Illinois plant may initiate Chapter 11 bankruptcy

Many individuals are facing difficult financial times; however, they aren't the only ones. Companies all over the country are seeking Chapter 11 bankruptcy protection for a variety of reasons. One Illinois coal plant has found itself considering bankruptcy due to a combination of low power prices and expensive upgrades.

Specifically, Midwest Generation operates six coal-fired electric generating plants supplying power to approximately 5 million customers in Illinois. Even with this customer base, the company is in danger of defaulting on at least two of its leases. There are two major factors causing the company to consider bankruptcy. The first is the fact that natural gas prices are low and keeping power prices low as well. The second factor is environmental upgrades required by both state and federal regulations.

Furthermore, Midwest Generation and its parent company, Edison Mission Energy, have indicated that they may not be able to finance the necessary upgrades and are set to close some plants. Edison Mission Energy may not be able to pay its $500 million in debt that is coming due next year. Add to that the fact that if Midwest Generation were to upgrade its plants to meet current environmental regulations, it would cost in the neighborhood of $863 million.

Ultimately, the holding company for Midwest Generation and Edison Mission Energy, Midwest Generation may have to file Chapter 11 bankruptcy.

There are several factors to consider, and companies may want to explore all of their options before deciding to file for bankruptcy. However, in the end, bankruptcy may be the best option, not only for Midwest Generation, but for any company struggling to survive in today's economy.

Source: Chicago Tribune, "Illinois coal plant owner weighs Chapter 11," Julie Wernau, July 31, 2012

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