Edison Mission Gets Final Approval For $2.6B Sale to NRG

The Federal Energy Regulatory Commission signed off on Edison Mission Energy’s $2.6 billion sale of its assets to NRG Energy Inc., signaling the final approval needed from regulators for EME to move forward with its reorganization plan, according to a Wednesday statement.

Under the terms of the transaction, NRG will nab virtually all of EME’s assets, adding nearly 8,000 megawatts of power generation and making it into the second-largest U.S. power company, according to a statement. The acquisition will also make NRG the third largest U.S.-based renewable energy generator.

In connection with the deal, NRG will assume more than $1.5 billion in nonrecourse debt, of which $273 million is associated with assets designated as noncore assets. The company is paying a $350 million portion of the deal with approximately 12.7 million shares of NRG common stock, and the rest will be paid with cash on hand.

Assets that are not sold to NRG or otherwise discharged will be placed in a trust controlled by EME’s creditors, according to the company’s reorganization plan, which was approved earlier this month.

Following the sale to NRG, which was challenged by the U.S. Securities and Exchange Commission and the Internal Revenue Service, EME is expected to have an estimated $1.2 billion worth of unused tax attributes, according to Edison International Chairman and CEO Ted Craver, and Edison International will pay creditors 50 percent of the amount of the tax attributes, plus interest or deferred payments.

EME will remain a wholly owned subsidiary of Edison International, which plans to continue to consolidate EME for income tax purposes.

The deal was already approved by the Federal Trade Commission.

The SEC pushed back last month against the plan, arguing that the Bankruptcy Code does not allow a debtor that is selling substantially all of its assets or that will not engage in business after the plan is confirmed to free itself of its debts. That objection was resolved prior to EME’s March 11 confirmation hearing in bankruptcy court, according to court documents.

The plan also garnered opposition from the Internal Revenue Service, which argued that the plan improperly grants releases to one or more debtors, fails to obligate debtors to pay interest on the IRS claim and impairs rights of offset and recoupment. The IRS asserted an unsecured priority claim for just more than $1.3 billion, seeking payment for 10 years of allegedly delinquent taxes dating back to 1984. The IRS’ objection was withdrawn prior to the confirmation hearing, EME said.

The transaction is expected to close on April 1.

California-based EME entered bankruptcy in December 2012, citing plummeting electricity prices because of increased natural gas production and the cost of complying with coal plant emission requirements imposed by state and federal regulators.

The company listed $5.13 billion in assets against $5.09 billion in liabilities as of the petition date, including $3.7 billion in principal owed to holders of senior unsecured notes.

EME is represented by James H.M. Sprayregen, David R. Seligman, Sarah Hiltz Seewer and Joshua A. Sussberg of Kirkland & Ellis LLP.

The case is In re: Edison Mission Energy et al., case number 1:12-bk-49219, in the U.S. Bankruptcy Court for the Northern District of Illinois.

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