On March 1, 2021, Brazos Electrical Energy Cooperative, Inc. (“Brazos”) commenced Chapter 11 chapter proceedings in the US Chapter Courtroom for the Southern District of Texas. Brazos is a Texas-based not-for-profit electrical cooperative firm that gives wholesale electrical energy to its members, who in flip present retail electrical energy to customers in Texas. Because of the freezing of important energy technology and fuel pipeline tools throughout the historic winter storm that blanketed Texas in mid-February 2021 and the ensuing spike in wholesale electrical energy costs, Brazos has acquired roughly $ 2.1 billion in settlement payment invoices from the Electrical Reliability Council of Texas (“ERCOT”). These invoices, issued shortly throughout and instantly after the storm, required cost inside days. In a press release accompanying the voluntary chapter petition, Mr. Clifton Karnei, government vp and normal supervisor of Brazos, described Brazos’ place within the wake of the sudden and dramatic surge in electrical energy prices as a “Liquidity lure that [Brazos] can’t resolve together with his present report. “

Brazos’ first day oral argument explains that his monetary scenario and want for chapter safety is a direct results of the results of the February winter storm on the Texas electrical energy market, specifically on the connection between Brazos and ERCOT. ERCOT performs a clearinghouse position in one in every of Texas’ three main power grids, the Texas Interconnection, which covers 213 of the state’s 254 counties, and is liable for power provision on behalf of its members whereas administering the dependable operation of the wholesale enterprise. electrical energy market. To purchase and promote wholesale electrical energy, as Brazos does, ERCOT requires market contributors to have adequate out there credit score (calculated utilizing a metric primarily based on the participant’s credit score restrict plus a proportion of tangible internet price, amongst different components) to assist that participant’s whole publicity. The consequences of the February winter storm on the Texas energy grid pushed costs as much as $ 9,000 per megawatt hour. The cut-off cap was set on February 16 by ERCOT as demand skyrocketed because the state’s electrical energy provide dwindled. For comparability, ERCOT’s month-to-month wholesale electrical energy costs from November 2020 to January 2021 ranged from $ 21 to $ 29 per megawatt hour. On February 16, and every of the next three days, ERCOT made guarantee calls to Brazos for a whole bunch of tens of millions of {dollars} daily, totaling roughly $ 1.5 billion in guarantee calls. Brazos filed a Pressure Majeure Discover on February 25, advising ERCOT that it could not pay the payments resulting from an occasion past Brazos’ affordable management. Brazos filed for chapter lower than per week later.

As of the date of the petition, Brazos estimates the overall principal quantity of its funded bonds to be roughly $ 2.04 billion, of which $ 1.81 billion of this debt is assured promissory notes financed by the Federal Financing Financial institution. . Brazos has absolutely utilized its $ 500 million unsecured revolving credit score facility with Financial institution of America, NA and different lenders. Mr. Karnei states that Brazos’ aims in initiating the Chapter 11 case are to protect its ongoing enterprise operations and to give you a reorganization plan to maximise collectors assortment. The primary day of listening to earlier than Decide David Jones is scheduled for March 3 at 2:00 p.m. EST.