Southern Montana trustee to file plan, select long-term power deal

By Caroline Salls

Pittsburgh, Dec. 17 - Southern Montana Electric Generation and Transmission Cooperative, Inc. Chapter 11 trustee Lee A. Freeman has selected proposals that will form the basis of the company's plan of reorganization, according to a Friday filing with the U.S. Bankruptcy Court for the District of Montana.

Freeman said that he intends to file a plan under which Southern will be reorganized and will emerge from Chapter 11 as an ongoing business entity.

Under that plan, Southern will retain ownership of Highwood Generating Station, and the wholesale power contracts between Southern and its members will be assumed, unless other satisfactory arrangements are agreed to by the trustee and any of the members and approved by the court.

Also under the plan, Southern will enter into a long-term power purchase agreement with one of three entities, including either Morgan Stanley Capital Group, Inc., Shell Energy North America (US), LP or PPL EnergyPlus, LLC.

To date, Freeman said the entities have submitted only indicative pricing under proposed long-term power purchase agreements with Southern.

The trustee said he cannot make a final decision on the counterparty to a long-term power purchase agreement until he receives firm pricing, the terms of which would be either fixed or adjusted between the date of the filing of his plan for Southern and the date of the confirmation of the plan.

In addition, Freeman said the contract for firm electric service between Southern and the Western Area Power Administration will be assumed or assumed as modified under the plan, subject to Western's consent, unless other satisfactory arrangements are made.

The trustee said he will develop and file his plan and related disclosure statement for Southern as soon as possible.

Southern Montana filed for bankruptcy on Oct. 21, 2011. The Billings, Mont.-based cooperative's Chapter 11 case number is 11-62031.

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