Astoria Generating hires finance advisors for restructuring guidance

By Caroline Salls

Pittsburgh, Sept. 2 - Astoria Generating Co., LP has retained financial advisory firm Perella Weinberg Partners and the law firm of Kirkland & Ellis, LLP to provide guidance on a potential restructuring, according to a news release from parent company US Power Generating Co.

US Power said that this step is necessary because actions taken by the New York Independent System Operator have resulted in dramatically lower market clearing prices for capacity for the New York Zone J power market.

According to the release, capacity pricing in July, August and September dropped roughly 50% from the spot auction results in June as a result of a government subsidized generating project being allowed to artificially depress prices.

Unless these actions are reversed, US Power said capacity prices would drop to near zero for the upcoming fall and winter months.

"NYISO's actions have resulted in a fundamental failure of the marketplace," US Power chief executive officer Mark Sudbey said in the release.

"Generators rely on capacity pricing for the vast majority of their revenue, and at these prices, even with no debt, we and other power generators will be forced to suffer significant and ongoing operating losses.

"The irony is that over the course of this summer and through recent heat waves, we reliably provided nearly 20% of New York City's electric supply when it was needed the most, while at the same time the NYISO has taken actions that will not allow us to cover our basic operating costs," he added.

US Power said that Astoria Generating and other market participants have filed complaints with the Federal Energy Regulatory Commission (FERC) seeking immediate relief and ensuring that the NYISO has in place transparent and consistent policies and market mechanisms to support competitive power markets by reducing the ability of any generator or load side market participant to exercise market power.

If FERC does not act and the NYISO does not begin to apply the rules as they were intended, the parent company said capacity pricing in New York City will continue to deteriorate to a point where, by year-end, Astoria Generating cash flow will be insufficient to cover operating expenses, including property taxes, maintenance and capital expenditures.

US Power said this outcome would leave Astoria Generating with no choice but to consider a financial restructuring in the bankruptcy courts.

Recently, Standard & Poor's downgraded Astoria Generating's debt to the CCC+/CCC- level from its previous ratings of BB-/B+, the release said.

Astoria Generating owns three operating electric power generation facilities in New York City.

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