[Just filed. Developing story.] November 17, 2021 – Alto Maipo Delaware LLC and Alto Maipo SpA (together “Alto Maipo” or the “Debtors,” with the Delaware LLC created just prior to filing) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case number 21-11507 (Judge TBA). The Debtors, owners of a not yet operational hydroelectric facility located 50km from Santiago, Chile, are represented by Sean T. Greecher of Young Conaway Stargatt & Taylor, LLP. Further board-authorized engagements include: (i) Cleary Gottlieb Steen & Hamilton LLP, as general bankruptcy counsel, (ii) as Alix Partners LLP as restructuring advisors (iii) Lazard Frères & Co. LLC and Lazard Chile S.p.A. as investment bankers, and (iv) Prime Clerk as claims agent.
As noted in "Corporate Structure" below, the Debtors' are indirectly controlled by potential DIP lender AES Andes which is in turn 67% owned by Virginia-based AES Corporation (NYSE: AES). In a November 17th 8-K, AES Corporation stated that: "On November 17, 2021, AES Andes announced that its subsidiary Alto Maipo SpA ('Alto Maipo') has commenced a reorganization proceeding in accordance Chapter 11 of the U.S. Bankruptcy Code, through a voluntary petition that was filed today (the “Chapter 11 Proceeding”). The AES Corporation (the “Company”) is no longer considered to have control over Alto Maipo and, therefore, in accordance with ASC 810-10-15-10, will derecognize from its Consolidated Statement of Financial Position the assets and liabilities of Alto Maipo and recognize an after-tax loss of approximately $800 million – $1 billion, net of non-controlling interests, in the Consolidated Comprehensive Income Statements for the fourth quarter of 2021, associated with the loss of control attributable to the former controlling interest.
The Debtors’ lead petition notes between 200 and 1,000 creditors; estimated assets between $1.bmn and $10.0bn; and estimated liabilities between $1.0bn and $10.0bn. Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) Strabag Spa ($3.4mn trade debt), (ii) Voith Hydro S.A. ($1.5mn trade debt) and (iii) Seguros Generales Suramericana S.A. ($1.1mn insurance-related trade debt).
In a press release announcing the filing, the Debtors advised that: “Alto Maipo SpA has filed for Chapter 11, Title 11 of the United States Code through a Pre Arranged financial restructuring agreement [although see below as to some doubt as where any support agreement stands] reached with its creditors, with the aim of initiating a financial reorganization process.
This process is intended to create a sustainable long-term capital structure maximizing recovery for all of its creditors and ensuring the liquidity necessary to
meet the short-term obligations for the start-up of the project.
The reasons for this decision are linked to the circumstances previously communicated, when it was informed about the update of studies and market and
hydrology projections prepared by independent experts. These estimate a reduction of more than 50% in the price of energy in different scenarios, considering the incorporation of multiple renewable projects to the national electricity system and in a time frame that was not foreseen years ago. Likewise, there was a significant decrease in hydrology in the last 10 years, compared to the historical average, which could mean a reduction in the expected annual generation of the project.
Alto Maipo is currently 100% complete in the excavation of its tunnels and 99% complete overall. Its construction will be completed within the costs estimated in its
last restructuring and approximately one year ahead of the dates guaranteed in the current construction contracts.”
Board minutes from a meeting held in Santiago on November 16th at 5pm (filed with the lead Petition) cast some shade on the Debtors' press release contention that they have already reached an restructuring support agreement with creditors. Those minutes note: "As a result of the work of the Company and its advisors, significant progress has been made with the Lenders regarding the restructuring of the Company's financing through the submission of the Company to the Chapter 11 regime. While the Company and the Lenders remain in discussions and have made progress towards proposed terms for a restructuring of the Company’s obligations, the Company and the Lenders have not yet reached definitive terms on a restructuring support agreement."
The Debtors are in advanced discussions with AES Andes (which indirectly owns 93% of the Debtors) as to the provision of $50.0mn of debtor-in-possession ("DIP") financing ($20.0mn with interim DIP order) to see the Debtors through their stay in Chapter 11. The financing comes with interest of 4% (payable in kind) and fees (also payable in kind) including (a) an Upfront Fee of 1.0% of (i) the portion of the DIP Commitments available upon entry of the Interim Order and (ii) the remaining portion of the DIP Commitments, and (b) an Unused Commitment Fee of 0.75% per annum on the undrawn portion of the DIP Commitments.
Events Leading to the Chapter 11 Filing
The Debtors provide: "The energy market that Alto Maipo will enter into next year is not the same energy market that Alto Maipo projected would exist upon its initial Commercial Operation Date (the 'COD') when construction began in 2013. Since that time, increased generation capacity has driven down electricity prices in Chile, such that spot prices at which Alto Maipo could sell power are now less than half of what they were in 2013. Meanwhile, climate change has significantly impacted the hydrology of the Maipo Valley, where the Project is being constructed, and lower precipitation levels reduce in turn the amount of power that the Project can produce. As a result, Alto Maipo can no longer rely on its prior revenue projections, which assumed economic and environmental factors that are no longer in place. In order to right-size their capital structure to meet these market challenges, and in light of a looming liquidity shortfall, the Debtors commenced these Chapter 11 Cases to ensure that they can complete construction of this hydroelectric project and generate renewable energy for many years to come.provides.”
About the Debtors
According to the Debtors: “Alto Maipo is a special purpose company, incorporated under Chilean law for the purpose of developing, constructing, and operating a run-of-river hydroelectric energy project in the Santiago Metropolitan Region of Chile, approximately 30 miles southeast of the city of Santiago. The hydroelectric energy project that is presently under construction (the 'Project') will consist of two run-of-river hydroelectric plants (the 'Hydroelectric Plants') which, once completed, will provide significant zero-emissions energy to Chile’s electric grid.
Corporate Structure (sourced from lead Petition)
- Alto Maipo SpA is 93% owned by Norgener SpA and 7% owned by Strabag SpA.
- Norgener SpA is 100% owned by AES Andes S.A. which is 66.7% owned by the AES Corporation.
- Strabag SpA is 100% owned by Strabag SE.
- Alto Maipo Delaware LLC is 100% owned by Alto Maipo SpA
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