Update #2, 7pm ET
Wholesale Provider Seeks Court Order Converting REP's Bankruptcy From Ch. 7 to Ch. 11, Appointment Of Trustee To Initiate Sale Process Of Customer Book
Pegs Market Value Of Customer Book At $6-12 Million
Earlier: Texas Retail Electric Provider Brilliant Energy Files For Bankruptcy (Chapter 7)
March 16, 2021 Email This Story Copyright 2010-21 EnergyChoiceMatters.com
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Update #2, 7:00 pm ET
DTE Energy Trading, Inc. (DTEET), which provides wholesale energy to Brilliant Energy on credit, filed an emergency motion with a bankruptcy court to convert the case to a Chapter 11 proceeding, and for the court to appoint a Chapter 11 trustee who would conduct a sale of Brilliant Energy's customer contract portfolio
DTEET alleged, "DTEET supplies energy to the Debtor on credit pursuant to a series of agreements,
the obligations under which are secured by first priority liens on substantially all the Debtor’s [Brilliant Energy]
assets and equity interests. The Debtor has been in payment default under these agreements
beginning at least three and a half years ago."
"DTEET was owed approximately $15 million from
the Debtor prior to the recent Texas weather events in late February, and that amount has grown
to north of $60 million since then. Notwithstanding these defaults, DTEET has continued to supply
energy to the Debtor for sale to its customers and has continued to allow the Debtor to use
DTEET’s cash collateral to fund operating losses, for the purpose of facilitating an orderly sale of
the Debtor’s customer contract portfolio while the Debtor operates its business as a going concern," DTEET alleged
"As a retail electric provider, the Debtor’s most valuable assets are its customer
contracts. Under Texas law, if a retail electric provider ceases operations, its contracts can be
transferred to a provider of last resort. If that happens here, the Debtor will lose the contracts,
destroying DTEET’s collateral and most of the value in the estate, and retail contracts will have
lost the contracts negotiated with their chosen REP, and instead be moved to a provider designated
by ERCOT with rates typically much higher than under their current contracts," DTEET alleged
"Conversion of this
case to chapter 11 and the appointment of a trustee to conduct an orderly sale of the customer
contracts will provide an opportunity to avoid this scenario and maximize the value of the estate’s
assets for the benefit of all stakeholders," DTEET alleged
Contemporaneously with the filing of its request, DTEET said that it has reached out to the chapter 7 trustee appointed in
this case to discuss potentially operating the Debtor’s business under section 721 of the
Bankruptcy Code to allow for an orderly liquidation process. To the extent the Trustee is willing to do so, DTEET
would also support the entry of an order authorizing the Trustee to operate the Debtor’s business under section
721 for a limited time to allow the sale of the Debtor’s customer contracts.
DTEET said, "Despite the increase in obligations to DTEET, the
Debtor still retained significant value in its customer contract."
DTEET said, "Market indicators suggest that the customer contracts have a value of approximately
"The value of those customer contracts now is at risk of being lost as a result of this
chapter 7 filing and management’s precipitous actions during the period leading up to the chapter
7 filing," DTEET alleged
DTEET further alleged, "DTEET has done everything in its power to give the Debtor an opportunity to
preserve the value of the customer contracts. DTEET essentially funded the Debtor’s operating
losses for years while management pursued opportunities to sell the contracts or obtain
capitalization to resolve outstanding defaults, however the Debtor consistently refused to execute
on opportunities that were presented. More recently, DTEET and the Debtor were engaged in
negotiations over a transaction that would have permitted either a secured party sale of the
customer contracts, or other actions to preserve the value of the customer contracts, but the
Debtor’s management abruptly ended those negotiations and filed the instant chapter 7 case."
"Further, DTEET understands that, as a result this Chapter 7 filing and the anticipation of such
filing in the Texas energy market, brokers for these types of contracts have been actively soliciting
customers to leave the Debtor for alternative REPs. For these reasons, the risk of loss of value
increases substantially each day, resulting in immediate and irreparable harm to the Debtor’s estate
and creditors," DTEET alleged
DTEET alleged that a Ch. 11 trustee is needed because, "Prior management [of Debtor] has already demonstrated its unwillingness operate the Debtor
or to work with DTEET, its primary secured creditor. A chapter 11 trustee would be a neutral
party with the primary goal of maximizing the value of the Debtor’s estate."
Case No. 21-30936, U.S. Bankruptcy Court
Southern District of Texas
Update #1, 4:02 pm ET
Texas electric market observer Preston Ochsner of Ochsner Interests Inc. told EnergyChoiceMatters.com that Brilliant Energy has a credit and supply arrangement with DTE Energy ("DTE").
"My sources tell me that Brilliant continues to serve its customers with DTE in charge now. With that said, those customers could be dropped to the provider of last resort at any time," Ochsner said.
Ochsner said that, as of October 2020, Brilliant was owned by Ambrosero Corporation (70%), Richard Wakim (15%) and Joseph Capasso (15%).
Brilliant Energy, LLC filed on March 16 a voluntary Chapter 7 petition for bankruptcy
Estimated liabilities were listed as $50,000,001 - $100 million
Other than the standard Official Form 201 filing, no other documents related to the proceeding were immediately available (such as the narrative petition)