliate Homer City Generation, LP entered into a master transaction agreement for the sale of EME Homer City's interest in a Homer City plant, according to an 8-K filed Monday with the Securities and Exchange Commission by EME parent Edison Mission Energy.

Under the agreement, EME Homer City will transfer substantially all of its rights in and assets related to the Homer City plant, as well as specified liabilities, to Homer City Generation.

The company said completion of the transaction is subject to a number of closing conditions, including obtaining the consent of holders of more than two-thirds of bonds issued by Homer City Funding LLC.

According to the 8-K, this consent may be provided through a plan of reorganization confirmed by any U.S. bankruptcy court.

As a result of the master transaction, Edison Mission said it has concluded that Homer City meets the accounting requirements of a discontinued operation beginning with the third quarter of 2012.

Assets that are expected to be transferred under the agreement will be classified as assets held for sale at Sept. 30 and are required to be written down to net realizable value.

Edison Mission expects to record a roughly $90 million third-quarter charge, the filing said.

As part of the master transaction agreement, Homer City will retain post-retirement other-than-pensions obligations and pension obligations and will be required to contribute about $32 million to voluntary employee beneficiary association trusts to fund the estimated liabilities.

Edison Mission said termination benefits for employees are expected to be made under existing plans.

The Homer City, Pa.-based company owns three coal-fired electric generating units, which it collectively refers to as the Homer City plant.

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