Homer City power plant, out of bankruptcy, still needs an overhaul

It’s a nice hot week, and all three generating units at the Homer City coal-fired power plant are running around the clock.

That’s as far into the future as William Wexler can see.

Mr. Wexler, who is charged with restructuring the Indiana County plant to make it more attractive to a potential buyer, said the underlying conditions that forced the facility into bankruptcy in January haven’t changed. So the plant must.

“The situation here at the moment, while it’s not dire, it certainly needs to improve fairly quickly,” Mr. Wexler said.

When asked to clarify a timeline, he said, “sooner than later.”

In April, Homer City emerged from its second bankruptcy in five years. Formerly owned by a joint-venture headed by GE Capital, the plant is now largely the property of bondholders who swapped some $606 million in debt for equity in the new company, Homer City Holdings LLC. Mr. Wexler is its board chairman.

The current owners of Homer City are hedge funds and private equity firms, Mr. Wexler said, who aren’t interested in owning a coal plant for a long period of time.

“I’ve spoken to all the employees, and I explained who we are and what we’re here to do,” he said. That is: “to get this plant to be a far more profitable member of the community and to sell it.”

Mr. Wexler was recruited for this effort fresh off another coal power plant restructuring in New York, where he oversaw two facilities that were sold last year.

There isn’t much he can do about revenue, he said.

That’s a function of the market, which hasn’t been kind to Homer City. Competition from cheap natural gas, falling demand and warmer winters has turned this once round-the-clock workhouse into a more sporadic resource.

“But we can do a lot to engage on the expense side,” he said. “Fuel, employees and maintenance — all of those are currently being attacked.”

The 1,884-megawatt plant employs 240 workers. Its biggest expense is the coal it burns, so getting that more cheaply is a top priority.

The facility’s previous efforts to wiggle out of more expensive coal contracts landed it in court with its largest supplier, Cecil-based Consol Energy Inc. The two parties reached a resolution that maintains Consol as a coal provider for about 30 percent of the plant’s needs.

The facility is also in the process of selecting a company to operate the plant. It is currently run by NRG Energy, which is among the bidders being considered, Mr. Wexler said.

As for a speedy sale, he said it’s not imminent.

While some would-be suitors have expressed interest, Mr. Wexler said that people interested in energy assets right now are looking for bargain basement prices. Homer City commands more, Mr. Wexler believes.

GE Capital tried to find a buyer for Homer City last year and received bids ranging in value between $230 million and $535 million, but debt holders rejected them.

The company’s advisers “determined that the value maximizing path was to pursue a Chapter 11 restructuring,” bankruptcy documents state.

Anya Litvak: alitvak@post-gazette.com or 412-263-1445.

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