FirstEnergy Solutions – Vermillion Power to Serve as Stalking Horse in Sale of West Lorain Assets, Opens with $152 million Bid

November 20, 2018 – FirstEnergy Solutions filed a sale motion which establishes (i) bidding procedures for the sale of Debtor FirstEnergy Generation LLC’s (“FG”) West Lorain Assets and (ii) a timetable for an auction and related hearings [Docket No.1730] The motion explains, “FG’s pursuit of a sale of the West Lorain Assets began in the summer of 2018.The sale process, which is being led by Lazard Frères & Co. LLC (‘Lazard’), was formally launched on July 30, 2018. FG and Lazard began the sale process by reaching out to thirty-nine potential counterparties, consisting of broadly-focused financial investors, power- and energy focused financial investors, strategic power generation companies and entities that had expressed interest to FG’s advisors….After extensive deliberations with the advisors and separate negotiations with the potential bidders that participated in phase two, FG has elected to proceed with the bid submitted by Vermillion Power, LLC (the ‘Stalking Horse Purchaser’) as the highest or otherwise best bid received for the West Lorain Assets, subject to FG’s receipt of any higher or otherwise better bids at an Auction proposed to be held on January 15, 2019….FG and the Stalking Horse Purchaser negotiated an asset purchase agreement (the ‘Stalking Horse Agreement’)…which represents a binding bid for the West Lorain Assets. 

The total consideration to be realized by FG is approximately $152,000,000, subject to certain adjustments set forth in the Stalking Horse Agreement (the ‘Stalking Horse Bid’)….The Bid Procedures contain certain bid protections for the Stalking Horse Purchaser….FG submits that the Bid Procedures and bid protections are an integral part of the Sale Transaction and are beneficial to FG’s estate. The Stalking Horse Agreement contains additional bid protections; namely, the provision of a break-up fee in the amount of 2.5% of the Initial Purchase Price, as defined in the Stalking Horse Agreement] (the ‘Termination Fee’) and an expense reimbursement of up to 1% of the Initial Purchase Price…The Bid Procedures also contemplate an Initial Topping Bid of $1,000,000.00 and that subsequent overbids shall be in the amount of $1,000,000.00.” 

The motion proposes the following general timeline: (i) a January 9, 2018 deadline to submit qualified competing bids and (ii) an auction, if necessary, to be held on January 15, 2019. The Court also scheduled a December 12, 2018 hearing on the sale motion.