[Just filed. To be Updated] June 27, 2021 – Agilon Energy Holdings II LLC (“Agilon” or the “Debtor”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Southern District of Texas, lead case number 21-32156 (Judge TBD). The Debtor, a Houston-based provider of peak energy, is represented by Elizabeth M. Guffy of Locke Lord LLP. The Debtor's Petition notes that it has two subsidiaries (Victoria Port Power LLC and Victoria City Power LLC), each of which operates a power generating facility, but those two entities have not (yet) separately filed for bankruptcy protection.
The Debtor's petition notes between 50 and 100 creditors; estimated assets between $100.0mn and $500.0mn; and estimated liabilities between $100.0mn and $500.0mn .
The Debtor's Petition notes that the filing has been necessitated by claims by contract counterparties that "critical" contracts have been breached and further that the Debtor's management has been in discussions with potential financial and strategic partners about a possible restructuring.
The Debtor is owned by Castleman Power Development ("Castleman;" NB: The Castleman website appears to have been maliciously hacked, be careful), which constructs power facilities to provide power during peak periods (eg, winter and summer months, especially when when wind-generated power falls short) and "[u]pon completion of development, Castleman Power Development finances its power projects under an affiliate entity Agilon Energy."
Together Castleman and the Debtor have a business model which specifically leverages the unique power generation regulatory environment in Texas, with Castleman providing a useful summary of this now notorious ERCOT-regulated environment and specifically heralding the opportunities presented by the equally notorious $9,000/MWh incentive for energy producers to be on stand-by to fill holes in Texas's "intermittent renewable generation."
From Castleman: "ERCOT is not synchronously connected to the rest of the U.S. power grid and as a result is not subject to oversight by the Federal Energy Regulatory Commission (‘FERC’), but is instead regulated by the Public Utility Commission of Texas (‘PUCT’) and the Texas Legislature
Another unique feature of the ERCOT market design is the energy-only market structure which does not have bifurcated energy and capacity markets as most of other organizes regional transmission organizations (‘RTOs) within the US.
Instead, ERCOT uses real-time co-optimization of energy and ancillary services that responds to real-time shortages of operating reserves…This structure is called the Operating Reserves Demand Curve (‘ORDC’)
As a result of the energy-only structure, real-time prices are allowed to spike up to $9,000/MWh to incentivize new generation…Natural gas is the marginal fuel in ERCOT and accounts for over 44% of generation, followed by coal, which represents 25% of generation
ERCOT has the largest amount of installed intermittent renewable generation (more than 24 GW of combined installed wind and solar resources)…The wind penetration record is 56% of load, which was achieved in January 2019…"
Further explaining the Debtor's niche market, CEO Ryan Castleman notes: "The two plants will provide power during peak demand, specifically during hot summer days and cold winter days….About half the state’s power comes from the wind…but how much power the wind generates can’t be controlled. They (the plants) come on when the wind is not blowing, there is so much wind power in Texas. There has to be something that comes on when the wind does not blow. The plants will operate during about 10 percent of the year during times of market scarcity."
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