Brazos Electric Power’s Chapter 11 plan effective as of Dec. 15

By Sarah Lizee

Olympia, Wash., Dec. 15 – Brazos Electric Power Cooperative, Inc.’s Chapter 11 plan went into effect on Thursday, according to a notice filed with the U.S. Bankruptcy Court for the Southern District of Texas.

As previously reported, the plan was majority accepted by the voting classes and confirmed on Nov. 14.

The plan incorporates a settlement with the Electric Reliability Council of Texas (Ercot). Brazos said the settlement is the culmination of an “all-encompassing and lengthy” multi-party arm’s length mediation.

Under the settlement, Brazos will make two effective date payments to Ercot: first, a $599.7 million payment to replenish Ercot’s congestion revenue right (CRR) reserve account, and second, a $553.8 million payment to fund an initial distribution to electing market participants.

The debtor will also make certain installment payments of up to $13.8 million per year over 12 years and contribute a portion of the generation sale proceeds (about $116.6 million) to fund payments, through Ercot, to the applicable eligible market participants.

The settlement also includes certain release and injunction provisions precluding Ercot from collecting default uplifts for prepetition amounts owed by the debtor.

Ercot, which voted to accept the plan, provided details of the distribution elections for its market participants in a separate filing.

Option 1 provides that market participants may receive an accelerated cash recovery of 43% on the effective date. Then, participants would receive an additional 9% on the generation sale closing date. Additionally, there would be another 1% paid for the next 12 years, equaling about 13% nominal recovery. These participants would, in total, receive about 65% nominal recovery.

Option 2 would provide full recovery, but it would be a deferred cash recovery. Participants would recover their portion of the Brazos short pay claim over 30 years.

Option 3 gives market participants a convenience cash recovery in a one-time cash payment on the effective date. Participants would receive 63% of the lesser of their allocable portion of the Brazos short pay claim or $10,000.

Option 4 is a hybrid recovery between option 1 and option 2. Participants would be allowed to receive the allocable portion of the Brazos short pay claim and the remainder as a market participant deferred cash recovery.

The majority of participants opted for option 1, accounting for 96.3% of the dollar amount.

Around 3.22% of the dollar amount will go to option 4.

Less than 1% of the $1,286,900,000 were elected as options 2 and 3.

Other voting claims

General unsecured creditors have a minimum estimated recovery of 89.5% and are set to receive a pro rata share of a GUC cash recovery with an initial GUC cash payment to be made on the effective date, a second GUC cash recovery to be made on or before the generation sale closing date and a residual GUC cash payment, if any.

Holders of $1,002,637,854 voted to accept the plan, and two voters representing $767,397.90 of the claims voted to reject the plan.

Holders of general unsecured convenience claims will receive the GUC convenience recovery, which is a total amount of cash enough to yield a recovery of 95 cents on account of their claims.

Claimants for $314,939.75 have voted to accept the plan, or 99.55% of the dollar amount. Two holders representing $1,427.48 voted to reject the plan.

Holders of tort claims have an estimated 100% recovery.

Holders of tort convenience claims will receive the tort convenience amount, which is the lower of the asserted total liquidated amount of the applicable allowed claim and $5,000 per holder.

Tort claimants voted to approve the plan, 92.92% approved to 7.08% rejected with 25 abstentions.

Holders of member patronage capital claims will have their claims reinstated, retained and retired in line with certain bylaws.

Brazos Electric is a 3,994-megawatt generation and transmission cooperative based in Waco, Tex. The company filed bankruptcy on March 1, 2021 under Chapter 11 case number 21-30725.

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