Approval of AES Thames, CL&P settlement called key to potential sale

By Jim Witters

Wilmington, Del., Sept. 22 - AES Thames, LLC received court approval Thursday for a settlement with Connecticut Light and Power Co. that attorneys said clears the way for the sale of AES Thames.

"A lot is happening outside this court related to a sale," the debtors' attorney, Adam G. Landis, said during a hearing in the U.S. Bankruptcy Court for the District of Delaware.

He said the debtors hope to come before the court by the end of the month for approval of sale procedures. Landis said he expects significant progress toward a sale before a scheduled Oct. 20 court hearing.

Judge Kevin J. Carey said the settlement with CL&P "resolves some contentious issues that are central to the success of this Chapter 11 proceeding."

The agreement settles disputes with CL&P involving an electricity purchase agreement. AES Thames claimed it terminated the agreement, while CL&P said the agreement was not legitimately terminated.

CL&P filed more than $300 million in claims against AES Thames in bankruptcy court and other litigation. CL&P said its claims were secured by substantially all assets held by AES Thames.

The settlement, which resulted from a full day of mediation between the two parties, eliminates all other litigation.

The settlement terms are as follows.

Under the settlement approved Thursday, CL&P's claim is reduced to $35.7 million.

AES Thames' assets will be sold free and clear of CL&P's liens, with the proceeds of the sale going to AES creditors under an agreed-upon waterfall provision.

Unsecured creditors will share with CL&P in the net sale of the company's assets, rather than seeing all proceeds flowing to CL&P because of its secured claim.

As part of the settlement, AES Thames parent AES Corp. will transfer $5 million to the AES Thames estate. Of that, $4 million will go to CL&P.

The settlement provides that CL&P and the company's other estate stakeholders each will receive 50% of net proceeds up to $10 million; CL&P will receive 75% of net proceeds between $10 million and $20 million, with the other stakeholders receiving 25%; CL&P will receive 90% of net proceeds between $20 million and $50 million, with other stakeholders receiving 10%; and CL&P will receive 10% of net proceeds over $50 million, with the other stakeholders receiving 90%.

The settlement also states that AES Thames must obtain consent from CL&P before declaring a purchase offer from AES Corp. or AES Connecticut Management, Inc. as the highest and best offer at sale.

John Lucian, attorney for the official committee of unsecured creditors, said the creditors retain the right to investigate any issues the committee deems significant, including funds paid pre-petition by CL&P to AES Thames. Lucian said some of that money went to AES Thames' parent company.

Uncasville, Conn.-based AES Thames is a wholly owned subsidiary of AES Corp. unit AES Connecticut Management, Inc. and operates a coal-fired power plant in Montville, Conn. The company filed for bankruptcy on Feb. 1, 2011. The Chapter 11 case number is 11-10334.

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