Asset Deal of the Week: Clean Energy Can Lead to Clean Profits

Posted by Michael on September 4, 2014

This week we're highlighting the sale of seven (7) hydro-electric plants in upstate New York. You can read the entire sale motion for free and contact the seller to learn more about bidding on these assets or others that we have on our site for subscribers.

Hydro-Electric Plants in New York
Snippet from the Sale Motion

On or about August 27, 2001 (the "Petition Date"), the above-captioned Debtors each filed individual cases under Chapter 11 of title 11 of the Bankruptcy Code in the United States Bankruptcy Court of the Eastern District of North Carolina, Raleigh Division (the "North Carolina Bankruptcy Court"). The cases are being jointly administered.

Pursuant to an Order entered in the North Carolina Bankruptcy Court on or about December 13, 2001, the cases were transferred to this Court.

No trustee has been appointed for the Debtors.

In 1987, Trafalgar developed seven (7) hydro-electric plants in upstate New York. TPI owns six (6) hydro-electric plants that are located in Ogdensburg, Forestport, Adams, Kayuta Lake, Cranberry Lake and Herkimer; and a seventh facility is owned by Christine Falls (collectively, the "Facilities" or the "Assets"). Trafalgar is the sole shareholder of Christine Falls.

The Algonquin entities have been responsible for maintaining, operating, repairing and managing the Facilities for almost two decades. Algonquin Power Corporation ("APC") is the named manager and operator of the Facilities. APC engaged its subsidiary, Algonquin Power Systems, Inc. ("APS"), to operate, maintain and arrange for necessary repairs to the New York Facilities. Algonquin Power Income Fund ("APIF") asserted a claim in this case alleging that it acquired a note secured by the Facilities and cash collateral (APIF, APC, and APS are collectively referred to as "Algonquin").

The Algonquin claims are subject to objections that are pending before the Court (See Dkts. 546, 564, and 567). As such, the validity and scope of Algonquin's claimed security interest is undetermined at this time.

Several of the Facilities are not operating, and the cost of maintaining the Facilities is far exceeding their income. In addition, there is an active market of qualified buyers who are interested in pursuing acquisition of the Facilities. Thus, the Debtors believe the sale of the Facilities at this time would be in the best interests of the estates.

As a result of the foregoing, in May 2014, Harris Beach PLLC, as counsel to the Debtors, began contacting various parties involved in the hydroelectric power industry that previously expressed an interested in purchasing the Facilities. While continuing the due diligence process with those parties, the Debtors determined that the retention of an investment banker to assist with the sale process was necessary to maximize the sales price of the Facilities while still moving expeditiously in light of the diminishing funds in the Debtors' debtors-inpossession account (the "DIP Account").

The Debtors have hired Clearbid Capital, LLC ("Clearbid") as an investment banker, subject to approval by the Court, whose fees and costs will be paid from the proceeds of the sale.

Clearbid will market the Facilities on a national and international basis to maximize the value of the Facilities, but will accomplish those efforts on an expedited basis to allow a sale to occur in September 2014, with a closing date before the end of 2014.

As noted above, the Debtors are experiencing significant financial difficulties. Several of the Facilities are not currently operating and the expenses incurred in maintaining the Facilities far exceed the Debtors' income. As a result, the funds in the DIP Account have been diminishing and will be completely depleted in the near future.

Given the current state of the Facilities and the Debtors' financial situation, the Debtors have determined that it is in the best interests of the estates, their creditors and other parties in interest to sell the Assets to a Purchaser or Purchasers as soon as practicable. The Debtors believe that the approval of a sale of the Assets is critical to preserving their value for the benefit of all creditors.

The Asset Purchase Agreement contemplates a sale of the Assets, free and clear of Encumbrances with all such interests to attach to the proceeds of the sale in the order of priority and with the same validity, force and effect that such interest has against the Assets.

The Asset Purchase Agreement
At this time, the Debtors do not have a selected stalking horse bidder, although they believe a stalking horse bidder will be forthcoming by August 8, 2014. However, the Debtors have prepared the Asset Purchase Agreement to serve as a template for the anticipated sale of the Assets. The proposed terms of the Asset Purchase Agreement are generally as follows:

(a) The Parties. The Debtors are the "Seller" and Purchaser is to be determined.

 (b) The Assets. The Assets to be sold pursuant to the Asset Purchase Agreement are all of the Debtors' operating assets consisting of all seven (7) of the Facilities.

(c) Purchase Price. To Be Determined.

(d) Required Cash Deposit. Ten percent (10%) of the Qualified Bid (as defined below) is the required cash deposit.

(e) Conditions. The Proposed Sale is subject to several conditions set forth in the Asset Purchase Agreement, including: (i) the Purchaser must apply within five (5) days after being designated as the Successful Bidder at the Sale Hearing, to the Federal Energy Regulatory Commission ("FERC") for expedited consideration of the transfer of the Debtors' licenses and for other regulatory approvals to allow a 'closing to occur on or before December 23, 2014; and (ii) approval by the Bankruptcy Court.

(f) Termination. The Asset Purchase Agreement terminates under certain circumstances set forth therein.

(g) Higher and Better Offers. As set forth in further detail below, the Sale of the Assets is subject to the submission by "third parties of higher and/or better offers.

(h) Bid Increments. Any initial competing bid shall be announced at the Auction. It is anticipated that a competing bid higher and/or better than the initial Stalking Horse Bid shall be three percent (3%) plus $100,000 higher, with other competing bids thereafter to be in increments of $50,000. In the event there is no Stalking Horse Bid, a competing bid higher and/or better than the initial bid shall progress in increments of $50,000. Debtors expressly reserve the right to modify these movements at the Auction.

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