Judge delays decision on venue change in AES Eastern Energy case

By Jim Witters

Wilmington, Del., Feb. 28 - A judge declined to rule from the bench Wednesday on a motion by New York State Electric & Gas Corp. to move the AES Eastern Energy LP bankruptcy case from Delaware to the U.S. Bankruptcy Court for the Syracuse Division of the Northern District of New York.

Several times during a hearing in the U.S. Bankruptcy Court for the District of Delaware, judge Kevin Carey stated that he failed to see unique qualities in the case that would justify or necessitate the transfer of venue.

While "not diminishing the regulatory role" of New York state agencies and the "desire of the residents of New York to have electricity," Carey said he could not identify the characteristics of this case that separate it from others in his court and dictate a transfer of venue.

Carey said he would take under consideration the written submissions by all parties and the oral arguments offered in court before rendering a ruling.

He said the decision would come as soon as possible and it would be shared with the parties via teleconference and read into the record.

Arguments for change

NYSEG, in requesting the change in venue, argued that

• The debtors' principal offices are located in Ithaca, N.Y.;

• The debtors' leveraged lease structures (and primary source of debt) are governed by New York law;

• The debtors' largest creditor is New York-based Deutsche Bank Trust Co., with an estimated claim of $450 million.

"The only apparent relationship the debtors have with the State of Delaware is that they are Delaware limited liability companies or Delaware partnerships," the NYSEG motion stated.

Eric J. Wycoff, representing NYSEG, said the interest of the 860,000 NYSEG electric service customers is in maintaining a reliable power supply. Those interests would be better served in a New York-based court, he said.

In 1998, AES entered into an asset purchase agreement with NYSEG to acquire six coal-fired electricity-generating power plants throughout New York state, which now comprise substantially all of the debtors' assets.

Wycoff said AES took over the power-generating aspects of the plants, while NYSEG retained the distribution and transmission functions. The equipment in the plants owned by AES and by NYSEG is so interconnected that separating the assets would be "like unscrambling an egg," he said.

Joining NYSEG in seeking the transfer of venue were the New York State Attorney General's Office and the New York Public Service Commission, both of which cited budgetary constraints on out-of-state travel as an impediment to full participation in the case.

Carey said those parties could participate in proceedings via teleconference, as they were during the Feb. 15 hearing.

Debtors' response

Adam P. Strochak, representing the debtors, said that all 14 of the debtors in the case are organized under Delaware law.

"This is not a tag-along case," he said.

The Delaware setting provides easy transportation access, with airlines and trains readily available to creditors, the debtors and other interested parties, Strochak said.

Gregory Horowitz, representing the official committee of unsecured creditors, said traveling to Syracuse, by contrast, "is virtually impossible." He said train and airline availability is limited and the timing would prohibit day trips, burdening the debtors' estate with additional costs.

The attorney representing Deutsche Bank Trust Co. Americas said that, even accepting NYSEG's arguments as factually true, there is no evidence that a change of venue would secure the reliability of the power grid.

AES Eastern Energy operates more than 1,000 megawatts of capacity at four New York facilities, which were acquired from New York State Electric & Gas in May 1999. The company filed for bankruptcy on Dec. 30. The Chapter 11 case number is 11-14138.

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