By Patrick Fitzgerald
Chevron Corp. (CVX) wants a bankruptcy judge to revisit his
decision allowing Edison Mission to keep its share of a natural-gas
joint venture involving the two companies now that Edison has a
deal to sell its assets to NRG Energy Inc. (NRG) for $2.6
billion.
In a filing Wednesday in U.S. Bankruptcy Court in Chicago,
lawyers for the oil company asked Judge Jacqueline P. Cox to
re-open the case record before granting final approval to Edison
Mission's bid to legally "assume," or retain, its stake in the
lucrative natural-gas deal.
The sale to NRG "fundamentally alters" some of the key premises
underlying Edison Mission's bid to assume the contract and
"debunks" its argument that it didn't intend to transfer their
contract to a third party.
Chevron, which sued Edison Mission shortly after its bankruptcy
filing to remove its partner from the deal, also said a newly
discovered document establishes Edison Mission is the "parent" of
two subsidiaries involved in the Chevron partnership.
That distinction is key to Chevron's argument that Edison
Mission's filing for bankruptcy constituted a default under their
deal.
Judge Cox, in a 21-page decision, said there were "no
non-so-called ipso facto defaults" under the gas partnership deal.
Provisions terminating a contract solely because of a bankruptcy
filing are known as ipso facto clauses and are generally prohibited
under U.S. bankruptcy law.
In any event, the affiliates aren't in default, Judge Cox said
in her decision, because their actual parent, California-based
utility Southern California Edison, hasn't filed for bankruptcy and
isn't part of the case. Edison Mission and Southern California
Edison are both owned by Edison International (EIX).
But if Edison Mission is in fact the parent of the subsidiaries,
Chevron says, its bankruptcy filing constitutes a default under
their partnership agreement.
Lawyers for Edison Mission say the recent developments make no
difference to the judge's initial ruling. A hearing on the dispute
is scheduled for Nov. 6 in Chicago bankruptcy court.
The two companies have been involved in a long-running fight
over the fate of their 30-year partnership, which is expected to
generate tens of millions of dollars over the next seven years.
At issue is Chevron's natural-gas venture with two Edison
affiliates, Southern Sierra Energy Co. and Western Sierra Energy
Co. The two energy-company affiliates are partners with Chevron at
the Kern River Cogeneration Co. and Sycamore Cogeneration Co.
facilities in California. Those plants produce electricity that is
sold to California power companies and steam that is sold to
Chevron.
The company's stake in the joint venture is slated to be part of
the assets transferred to NRG as part of its $2.6 billion offer for
Edison Mission. That bid, which is subject to higher offers at a
bankruptcy auction, would form the backbone of a Chapter 11 exit
plan, which the company hopes to file by mid-November. If the plan
wins court approval, Edison hopes to close the sale and exit
bankruptcy next summer.
--Jacqueline Palank contributed to this story.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to
http://dbr.dowjones.com)
Write to Patrick Fitzgerald at patrick.fitzgerald@wsj.com
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