Exelon Corp. subsidiary Exelon Generation Co. has filed a lawsuit against First Energy Solutions to prevent it from backing out of the $140 million sale of its retail and wholesale load-serving business, which was signed in July.
The deal, which provides for Exelon's Constellation to buy and honor about a million FES customer contracts, emerged from the former FirstEnergy Corp. competitive generation subsidiary's Chapter 11 proceedings (PFR, 7/12, 8/30).
Exelon accuses FES of stalling by postponing the bankruptcy court sales hearing five times, according to a complaint filed with the U.S. Bankruptcy Court in Akron, Ohio, on Nov. 26.
Since the agreement between Exelon and FES provides for either party to back out of the deal as long as the sale does not take place by Dec. 31 and neither of the parties have breached their obligations, Exelon has asked Judge Alan Koschik to intervene so that the deal isn't scuttled at the end of the month.
McGuire Woods is acting as legal adviser to Exelon on the proceedings. Akin Gump and Brouse McDowell are representing FES.
"We will analyze this surprising disagreement over FES's sale of its electric consumer contracts to Exelon," said JP Blackwood, a spokesperson for the Ohio Consumer's Counsel," via email. "And we may make further recommendations to the Bankruptcy Court, if needed for consumer protection."
Exelon and FES initially entered into the asset purchase agreement, which represented a stalking horse bid, on July 9. After FES was unable to secure other qualified bids, Exelon became the successful bidder.
However, FES later informed Exelon that certain creditor groups had requested more time to review the proposed sale, and adjourned a sale hearing scheduled for Sept. 21, first to Oct. 12, and then to Oct. 26.
FES told Exelon that its creditors "were attempting to develop an alternative reorganization plan that may contemplate FES retaining the Purchased Asset,” referring to the retail business Exelon had agreed to buy, according to the complaint.
FES adjourned the sale hearing three more times, to Nov. 5, then Nov. 27 and most recently to Dec. 17.
“Exelon did not agree to any of the postponements of the Sale Hearing,” reads the company's complaint. “In each instance, Exelon asked FES to move forward with the Sale Hearing and work with Exelon to prepare to do so.”
“We continue to believe we are best suited to provide FES’ 900,000 customers with a broad array of energy products and services at competitive prices,” an Exelon spokesperson in Baltimore told PFR.
Spokespeople for FES declined to comment beyond the details published in a Nov. 27 statement, which reads: “FES creditors are conducting a thorough and comprehensive analysis of the proposed transaction and its ultimate value to the FES estate, creditors and other stakeholders and whether the retention of the FES retail business compared with the proposed sale maximizes the value of such assets for all stakeholders.”