Bankrupt Salem Harbor power plant reaches $43 mln settlement with energy regulators

Salem Harbor Power Station, a natural gas-fired power plant operated by Footprint Power, stands in Salem, Massachusetts, US, March 24, 2022. Picture taken March 24, 2022. REUTERS/Nate Raymond

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  • Salem Harbor to pay $17 million penalty and disgorge $26.7 million in profits
  • Power plant operator did not admit wrongdoing, said settlement would avoid costly litigation

(Reuters) – Massachusetts power plant operator Salem Harbor Power Development LP on Tuesday asked a US bankruptcy judge in Delaware to approve a $43 million settlement with federal energy regulators over construction delays at its natural-gas fired plant.

Salem Harbor said it had agreed to pay a $17 million civil penalty and to disgorge $26.7 million in profits as a result of a Federal Energy Regulatory Commission (FERC) investigation into its collection of payments meant to incentivize energy production. FERC had alleged that Salem Harbor took $100 million in payments, but failed to meet power generation commitments due to construction delays that prevented its power plant from opening on schedule. Salem Harbor did not admit wrongdoing, butsaid the settlement would avoid costly litigation in its bankruptcy case.

Salem Harbor recently decided to pursue a restructuring that would hand its assets to secured lenders rather than finding an outside buyer, and it amended its Chapter 11 plan of reorganization on Monday to remove references to a sale. The company will ask US Bankruptcy Judge Mary Walrath on Friday for her approval to begin soliciting creditor votes on the amended plan.

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Former construction partner Iberdrola Energy Projects Inc (IEP), which is attempting to preserve an arbitration award against Salem Harbor, objected to that request.

IEP, which was hired to build Salem Harbor’s power plant in 2014 before the relationship soured, has been embroiled in litigation with the company since the 2018 termination of the construction agreement.

Salem Harbor blamed IEP for rising costs and delays, and Iberdrola launched arbitration proceedings over the canceled contract, eventually winning a $236 million judgment against Salem Harbor.

That claim would almost completely be wiped out under Salem Harbor’s bankruptcy plan, which would force IEP to share a cash pool of $175,000 with Salem Harbor’s other unsecured creditors.

Salem Energy responded Tuesday by asking Walrath to overrule the objection and allow it to begin soliciting votes. IEP’s objection was part of an “aggressive litigation strategy” and its call for additional disclosure was simply a demand for information that could be used in future litigation against Salem Energy’s lenders, the company said.

β€œThe court should not permit IEP to hold the debtors’ estates hostage to benefit its own litigation campaign,” Salem Energy wrote.

The case is In re Footprint Power Salem Harbor Development LP, US Bankruptcy Court for the District of Delaware, No. 10239-22.

For Salem Harbor: Brian Hermann and John Weber of Paul, Weiss, Rifkind, Wharton & Garrison; and Pauline Morgan and Andrew Magaziner of Young Conaway Stargatt & Taylor

For IEP: Richard Riley of Whiteford Taylor Preston; and Jeffrey Reisner and Thomas Watson of Steptoe & Johnson

Read more:

Massachusetts natural gas plant files for Ch. 11 after arbitration loss

Iberdrola profits rise on growth in Americas, renewables and grids

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Our Standards: The Thomson Reuters Trust Principles.


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